Opinion

James Saft

The patient and the brave

Mar 5, 2014 21:44 UTC

(James Saft is a Reuters columnist. The opinions expressed are his own)

By James Saft

(Reuters) – There are two main ways to get paid as a value investor: one is by avoiding the mistakes of your peers, the other is by making some mistakes of your own.

Avoiding other people’s mistakes is all about buying stocks which are cheap but solid and letting the dividends pile up and compound. Buy quality companies which are cheap and you, by definition, miss out on Pets.com, or, dare I say it, Facebook.

In a very real sense, and I’ll explain later, by doing this you are generating a stream of returns based on other money managers’ fear of losing their jobs.

The alternative value strategy is to buy the downtrodden: companies begging to be restructured or even gasping for air.

This can generate big returns but, obviously, means making mistakes, suffering losses and, sometimes, losing your own job.

Russia and the dead BRIC thesis: James Saft

Mar 4, 2014 05:01 UTC

March 4 (Reuters) – Sometimes it takes a slap in the face to
make you realize a long-cherished belief is long dead.

Russia’s power move in Ukraine is the slap and the so-called
BRICs (Brazil, Russia, India and China) as an investment concept
is the (now very much dead) belief.

That’s not because India will bomb Sri Lanka or Brazil
impose a ‘co-prosperity zone’ on Surinam. It is rather because
Russia’s move on Crimea demonstrates that history is not over,
that globalization is not inevitable, and that you as an
investor can very easily get worked over by this process.

Managers improve, but scale kills

Feb 26, 2014 21:46 UTC

Feb 26 (Reuters) – Fund managers are getting better, but
active fund management is getting worse.

Yes, I realize that is a bit like saying improved medical
care is causing us to lose more patients, but this is indeed the
upshot of new research and it should put investors in a
quandary.

Researchers have found that skill levels among active money
managers are rising in a measurable way, but that performance
across the active industry as a whole as it increases in size is
declining.

Column: Dwindling inflation puts pressure on ECB: James Saft

Feb 25, 2014 05:01 UTC

By James Saft

(Reuters) – Never a hot-bed of monetary policy activism, the European Central Bank may soon find itself forced into an uncomfortable period of experimentation.

At issue is inflation, or rather its increasing scarcity: euro zone inflation fell at its fastest ever month-on-month pace in January, down 1.1 percent from December. Only three small countries, Estonia, Slovakia and Latvia, saw consumer prices rise in the month, with the rest flat or in outright deflation. Annual inflation came in at 0.8 percent, far below the ECB’s 2.0 percent target and slightly below economists’ expectations.

Indeed with Germany seeing a month-on-month decline in prices, the supposed contrast between a healthy core and sclerotic periphery is harder to see, at least in inflation terms.

Dwindling inflation puts pressure on ECB: James Saft

Feb 25, 2014 05:01 UTC

Feb 25 (Reuters) – Never a hot-bed of monetary policy
activism, the European Central Bank may soon find itself forced
into an uncomfortable period of experimentation.

At issue is inflation, or rather its increasing scarcity:
euro zone inflation fell at its fastest ever month-on-month pace
in January, down 1.1 percent from December. Only three small
countries, Estonia, Slovakia and Latvia, saw consumer prices
rise in the month, with the rest flat or in outright deflation.
Annual inflation came in at 0.8 percent, far below the ECB’s 2.0
percent target and slightly below economists’ expectations.

Indeed with Germany seeing a month-on-month decline in
prices, the supposed contrast between a healthy core and
sclerotic periphery is harder to see, at least in inflation
terms.

Mark Zuckerberg, value investor: James Saft

Feb 20, 2014 21:38 UTC

By James Saft

(Reuters) – So now we know: Mark Zuckerberg is a value investor.

That’s true, at least if you accept his logic, which lays great emphasis on the sheer scale of users of mobile messaging company WhatsApp, which Facebook is buying for an astounding $19 billion.

“WhatsApp is on a path to connect one billion people,” Zuckerberg said in announcing the deal. “The services that reach that milestone are all incredibly valuable.”

Zuckerberg’s Facebook update about the deal only mentioned two numbers (neither of them with a dollar sign in front): WhatsApp’s current 450 million active users and the aspirational one billion.

Should you fire your economists?

Feb 19, 2014 21:12 UTC

Feb 19 (Reuters) – Rather than waste time and money making
doubtful predictions about economic growth, you might just do
better by buying stock in countries which have recently had hard
times.

A new study finds a rather puzzling outperformance of
equities in countries which, if you looked at the economic rates
of growth, would appear to be struggling.

This adds to earlier findings by the authors, Elroy Dimson,
Paul March and Mike Staunton of the London Business School,
which found a lack of correlation between economic growth and
investment returns.

Column: Abenomics’ wobbly arrows: James Saft

Feb 18, 2014 06:01 UTC

By James Saft

(Reuters) – Japan’s bold Abenomics plan is producing spluttering results on key consumption and investment measures, potentially undermining its resolve.

Japan’s economy grew by just 0.3 percent in the fourth quarter, less than half estimates. That’s despite Japan and its central bank following through strongly on a massive campaign of asset purchases which is on course to double the amount of money sloshing around the economy in the 20 months to the end of 2014. The Bank of Japan on Tuesday kept policy steady but increased a smaller lending program.

That buying, or money creation binge, has been successful on some fronts: creating the best growth in more than three years and lifting prices decisively.

A winter’s tale of a policy error: James Saft

Feb 13, 2014 21:00 UTC

Feb 13 (Reuters) – An exceptionally cold winter in much of
the U.S. is slowing the economy, but may also be laying a trap
for the Federal Reserve.

Where I live in Alabama we just had our coldest January in
about 30 years. That’s good luck for my kids, who are now on
their third straight day off of school, but bad news for growth
in the large parts of the country which have suffered cold, snow
and blackouts.

It is also raises risks for the Fed, making it more likely
that they may misread the strength of the economy and make what
could be a very expensive policy error.

The ‘slow trade’ movement

Feb 12, 2014 20:25 UTC

By James Saft

(Reuters) – As with food, where fast is synonymous with junk, so it seems that a “slow trade” movement in investment may lead to tastier results.

Ben Inker, of value-investing-orientated funds house GMO LLC, coined the slow trade term to describe a fascinating phenomenon: if something looks good from a value perspective now, you usually do better by waiting a year.

“The slightly odd fact is that moving slowly on value-driven decisions has simply made more money historically than moving immediately would have,” Inker, who is co-head of asset allocation at GMO, wrote in a note to clients.

  •