Opinion

James Saft

All central banks do is talk, talk: James Saft

Feb 11, 2014 05:01 UTC

Feb 11 (Reuters) – Key central banks appear to be down to
their last tool: making promises.

Unfortunately these promises – “forward guidance” in banker
parlance – are ones they appear unable to honor for more than a
few months, and ones that investors demonstrably didn’t believe
while they lasted.

Both the Federal Reserve and the Bank of England are likely
to provide updated or clarified forward guidance this week,
painting a new and presumably more believable picture of what
they will do about interest rates under what circumstances.

The BOE should give new information about forward guidance
as part of its Inflation Report to be issued on Wednesday, while
many investors expect Fed chair Janet Yellen to expand on
forward guidance when she testifies before Congress.

With interest rates close to zero, central bankers have
limited levers with which to move the economy one way or
another. Quantitative easing – buying bonds or other assets – is
one option, but there are good reasons to believe that while it
ratchets up values in financial markets, it does so at the risk
of causing dislocations and with uncertain benefit to the actual
economy.

Column: Jobs data not helpful to risk assets: James Saft

Feb 7, 2014 19:56 UTC

By James Saft

(Reuters) – This has got to have been a frustrating jobs report for Janet Yellen and her colleagues at the Fed.

For stock market and other risky asset investors hoping for more stimulus it may turn out even worse.

U.S. payrolls rose by 113,000 in January, with only paltry revisions to the previous month’s disappointing 75,000 total. The data colored in a picture of a gradually weakening economy at worst, or at best one which is far from escape velocity.

Jobs data not helpful to risk assets: James Saft

Feb 7, 2014 19:55 UTC

Feb 7 (Reuters) – This has got to have been a frustrating
jobs report for Janet Yellen and her colleagues at the Fed.

For stock market and other risky asset investors hoping for
more stimulus it may turn out even worse.

U.S. payrolls rose by 113,000 in January, with only paltry
revisions to the previous month’s disappointing 75,000 total.
The data colored in a picture of a gradually weakening economy
at worst, or at best one which is far from escape velocity.

Apple and the grim history of buybacks

Feb 5, 2014 22:22 UTC

By James Saft

(Reuters) – Based on its own history, and the broader experience with other companies, Apple’s plan to buy back $60 billon of its own shares will probably end as a bit of a disappointment.

That’s because companies on the whole buy their own shares badly, a generalization which Apple seems well on its way to fulfilling.

Under intense pressure from activist investor Carl Icahn to up that $60 billion by another $50 billion, Apple last week beat earnings and revenue estimates but managed to disappoint the market anyway, sparking a double-digit percent sell-off in its shares.

The central bank cavalry isn’t coming: James Saft

Feb 4, 2014 05:01 UTC

Feb 4 (Reuters) – The pain is increasing in global markets,
but the likelihood of immediate relief from the Federal Reserve
and the European Central Bank isn’t.

A novel idea, that the Federal Reserve won’t send the
cavalry every time risk assets fall by a few percent, will in
itself be profoundly unsettling to investors used to conflating
their own wellbeing with that of the global economy. But with
transition to new leadership and no sell-off in critical
government bonds, it will take more than a few percent off
equities to prompt a U-turn on the Fed’s decision to trim bond
purchases.

The ECB is if anything less well positioned to provide balm,
though given its track record and the euro zone’s institutional
issues this will come as less of a surprise.

China Tobin tax, shadow banking and moral hazard: James Saft

Jan 30, 2014 21:50 UTC

By James Saft

(Reuters) – Sometimes it can be hard to understand just what exactly China’s regulators are trying to achieve.

Take, for example, two interesting but fundamentally conflicting stories in the past week: the bailout of a trust product and discussion of a Tobin tax on financial transactions.

The forces behind these two stories are pulling against one another, with the shadow banking bailout creating a moral hazard enticement for the capital flows the Tobin tax is intended to stem.

Ben Bernanke’s parting shot to emerging markets

Jan 29, 2014 21:59 UTC

By James Saft

(Reuters) – Ben Bernanke’s parting gift to emerging markets was some tacit advice they should have understood all along: you are on your own.

The Fed carried on with its tapering campaign at the conclusion of the Federal Open Market Committee meeting on Wednesday, slicing another $10 billion off of monthly purchases, and making no mention of the impact of a nascent crisis in emerging markets.

The statement accompanying the decision was reasonably upbeat, and carried no mention of recent upsets in emerging markets as a possible factor in their thinking. The Fed said the economy “picked up”, that the labor market indicators were “mixed” but showing “further improvement” and that household spending and business investment had advanced “more quickly”.

Emerging markets pray for Wall Street tumble: James Saft

Jan 28, 2014 05:18 UTC

By James Saft

(Reuters) – What struggling emerging markets need right about now is a big sell-off – in the U.S.

Without a substantial downdraft on Wall Street, the Federal Reserve is highly likely to carry on trimming the amount of bonds it buys every month, continuing at its meeting ending on Wednesday by taking it down another $10 billion to $65 billion.

That tapering will accentuate pressure on emerging markets, which have suffered substantial losses on currencies and securities with investors increasingly less interested in discriminating between the weak and the more stable.

Non-traded REITs are a relationship ender

Jan 22, 2014 21:46 UTC

Jan 22 (Reuters) – When a financial advisor tried to sell my
sister a fee heavy non-traded REIT last year, pitching it as an
alternative to fixed income, I told her she ought to fire him.

Then, having thought it over, I told her she ought to fire
him, re-hire him and fire him again.

Non-traded REITs are a species of real estate investment
trusts, specifically ones which are not traded on an exchange
and which typically lock investors in for seven or more years.

You must be joking, Mr. Bernanke

Jan 16, 2014 22:01 UTC

By James Saft

(Reuters) – Well, now we know: monetary policy certainly isn’t rocket science.

Asked on Thursday if he was confident before implementing quantitative easing that it would work, outgoing Federal Reserve Chairman Ben Bernanke quipped:

“The problem with QE is that it works in practice, but it doesn’t work in theory.”

  •