James Saft

Funds too lame rather than too big to fail: James Saft

Apr 8, 2014 04:01 UTC

April 8 (Reuters) – It isn’t true that the asset management
industry is too big to fail but it may well be that it is too
lame to be tolerated.

Noting the rocketing growth of the global asset management
industry, which is on track to more than quadruple in size by
2050 to $400 trillion, Bank of England executive director for
financial stability Andy Haldane argued that funds may require
closer and tighter supervision by regulators.

“Their size means that distress at an asset manager could
aggravate frictions in financial markets, for example through
forced asset fire sales,” Haldane said in a speech last week in

“It is possible to identify a set of market-wide conventions
or regulatory practices which have the potential to drive common
behaviour among asset managers and their institutional client
base. These have the potential to turn idiosyncratic market
frictions into systemic market failures.” (here)

The idea that asset managers are too big to fail, that their
sheer size makes them a particular threat, is at best unproven,
as Haldane acknowledges. Not only do asset managers employ far
less leverage than banks, they mostly play with other people’s
money, making those that flame out more a source of private
grief than public strife.

Big fear, no action shows ECB limits: James Saft

Apr 3, 2014 21:00 UTC

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

By James Saft

(Reuters) – If Mario Draghi’s biggest fear has come to pass and yet he does nothing, it follows that he may believe that there is little he can do.

Or rather that the costs and risk of what he feels is within the ECB’s ambit aren’t yet worth the potential benefits.

How else to reconcile the ECB’s decision to stand pat on monetary policy with the following statement:

Break the money market buck

Apr 2, 2014 20:43 UTC

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

By James Saft

(Reuters) – It is time for money market funds and their investors to grow up and accept that investments are worth what they will fetch.

Any policy other than allowing all money market funds to fluctuate in value, as they surely do anyway, rather than adopting the protective coloring of an artificial $1.00 share price is a huge mistake and a disservice to investors and taxpayers alike.

New money market regulations reported to be under consideration by the Securities and Exchange Commission may give broad exemptions to money market funds which would otherwise be forced to abandon a stable $1 share price, long an industry standard.

Bank lending surge very good or really bad: James Saft

Apr 1, 2014 04:01 UTC

April 1 (Reuters) – A remarkable rise in U.S. bank lending
may hold the key to the outlook for the U.S. economy, but it
could be either very good or very bad news.

Lending for commercial and industrial purposes rose at a
26.4 percent seasonally adjusted annual rate in February,
according to Federal Reserve data released last week, the
biggest such spike since the 2008 fall of Lehman Brothers.

As is so often the case, it is hard to know if this
represents the first rays of dawn or simply an oncoming train.

The why and how much of Fed rate hikes: James Saft

Mar 25, 2014 04:01 UTC

March 25 (Reuters) – Now we know interest rates are rising
in the largest economy in the world: it isn’t a question of
whether, or even so much when, only how fast.

Janet Yellen, in her first Federal Open Market Committee
press conference since taking over as chair, surprised investors
last week by suggesting that rates can be expected to rise six
months after the taper is completed and QE is done. That puts
liftoff, all things being equal, at April of 2015, several
months sooner than markets previously were anticipating.

Subsequent comments from Fed officials have been more about
how best to characterize the perception created by Yellen,
rather than clarifying or correcting it.

UK makes a welcome pension move

Mar 20, 2014 19:54 UTC

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

By James Saft

(Reuters) – British retirement savers will benefit greatly from new pension rules, though inevitably some will squander the opportunity.

Still, better to make one’s own mistakes than have them made for you by a system which, as it was, laid out a banquet for pension providers and produced table scraps for savers.

Under reforms announced on Wednesday, Britain will scrap pension rules which obliged about 75 percent of retirees with defined contribution, or 401k-style, pension plans to buy annuities.

Fed turns hawkish, or fumbles message: James Saft

Mar 19, 2014 21:15 UTC

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

By James Saft

(Reuters) – The Federal Reserve is telling us that not much has changed in the economy except rates are going to go up faster.

That is either growing hawkishness or a communications flub by Janet Yellen in her first Federal Open Market Committee press conference.

Today’s FOMC announcement didn’t change much in terms of the Fed’s economic outlook. The employment outlook is ever so slightly more positive but GDP forecasts for this year were taken down a modest peg. That excepted, the FOMC doesn’t see much difference between today’s economy and the one they described in December. There is a slight weakening. Other than that, the committee does not appear to be expecting much difference in the economy relative to the outlook in December.

Alibaba and the battle for financial supremacy: James Saft

Mar 18, 2014 04:01 UTC

March 18 (Reuters) – To understand why New York capturing
the title of world’s greatest financial center is no cause for
celebration, look no further than the Alibaba IPO.

Chinese e-commerce company Alibaba announced its intention
to list its shares in the U.S. rather than Hong Kong, a decision
driven in significant part by regulatory arbitrage, just hours
after the Big Apple captured the top spot for the first time in
a survey of global financial capitals.

The battle to be top financial center is a bit like hosting
the Olympics: the winner always loses but the athletes (or
bankers) do well out of the deal.

Candy Crush and the moat fallacy: James Saft

Mar 13, 2014 20:03 UTC

March 13 (Reuters) – A game involving “moving candies to
make a line of three in the same color” seems like an excellent
basis for a $7.6 billion IPO to me.

That game is ‘Candy Crush,’ which is the principal ornament
and money maker of King Digital Entertainment, a Dublin-based
company planning a share offering this month.

Seems like they have really hit the sweet spot with Candy

I mean two candies of the same color in a row, well that
would just be stupid. And if Candy Crush required people to do
four it would be limiting the market unnecessarily to players
with good spatial skills.

What’s good for Yale isn’t good for you

Mar 12, 2014 20:30 UTC

March 12 (Reuters) – The Yale Endowment’s heavy emphasis on
illiquid and alternative investments like hedge funds and
private equity in its endowment is working like a charm.

You, however, are not Yale and neither, likely, is your
pension fund, university endowment or personal portfolio.

Understanding why what is good for the goose underperforms
for the gander is key to not just Yale’s fantastic performance,
but improving your own.