Opinion

James Saft

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.

Japan’s consumers and its companies, however, have failed to follow through on their end of a bargain which would create self-sustaining growth and rising prices in Japan.

Put simply, consumers are not spending enough and companies, despite a cheap yen and favorable conditions for exports, seem generally uninterested in making big capital investments to expand.

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.

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.

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”.

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