James Saft

Utilities flashing red

Apr 16, 2014 21:25 UTC

NEW YORK, April 16 (Reuters) – Utility share prices, a
reliable leading indicator of stock market ructions, are
flashing red.

Utilities have been particularly strong, especially relative
to the broader market, a set up which has historically been a
flag for relatively weak stock markets and high volatility.

The Dow Jones Utilities Index is up nearly 13 percent
this year, compared to a fall of nearly 4.0 percent in the
broader market. The divergence has been especially striking
since early March, since when utilities have outperformed by
nearly 12 percentage points.

“The fact that you are seeing this year utilities and long
duration bonds performing so strongly is telling you that
something is off – and when utilities lead it tends to happen
before black swans strike,” Michael Gayed of Pension Partners
said in an interview.

“Utilities have been strong since the first week of January,
signaling concern, alongside long-duration Treasuries for some
time before the high momentum breakdown began,” he said.

Tech downdraft may spread: James Saft

Apr 15, 2014 12:01 UTC

By James Saft

(Reuters) – Calling the stock market downdraft a correction contained to technology may be both optimistic and premature.

With Federal Reserve aid to the stock market ebbing, and margin debt at all-time highs, what started with the most expensive stocks could easily do much damage to more conservative investments.

Last week was the worst for the tech-heavy Nasdaq index since June 2012, and though all major U.S. indices finished the week lower the most striking losses were among shares which had enjoyed very strong upward momentum. Twitter is down more than 40 percent from its high this year, while Netflix is off 27 percent and Facebook nearly 20 percent. Overall social media stocks, which rose 65 percent last year, are down 15 percent so far this year.

Words, charts, numbers all fail Fed: James Saft

Apr 10, 2014 20:18 UTC

April 10 (Reuters) – Since neither words, nor charts nor
numbers seem capable of expressing when the Fed will raise
interest rates, perhaps they need to adopt some new kind of

What’s the symbol for “The first day of never”?

Didn’t Prince already use that?

Seriously, the Federal Reserve seems most comfortable with
that which expresses the least specific meaning.

We learned Wednesday from the minutes of the most recent
FOMC meeting that there was much concern that we not actually
believe the dot scatter charts the Fed goes to the trouble of
making which indicate their individual projections of the future
path of interest rates.

The kids are mostly cash (and mostly wrong)

Apr 9, 2014 21:05 UTC

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

By James Saft

(Reuters) – Younger investors may have drawn the right conclusion about the great financial crisis – that they were scammed – but their defensive reaction will simply add self-inflicted wounds to existing injuries.

Specifically millennials, aged 21 to 36, hold more than half of their assets across all accounts in cash, more than double the allocation of their elders, according to a survey by UBS released this year. (here)

Just 28 percent of their assets are in stocks, as against 46 percent for other adults (including retirees who often cut stock holdings for safety).

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

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.