James Saft

By James Saft

(Reuters) – After 23 years of being the smelly wet dog of global markets Japan may be at a turning point.

With many massively, and understandably, short on Japan, the possibility that new policies actually work, or fail memorably, means investors are carrying considerable, and growing, risk. Now might be a prudent time to move closer to a benchmark allocation, which for most of us means putting money back in Japan.

A set of radical new fiscal and monetary policies being pushed by newly-minted Prime Minister Shinzo Abe might finally succeed in bringing inflation and growth back to Japan, but also could easily end in a financing or banking crisis.

Abe has advocated “unlimited” easing by the Bank of Japan, while at the same time going so far as to lay plans for the government to buy and lease back plants to troubled firms as a means of support and to spur capital investment.

Abe also advocates a weaker yen to make Japanese exporters more competitive. Global markets think he means business, driving down the yen’s value against the dollar by more than ten percent since mid-November, when his victory in elections first seemed secure.

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

By James Saft

(Reuters) – Short term movements in the stock market don’t tell you much, and one of the main things they don’t tell you is how to make public policy.

The idea that a given policy can be justified by its impact on the stock market, or that movements on the stock market in and of themselves call for (usually pacifying) public policy is one of the great fallacies of our time.

The “fiscal cliff” farce is a prime example, with lawmakers urging a deal on the grounds that stocks would fall if one was not forthcoming and analysts nodding their heads approvingly when news of the deal, at best a temporary balm, was met with a sharp rally in stocks on Wednesday.

Dec 26 (Reuters) – As well as too-big-to-fail it looks as if
we must think of our largest banks as too-big-to-punish as well.

After comments from top U.S. Justice Department officials in
the wake of the $1.5 billion settlement with UBS over
interest-rate manipulation, the bank’s counterparties,
employees, clients and competitors certainly will.

UBS was fined and a subsidiary pleaded guilty to one count
of felony wire fraud over its part in a wide-ranging effort to
doctor key benchmark interest rates such as the London Interbank
Offered Rate (Libor).

By James Saft

(Reuters) – As well as too-big-to-fail it looks as if we must think of our largest banks as too-big-to-punish as well.

After comments from top U.S. Justice Department officials in the wake of the $1.5 billion settlement with UBS over interest-rate manipulation, the bank’s counterparties, employees, clients and competitors certainty will.

UBS was fined and a subsidiary pleaded guilty to one count of felony wire fraud over its part in a wide-ranging effort to doctor key benchmark interest rates such as the London Interbank Offered Rate (Libor).

Dec 20 (Reuters) – Look to 2013 to be the year of three
Ls: Low growth, low returns, and thankfully, lower risk.

The upshot for investors may be a calmer year, but possibly
one that is less lucrative. It could be quite a contrast from
2012, which featured plenty of drama, notably in the euro zone,
but also decent returns courtesy of a 12.5 percent gain in the
S&P500 stock index and a similar return from global shares.

Extraordinary monetary easing and pledges from the Federal
Reserve, the Bank of Japan, and the European Central Bank will
provide a safety net to investors in 2013. However, we still
face a global economy that is facing both deleveraging and a
drag from falling government spending in important economies.

Dec 19 (Reuters) – Proving yet again that history rhymes
rather than repeats, just a few short years after an epochal
crash the search for yield just gets wilder and wilder.

Perhaps the best place to see this is in the corporate bond
market, where yields are at or near all-time lows while, by some
measures in key sectors, investor protections have never been
weaker.

Don’t expect, though, to see a repeat of the bloodbath of
2008 and 2009, when markets froze and there was real fear that
normally viable companies would as a result hit the shoals. For
one thing, companies are more liquid and less leveraged.

By James Saft

(Reuters) – Japanese banks and pensioners will be first in line to feel the pain if Japan successfully reignites inflation and inflates away its debts.

Which are two very good reasons truly effective central bank action may not happen, and if it does will carry heavy unintended consequences.

Fresh from a landslide victory on Sunday, Shinzo Abe, Japan’s next prime minister, lost no time in hammering home the demands he’s made on the Bank of Japan, saying the electorate had ratified his calls for more stimulus.

By James Saft

(Reuters) – For an uncertain world – one with fiscal cliffs, eurozone recession and regime change at the Federal Reserve – it sure is quiet out there.

Volatility in financial markets is now trading more like we are in the pre-crisis world of 2006, rather than one in which most of the crucial questions are left unanswered.

Sometimes called the fear index, the VIX which gauges investor perceptions of how jumpy the S&P500 stock index will be in the coming month, is now trading at around 16, more than 60 percent below its 2011 peak and not too far above its median level for the past century. In fact, if we get through December without a major market upset, 2012 will be the first year in seven without a significant spike in the VIX.

Dec 14 (Reuters) – For an uncertain world – one with fiscal
cliffs, eurozone recession and regime change at the Federal
Reserve – it sure is quiet out there.

Volatility in financial markets is now trading more like we
are in the pre-crisis world of 2006, rather than one in which
most of the crucial questions are left unanswered.

Sometimes called the fear index, the VIX which
gauges investor perceptions of how jumpy the S&P500 stock index
will be in the coming month, is now trading at around 16, more
than 60 percent below its 2011 peak and not too far above its
median level for the past century. In fact, if we get through
December without a major market upset, 2012 will be the first
year in seven without a significant spike in the VIX.

By James Saft

(Reuters) – To say taxpayers made money from their investment in AIG is to libel the very concept of profit.

Come to think of it, it may well be a gross insult to the idea of investment too.

The Treasury Department announced on Tuesday it would get $7.6 billion from the sale of its remaining government-owned shares in American International Group, taking it to what was widely reported to be a profit of $22.7 billion on the bailout.