James Saft

Dec 11 (Reuters) – U.S. student debt levels are surging but
along with degrees and skills the loans are producing perverse
incentives and unforeseen economic consequences.

Consumers upped their debt by a seasonally adjusted $14.2
billion in October, driven in substantial part by strong growth
in student loans, a market dominated by the government.

U.S. student debt has grown at a nearly 14 percent clip
annually since 2005, hitting $904 billion in the first quarter
of 2012, partly cushioning the impact on the economy of an
overall fall in outstanding debt as people sought to use a
period of slack growth to retool.

A tough job market, however, has led to growing rates of
delinquency and default, with 10.6 percent of loans more than 30
days past due, a figure that masks the difficulty students are
having because it does not include the many which are in
deferment or forbearance.

To be sure, student loans are a form of economic stimulus,
driving jobs and consumption, but there are real questions over
how effectively the money is being used and how the accumulation
of debt will affect borrowers in the future.

By James Saft

(Reuters) – What happens when an over-valued currency meets a political leader seemingly bent on imposing his vision on a battered central bank?

Watch Japan, soon-to-be Prime Minister Shinzo Abe and the yen in 2013 to find out. (Spoiler alert: the currency gets it in the end.)

Abe, whose Liberal Democratic Party is expected to be returned to power by a December 16 election, also is likely to deliver global financial markets about as much volatility as they can handle, as his comments about his plans for the central bank have been frequent, inconsistent and radical.

Nov 29 (Reuters) – If U.S. fiscal woes set off a market
downdraft, this time the dollar could actually be a beneficiary.

Negotiations over the “fiscal cliff,” a mix of automatic tax
rises and spending cuts, are ongoing. Though a deal of some sort
will probably be struck, there is a real chance of a
market-toxic outcome.

Stocks, of course, would suffer and Treasuries
rally, even if an inability to strike a credible
deal over the fiscal cliff makes the United States as a borrower
look, well, a bit lame.

Nov 27 (Reuters) – To understand why the retail sector will
continue to be such an investment minefield consider just two
phrases: Black Friday and Cyber Monday.

The latter, the mock tradition of buying stuff online when
the boss isn’t watching on the Monday after Thanksgiving, is
emblematic of the forces challenging a retail industry much of
which was built for a U.S-centered cars, parking lots and box
store paradigm which makes less and less sense every day.

Black Friday began to be so called in the 1980s because it
marks the kick-off of the holiday shopping season during which
retailers are thought to move from the red ink of annual loss
into the black of profit.

Nov 20 (Reuters) – Like a hangover that starts before you
even go to bed, the fact that the shadow banking system has
expanded since the crisis bodes poorly for what comes in the
morning.

Shadow banking, financial intermediation done in such a way
as to elude regulations imposed on traditional banks, has
actually grown since the onset of the financial crisis in 2007
and stands at $67 trillion worldwide, according to a new
accounting from the Financial Stability Board.

That’s hard to square with assumptions that investors, stung
by losses caused by a run on assets in shadow banking during the
crisis, have learned their lesson, much less that economic
growth is being crimped in part by falling credit and money
creation by shadow lenders.

Nov 16 (Reuters) – Every investor, sadly, has to be a Fed
watcher given that U.S. asset markets are supported, if not
levitated, by quantitative easing.

Sadly because, and Ben Bernanke himself might agree with
this, we could all probably find more productive ways to spend
our time. Sad, too, because the Federal Reserve’s reach actually
seems to be diminishing amid doubts about how well QE is
working.

Perhaps never before has the market been this dependent on
the Fed and perhaps never before has there been as much doubt
over its eventual success.

By James Saft

(Reuters) – With earnings data now looking decidedly glum, the market may have more immediate things to fear than rising tax rates and falling government spending.

The S&P 500 is down more than 9 percent from its October peak, and about 4.5 percent since election day, prompting much debate over the impact of the impending fiscal cliff, which may hit the economy, and potentially rising rates of taxes on income, dividend and capital gains taxes.

Albert Edwards, the bearish but often prescient strategist at Societe Generale in London, thinks things are quite a bit more simple than that.

Nov 13 (Reuters) – Japan is shrinking again and its
government thinks the answer lies in more of the same policy the
Bank of Japan has been unsuccessfully implementing for 17 years.

Japan’s economy contracted by 0.9 percent in the third
quarter, data showed on Monday, reversing earlier quarters of
growth and taking the country into a nosedive equating to a 3.5
percent annual decline.

Inevitably, this has economists and policy-makers fretting
over whether Japan is sinking into a recession, technically
defined as two successive quarters of economic contraction.

By James Saft

(Reuters) – Banking shares are down sharply since the election, but the threat of tough regulation now moving markets might hold a kernel of hope for investors.

The re-election of Barack Obama and the victory of several high-profile supporters of tough financial regulation – notably Massachusetts Senator-elect Elizabeth Warren – have cemented expectations of an increasingly difficult operating environment.

Although not far off 52-week highs, the KBW bank index is about 4 percent lower than just before the election. Morgan Stanley is 8 percent lower, while Citigroup Inc is down about 4 percent.

Nov 7 (Reuters) – Obsess exclusively over the fiscal and
monetary impact of the U.S. election at your peril: the real
news may be coming out of the euro zone.

An election producing a split Congress and a second Barack
Obama term was greeted on Wednesday with a sharp divergence in
financial markets, with stocks falling and Treasuries and the
dollar rallying sharply.

Since most of us in the U.S. have spent nearly every waking
hour in recent weeks being bombarded by news, advertisements,
images, lies, statistics and still more lies it is no wonder
that most analysis of the market is attributing the moves to the
election’s implications.