Opinion

James Saft

Column: Grand-dad, what’s a rate hike?

Oct 17, 2013 21:10 UTC

By James Saft

(Reuters) – Like corded telephones, it is looking like our grandchildren will someday need to have the concept of rate hikes explained to them.

Seriously, someone needs to put a Federal Reserve statement with an interest rate hike into a time capsule so future civilizations can know that once upon a time monetary policy could become something known as ‘tighter’.

And as for the taper, which only recently we were expecting, that too may take quite a while.

In fact, now that we have what passes for a budget deal in Washington, we, and the Fed, can get on with the important business of counting the four top reasons not to taper.

REASONS NOT TO (EXPECT A) TAPER

1. There was never economic justification.

There probably wasn’t sufficient justification to tighten conditions back in August, before this mess transpired. Inflation was too low and job growth and labor force participation too anemic. Tightening now would require some new, positive reason, or an over-riding commitment to risk management and bubble prevention.

Grand-dad, what’s a rate hike?: James Saft

Oct 17, 2013 21:09 UTC

Oct 17 (Reuters) – Like corded telephones, it is looking
like our grandchildren will someday need to have the concept of
rate hikes explained to them.

Seriously, someone needs to put a Federal Reserve statement
with an interest rate hike into a time capsule so future
civilizations can know that once upon a time monetary policy
could become something known as ‘tighter’.

And as for the taper, which only recently we were expecting,
that too may take quite a while.

Column: Invest like Fama but regulate like Shiller

Oct 16, 2013 20:46 UTC

By James Saft

(Reuters) – If the board awarding this year’s Nobel Prize in economics didn’t get bogged down in a foolish consistency, there is no reason for you to.

The award this year went to Eugene Fama, Robert Shiller and Lars Hansen, leading to much hand wringing over the apparent conflicts between the work of Fama and Shiller. (Hansen is mostly known for research on risk, which may be why so few are discussing him.)

Fama is famous for the efficient markets hypothesis, which posits that securities prices reflect all available information, which on the face of it makes quite a contrast to Shiller’s central assertion that animal spirits – greed and fear, to you and me – drive financial markets and make bubbles a regular feature.

Invest like Fama but regulate like Shiller

Oct 16, 2013 20:43 UTC

Oct 16 (Reuters) – If the board awarding this year’s Nobel
Prize in economics didn’t get bogged down in a foolish
consistency, there is no reason for you to.

The award this year went to Eugene Fama, Robert Shiller and
Lars Hansen, leading to much hand wringing over the apparent
conflicts between the work of Fama and Shiller. (Hansen is
mostly known for research on risk, which may be why so few are
discussing him.)

Fama is famous for the efficient markets hypothesis, which
posits that securities prices reflect all available information,
which on the face of it makes quite a contrast to Shiller’s
central assertion that animal spirits – greed and fear, to you
and me – drive financial markets and make bubbles a regular
feature.

China’s creaking export model: James Saft

Oct 15, 2013 04:00 UTC

Oct 15 (Reuters) – That creaking sound you hear just might
be the Chinese export-driven economy model about to break.

While most of the world’s attention is focused on the
interminable and badly sung opera in Washington, China just
released a set of data that indicate a serious slowing in demand
for its products, particularly from its emerging market trading
partners.

Chinese exports in September fell 0.3 percent from a year
ago, customs officials said. While demand for Chinese products
flagged in the European Union, the main culprit seems to have
been emerging markets, which have been hit hard by slowing
capital flows. Exports to Southeast Asia fell to a 17-month low,
while those to South Africa were also hit hard.

The debt deal and the risk-eating zombies: James Saft

Oct 10, 2013 20:38 UTC

By James Saft

(Reuters) – As if they weren’t already risk-eating zombies, investors are being further conditioned to close their eyes and buy.

House Republicans proposed a short-term plan to extend the U.S. borrowing limit by six weeks, a move which would avert, at least for the time being, a default on U.S. debt.

The deal, which would run through November 22, just before Thanksgiving, would not end the 10-day-old government shutdown, but would shelter the economy and financial markets from the carnage that a U.S. default would bring.

Meet the new Fed, same as the old Fed

Oct 9, 2013 21:12 UTC

Oct 9 (Reuters) – The Yellen era will feature more of the
same: the same monetary policy and the same unanswered
questions.

Appointed today as Ben Bernanke’s successor as Fed chief,
Janet Yellen is likely to pursue a similar approach to monetary
policy. That makes any taper in bond buying likely to be later
and gentler, a factor which will support, all things being
equal, riskier assets.

Less clear, and also unchanged, is how she and her highly
divided colleagues at the Fed will react as yet another year of
unsatisfactory growth and low inflation call into question the
wisdom of the whole approach.

By worshipping markets, we’ve crippled them: James Saft

Oct 3, 2013 20:24 UTC

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

By James Saft

(Reuters) – The interaction of financial markets and debt standoff shows how by worshipping markets, we’ve crippled them.

Stan Collender, who knows Washington politics, sees a 25 percent chance the debt ceiling is not raised in time which implies a slightly lower chance of default or partial default. (here)

This is not mild stuff: a U.S. sovereign default is the market equivalent of frogs raining out of the sky and zombies cruising the malls.

Gridlock holds perils for stocks

Oct 2, 2013 20:25 UTC

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

By James Saft

(Reuters) – Don’t kid yourself: if you hold equities you ought not to welcome political gridlock.

If you hold stocks, history shows you’ll do worse. If you are strictly a bond investor, or fear inflation above all else, perhaps you’ll be happier with finger pointing and inactivity in Washington.

Markets have been mildly spooked by the government shutdown and budget impasse, though not nearly as much as they would be if they came to believe that a debt default was on tap for later this month.

Forget fundamentals, it’s all about government: James Saft

Oct 1, 2013 04:05 UTC

By James Saft

(Reuters) – Get used to it: in today’s dysfunctional investment landscape, most risk is, at bottom, government risk.

Two stories illustrate this neatly: the threatened shutdown of or default by the U.S. government and the Keystone Cops-style slow-motion disintegration (or not) of Italy’s governing coalition.

Taking a step deeper, the amazing thing about both situations is that the principal counter-weight to terror in the markets is also government, namely the Federal Reserve and the European Central Bank, both of which are busily writing investors insurance against government malpractice.

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