Opinion

James Saft

Japan stocks may have strong 2014 follow-up

Jan 8, 2014 22:28 UTC

By James Saft

(Reuters) – You probably missed last year’s epoch-making rally in Japanese stocks, and if you are still underweight, you might just do it to yourself again.

After rising a massive 57 percent last year, its best year in four decades, Tokyo’s Nikkei 225 index will be supported in 2014 by support from local buyers, by the continued benefits of a cheap yen and, most of all, by massive quantitative easing.

None of this is to say that Abenomics, the program of reflation and reform pursued by Prime Minster Shinzo Abe and the Bank of Japan, will ultimately be successful. There is plenty to worry about there – from the fashion in which households appear to be carrying the worst of the burden to the deeply difficult medium-term demographic issues.

That, however, is not our concern right now. If you were underweight Japan, and most people likely were, you signed on for a painful source of underperformance in 2013.

There are good reasons to believe that, all else being equal (which it so rarely is), 2014 could be another good year for Japanese stocks.

Column: Default, and other ugly words: James Saft

Jan 7, 2014 13:04 UTC

By James Saft

(Reuters) – Default, capital controls and high inflation are all such ugly words but they may, for many of the world’s largest economies, prove to be necessary tactics.

Thus far the official response to the crisis has concentrated on rather less painful measures: a bit of austerity, a willingness to create conditions which are helpful to debtors (AKA kicking the can down the road), and the hope of growth.

But the sheer size of the debt burden in large economies, not to mention the historical record, argue that ultimately we may need to turn instead to more painful measures, ones which unfortunately make it much easier to see who is benefiting at whose expense.

Default, and other ugly words: James Saft

Jan 7, 2014 05:01 UTC

Jan 7 (Reuters) – Default, capital controls and high
inflation are all such ugly words but they may, for many of the
world’s largest economies, prove to be necessary tactics.

Thus far the official response to the crisis has
concentrated on rather less painful measures: a bit of
austerity, a willingness to create conditions which are helpful
to debtors (AKA kicking the can down the road), and the hope of
growth.

But the sheer size of the debt burden in large economies,
not to mention the historical record, argue that ultimately we
may need to turn instead to more painful measures, ones which
unfortunately make it much easier to see who is benefiting at
whose expense.

After go-go decade, farmland faces threats

Dec 26, 2013 20:32 UTC

Dec 26 (Reuters) – The rise and rise of farmland values
faces two tough challenges: falling crop prices and rising
interest rates.

Because farmland is not a widely-held investment, with the
exception of large institutions, its remarkable rise gets
comparatively little attention.

Illinois average farmland prices more than doubled, to
$7,900 per acre in the six years to 2013, according to one
Department of Agriculture measure.

The trouble with forward guidance: James Saft

Dec 24, 2013 05:02 UTC

By James and Saft

(Reuters) – Keeping your word is hard, and people simply hate it when you don’t, something that central bankers enamored of the vogue for “forward guidance” may soon learn.

The Federal Reserve put forward guidance – essentially a pledge or promise to keep policy within certain parameters for a set period of time or given certain conditions being met – at the center of its strategy for keeping control over market interest rates while withdrawing from bond buying. In announcing a $10 billion per month taper, or reduction in bond buying last week, the Fed sweetened the medicine by hardening forward guidance to indicate that rates could remain near zero “well beyond” the time unemployment drops below 6.5 percent so long as inflation remains below a 2 percent target.

In some ways this has worked admirably – markets for risky investments remain upbeat. But in other areas, namely the exchanges where people make bets about future interest rate moves, things seem to be getting away from the Fed.

The “smart beta” oxymoron

Dec 19, 2013 20:34 UTC

Dec 19 (Reuters) – As is so often true in investments, in
the case of “smart beta” it turns out that if it sounds like an
oxymoron, it probably is.

Beta – the opposite of alpha, otherwise known as beating the
market through skill – is the return you get from market
exposure. In other words, if you buy an index fund you get beta.
Pay up for an active fund and you are betting on receiving alpha
in return.

Smart beta is a strategy which tries to improve on index
tracking returns by adjusting away from the typical cap-weighted
style, in which a given fund will hold shares or securities in
proportion to market capitalization.

A taper is whatever the market says it is: James Saft

Dec 18, 2013 22:44 UTC

By James Saft

(Reuters) – Coming months will answer decisively a question the Federal Reserve insists is already settled: is a tapering a tightening?

Score one for the Fed today: it cut purchases of bonds to a monthly $75 billion from $85 billion, but paired the move with a confection of sweeteners which touched off a startling rally in equities and only a small increase in long-term interest rates.

“Tapering is not meant to be a tightening,” Bernanke said after the Federal Open Market Committee announced the move. “The Federal Reserve means to keep the level of stimulus more or less the same.”

Fed may wait, you shouldn’t

Dec 17, 2013 13:04 UTC

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

By James Saft

(Reuters) – The Federal Reserve probably won’t taper when it meets this week, though maybe it should.

Financial markets definitely ought to sell off no matter what the Fed does, but almost certainly they won’t.

The Federal Reserve will announce its interest rate policy on Wednesday, after which Ben Bernanke will get a chance to explain why, or why not, they choose to reduce bond purchases. While less than a fifth of economists polled by Reuters expect the Fed to taper in December, a recent run of encouraging data has driven that figure up four-fold in just one month.

Fed may wait, you shouldn’t: James Saft

Dec 17, 2013 05:01 UTC

Dec 17 (Reuters) – The Federal Reserve probably won’t taper
when it meets this week, though maybe it should.

Financial markets definitely ought to sell off no matter
what the Fed does, but almost certainly they won’t.

The Federal Reserve will announce its interest rate policy
on Wednesday, after which Ben Bernanke will get a chance to
explain why, or why not, they choose to reduce bond purchases.
While less than a fifth of economists polled by Reuters expect
the Fed to taper in December, a recent run of encouraging data
has driven that figure up four-fold in just one month.

Hot U.S. housing markets turning cold -James Saft

Dec 12, 2013 20:03 UTC

Dec 12 (Reuters) – After rapid gains, some of the hottest
housing markets in the United States look like they are starting
to roll over.

Whether this is a reaction to the run-up in mortgage
interest rates in recent months or represents a waning bid from
the all-cash financial investors who have so often been marginal
buyers is unclear. Either way, volatility in house prices may
now prove to be a feature of the system rather than a bug.

In Phoenix, where house prices have risen more than 40
percent in less than two years, pending sales fell 32 percent in
October, while the number of months (at current sales rates) of
supply is up 111 percent from May.

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