13 June 2019 FT — Articles to Read

Question: According to MSN: Money, what are 15 money truths your successful friends will not tell you?

Foreign investment drops to crisis-era levels amid rising tide of protectionism – Pg. 1

  • Global foreign direct investment has fallen to its lowest level since the financial crisis as richer countries lead the world into a retreat form a “heyday of export-led growth”…
  • The 13% drop in worldwide FDI to $1.3tn in 2018 – the third straight year of falls – comes amid rising global protectionism and more US profits being repatriated after the Trump administration’s 2017 tax reform
  • Investment from Chinese multinationals also fell for the second year in a row, dropping 18% to $130bn….
  • Last year the number of restrictive policy measures affecting foreign investment was close to a record high….while only one in 10 policy measures affecting investment was restrictive 16 years ago, by last year that had risen to one in three
  • Most of the restrictions introduced last year – 21 of 31 – were in developed countries, while there were substantial increases in 2017 and 2018 in screening processes for FDI
  • The drop in investment inflows was geographically uneven, with the largest fall in Europe, influenced by large repatriations of US foreign earnings following tax reforms at the end of 2017

US homeowners rush to refinance after bond rally depresses borrowing costs – Pg. 21

  • US homeowners are rushing to refinance their mortgages, taking advantage of a drop in borrowing costs triggered by lingering trade tension and growth concerns that have fueled a global bond rally
  • The rise in mortgage applications comes as the average interest on a 30-year fixed-rate mortgage has fallen from 4.42% at the beginning of May, when trade tension began to escalate, to 4.12%…
  • The US trade offensive has amplified concerns about weakening economic growth, fueling a global bond rally and dragging benchmark sovereign bond yields lower
  • The 10-year Treasury yield has fallen 36bps to 2.14% since the start of May
  • The likelihood of a quarter-point cut in interest rates when the Fed meets in July stands at 76%, according to the probabilities derived from futures prices
  • Often when refinancing volumes surge, mortgage investors seek to replace the lost income from the early repayment by buying up Treasuries and interest rate swaps, further exacerbating the move lower in bond yields

Germany sells 10-year Bunds at lowest yield on record as uncertainty bites – Pg. 21

  • Germany has sold medium-term Bunds at the lowest yield on record, in the latest sign of how the uncertain outlook for Europe’s economy has depressed borrowing costs
  • The country auctioned 10year Bunds at a yield of minus 0.24%, …
  • …the auction marks the first time 10-year Bunds have been sold directly by the German government at such a low yield,…
  • The negative yield suggested investors who purchased the debt are guaranteed to sustain a loss if they hold it to maturity

Answer: (1) You need a budget (Prof Note: Rather than a “budget” try for a savings/investing goal and NEVER cheat yourself); (2) You do not save enough (Prof Note: Think “investing” over savings.  Also, tighten your belt further!); (3) You do not have a plan to pay down your credit card debt (Prof Note: Ask yourself why you have this type of high interest debt?!); (4) You do not invest; (5) You do not solicit financial advice (Prof Note: I had a respected peer ask me my thought(s) on the transformation of capital to passive income for retirement this week.  It was an honour.  Seek out individuals that have credentials in finance/wealth management, have achieved what you want to achieve, and ask them their thoughts); (6) You never consider the opportunity cost (Prof Note: Be aware of the purchasing power lost at retirement for consumptive purchases); (7) You are still driving manual (Prof Note: fight the urge to splurge!); (8) You need an emergency fund (Prof Note: What you need is a side hustle that will support you in case of need); (9) You live above your means (Prof Note: No joke…my house does not have an indoor bathroom at the moment.  That is extreme but you get my point…); (10) You give up too easily (Prof Note: When it comes to your retirement, as my past father always use to say, “Failure is NOT an option!”); (11) You eat out too often (Prof Note: I love the eat-in with company.  Love visiting people’s homes and chatting!); (12) You do not have a clear financial goal (Prof Note: Decide the lifestyle you want at retirement.  Determine the age at which you want to retire.  Work backwords for how you create the passive income to produce the lifestyle you want at the age chosen); (13) You need to learn to say, “no” (Prof Note: Do not “lend” money.  Do not always pay for others.  It must be fair.); (14) You spend too much on trends (Prof Note: I am the definition of “trendy”.  By the time you emulate me, I have reinvented myself and fashion! J); (15) You are procrastinating (Prof Note: Retirement strategy must be omnipresent in one’s thoughts)