17 April 2019 FT — Articles to Read

17 April 2019


Question: According to MSN: Money, what are five (5) money moves to make if you win the Powerball jackpot?


Germany rules out further Brexit delay – Pg. 2

–          One important area of disagreement remain the Iranian nuclear deal and, in particular, Washington’s threat to impose sanctions on European companies that trade with the Islamic republic.  Germany, France and Britain recently launched Instex, a special purporse vehicle to help European businesses settle payments with their Iranian partners


China house price surge points to recovery – Pg. 4

–          House prices in 70 Chinese cities increased an average of 10.6% year on year in March, the quickest gain since April 2017 and the latest indication that the world’s second-largest economy is rebounding after a difficult start to the year

–          …outstanding total social financing, a broad credit measure, grew 10.7% in March compared with 10.1% in February

–          …the property sector accounted for 12% of total economic output in 2016.  Other studies have estimated the sector’s contribution could be as high as 25%, after taking into account ancillary industries, such as building materials


No need for the Fed to step on the gas – Pg. 9

–          The Fed has turned 180-degrees in the past few months, downshifting its dot plot to zero interest rate rises in 2019 from the two forecast just last December

–          …Fed officials may have more reason to worry: the US looks worse than the Eurozone when it comes to inflation

–          …the main difference is that the US weighs housing much more heavily in the basket of goods and services used to calculate inflation

–          Using the eurozone’s weights to calculate inflation, prices have been rising more slowly in the US than in the Eurozone since last November.  Weaker inflation pushes real rates higher, a de facto monetary tightening

–          Yet the Fed is pursuing patience while the ECB is easing

–          To provide that stimulus, the ECB recently announced a third targeted longer-term refinancing operation to boost lending by Eurozone banks

–          …inflation is not the only factor in the Fed’s monetary policy reaction function; its dual mandate includes maximum employment

–          Financial stability is also key for the Fed, and US banks look stronger than many of their Eurozone counterparts

–          Furthermore, the US has higher gdp and potential growth than the Eurozone.  The IMF’s latest World Economic Outlook estimates US growth of 2.3% in 2019 and Eurozone growth of 1.3%.  Germany, the supposed growth engine of Europe, barely skated past recession and Italy fell into one in the fourth quarter of 2018


Answer: (1) Pay off debt (Prof Note: This is completely WRONG!  Or rather, only specific to the question.  One needs to pay off the correct debt.  For instance, if you have three years left of a 30-year mortgage, the payments are virtually all principal.  Therefore, the payoff is a reduction of liquidity with little other benefit, i.e. NOT good!  Talk to an expert); (2) Save, save, save; (3) Keep it quiet; (4) Establish a revocable living trust; (5) Hire trusted financial planners and advisers