19 June 2019 FT — Articles to Read

Question: According to MSN: Money, what are sixteen (16) money moves that could set you up for life?

Global financial watchdogs join forced to judge risks of Facebook currency – Pg. 1

  • Policymakers and regulators around the world have responded swiftly to Facebook’s plans to launch a digital currency, in what appears to be a choreographed move to scrutinize the tech group’s audacious plans to transform global financial services
  • Facebook announced plans yesterday for its new global digital currency, dubbed Libra, which will be supported by more than two dozen companies ranging from Visa and Mastercard to Lyft and Spotify, bringing the heft of the world’s largest social network to efforts to transform financial services

Berlin imposes rent freeze amid anger at rising prices – Pg. 3

  • Authorities in Berlin have decided to freeze most rents for five years, part of an increasingly fierce political backlash in Germany against the rising cost of tenancies and property prices
  • Rental prices in the German capital have more than doubled over the past decade, though Berlin remains cheaper than other national property hotspots such as Frankfurt and Munich
  • Critics of the property industry argue that the recent rise in rents is the direct result of the large-scale privatization of public housing stock in recent years.  Others point the finger of blame at Berlin’s restrictive policy on construction and excessive bureaucracy
  •  The law imposing Berlin’s rental freeze is suppose to enter into force in 2020 but will apply retroactively to all rental agreements as of yesterday.  It covers an estimated 1.5m flats

Building a real estate bubble – Pg. 7

  • The changes in prime London real estate have indeed been stark: prices have since fallen more than 20%
  • …the stalled site has brought back memories of the financial crisis, when from Ireland to Dubai, half-finished construction projects conceived at the peak were stopped in their tracks by collapsing markets, a lack of funding or insolvent developers
  • Sam Zell, the Chicago-based real estate billionaire known for his sell-off of a $36bn office portfolio on the eve of the financial crisis, has been selling again: he has disposed of almost all the properties within Equity Commonwealth, a $3.9bn real estate investment trust
  • Real estate prices in global cities have soared to new highs: they are 45% higher than at their previous peak in 2007, …
  • Property markets once dominated by maverick individuals are now home to trillions in pension and insurance capital, often managed by investment groups…
  • The inexorable rise of economies in Asia, meanwhile, has meant that sovereign wealth funds, pension funds and insurers from China, Singapore and elsewhere have been equally hungry for global real estate assets…

Transparency can stop countries falling deeper into debt – Pg. 9

  • The world’s debt burden stands at a staggering 317% of global GDP, just shy of its all-time high in 2016, …
  • Greater transparency can facilitate better governance, aid the fight against corruption and help countries avoid the debt trap.

Property-based CLO issuance soars past $8bn as yields tempt buyers – Pg. 19

  • Packages of real etate loans are hitting the US market at the fastest rate in a decade as investors step up their search for higher returns
  • …CLOs – riskier cousins of the more mainstream commercial mortgage-backed securities….
  • CMBS transactions package up loans on commercial buildings like hotels or apartment buildings and are typically larger in size, with longer maturities
  • …CLOs have been backed by loans to retail properties undergoing renovations, or by building owners seeking interim financing while they find new tenants

US mortgage investors should brace for Fed exit hazards, warns QE pioneer – Pg. 19

  • Plunging government bond yields could complicate the Federal Reserve’s plans to exit the US mortgage market, ….
  • The central bank has been one of the biggest buyers of mortgage-backed securities since the financial crisis, racking up a total of almost $18.tn at the peak, as it looked to cap the cost of home loans for a generation of borrowers as part of a broad quantitative easing programme
  • The Fed has since wound down the portfolio to below $1.6tn and plans to continue to let up to $20bn run off every month from September, reinvesting the cash in Treasuries, as it looks to gradually remove its support from the mortgage market

Answer: (1) Make your savings very hard to get at (Prof Note: Real Estate!); (2) Earn on your savings while staying flexible; (3) Use alternative investments (Prof Note: Be careful…invest in what you understand); (4) Don’t spend the fives (Prof Note: This is saying, take all five dollar bills and squirrel them away into a savings plan); (5) Save your savings (Prof Note: Purchasing at 50% off is NOT saving 50%…it is spending 50%!); (6) Look in your attic (Prof Note: Can you sell anything?); (7) Claim what is yours (Prof Note: Do you have any $$$ owned to you?  If so, claim it!); (8) Use your credit card (Prof Note: Get those points); (9) Save the raise (Prof Note: Do not increase your standard of living!); (10) Use the right IRA; (11) Invest in real estate (Prof Note: Be careful and know what you are doing!); (12) Look at where you live (Prof Note: Can you lower your cost of living by moving?!); (13) Round up (Prof Note: Some credit cards will round up purchases and save the incremental amount for you); (14) Deposit your change; (15) Do not pay fees (Prof Note: In my latest battle of not paying fees at BB&T, I literally wrote letters to the Chairman of SunTrust!  Manage the pennies and the dollars will take care of themselves!); (16) Control your debt (Prof Note: As I age and presumably become wiser, the more I see that first time wealth achievers must use debt and leverage to build wealth.  Use the right type of debt and the right size of leverage.  Be certain you understand what the debt “means”)