2 January 2019 FT — Articles to Read

2 January 2019


Question: According to MSN: Money, what are ten (10) guaranteed ways to retire rich?


Central banks’ embrace of blockchain remains too timid – Pg. 9

–          Whatever happens to bitcoin, its underlying technology, called blockchain, could transform the worlds of finance and central banking

–          Unofficial cryptocurrencies are not about to displace central bank currencies.  Moreover, the Fed arguably has little to worry about given the dominance of US financial markets and the dollar in global finance

–          Blockchain is an electronic distributed ledger that can record transactions between two parties efficiently and in verifiable and permanent way.  Each transaction is recorded on multiple electronic ledgers, is visible to anyone with a computer, and cannot be manipulated by any one party

–          Rather than having transactions verified by a central bank or commercial bank, blockchain does so through people power.  Trust comes from the public verification by multiple agents in a network, who must all agree

–          Adopting distributed ledger technology could transform modern financial systems, which are rife with inefficiencies.  Making payments, verifying different stages of a transaction, and ensuring the finality of such transactions remains time-consuming and costly.  Banks charge steep fees to process domestic payments.  International transactions are even worse, with the process taking days and involving a stiff fee

–          Some central banks, such as those of Singapore and Sweden, plan to issue digital versions of their currencies to retain their key role in domestic payment systems

–          The Fed is undertaking a major effort to improve retail and interbank payment systems in the US.  But it remains skeptical about whether digital currencies can contribute to this effort

–          Unlike paper currency, digital cash is potentially cheaper and easier to use, and makes it harder to evade taxes or fuel illicit activities.  Central banks could also use the technology to improve the speed and efficiency of payment systems, rendering it easier to make and verify payments across people, businesses and financial institutions

–          Central banks will need to innovate and adapt to changing financial technologies.  But their biggest asset is the trust that households and businesses have in them.  In finance, people power may go a long way but will not be a substitute for that trust


Global investors get ahead of Indian bankruptcy code with financial lifeline – Pg. 12

–          Once a company enters into bankruptcy, it kicks off a tight, 270-day process in which the shareholders are replaced with an external restructuring team.  Creditors and investors must agree on terms for the restructuring by the deadline or the group is liquidated


Volatility of 2018 leads to changeable outlook – Pg. 18

–          The 10-year US government bond yield is arguably the most influential interest rate in the world, and the turbulence of 2018 shows that investors are acutely sensitive to its movements….$14tn market….

–          Despite the sharp move down in yields in November and December, which sent the 10-year yield as low as 2.72%, Wall Street analysts on average expect the yield to end 2019 at 3.44%…

–          Equity strategists at Barclays say they see two scenarios.  Their base case is a “last hurrah [for equities] followed by an eventual sell-off as recession hits after two years”, but there is “an alternative scenario where equities have already peaked and will continue drifting down as they have done historically a year before recession starts”

–          The macro risks are multiple and well-known: the Fed stalls the economy by raising rates too high, Beijing and Washington’s temporary trade truce unravels or cooler growth outside the US saps corporate profits


Answer: (1) Spend less than earn (Prof Note: Just yesterday I completed my 2019 forecast of revenue less expense, i.e. identifying lifestyle for 2019 and allowable expenditures); (2) Start saving early (Prof Note: the earlier one starts the more “free” money provided through compounding); (3) If you start late, make up for lost time; (4) Don’t leave free money on the table; (5) Minimize your taxes (Prof Note: I discuss this in all my classes, form businesses and maximize expenses and deductions (legally)); (6) Take a little risk; (7) Stay informed about your investments; (8) Break free from the herd; (9) Work longer (Prof Note: Choose work that is rewarding and it will not be “work”); (10) Maximize your income potential