22 April 2019 FT — Articles to Read

22 April 2019


Question: According to MSN: Money, what are the most expensive mistakes a homebuyer can make?


Italy falls behind in cutting public debt as populists stall on state assets sell-off – Pg. 1

–          The Italian government holds direct stakes in various companies, including 23.6% of the power utility Enel and 4.3% of oil company ENI, as well as large holdings in defence company Leonardo and postal service Poste Italian

–          Italy has the second-highest ratio of debt to GDP of any Eurozone member apart from Greece, standing at more than 140%.  Last year its populist coalition government lashed with Brussels over plans to ramp up public spending but eventually reached a deal on the size of its budget deficit


Banks pour cold water on ‘earnings recession’ fears – Pg. 8

–          An “earnings recession” could be looming for the US stock market.  Analysts estimate that earnings for companies in the S&P 500 index of blue-chip stocks contracted 4.6% in the first three months of the year, they forecast that they will shrink another 0.4% in the second quarter

–          The goal is to boost consumption, which now accounts for more than half of GDP [for China]

–          A rebound in oil prices has provided a boost to currencies of commodity-exporting countries, with the Russian rouble notching up more than 8% gains against the dollar this year.  The Canadian dollar and Norwegian krone have been relative laggards despite a 43% rise in oil prices this year


Victims of workplace bullying are still let down by poor management – Pg. 12

–          Bullying is rife at universities, he says.  “It’s appallingly common…the kind of thing that is punished if a janitor was doing it, in a professor it’s [seen as] eccentric.”  Another academic describes the behavior of his bullying line manager as “normalized”.  (Prof Note: What I have seen in the past 10 years is University Administrations Gone Wild!  Deans, who have no experience in classrooms are suddenly making decisions on classroom teachings!  My favourite example is the great importance placed on classroom evaluations completed by the students.  Are the prisoners running the prison?  It has become the goal of professors, due to self-preservation, to give the students what they want as opposed to what they need!  Professors now game the system, e.g. weight final examinations heavily so evaluations are completed prior to students truly knowing their grade.  This leads to lack of transparency but, again, is self-preservation for the professors.  As for the bullying, if the professor is such an “expert” this individual should have MANY options and simply remove themselves from abusive situations.  If they are not an expert, why are they in their position?  When enough staff leaves, the “mighty” will fall!)

–          In the UK – as with the US – there is no specific anti-bullying legislation

–          Bullying behavior can be a sign of a broader organizational dysfunction

–          (Prof Note: How does one define bullying?  Is a jerk boss a bully?  Build skills and when work environments become toxic…walk!  Yes, I know, easy to write…harder to do.  The single-employer system places employees at significant risk.  It is like investing in only one equity.  If you picked Amazon, up to this point, you did very well. Pick a loser, well, not so well.  Build skills and take back power.  Easier to deal with jerks when one has options.  Power to the People!!!)


Admitting younger students can benefit MBAs – Pg. 13

–          Several US business schools are admitting undergraduates to their MBAs

–          Ten years ago, Harvard Business School created a deferred MBA admissions process called 2+2.  It is open to undergraduate and masters students.  They spend at least two (maximum four) years in full-time work before matriculating (Prof Note: I deferred by MS Finance admission by one year at GW.  I forget the exact reason why (so many years ago) but believe I wanted to focus on my career in energy.  It was wonderful for me as I was able to focus on my career while still knowing graduate school was advancing)

–          …some employers are skeptical about employing MBA candidates in the deferral period… (Prof Note: My experience is that it comes to maturity.)


Answer: (1) Not working with a buyer’s agent (Prof Note: I still work with an agent.  Pick your agent VERY carefully.  Agents are like lawyers, they have a bad reputation, in general, but a great one makes the deal!); (2) Failing to negotiate the sales price (Prof Note: This is tricky as residential can be emotional); (3) Not cleaning up bad credit (Prof Note: Credit score goes a long way to interest over 30 years); (4) Buying a fixer-upper (Prof Note: From personal experience and that from my peers, renovations can be more costly than a new build and/or new purchase.  Think hard!); (5) Buying “As Is” without inspections (Prof Note: There can be justification for this….just be careful!); (6) Getting the wrong loan (Prof Note: In Roger’s World there would be a test to qualify on knowledge prior to receiving a loan.); (7) Having a change of heart (Prof Note: This has to do with the deposit.  Think!!!); (8) Overestimating your budget (Prof Note: Be realistic.  The example I use in the book and classrooms is 2X P&I for true cost of a house using a 30-yr mortgage rate.  I actually think the cost is closer to 1.5X but 2X is a great buffer); (9) Buying a home on emotion (Prof Note: I struggle with this.  Is not dreaming great?!  Just be certain you can afford the dream and it does not become a nightmare.); (10) Making a small downpayment (Prof Note: This requires a complete understanding of personal finances); (11) Talking to only one lender (Prof Note: Best to shop but also understand); (12) Skipping the walk-through (Prof Note: Laughing…I cannot remember the last walk-through I attended for a property.  My brokers get frustrated as I put such faith in them.  You should do the walk through BUT have an expert.  Should you look at your deal underwriting pro forma?  YES!!!  Is it best to have P(Gain) do the underwriting and provide professional assurances?  ABSOLUTELY!!!)