22 January 2019 FT — Articles to Read

22 January 2019


Question: According to MSN: Money, how much does the average retiring couple need to cover medical costs in retirement (according to Fidelity)?


China growth cut to 3-decade low by trade war and debt crackdown – Pg. 1

–        The 6.6% increase in GDP in 2018 was the lowest since 1990, when China was reeling from international sanctions following the Tiananmen Square massacre.  It was down from 6.8% in 2017

–        …growing just 6.4% in the fourth quarter, the lowest quarterly rate since the financial crisis.  Growth has now slowed for three consecutive quarters, prompting concern among investors that the country could drag down the global economy

–        Last week the finance ministry outlined plans for additional tax cuts

–        …forecasting 6.2% growth this year…


Scientist who altered babies’ genes set to face criminal charges – Pg. 4

–        …Chinese scientist who made the world’s first genetically modified babies, is expected to face criminal charges after a government investigation found that he falsified ethical review documents

–        A second woman is pregnant with a foetus whose genes were edited…

–        …twins’ genes were edited to give them immunity to HIV

–        A Chinese regulation issued in 2003 banned altered human embryos from being implanted for the purpose of reproduction, and said altered embryos could not be developed for more than 14 days.  But scientists say there is no clear punishment attached to the regulation

–        The unidentified twin girls had a single gene, named CCR5, altered to make them less susceptible to HIV infection when their embryos were just a day old – early enough to become incorporated in the germ line, meaning it can be passed to future generations

–        Such far-reaching changes are widely prohibited, including, for example, by the Council of Europe’s 1997 Convention on Human Rights and Biomedicine


IMF warns on trade wars and slowdown – Pg. 6

–        The global economy is weakening faster than expected as trade wars and financial market volatility further undermine the investment climate, …

–        …populism and the policies of international conflict are taking their toll on global economic prospects

–        …almost a third of chief executives believed the global outlook would darken compared with 5% a year ago

–        The IMF blamed its pessimism mostly on weaknesses in Europe and Japan that slowed momentum in the global economy.  It said the biggest downgrades had come in advanced economies, where growth was set to drop from 2.3% in 2018 to 2% in 2019 and 1.7% in 2020

–        …revise down its main economic forecasts, with the fund now predicting the global economy would slow from 3.7% growth in 2018 to 3.5% in 2019 and 3.6% in 2020.  The uptick in 2020 was due to expectations that Turkey and Argentina would suffer deep recessions in 2019, before recovering the following year


Finance – Pg. 9

–        …leveraged loan market has exploded since the financial crisis, doubling in size over the past decade to $1.2tn…

–        Looser lending standards are less important when the economy is robust and the likelihood of company defaults is low

–        The bout of uncertainty has sparked more scrutiny of the leveraged loan market, with organizations such as the Federal Reserve, IMF and the Bank for International Settlements all sounding the alarm about the potential broader risks to the economy

–        When the global financial crisis erupted in 2008, central banks slashed interest rates and bought trillions of dollars worth of bonds, pushing yields down.  That forced investors to look elsewhere for higher returns.  One beneficiary was the leveraged loan market

–        Loans had performed relatively well throughout the financial crisis, and investors were attracted by the fact that the debt is backed by assets, unlike the unsecured bond market

–        In December 2015, as the US economy continued its recovery, leveraged loans received another boost; the Fed began to raise interest rates.  One of the attractions of investing in loans instead of junk bonds is that the interest rate paid to investors fluctuates in line with benchmark rates.  As the Fed embarked on raising rates, loans became an attractive way to take advantage

–        So-called financial maintenance covenants – agreements that limit the leverage a company can take on, or mandate thresholds for the amount of cash they need on hand to pay interest on their loans  – have close to disappeared.  More than 80% of the market is now deemed “cov-lite”…

–        The US default rate is now just 1.6%, well below the historical average of 3.1%,…

–        Moody’s estimates that recoveries on so-called first-lien loans – which rank first in a debt workout – are likely to fall from the historical average of 77 cents on the dollar to 61 cents.  The recoveries on riskier “second-lien” loans will tumble from 43 cents to just 14, …


Cannabis ‘too risky’ says Philip Morris – Pg. 15

–        Coca-Cola, which has studied whether to invest in cannabis, has decided not to do so

–        A wave of legislation has given a quarter of the American population access to recreational marijuana ( and two-thirds access to medical marijuana), creating a $10bn industry in the US alone


Answer: $280,000