25 June 2018 FT — Articles to Read

25 June 2018

Question: According to money.cnn.com what are four financial goals you need to meet by age 40?

Beijing eases capital reserve rules to soften impact of US trade war – Pg. 1

–          China is cutting the amount of reserves the country’s banks are required to keep on deposit at the central bank, freeing up more than $110bn to help cushion a slowing economy and the impact of a potential trade war with the US

–          …cuts are scheduled to take effect on July 5

–          This month, Donald Trump, US president, announced his administration would impose punitive tariffs on $34bn worth of Chinese industrial exports in retaliation for alleged intellectual property theft.  The first round of tariffs is scheduled to take effect on July 6, with a second round hitting another $16bn worth of Chinese exports

–          The US administration is also taking further steps to escalate a trade war with plants to restrict Chinese investment in US companies in sectors ranging from aerospace to robotics and railways

US set to use emergency act against Beijing – Pg. 2

–          The Trump administration has decided to restrict Chinese investment in US companies and start-ups in sectors from aerospace to robotics as it prepares to deploy its latest weapon in the escalating trade war with Beijing

–          …Chinese foreign direct investment in the US plunged more than 90% to just $1.8bn in the first half of 2018 compared with the same period last year.  In 2016 Chinese companies made a record $46bn in foreign direct investment in the US

Road opens up for Saudi women as driving ban is lifted – Pg. 3

–          Women drivers in Saudi Arabia took to the roads for the first time yesterday as a decades-long ban was lifted

–          The plan also aims to spur growth in the private sector and create jobs for young Saudis

KKR faces ire over Toys R Us workers – Pg. 14

–          The retailer’s 30,000 employees face joblessness, many without the severance benefits they expected, after the creditors who are now in control decided to liquidate the business in the wake of disappointing Christmas trading.  Toys R Us employees last week made motional pleas to the investment committee at the California public employees pension fund Calpers, the largest pension fund in the US

–          (Prof Note: This is an interesting conundrum!  CALPERS has a fiduciary duty to its investors which, ignoring social benefits, benefits from paying Toys R Us employees less.  I dare say it, “Do the hustle!”)

Answer: (1) Have a fully loaded emergency fund (Prof Note: NO!!!!  This implies that in emergency you burn down principal.  Yes, absolutely in the case of familial health crisis, etc.  However NOT for job losses.  Do The Hustle!  Have a side business, even if waiting tables at Cheesecake Factory, so that familial wealth is not decreased.  Side Hustles!!!); (2) Have three times your salary saved for retirement (Prof Note: This is a BS number!  Where did it come from?  Have investments that provide passive income sourcing which can replace income at retirement/illness.  Cash can be gone, assets/businesses providing income are true “gold”; (3) Have no debt other than your mortgage and vehicle payment (Prof Note: This could NOT be MORE WRONG!!!  Mature leverage but disciplined leverage!  If starting at zero (0) one of the only ways to build wealth is the proper and mature use of leverage.  Build a real estate portfolio with mature leverage that naturally amortizes over one’s working life.); (4) Have a will (Prof Note: This is so simplistic it sickens me!  Yes, it is accurate.  However, one needs to consider how assets are owned.  Assets in a trust transfer outside of a Will.  How does one own the assets?  Yes, a will is necessary BUT as important are powers of attorney (medical and financial), living wills, home inventory, property use of insurance, etc.  Stating “Have a will” is over simplifying a very complex and necessary requirement)