3 August 2019 FT — Articles to Read

3 August 2019


Question: According to MSN: Money, what are thirty (30) truths retirees wish they had known beforehand?


Trump’s escalation of trade war drives investors to seek safety – Pg. 1

  • ….sell-off in equities and a flight to government debt, even as jobs data offered reassurance about the US labour market
  • The swoon in leading financial indices was driven by the US president’s announcement on Thursday that he would impose 10% tariffs on a further $300bn of Chinese goods in early September. Beijing vowed to retaliate with “necessary countermeasures”
  • The yield on 30-year German government bonds plummeted into negative territory for the first time in history, briefly pushing the country’s entire government bond market below 0%, meaning investors seeking safety were prepared to face a guaranteed loss when holding the debt to maturity


Europe faces ‘hair-trigger instability’ after US quits Russia nuclear arms pact – Pg. 1

  • The US has withdrawn from a 1987 nuclear arms control treaty with Russia after Moscow refused to destroy an intermediate-range missile that Washington and its Nato allies said violated the cold war-era pact
  • The US spent six years urging Russia to return to compliance with the INF…


State Assets: Italy cashes in on historic properties – Pg. 3

  • Rome is cashing in on its portfolio of state-owned assets by holding a fire sale of historic properties, from disused army barracks to forts, monasteries and lighthouses
  • In addition to the revenues, the sales will reduce maintenance costs and prevent beautiful but redundant properties from slipping into decay….


Trump duties pile pressures on Fed over rates – Pg. 4

  • For Mr Powell, the tariff threat by the White House could serve as validation of the Fed’s rationale for pursuing interest rate cuts in the first place, which is primarily based on neutralizing the risks from trade unrest and global economic weakness
  • It will also raise the possibility of the US central bank getting dragged into a much deeper monetary easing cycle because of the economic damage looking from Mr Trump’s trade policies, rather than the milder, preventive “mid-cycle adjustment” to interest rates it is intending
  • The Fed Chairman warned there had already been some impact on the US economy, which has posted weaker manufacturing and investment data


Central banks should consider giving people money – Pg. 7

  • With interest rates currently positive, the US looks like an anomaly. In the Eurozone Switzerland, Japan and Scandinavia, official interest rates are negative.  Considering the fact that in past recession the Fed has reduced interest rates by four to five percentage points, this prospect may not be far away from the US, too
  • Forward guidance aims to keep interest rates low for longer, and QE is an attempt to use assets purchases to reduce the interest rate on government debt, which is a reference point for long-term borrowing by the private sector. Either way the problem is the same.  When interest rates are already this low, further reductions are ineffective
  • So where next for monetary policy? One option is to pass the baton to the fiscal authorities
  • Three novel proposals are gaining support, all of which involve giving people money
  • The first, which literally involves central banks posting cheques to households
  • The Australian government sent households money during the financial crisis, and Australia avoided recession
  • Another policy, already being practiced by the BoJ…is that central banks consider giving money to the owners of the stock market by buying equities
  • The most intriquing and practically viable idea of all is emerging from the least likely sources, the ECB: so-called targeted long-term refinancing operations. In straightforward terms, that is the policy of dual interest rates which involves giving money to both borrowers and savers (Prof Note: Sounds a bit like a bid-ask spread)
  • In contrast to the other monetary innovations adopted since the crisis, dual interest rates are almost certain to raise spending and economic activity. How do they work?  In any economy, there are two interest rates that really matter to households: the interest rate at which they borrow and the rate they are paid on savings.  One of the problems with reducing interest rates, and with negative interest rates in particular, is that households suffer a decline in interest income on savings


One child families are becoming the norm – Pg. 7

  • In 1964 the average woman had just over 5 children; by 2015 she had only 2.5. There are now 83 countries, home to nearly half the world’s population, with fertility rates below replacement rate (roughly 2.1 births per woman)
  • ….the birth rate in England and Wales in 2018 fell to 11.1 live births per 1,000 members of the population, the lowest rate since records began in 1938
  • There is also the tragic problem that some women who really want children can’t find anyone who will commit
  • As we live longer, our desire to study for longer, pay off debt and settle down later is coming up against the hard deadline of the biological clock – with painful consequences
  • Worries about affordability also play a big role


Answer: (1) There are no guarantees for your retirement investments; (2) You may not have saved enough as a young person; (3) It costs more to live longer; (4) You will make more from social security if you wait; (5) Tax planning is complicated; (6) You need to consider health care costs; (7) You will probably need long-term care; (8) inflation will eat your savings; (9) You cannot borrow for retirement; (10) You should he contributed to your employer-sponsored plan; (11) Your house is too big; (12) You should have bought property; (13) You might have to work part-time; (14) Your children might not be financially independent; (15) Your parents might still require your assistance; (16) You will have to think about what comes after death; (17) It is hard to pay off debt in retirement; (18) You might not be able to afford the retirement you want; (19) Staying healthy will save you money in retirement; (20) You should have diversified your investments; (21) You might have to follow your family at some point; (22) You should have looked at fees; (23) You could have used catch-up contributions; (24) It gets boring; (25) Unexpected costs can be quite a burden; (26) You will probably only be able to spend a portion of what you spent before retirement; (27) Divorce is becoming more common among retirees; (28) You could be forced into early retirement; (29) Dividends are not a reliable source of income; (30) It can get lonely