3 December 2018 FT — Articles to Read

3 December 2018


Question: According to MSN: Money, what are 4 retirement mistakes to avoid in 2019?


Factory demise symbolizes rot at core of Russian manufacturing – Pg. 3

–          …Russia’s $1.7tn economy, which is crippled by chronic under-investment, long-delayed reforms, widescale state ownership and western sanctions that are slowly squeezing its banking sector

–          Expected GDP growth of about 1.7% this year would be far worse without strong oil and gas revenues, suggesting other sectors are stagnant or in retreat

–          Real disposable incomes have fallen each year since 2014 and were 11% lower at the end of 2017 compared with four years earlier, …

–          Strong crude prices have largely meant western sanctions against Moscow, levied after the 2014 annexation of Crimea, have failed to paralyse Russia as much as proponents had hoped


Fed eyes murkier messaging after next rate rise – Pg. 5

–          …probably increase on December 19, is how much further they will need to go given tepid inflation and a widening array of risks

–          The Fed could, as soon as its next meeting, ditch now familiar guidance telling traders that further “gradual” increases in rates lie ahead

–          The move by the Fed away from explicit guidance and towards a more “data dependent” approach has long been in the works.  The Fed has already dropped assurances that policy will remain “accommodative”


Inflation indices should add house prices to prevent bubbles – Pg. 9

–          Both in 1990s dot-com equity bubble and the 2000s housing bubble saw large, persistent increases in asset prices.  And each time, the economic tipping point came from sharp falls in asset prices and the abrupt changes in balance sheets on spending and investment decisions

–          This means the Federal Reserve must elevate the goal of maintaining financial stability to a more equal position alongside full employment and stable prices

–          …government statisticians should create a broad transaction-based price index, which would include house prices and serve as a complementary indicator to gauge economy-wide inflation.

–          The original consumer price index included house prices.  But they were removed in 1983 and replaced with “non-market rents” – an estimate of how much owners could charge to let their homes.  Then in 1998, all links to the actual real estate market were severed when we stopped sampling homeowners about rents

–          The traditional consumer price index is a hybrid price series that includes both market prices and non-market prices.  Within it, the non-market rent component creates two problems: first it is nearly one-quarter of the overall index and therefore it can create the illusion of general price stability, and second, the rent estimate misses important price signals from the real estate market (which have become increasingly correlated with equity prices)

–          Accurate measurement of inflation is critical for any central bank whose mandate is to maintain financial stability

–          The hallmark of successful monetary policy will always be seen in securing stable inflation rates, but each generation of central bankers must adapt to changes in the economy and finance.  Given the increasing role of asset prices, a new challenge will also be acting in a pre-emptive way to prevent bubbles

–          ….three of their mandates: full employment, price stability, and financial stability


Dollar debt sales at lowest in two years – Pg. 12

–          The amount of US dollar-denominated debt sold by companies and banks has hit its lowest level in two-and-a-half years as the impact of the currency’s appreciation ripples through the bond markets

–          Investors have previously benefited from the favourable arbitrage available by swapping the dollar back into other currencies but the greenback’s strengthening over the course of this year has eroded its relative attractiveness, undermining bond sellers’ incentive to price in dollars

–          As a proportion of global issuance in all currencies, dollar-denominated bond sales fell to 45% in the six months to October, down from a high of 53% in February

–          Sales of the riskiest type of investment grade debt have dropped sharply as investors’ concerns over corporate bond market risks rise


Answer: (1) Not following a budget; (2) Forgetting about taxes; (3) Neglecting your retirement plan; (4) Not taking your RMDs (Required Minimum distributions)