6 September 2019 FT — Articles to Read

6 September 2019


Question: According to MSN: Money, what are twelve (12) reasons your home is not worth as much as you think?


WeWork’s valuation slashed to $20bn from $47bn ahead of IPO – Pg. 1

  • The sharp fall comes after prospective investors raised doubts about the ability of the lossmaking shared-office provider to become profitable in the near future, …
  • WeWork is expected to begin a roadshow as soon as next week ahead of the IPO, which would rank as one of the year’s biggest.
  • The lower valuation will leave co-founder and chief executive Adam Neumann stretching to reach targets attached to part of his incentive package, which includes several tranches of profit interests that would vest if the company attained market capitalizations above $50bn, $72bn or $90bn
  • …noted the gulf between WeWork’s valuation and its largest rival, London-listed IWG, which has a market capitalization of 3.7bn (sterling) despite having more sites than WeWork
  • WeWork reported net losses of $1.9bn for 2018 and said that losses had continued to grow in the first half of this year, from $723m to $904m, despite revenues doubling from $764m to $1.54bn


ECB to consider damage done by negative rates – Pg. 2

  • The ECB’s main deposit rate hit zero that year and successive cuts have left it at minus 0.4% since 2016
  • Critics say that negative rates weaken the eurozone’s already struggling banking system, discouraging lending and motivating insurers, banks and savers to hoard physical cash
  • Banks are the main source of finance for European companies and households, making them an important transmission mechanism for monetary policy
  • The debate about negative rates hinges on the idea of a point below which further cuts in a central bank’s deposit rate subdue lending activity by banks
  • It has become more common for European banks to charge fees for current accounts, but they only mitigate a fraction of the extra cost of negative rates
  • Bank lending to households in the Eurozone has increased more than 10% since the ECB first cut into negative territory in June 2014, while corporate lending has grown by almost 4%
  • Open option is a tiering system in which a portion of banks’ excess deposits are exempt from negative rates. Other countries with negative deposit rates, including Switzerland, Denmark and Japan, have similar ones
  • And the ECB has another option: subsidized lending. A third progamme of subsidized loans is set to launch this month.  The targeted longer-term refinancing operation will lend at a slightly more expensive rate than the previous two, but the ECB could choose next week to sweeten terms


Indian households tighten belts as economic gloom deepens – Pg. 3

  • India’s GDP growth is in its fifth consecutive quarter of deceleration, …tumbling to a six-year low of just 5% year-on-year between April and June. That was down sharply from the disappointing 5.8% in the first three months of 2019, and from 8% in the same quarter the previous year
  • One of the biggest drags on growth was a sharp deceleration in private consumption, which had been one of the economy’s major growth engines over the past few years. Private consumption grew just 3.1% year-on-year from April to June, down from 7% growth in the previous quarter
  • Household savings – the biggest component of a nation’s overall savings rate – have fallen from 23% of GDP in 2012 to 17% this year. Household indebtedness rose from 9% to 11% of GDP in the same period


America’s debt-laden students require better policy solutions – Pg. 9

  • Since 2006, outstanding student debt has quietly tripled to $1.6tn – nearly $35,000 per borrower
  • That makes it the biggest source of non-mortgage consumer lending, representing around 7% of economic output.  It also makes the American government “the largest consumer lender in the United States”, since most loans have federal backing …
  • The debt creates a debilitating economic drag by reducing consumption, entrepreneurial activity and household formation among millennials
  • ….college attendance is a defining trait of middle class identity (Prof Note: I use to agree with this; my beliefs are shifting…)
  • …other ideas are being tossed around that should be adlopted….one is to develop occupational alternatives to college
  • …interest rate on loans….this currently stands at 4 to 7% for federal loans, and close to 10% for private debt…


Answer: (1) Not loving laminate; (2) Bar None (Prof Note: Article suggests built-in wine coolers and bars are not trending today); (3) Banish weeds; (4) Good fences make good sales; (5) Cannot have carpet; (6) Pave paradise; (7) Draft dodgers (Prof Note: Article suggest fireplaces are in the past); (8) Put your house in order; (9) Screen savers; (10) Repaint your rooms; (11) Look up; (12) location, Location, LOCATION