Author: Roger Staiger

26 February 2019

 

Question: What is the size of consumer debt in the U.S. currently?

 

GE chief’s $21bn sale of life science business propels break-up strategy – Pg. 1

–          …the high price for the unit, which provides tools for medical research and the development of advanced therapies, would enable GE to be more patient in selling other businesses

–          Among the transactions likely to be delayed – o even cancelled – is the public offering of its remaining healthcare business, which had been expected in the second half of this year

–          Shares in GE are up more than two-thirds since the decade-long lows of December.  They jumped 15% after the deal was announced yesterday, though they pared gains and were up 9% in afternoon trading

–          GE will retain its other main life sciences business, pharmaceutical diagnostics, which it sees as a better fit with medical equipment such as scanners

 

Buffett offers rare admission of failure in saying Berkshire overpaid for Kraft – Pg. 1

–          Kraft Heinz is also struggling to adapt to changing consumer tastes.  Mr Buffett said it had misjudged the “retail versus brand fight”, referring to retailers that push own brands over labels such as those of Kraft Heinz

 

Crispr treats human with gene editing – Pg. 13

–          …treat patients with blood disorder beta thalassaemia, which affects the movement of oxygen around the body and restricts growth

–          …patients have stem cells that create blood cells collected and edited using the new technology based on the Cas9 enzyme, which binds to DNA and cuts it, shutting off the gene.  The edited cells are then placed back into the body in a stem cell transplant

–          The announcement comes after a Chinese scientist provoked uproar last year by using the Crispr technology to genetically edit babies

 

OECD warns corporate bond investors over ‘fallen angels’ risk in downturn – Pg. 19

–          Corporate bonds worth about $500bn could become “fallen angels” within a year of an economic downturn, …after a decade-long boom in debt issuance

–          The volume of outstanding corporate debt has doubled in real terms in the 10 years since the global financial crisis…with bonds issued by non-financial companies totaling more than $13tn at the end of 2018

–          Companies from advanced economies, which account for four-fifths of the total bonds outstanding globally, have seen volumes grow from almost $6tn in 2008 to $10.2tn in 2018

–          …driven down the overall quality of corporate debt

–          Triple B rated bonds, the lowest investment-grade rating, accounted for 30% of all investment grade bonds outstanding in 2008.  By 2018, they made up 54% of the issuance…

–          The OECD said its own proprietary index of corporate bond ratings, weighted according to the amounts outstanding, has now been below triple B plus for nine consecutive years – the longest period since 1980

–          In January, Jay Powell, …cited corporate debt as a risk that could amplify a potential downturn if highly leveraged companies were forced to resort to lay-offs

–          The OECD also noted that there had been a marked decrease in bondholder rights, in the form of scrapped or weakened covenants, that could “amplify negative effects in the event of market stress”

–          Covenants are clauses in the bond contract designed to protect the interests of investors, such as capping the total amount of debt that a company is allowed to take on

 

Answer: $13.5tn

25 February 2019

 

Question: According to MSN: Money, what are the five (5) expenses derailing American’s Retirement savings?

 

Abortion debate exposes deep divisions across US – Pg. 4

–          On Friday the Trump administration issued a draft federal rule that would prohibit healthcare providers that receive federal funding from referring women elsewhere for abortions

–          New York’s new law, which took effect last month, permits abortion after 24 weeks of pregnancy in the “absence of foetal viability” or cases where the procedure is necessary “to protect the patient’s life or health”, and decriminalizese the procedure

–          New Mexico, Rhode Island and Vermont are following suit with bills that would codify abortion access in case the Supreme Court takes steps to overturn Roe v Wade, its 1973 ruling that established a legal right to abortion in the US.  Virginia had been considering a measure that would have allowed late-term abortions in cases of danger to a woman’s “mental health”, but it failed at the committee stage

 

Tepid inflation sparks Federal Reserve rethink – Pg. 4

–          …persistent soft inflation readings over recent years could damage the Fed’s ability to convince the general public it will hit its 2% goal.  Central banks in other large economies are likely to face similar problems…

–          Persistent shortfalls relative to the Fed’s 2% target have already helped prompt officials to shelve plans for further rate rises.  But they are also thinking more broadly about the US central bank’s inflation mandate – a topic that will be up for discussion at the Fed conference in June

–          When former Fed chair Janet Yellen began monetary tightening in 2015, her approach was rooted in economic orthodoxy.  This dictates that a hotter labour market will fuel both wage and price growth.  Late into 2018 the Fed’s leadership was still worrying about the risks of economic overheating

–          Fed officials’ faith in the so-called Phillips curve linking unemployment and inflation is being shaken by persistently tepid price data…

–          Having peaked at 10% after the crisis, unemployment is now only 4%.  Wage growth has risen above 3%, but the measure of core inflation favoured by the Fed remained below 2% in November, as it has done for all but six months of the past decade

 

Answer: (1) Unexpected expenses or emergencies; (2) Quality-of-life activities; (3) Paying off credit card debt; (4) Monthly bills; (5) Children’s expenses