Author: Roger Staiger

17 December 2018

 

Question: What is the most expensive zip code in the U.S.?  Median Sales Price for a home?  Median household income?

 

US credit markets dry up as rate rises and volatility rattle investors – Pg. 1

–          US credit markets are grinding to a halt, with fund managers refusing to bankroll buyouts and investors shunning high-yield bond sales as rising interest rates and market volatility weight on sentiment

–          Not a single company has borrowed money through the $1.2tn US high-yield corporate bond market this month.  If that drought persist, It would be the first month since November 2008 – when global credit markets froze up after the collapse of Lehman Brothers – that not a single high-yield bond priced in the market (Prof Note: This is profound…pay attention!)

–          A prolonged period of low interest rates since the financial crisis a decade ago has seen companies binge on cheap debt

–          As prices in loan market have fallen, banks that were committed to financing highly leveraged buyouts this year have struggled to find investors to back the deals

 

Wall Street banks to reduce bonuses as tough fourth quarter hits earnings – Pg. 13

–          ….low single-digit increases to their bonus pools

–          Investment bank revenues – including sales and trading and advising companies on deals and capital raising – for the top five US banks were up around 8% in the first half of the year, driven by booming equities markets.  They rewarded banks with a 16% rise in equities trading revenues and a 20% increase in fees for advising clients on IPOs, …

 

US retail shares face sharp sell-off – Pg. 14

–          Shares in US retailers are on course for their biggest quarterly sell-off since the financial crisis, putting the sector at the sharp end of Wall Street’s mounting concerns about the global economy and President Donald Trump’s trade wars

–          …S&P’s index of 95 leading listed retailers has dropped 17% so far this quarter

–          Concerns include retailers being forced to shed stock at hefty discounts, in part because they have accelerated shipments through ports to avoid being subjected to higher tariffs, which the Trump administration has since put on hold

–          The sell-off has erased all gains from earlier this year, when investors drove a rally in retail stocks on signs that a strong US economy and tax cuts were helping bricks and mortar companies deal with the online threat

–          Weak economic data from Europe and Asia – figures on Friday showed retail sales in China grew at the slowest pace in 15 years in November – have added to fears about a global downturn

–          Amazon shares have dropped 20% for the quarter so far, paring its market capitalization to $778bn

 

Answer: 94301, Palo Alto, CA; Median Sales Price: $3,750,000; Median Household Income: $146,488

14 December 2018

 

Question: According to MSN: Lifestyle, what are eight (8) things that happen when you stop drinking alcohol?

 

Draghi calls time on ECB’s 2.6tn (euro) Eurozone stimulus experiment – Pg. 1

–          Although the ECB has long signaled it would end new purchases this month, the move marked a milestone for the Eurozone, which will not be left to manage its economy with more traditional tools such as interest rate changes

–          The US Federal Reserve, which has been steadily raising interest rates for the past two years, has sent strong signals it may need to slow down after another rate rise this month.  The BoE remains in a holding pattern after raising rates twice in the past two year, amid fears that Britain’s exit from EU might dent growth

 

US snubs IMF push to lift permanent reserves – Pg. 3

–          The US has come out against an increase to the IMF’s permanent reserves, dealing a blow to efforts by Christine Lagarde, ….to put the institution on a more stable financial footing

–          While the US appears to have shut the door on an increase in the IMF’s permanent reserves, it appears to have left it open when it comes to US backing for alternative funding mechanisms, such as a renewal of the borrowing facility that pools temporary contributions to the IMF from members

–          The Trump administration’s decision to shy away from a permanent boost to IMF resources reflects its aversion to multilateral institutions.  While an increase for the IMF would have strengthened an institution that has for decades been synonymous with the US-led global economic order, it would have inevitably allowed emerging markets, including China, to wield greater influence within the organization, at a time of high tension between Washington and Beijing

–          The US backed this year’s IMF bailout of Argentina, the largest in its history, but has been more skeptical of interventions in countries that are big recipients of Chinse investment, like Pakistan

 

Warburg in China distressed property push – Pg. 15

–          Rating agencies have warned that smaller, highly indebted Chinese developers are at risk from the current property slump, with prices in major cities stagnant or falling.  Moody’s forecasts that nationwide property sales volume will contract by 5% next year

–          Foreign investors are cautiously returning to China’s distressed debt, after mostly sitting on the sidelines for roughly a decade after the end of the wave of bad debt disposal that began in the late 1990s.  Property is the collateral for a large share of distressed debt, meaning the success of such investments is closely tied to property prices

 

Leveraged loans lose their appeal as investors cut rate rise expectations – Pg. 19

–          Investors are pulling away from bonds backed by riskier corporate loans, raising pressure on highly indebted companies that have enjoyed easy access to the $1.3tn leveraged loan market

–          Leveraged loan investments have grown popular because they pay a floating interest rate, positioning buyers to receive higher returns as the Federal Reserve tightens policy

 

Answer: (1) You’ll sleep more soundly (Prof Note: More soundly than a blackout?); (2) You’ll eat less at dinner; (3) You might crave sugar; (4) You’ll start losing weight; (5) Your skin will clear up; (6) You’ll have more money; (7) Your mood might take a hit; (8) Your cancer risk falls, but your heart disease risk might rise

13 December 2018

 

Question: According to MSN: Money, what are eleven (11) steps to retire at age 50?

 

Former Trump lawyer Cohen sentenced to 3 years in prison – Pg. 1

–          Michael Cohen was sentenced to three years in prison yesterday after a federal judge determined he should face “considerable punishment” for crimes he committed at the direction of Donald Trump, his one-time client and patron

–          …Mr Cohen pleaded guilty, connected to paying hush money to two women who claim to have had affairs….

–          “While Mr Cohen was taking steps to mitigate his criminal conduct by pleading guilty and volunteering useful information to prosecutors, that does not wipe the slate clean,” the judge said.

–          Standing to address the court, his family seated behind him, Mr Cohen again pointed the finger at the president, saying he had been living “in personal and mental incarceration” ever since going to work for Mr Trump in 2007 (Prof Note: There is much to be said for a simple life.  Ask yourself if your morals are “pushed”, “Is it worth it?”, “How much is your freedom worth to you?”)

–          Mr Cohen noted the “heavy price” he had paid to turn against “the most powerful man in the world”

–          Mr Cohen also admitted to lying to Congress about a Trump Tower project in Moscow

 

Slowing inflation data bolster Fed’s caution on rate rises – Pg. 4

–          US inflation rose at its slowest pace in nine months in November as fuel and energy costs fell, in the  latest sign that price pressures are easing after a surge earlier this year

–          Headline consumer price growth slowed to 2.2% from a year earlier, …that is down from the 2.5% recorded in October and in line with economists’ forecasts

–          Lower energy costs – thanks to a 22% fall in global crude prices – helped keep a lid on price gains last month.

–          Core inflation, which strips out volatile food and energy prices and is of greater interest to the Federal Reserve, edged up to 2.2% year-on-year in November, from 2.1% the previous month

–          Fed funds futures are pricing in a 34% chance that the central bank does not touch interest rates next year

 

US homebuilder stocks under pressure as interest rates bite – Pg. 19

–          Having returned more than 70% last year, the sector is down by 30% in 2018 and facing its worst year since the global financial crisis as a combination of higher mortgage rates and lofty home prices raise concerns for the housing market

–          …knocked over $20bn off the sector’s market value this year

–          Such has been the intensity of the sell-off that all 15 members of the S&P super-composite homebuilder index have at one point found themselves in a bear market this year.  By contrast, the wider S&P 500 is about flat in 2018

–          …housing has been a weak link in an otherwise strong US economy underscores the impact successive rate rises from the Fed have had on the market’s outlook

–          Housing starts and building permits in October were a seasonally adjusted 2.9% and 6% lower, respectively, from a year ago

–          Signs of weakening demand came as housebuilders were also squeezed by rising material and labour costs

–          The biggest test for the US housing market will come early next year when the key house-selling season kicks off around the time of the Super Bowl, which is set for February 3

–          The biggest homebuilders, as a group, are trading at a price to book multiple of 1.3 times, which is round fair to cheap by historical standards, …

 

Answer: (1) Start with how much you’ll spend in retirement (Prof Note: Remember that once you stop earning passive income you are most likely tied to this level of spending ONLY); (2) Plan for the cost of health care; (3) Calculate how much you need to retire at 50 (Prof Note: While this article clearly means capital amount, what it should and must mean is passive income flow); (4) Save like your retirement depends on it; (5) Keep your expenses low (Prof Note: Do you really need that Starbucks?); (6) Be smart about taxes; (7) Increase your income (Prof Note: Also, diversify income streams); (8) Invest for growth; (9) Plan how you’ll spend your time in retirement (Prof Note: This is important.  Will expenses go down/up?  Will you have expenses travel?); (10) Write your early-retirement plan down; (11) Choose your retirement year wisely (Prof Note: Most importantly, remember retirement is not a concept, it is not a year, it is NOT an age, it is an equation.  When Passive Income >= Active Expense one is retired!)