Author: Roger Staiger

7 December 2018

 

Question: According to MSN: Lifestyle, what are five (5) holiday nightmares that can break the bank?

 

Oil prices slide as Opec and its allies struggle to settle on production cuts – Pg. 1

–          Oil prices fell as much as 5% yesterday after Saudi Arabia’s energy minister said he was “not confident” that a deal to cut crude production could be achieved between Opec and its allies

–          Benchmark crude prices have plummeted 30% in the past two months as global supplies have started to outstrip demand, dropping from more than $86 a barrel in early October to near $58 a barrel yesterday

 

Investors cancel US rate rise bets – Pg. 2

–          Crumbling hopes for a US trade reprochement with China and worries about sluggish global growth prompted investors to slash their bets on Federal Reserve rate rises yesterday

–          Fed funds futures, derivatives contracts that investors use to wager interest rates, show traders still expect the central bank will raise rates this month, but are growing less certain.  They are also increasingly skeptical that the Fed will keep raising rates in 2019.  The Fed’s current overnight rate target is now between 2 and 2.25%

–          The market is pricing in in only a 63% chance that the Fed raises rates this month – down from over 80% in mid-September.

–          …Fed funds futures are pricing in a nearly 40% chance that the central bank does not touch interest rates again next year, and a 33% possibility it lifts rates only once.  Markets are pricing in a mere 2% chance the Fed raises rates by the three times it indicated in September

–          The shift in sentiment comes despite strong data on the domestic US economy, including buoyant figures for the services sector

 

Yield curve offers clues to chances of a recession – Pg. 21

–          The yield curve is created by plotting US government bondyields of different maturities on a single graph with the Federal Reserve’s overnight interest rate at one end and the 30-year “long” Treasury bond at the other

–          Typically, it should cost less to borrow money for one day than one year or a decade and 30 years should be the priciest.  This is, in part, because a lot of things can happen to an investment over time – such as inflation that would erode the fixed returns of a bond – which means investors tend to want compensation for taking on that risk

–          Therefore, shorter dated Treasury bonds, which are inclined to hew closely to the Fed’s interest rates, usually have a lower yield than longer dated ones

–          That means the shape of the yield curve tends to slope upwards on a chart over time, from left to right

–          If there is a big difference between short- and long-term Treasury yields – that is, if there is a steep upward curve- then it suggests that investors expect inflation and interest rates to rise markedly in the future.  The curve can be particularly steep as the US economy  is pulling out of a recession

–          But as that difference  declines – as the curve flattens, as it is doing now – it indicates that investors expect slower inflation and more tepid economic growth in the future

–          A yield curve inversion has preceded every recession in the US since the second world war

–          The most powerful indicator is the difference between two-year and 10-year Treasury yields.  At its post-2008 financial crisis peak, that difference, or spread, was above 290 bps, as the economy pulled out of recession

–          US economic growth in the third quarter was strong.  Unemployment and wage growth data are still broadly positive

–          …an inverted yield curve is a warning sign precisely because it tells investors about expectations for the future and not necessarily about the state of things right now.

–          There are concerns that the economic sugar rush provided by tax cuts this year will soon wear off

–          Since 1980, the average time lag between the yield curve inverting and the economy falling into recession is 21 months, ….and it can take almost three years…

–          …there has been one occasion where the curve has inverted and a recession has not occurred – in the mid-1960s

–          Some analysts and Federal Reserve officials, as well as the US central bank’s former chairman Ben Bernanke, have also argued that the world is much different now to when the yield curve inverted before the last financial crisis and as such the indicator may not be as reliable

 

Answer: (1) Your home catches on fire; (2) A guest hurts themselves in your home; (3) Your flight or cruise gets canceled; (4) Your holiday shopping is stolen; (5) Credit card fraud or ID theft

6 December 2018

 

Answer: According to MSN: Lifestyle, what are nine (9) foolish mistakes that will ruin your next airplane flight?

 

US and China bolster trade truce message in bid to soothe markets – Pg. 1

–          Beijing and Washington yesterday sought to reassure shaken markets that their trade ceasefire could lead to a lasting peace after a global sell-off exposed widespread investor fears that a G20 deal lacked any substantive agreement

–          Beijing has insisted it is moving to liberalize its foreign investment rules and crack down on intellectual property theft

 

Flexibility takes global jobless rate to lowest since 1980 – Pg. 4

–          Global unemployment has fallen to its lowest level in almost 40 years, a breakthrough economists attribute to changes including more flexible working practices, lower wages and rock-bottom interest rates

–          The worldwide unemployment rate has dropped from 8% of the workforce in 2010 to 5.2% in September, the lowest level since 5% in 1980…

–          The survey covered 48 developed and emerging economies which between them account for about 84% of global output

–          The IMF has also forecast that the unemployment rate in advanced economies will fall to 5.2% this year, the lowest level since the 1970s

–          In only a handful of countries – Greece, Italy, Spain and South Africa – was unemployment more than 2% higher than pre-crisis level of December 2007

 

Tariff and rate tightening fears return to haunt investors – Pg. 21

–          The market reprieve triggered by the US Federal Reserve’s perceived dovish turn on rate rises and a tentative Sino-American entente on trade has proven short-lived, setting investors up for a nail-biting end to an already stressful year

–          Last week, the US stock market had its best weekly performance since 2011.  But the S&P 500 on Tuesday suffered one of its biggest one-day declines of recent years, sliding more than 3% in an unnerving and accelerating sell-off

–          Two of the primary bugbears that have plagued financial markets this year remain: fears over rising interest rates and concerns over trade

–          The difference between two- and 10-year Treasury yields dropped into single digits for the first time in more than a decade on Tuesday.  This is one measure of the US yield curve – the line created by plotting all the interest rates for ascending maturity Treasuries on a graph

–          Futures suggest one more increase in 2019 could bring the climb in US interest rates to its summit

–          Tomorrow’s data on US employment and wage growth will be the next test….

 

Answer: (1) Failing to dress for the occasion; (2) Not staying hydrated; (3) Not preparing to entertain yourself; (4) Overlooking your airline choices; (5) Forgetting to pack sleep aids; (6) Sitting for too long; (7) Not picking your seats early; (8) Refusing to upgrade; (9) Packing too much

5 December 2018

 

Question: According to MSN: Money, what are nine (9) IRS audit red flags for retirees?

 

Opec Meeting – Pg. 7

–          The shaleboom has not only transformed rundown towns deep in the west Texas desert; it is increasingly reshaping the landscape of international politics.  The emergency of the US as a born-again energy superpower – one of the key factors in the recent fall in oil prices – has led politicians in Washington to weigh how that might reshape some of the country’s oldest alliances, raising uncomfortable questions for the oil producers in the Middle East

–          …how to respond to the 30% fall in oil prices over the past two months to around $60 a barrel

–          Lower oil prices mean cheaper petrol, providing a boost for consumers

–          The stakes for Saudi Arabia are higher than just a single decision on output.  Its alliance with the US has long been underpinned by oil supplies, with the resultant petrodollars recycled back into the American economy through the purchase of military hardware

–          The shale boom is eroding the foundations of one of the pillars of the alliance.  US net oil imports, which peaked at about 13m b/d in 2005, have dropped to about 2.4m b/d this year.  By the end of next year, they could be running at just 330,000 b/d…

–          Legislation that would allow the US to impose criminal penalties on members of Opec and their allies for acting as a cartel has also been making progress.  For Saudi Arabia, which has extensive assets in the US including the largest refinery in North America, that legislation is a genuine threat

 

Flattening yield curve stirs recession fears as traders prepare for Fed chair to react – Pg. 19

–          A widely followed bond market barometer of economic sentiment stirred fears of slowing economic growth yesterday as traders braced for the Federal Reserve raising interest rates at its forthcoming meeting this month

–          The yield curve – which reflects the difference between shorter- and longer-term US borrowing rates – fell to an 11-year low.  When short-term bond yields rise above long-term ones, it is seen by some investors as an indicator that monetary policy is too tight

–          The difference between two- and 10-year Treasury yields fell to below 12 bps yesterday, its lowest level since June 2007

–          Other measures are also showing warning signs.  The spread between three-month and 10-year yields fell more than 10bp yesterday to just 52bp, and the difference between five- and 30-year yields dropped back to below 40bp, having edged higher in recent weeks

 

Answer: (1) Making a lot of money; (2) Failing to report all taxable income; (3) Taking higher-than-average deductions; (4) Claiming large charitable deductions; (5) Not taking required minimum distributions; (6) Claiming rental losses; (7) Failing to report gambling winnings or claiming big losses; (8) Writing off a loss for a hobby; (9) Neglecting to report a foreign bank account

4 December 2018

 

Question: According to MSN: Money, what are 10 brilliant ways to reduce your taxes in retirement?

 

Mnuchin warns Beijing on truce pledges – Pg. 4

–          …warned China to avoid “soft commitments” in a new round of trade talks expected to follow a ceasefire deal reached at the weekend…

–          According to the agreement that hit the pause button on the months-long trade war between Washington and Beijing, Mr Trump agreed not to ratchet up tariffs on $200bn of Chinese imports from 10% to 25% on January 1, as planned.

–          In exchange, China agreed to buy US goods to narrow the trade gap between the countries and move ahead with structural changes to its economy to address practices such as intellectual property theft and the forced transfer of technology that the US regards as unfair

–          Apart from its main demands, the US has also pressed China to refrain from competitive devaluation of its currency to offset the impact of the tariffs

 

Dallas Fed chief urges caution on further interest rate rises – Pg. 4

–          …seeing signs of weakness in sectors sensitive to higher interest rates, such as  housing, as well as more sluggish growth readings overseas and tepid US inflation data.  …predicted expansion would decelerate over the next two years following a strong performance in 2018

–          The boost from higher public spending may have been “masking” some of the effects on the economy from the Fed’s eight quarter-point increases in short-term rates, as well as its balance sheet reduction programme…

–          The US monetary policy outlook is becoming murkier as official interest rates get closer to neutral levels that neither stimulate the economy nor hold it back, as the expansion loses some of its shine

–          …possible “downside risks” included the waning impulse from fiscal stimulus, the effects of past rate rises, signs of weakness in the housing sector, decelerating global growth, and the impact of tariffs and trade tensions

 

Answer: (1) Pick your retirement state carefully; (2) Contribute to or Convert to Roth accounts; (3) Roll over from a traditional IRA to an HAS; (4) Withdraw extra from tax-deferred accounts in low-income years; (5) Make charitable contributions from RMDs; (6) Invest in tax-free bonds; (7) Strategically withdraw from Roth accounts; (8) Harvest Capital losses in High-Income years; (9) Bunch itemized deductions; (10) Cut your expenses