Author: Roger Staiger

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)

1 December 2018

 

Question: According to MSN: Lifestyle, what are the top 10 causes of death in American (#’s based on 2017)?

 

Credit markets set for worst year since 208 as investors shed corporate debt – Pg. 1

–          Investors pulled more than $5bn from funds investing in corporate bonds in the past week, as the credit market heads for its worst year since the financial crisis a decade ago and concerns mount over the outlook for 2019

–          Rising US interest rates, the Federal Reserve shrinking its balance sheet and the ECB ending its bond-buying programme have stirred worries over a new era of “quantitative tightening” that might rattle financial markets

–          Corporate debt has emerged as one of the focal concerns…

–          US corporate bond yields have been climbing steadily this year, to an eight-year high of 4.36% on Thursday.  That has inflicted a 3.9% loss on investors so far in 2018, putting it on track for the worst year since 2008

–          Corporate debt as a percentage of US GDP is at a record high…

 

Fed considers adjustment to keep interest rates on track – Pg. 4

–          The US Federal Reserve is preparing the ground for a further tweak to interest rates to ensure it keeps borrowing costs exactly where it wants them – with the change potentially set to happen before its next formal policy meeting

–          …considering a “technical adjustment” to one of the rates that the central bank uses to ensure the federal funds rate remains well within the target range it wants, currently 2% to 2.25%

–          The potential change to interest on excess reserves or IOER, would follow a move the Fed made back in June, when it raised it by 20bps, rather than the normal 25bps

–          An alternative would be to go back to a system similar to the pre-crisis one, in which a relatively scarce quantity of reserves is held by the banks and the central bank conducts frequent interventions to hold official rates close to its target

 

Treasuries catch little relief despite dovish Fed – Pg. 11

–          Federal Reserve Chairman Jay Powell’s more dovish stance helped buoy stocks this week and briefly tipped the 10-year US Treasury yield below the 3% mark for the first time since mid-September

–          One of the most notable aspects of the “Red October” sell-off that has continued to echo and fray nerves in November is the lack of a strong rally in Treasuries, the traditional haven asset for investors

–          Despite US equities erasing the last of their 2018 gains, the 10-year Treasury yield – the most widely watched interest rate in the global economy – has only grudgingly dipped lower

–          The Fed is still widely expected to lift interest rates again later in December…

 

Answer: (1) Suicide (47,173); (2) Kidney disease (60,633); (3) Influenza and Pneumonia (55,672); (4) Diabetes (83,564); (5) Alzheimer’s Disease (121,404); (6) Stroke (146,383); (7) Chronic Lower Respiratory Diseases (160,201); (8) Accidents/Unintentional Injuries (169,936); (9) Cancer (599,108); (10) Heart Disease (647,457)

30 November 2018

 

Question: According to MSN, Lifestyle, what are 17 surprising signs your hair will go gray?

 

Deutsche Bank raided by police probing dirty money allegations – Pg. 1

–          …broad criminal investigation into alleged money laundering

–          …carried out in the bank’s wealth management division…

–          The investigation was triggered by documents published in 2013 and 2016 as part of the so-called Panama Papers and “offshore leaks” disclosures, where millions of records detailing use of tax havens to shield wealth were passed to a consortium of journalists

 

Trump’s former lawyer admits lying – Pg. 2

–          …pleaded guilty yesterday to lying about the work he did for the US president on a Moscow real estate deal….

–          (Prof Note: It is never worth it.  Prosecutors must get lucky one day to find the guilty, the guilty must get lucky every day that the prosecutors do not find them.)

 

Australia’s central bank hit by scandal – Pg. 4

–          The Reserve Bank of Australia has admitted that two subsidiaries were fined a record A$22m in 2012 for offering bribes to foreign officials in a decade-long scandal that was the subject of court suppression orders until this week

–          Charges linked to the scandal involved conspiracies to bribe officials in Malaysia, Indonesia, Nepal and Vietnam between 1999 and September 2004

 

Federal Reserve attack is just a distraction – Pg. 9

–          When the Fed chair modified his tone – fractionally – on policy, noting that rates were “just below” levels that would be neutral for growth and inflation, the stock markets soared as investors concluded that he was changing course after Mr Trump’s broadside

–          …Fed officials had been saying for a couple of weeks that they find it very hard right now to see where the “neutral rate” should be, and thus how much further rates should rise

–          …risky corporate debt has surged and “highly leveraged borrowers would surely face distress if the economy turned down”.  Another was the raging debate about how fast the Fed should reduce its balance sheet.  This is receiving little or no public attention…

–          Investors should also consider the relative silence around the fact that the US deficit is nearly the $1tn mark for the first time in history and recent signs that that the US recovery is softening.  Consumer confidence and house sales have declined and US farmers are suffering as soyabeans rot in silos, amid the trade war with China

 

US dividends trail rest of world despite tax cuts – Pg. 12

–          Stripping out special dividends and currency swings, payouts rose by an underlying 7.3% in the third quarter of 2018, …

–          The $120bn returned to shareholders in the period set a record, but the underlying growth rate was lower compared with a global pace of 9.2%, and far behind the 28.2% rise in US earnings…

–          Companies have used the largest share of the windfalls from the tax reforms to buy back their own shares.

–          Buybacks…increase earnings per share, allow companies to smooth volatility in their stock and send a message that boards think their stock is undervalued…

–          US groups also favour buybacks because of their tax treatment: investors pay taxes on dividends in the year they receive they but can defer paying taxes on share gains until they sell

 

Answer: (1) You’re a natural redhead (Prof Note: My hair remains Auburn…War Eagle!); (2) You are Caucasian; (3) You have had chemotherapy; (4) Your constantly stressed; (5) You smoke; (6) You are missing key nutrients in your diet; (7) You have diabetes, pernicious anemia, or thyroid problems; (8) You are failing to care for your scalp; (9) Your parents went gray early; (10) You have vitiligo; (11) You have alopecia areata; (12) You shed hair often (Prof Note: I still remember my freshman year roommate.  My date had long blond hair and she was always brushing it (I mean CONSTANTLY).  My roommate would then take the hair from my brush, after she left, and put it in an envelope.  He would, this is NO joke, take it out when he wore a dark shirt or jacket and throw on his shouder.  I will admit I thought it a novel idea.); (13) You have heart disease; (14) You are over the age of 50; (15) Your hair is more coarse than before; (16) You have experienced trauma; (17) You spend too much time in the sun)

29 November 2018

 

Question: What percentage of Americans carry credit card debt from one month to the next?

 

Powell sparks rally as investors detect signs of slowing rate rises – Pg. 1

–          The Federal Reserve chair declared US interest rates were closing in on “neutral” levels, triggering a stock market rally as investors interpreted the comments as a sign the central bank was preparing to slow down its rate-rising programme

–          Rates are hovering “just below” estimates of neutral – the level that neither causes growth to accelerate nor slow down – ….in a possible sign that policymakers may decide they do not need to lift them much further

–          The S&P 500 was up 1.6% in afternoon trading, jumping a full percentage point after Mr Powell’s speech

–          The Dow Jones extended its gains to trade 1.9% higher and the Nasdaq Composite was up 1.9%

 

Fed flags risks of UK no-deal and Italian debt – Pg. 3

–          The Federal Reserve has flagged a hard Brexit and Italian sovereign debt sell-off as near-term risks to the US financial system in a stability assessment

–          A no-deal Brexit or an intensification of euro area sovereign debt concerns could trigger market volatility and a “sharp pullback” by investors from riskier assets similar to that seen after the 2016 Brexit vote,…

–          The report also highlighted the risk of an escalation of trade tension or geopolitical uncertainty that could erode risk appetite and trigger a “particularly large” drop in asset prices

–          Overall vulnerability in household credit were “moderate”, with debt levels contained relative to incomes.  Business sector debt was at a “historically high” level relative to GDP, it found, and there were signs of deteriorating rate credit standards

–          Leveraged loans have seen by far the quickest expansion among credit classes examined, recording average annual growth of 15% between 1997 and the second quarter of 2018

–          Risky business debt, which includes high-yield bonds and leveraged loans, rose 5% in the year ending in the third quarter of 2018 and stands at over $2tn

–          The Fed flagged up elevated asset prices relative to their historical ranges across markets including high-yield corporate bonds, equities, commercial real estate and farmland.  Big banks were strongly capitalized and leverage among broker-dealers was far lower than before the crash

 

US fear gauge higher than European peer in sign of post crisis shake up – Pg. 19

–          Europe’s volatility index is trading well below its more famous US counterpart, reversing their usual relationship and highlighting how the post-crisis market dynamics have been upended this year

–          But the US stock market has experienced several flashes of turbulence this year, overturning the Vix-Vstoxx relationship and underscoring why many analysts and investors say markets have undergone a “regime change” in 2018

–          So far this year, the average “spread” between the two volatility indices has been close to zero.  And it has been negative since the end of the summer.  In other words, European volatility has been muted relative to US turbulence

–          Volatility indices such as Vix capture the level of stock market turbulence implied by options prices and for the most part simply reflect the actual, “realized” volatility of the equity indices that underpin them

 

Answer: nearly 40.00% (according to MSN: Money)