Author: Roger Staiger

9 October 2018

 

Question: According to MSN:Money, what are 9 things you’ll regret keeping in a safe deposit box?

 

US due share Nobel Prize for economics – Pg. 2

–        US economists William Nordhause and Paul Romer have jointly won this year’s Nobel Prize in Economics Sciences for their work on climate change and innovation

–        Mr Nordhaus, a professor at Yale, won recognition for his pioneering work integrating climate change into long-run macroeconomic analysis

–        …first to create a quantitative model describing the global interplay between the economy and climate

–        Paul Romer, a professor at New York University’s Stern School of Business – and former chief economist at the World Bank – has been recognized for work that laid the foundations of endogenous growth theory, which argues knowledge and innovation can spur growth

–        One of his first big contributions was to show that “ideas” were the missing ingredients of economic growth, contributing as much as the traditional inputs of labour, skills and physical capital – and that this could help explain the big variation in growth and living standards between otherwise similar countries

 

Wooing a sceptic (America and the IMF) – Pg. 7

–        In recent months, the US has supported the biggest IMF loan in history, a $50bn aid package for Argentina to try to stabilize the debt-stricken Latin American nation.  After the initial effort bailed to reassure markets, the total was bumped up to $57bn – with US approval

–        Other countries – including EU members – are waiting for the US to make a first move in order to stake out their own positions

–        The IMF is a profitmaking institution that does not dispense outright aid but attaches fiscal, monetary and other conditions to its lending – sometimes, as in the case of Greece, controversially – to recuperate its money

–        It has about $1tn in resources to tackle any new financial distress around the world.  But about $450bn comes from its permanent “quota” – based resources, which are drawn from countries based on the size of their economy and reflected in weighted representation on the IMF board.  The most influential countries, including the US, China and Germany, have single seats, but others have to share with economically and geographically similar nations

–        The rest comes from special borrowing arrangements with individual countries, and pools of countries, which are due to expire between 2019 and 2022

–        High levels of indebtedness in many advanced economies may mean there is less space for fiscal stimulus.  New regulatory space for fiscal stimulus.  New regulatory regimes around bank rescues are untested and could lack political support, creating chaos in the markets

–        Signs of trouble in emerging markets and even in advanced economies such as Italy – where the new government is bent on defying EU rules on fiscal discipline, triggering a sell-off in the country’s debt – have not yet been enough to create a sense of urgency around the issue

 

Answer: (1) Cash (Prof Note: Banks typically keep a small amount of cash on hand.  Soooo…if you believe you may need $10,000 or more in a hurry…best to keep in safety deposit box); (2) Passport (Prof Note: Great place to keep but remember to plan.  Can only access when bank is open.); (3) Original copy of your will (Prof Note: Completely disagree!  Though a good place for the original is with your attorney); (4) Letters of Instruction (Prof Note: Again, keep copy with your attorney); (5) Durable Power of Attorney (POA) (Prof Note: Again, keep copy with your attorney); (6) Advance Directives for health care (Prof Note: Again, keep copy with your attorney); (7) Uninsured Jewelry and Collectibles (Prof Note: Just remember if they are to go to different individuals as per Letters of Instruction, remember there will probably just be one person accessing the safety deposit box after death.  How do you know this person will do the correct thing?  How do you prove they were even there?); (8) Spare Keys; (9) Illegal or dangerous items (Prof Note: You walk across a bank lobby to place a firearm in your safety deposit box.  You trip and the firearm’s presence is known. Welcome to jail!)

8 October 2018

 

Question: According to MSN:Money, what 6 things should one stop doing if they hope to be rich?

 

China eases rules on banks’ reserves to unlock cash and lifting slowing economy – Pg. 1

–          China’s central bank has moved to inject more cash into the financial system by cutting reserve requirement ratios for most commercial banks…

–          The easing measure…follows weak investment and manufacturing data, and comes as a deepening trade war with the US raises pressure on the world’s second-largest economy

–          Christine Lagarde, managing director of the IMF, warned last week that the global economic outlook was turning for the worse…

–          China’s foreign exchange reserves fell $22.7bn in September from the previous month to $3.09tn…

–          Growth in China’s manufacturing sector stalled in September after more than a year of expansion, …

–          China’s economy expanded by an annualized 6.7% in the second quarter, its slowest pace since 2016…

 

US to open more funding for the IMF as expiry dates loom – Pg. 2

–          …some of the IMF’s funding would expire between 2020 and 2022 – ….

–          The IMF….is hoping to convince its members to increase the fund’s permanent reserves – in tandem with an upgrade in governance – next year, with initial conversations to gather pace among officials this week on the margins of the meetings

–          The IMF has about $11tn in available reserves for lending, but more than half of that is due to expire in 2022

–          The experience has down US officials that the IMF can be helpful in stabilizing countries in the western hemisphere that have friendly relations with Washington, ….

–          For now, the US is suggesting it would not support any new IMF interventions in advanced economies, particularly in Europe, where Eurozone countries have set up a separate bailout fund to deal with crises in the single currency

 

Strong global growth fragility in emerging markets – Pg. 3

–          Momentum in the global economy remains strong, if weaker than hoped at the start of the year, but severe strains have already been seen in Argentina and Turkey and these are starting to ripple out to other emerging economies

–          The Tiger index, which tracks a wide range of official economic data, financial market prices and confidence indicators and compares them with historical values for the largest economies, suggests global growth has come a little off the boil

–          With the US economy notably strong, pushing unemployment to its lowest level in almost 50 years, and other advanced economies still growing faster than long-term sustainable rates, the short-term concern in the global economy is centred on emerging economies

–          In advanced economies, the long upswing has been welcome in lowering unemployment to pre-crisis levels in most economies, but that has not repaired all the damage of the crisis, leaving them vulnerable to a new shock

 

Dark clouds gather over US housing – Pg. 9

–          Nationwide, sales and building permits are down.  Several once soaring markets, including New York City, the San Francisco area, and Denver, have been softening.  Construction activity has been slowing too, which is a concern given the disproportionate role that home building plans in the US economic growth

–          The problem is, ironically, the growth of the housing market itself, which has been bifurcated and has outpaced the ability of most consumers to pay for shelter

–          A wider fall in house prices is not expected to cause a 2008-style systemic collapse, because most mortgages are now lent at fixed rates and borrowers are required to show more evidence they can repay their lenders

–          That has reduced the risk of mass foreclosures, but it has also meant that much of the investment gains from housing in the past decade have flowed to the oldest, richest buyers.  Younger people have an average of $30,000 in student loans and have come of age in a weak employment market

–          Asset growth, rather than income, has driven so much of the US economy in recent years

–          Four decades ago, a 20% decline in house prices would have created negative home equity equivalent to about 1% of the aggregate income.  Today, the same drop would amount to 5%, or roughly $600bn in negative equity

 

Answer: (1) Blowing through a budget (Prof Note: When you make the budget, one must be true to one’s self (note…there are times, e.g. medical issues, where budget be damned!); (2) Waking up too late (Prof Note: One of the blessings I give myself is non-use of alarms.  I still am at my desk by 8:00am.  Of course my commute is about 10’ J); (3) Ignoring that book on your side table (Prof Note: Reading is such a joy.  As I age I realize it is an ultimate luxury as one must have the time); (4) Hating a job (Prof Note: If you are looking at the holiday calendar to learn when your boss is on holiday as you do not want to coincide holidays AS when you boss is out it is a HOLIDAY….you need to change jobs! J); (5) Shying away from investment opportunities (Prof Note: Get in the game.  You cannot win if you are not playing!); (6) Neglecting body and mind (Prof Note: Exercise and travel…better body and mind)

6 October 2018

 

Question: According to MSN:Money, what are 6 silly tidbits of Money Advice that will make you poorer?

 

US jobless rate at lowest since 1969 – Pg. 1

–          The US unemployment rate has fallen to its lowest level since 1969, underscoring the strength of the country’s economic growth and giving fresh fuel to a week-long bond-market sell-off

–          US Treasury yields hit multiyear highs yesterday as investors predicted a hardening of the Federal Reserve’s determination to push through further rises in short-term rates after another quarter-point increase last month, with the next move widely expected in December

–          The 10-year Treasury yield, which had been climbing earlier this week, rose nearly 5bps to 3.24% – the highest since 2011

–          The jobless rate dropped to 3.7% in September, slightly lower than forecasts of a 3.8% rate.  Non-farm payrolls rose by 134,000 in September…

 

US business – Pg. 8

–          …GE’s only strategic mis-step….emblematic of two of the company’s flaws: a weakness for dealmaking, and an inability to respond effectively to a changing market

–          …original member of the DJIA at its creation in 1896, has lost more than 80% of its market capitalizations since 2000

 

Italy’s deficit plans push sovereign yields higher – Pg. 15

–          The government’s plan targets a budget deficit of 2.4% of GDP in 2019, to be gradually reduced to 2.1% in 2020 and 1.8% in 2021, …

 

Answer: (1) Credit cards are evil (Prof Note: Used responsibly they can provide rewards, e.g. flights); (2) Following a rigid spending plan will set you free (Prof Note: You have to live….a little!); (3) sign up for life insurance – or else (Prof Note: you are more likely to be disabled during your career than to die!); (4) 10% is the sweet spot for retirement contributions (Prof Note: 10% is a good target but must be focused); (5) You should buy a house because it is a good investment (Prof Note: What I do like about traditional mortgages is that they are forced savings vehicles); (6) Home equity loans are a great way to get out of a hole (Prof Note: Be smart and understand what one is doing!  I am a huge proponent of home equity line usage but ONLY AFTER paying off the house.  Then, using the HELOC’s for capital improvements, etc.  Remember: $1.00 must produce $1.00+ or you are going backwards!)