29 August 2018 FT — Articles to Read

29 August 2018

 

List-Serve Comment (w/ permission): In addition to your excellent Prof Notes, I offer my own experience.

As a student, in order to save on living expenses, I was a “mother’s helper:” in exchange for room and board, I lived with various families and worked 15 hours a week, which included eating dinner with them. Hours varied, depending on family needs and structure: some needed help around dinner time during the week and babysitting on weekends, others wanted me to make dinner and wash dishes every day, etc.  I did some yard work as well, mostly because I enjoyed it.  Experiences ranged from awful to wonderful, so much so that I am friends with one family now 40 years later and we exchange visits even though we live on opposite coasts.

 

Years later the roles were reversed.  When our children were small, my husband and I employed young women in the same role.  Again, the experiences ranged from awful to wonderful.  One young woman even stayed with us after college while she took a full time position so that she could pay down her school debt.  We have stayed in touch with her.  She lives in another state and has stayed us with her family many years later.

 

Men can live in and help with chores, home maintenance, etc.  Finding an agreeable situation for both parties is challenging, and both sides have to be flexible and up front about their expectations.  But, can you imagine how much one can save by not paying for room and board for 3-4 years?

 

While this may not be for everyone, people should consider it.

 

Question: According to Woman’s Day on MSN, what are 6 Heart Attack warning signs?

 

Job security Rules aim to restore Detroit’s fortunes and benefit steel mills – Pg. 4

–          …75% of the parts used in US and Mexican-assembled vehicles must come from North America.  The current level is 62.5%, far lower than the 85% figure the US originally pursued in the talks

–          Between 40 and 45% of the content of the vehicle must be made by workers earning $16 an hour or more

–          The rule will affect the supply chain companies far more, as less than 10% of the value of a vehicle is in the assembly

–          Another clause will require manufacturers to buy steel and aluminum from inside North America, with the aim of increasing output at US mills

–          Factories have until 2020 to comply

–          Cars that fail to pass the rules allowing unfettered access will be subject to tariffs of 2.5% under the WTO’s most favoured nation status

 

Hostility to high pay grows as big UK groups see shareholder revolts double – Pg. 11

–          Shareholder rebellions over executive pay at the UK’s biggest companies have doubled this year, ….

–          High pay has risen up the agenda for investors in the face of sustained public anger and criticism from politicians over big payouts for corporate bosses

 

Tumbling peso adds to Argentine obstacle course – Pg. 17

–          Argentina may have reluctantly fallen back in the embrace of the IMF but the biggest aid package in history has not managed to inoculate the country from an onslaught of market pain

–          Many investors felt reassured when Argentina received a $50bn credit line from the IMF in June….

–          Argentina’s currency has weakened more than 9% against the dollar since the start of the month, cementing its position as one of the biggest losers in the broader EM rout triggered by the Turkish Lira’s tumble

–          In July, consumer prices rose 3.1%, bringing the 12-month inflation rate to 31.2%, about 10% above the IMF’s 2019 target

–          By year-end….forecast that Argentina’s debt will exceed 71% of its annual economic output

 

Answer: (1) Dizziness; (2) Upper body pain; (3) Fatigue; (4) Sweating; (5) Nausea; (6) Shortness of breath

28 August 2018 FT — Articles to Read

28 August 2018

 

Question: According to CNBC, what are four (4) things extreme savers refuse to spend money on?

 

US and Mexico in breakthrough on restructured trade agreement – Pg. 1

–          The US and Mexico have reached a breakthrough in efforts to revamp the Nafta trade agreement, potentially ending an acrimonious impasse in relations between the countries since Donald Trump took office

–          It was unclear whether Canada…would sign up to the deal

–          The two sides agreed to stricter rules for Mexican car exports to the US, including requirements that 75% of the content be made in North America, and that 40 – 45% of the content be made with workers earning at least $16/hour – a measure aimed at discouraging manufacturers from relocating to Mexico

–          The deal keeps tariff-free trade for farm products, but with new measures on health standards

 

European Economy – Running out of steam – Pg. 7

–          Yet the labour shortages rippling through central Europe are the result of demographic decline and economic success.  Having peaked in the late 1990s, the region’s population is now shrinking, wizened by emigration and tumbling birth rates

–          ..the combined population of Poland, Hungary, the Czech Republic and Slovakia – known as the Visegrad Four, or V4 – will fall from about 64m in 2017 to just 55.6m by 2050, or about 13%

–          …economies are set to expand by around 4% this year

 

Higher yielding trades hit by macro pain – Pg. 18

–          …four key areas: Emerging market local currency denominated debt, Eurozone bank shares, high-yield corporate paper and Italian government bonds….

–          …dominant market trend is the surging US dollar and an increasing sense that, in growth and interest rates policy terms, the US is moving ahead of other countries

–          ..US equities have recovered from February’s volatility shock with the S&P 500 back in record territory

–          The divergence in economic outlook between US and other countries has injected greater discernment into the market – European and Asian junk bond indices have suffered while the US is up 1.7% on the year

 

Answer: (1) Excess living space; (2) Lunch and dinner everyday; (3) Things that aren’t important to them; (4) Excessive car payments

27 August 2018 FT — Articles to Read

27 August 2018

 

Question: According to MSN:Money, what 8-step plan do financial planners recommend for paying off credit card debt?

 

Price of Trump’s tariff war likely to be paid by consumers, warn Fed chiefs – Pg. 1

–          Moves by US companies to shift the cost of President Donald Trump’s tariffs to their customers risk complicating monetary policy decisions as the Federal Reserve seeks to keep inflation steady,…

 

Tinkering at the edges will not deliver a stronger euro – Pg. 9

–          …idea of establishing a competitor to the Society for Worldwide Interbank Financial Telecommunication – the global payments and financial information system better known as Swift

–          Since it began operating in 1977, Swift has provided a vastly more efficient cross-border payment infrastructure than the previous system based on communication by telegraph messages.  A modern competitor to Swift may or may not be useful, …

–          The Russian central bank has already set up an alternative, for domestic use mainly

–          The reason why European companies are vulnerable to US sanctions has nothing to do with Swift

–          Swift is based in Belgium and subject to Belgian law.  The US exercises no formal control over its governance

–          …the true source of US power lies in the global role of the US dollar and the predominance of the American financial system

–          The Trump administration is also in the position to cut foreigners out of US financial markets, or stop them from travelling to the US if they continue to do business with Iran.  These are known as secondary sanctions…

–          The euro is the world’s second largest currency, but is trailing the dollar on all important metrics by wide margins: for central reserves, cross-border payments and investments; for foreign exchange; and in debt and loan markets

–          It does not seem possible for the euro to strengthen its global role without a single safe asset – a Eurobond.  Modern financial markets require the presence of risk-free securities to function effectively

 

Burden of knowledge/US student debt surges – Pg. 13

–          The US student loan burden has swelled past $1.5tn, despite lending volumes falling for more than half a decade, as graduates fall behind on payment plans and debt relief programmes fail to offer sufficiety succor

–          The overall size of US student loan debt has grown by $500bn since the 2010-11 academic year, ….but the credit rating agency notes that loan origination has declined every year since then

–          The student loan delinquency rate – how many loan balances are overdue by 30 days or more that were not delinquent the previous quarter – fell to a 12-year low of 8.8% in the second quarter of 2018,…

–          The unemployment rate for graduates with a bachelors degree or higher stands at just 2.2%, compared with 5.1% for those with less than a high-school degree.  Nonetheless, student debt remains the worst-performing area of consumer credit

–          (Prof Note: How can young people possibly understand the ramifications and consequences of this crushing debt when I (sorry if this is perceived as arrogant…not meant to be) when my own thoughts (I am well into my 40s) are still maturing on amortization and debt?!  One things I say in class, “Debt <> Debt”.  That is true but also very complicated to understand and I am still maturing in my understanding an defining.)

 

Answer: (1) Change your spending patters (Prof Note: Track Starbucks to the penny); (2) Figure out what you owe (Prof Note: Identify, Quantify, Fix); (3) Roll your balances into a new form, such as a lower APR card; (4) Tap into your assets (Prof Note: Be careful with tax consequences when selling the bonds Aunt Ida left you in her estate.  Be prudent); (5) Choose your debt paydown strategy (Prof Note: Speak with several advisors/experts.  You must learn!); (6) Focus on one card at a time (Prof Note: Small battles, lead to bigger, lead to winning the war); (7) Break down big paying-off-debt goals into smaller ones (Prof Note: I call this making it palatable.  Get a calendar, build an income statement with budget, and plan.  I still do this with projects today.  It is never as scary when written down with a plan.); (8) Promise yourself to never carry a credit card balance again (Prof Note: I learned from attorneys to never make “absolute” statements.  Promise yourself that without a medical emergency, etc, you will never…)

25 August 2018 FT — Articles to Read

25 August 2018

 

Question: According to MSN:Money, what are 10 things you’ll spend less on in retirement?

 

Fed chief shrugs off inflation fears – Pg. 1

–          The Federal Reserve does not see risks of the US economy overheating….

–          The Fed has signaled it will lift rates again next month, with a December move also widely expected.  But prospects get murkier in 2019 as rates close in on current estimates of neutral rates – broadly defined as the interest rate that keeps the economy on an even keel

–          …Fed was attempting to navigate between twin risks – moving too quickly and needlessly shortening the economic expansion, and conversely lifting rates too slowly and risking a “destabilizing overheating”

–          Mr Powell’s dovish tone…

 

At a record high, the US market is still shrinking – Pg. 6

–          The US stock market this week reached twin landmarks: an all-time high, and the longest bull run in history

–          The tally of listed domestic companies in the US has almost halved from 8,090 in 1996 to 4,336 last years, …

–          Total US market capitalization is more than 130% of GDP, against 105% in 1996.  But companies are on average older and bigger than they were two decades ago

–          Mergers and acquisitions have brought consolidation in industries from oil and gas to beer

–          IPOs are running at half their annual average level of the 1980s and 1990s

 

Answer: (1) Transportation; (2) Clothing; (3) Groceries; (4) Entertainment; (5) Mortgage; (6) Education; (7) Insurance; (8) Alcohol and Tobacco Products; (9) Pets and Pet Supplies; (10) Taxes