Category: Financial Times Summaries

3 September 2019

 

Question: According to MSN: Money, what is not covered by homeowners/renters insurance in case of a natural disaster?

 

Investors pump $5bn into gold as rising global risks fuel ‘fear trade’ – Pg. 1

• Holdings in gold-backed exchange traded funds surged to their highest level in six years last month, as investors ploughed almost $5bn into the metal as part of a “fear trade” responding to mounting political risks
• Investors’ demand for gold has helped propel the biggest gold-backed ETF – the SPDR Gold Shares – to become the 10^th-largest in the US, …with assets under management of $43bn. It has narrowly outperformed the S&P 500 stock index this year
• The recent tumble in bond yields globally has only added to gold’s appeal, since it lowers the “opportunity cost” of holding a metal that provides no yield…

 

Turkey shakes off recession fears after economy expands – Pg. 5

• A surge in government spending and bank lending – aimed at boosting the economy ahead of important local elections – lifted the country out of recession in the first part of the year …

 

Central banks need new tools to tackle the next downturn – Pg. 9

• The most consequential policy mistake in economic history was the lack of proper response to the financial crash of 1929. Central  banks failed to recognize the impact of bank failures and debt-deflation dynamics, and monetary policy was too tight
• Until now, monetary policy has essentially worked by lowering interest rates to stimulate demand and the appetite for risk
• A third of all government bonds globally – and two-thirds in Europe – have negative yields. Even in the US, which still enjoys moderate growth, long-dated Treasury yields are at or near record zero in a recession
• To be feasible, a policy of going direct should have the following elements. First, a clear definition of the circumstances that call for such unusual policy co-ordination.  Second, an explicit inflation objective that fiscal and monetary authorities are jointly held accountable for achieving.  Third, a mechanism that enables the prompt deployment of productive fiscal policy measures, without the negative policy impact on inequality

 

Answer: Damage from flooding and earth movement

2 September 2019

 

Question: According to MSN: Money, what do parents in Washington DC shell out, on average, for infant care per year?

 

Argentina battles to limit debt crisis as election booms – Pg. 3

• The peso fell by 26% against the dollar during August
• …Congress was not consulted when Argentina rushed to the IMF for a $57bn bailout amid a currency crisis last year

 

US hits China with fresh 15% tariffs as trade war escalates – Pg. 3

• Washington added tariffs to 15% on $112bn of goods from China yesterday, expanding the trade war in a move that will probably raise prices for American consumers
• Until now, tariffs from the Trump administration have raised costs for businesses with supply chains that reach across the Pacific. Inflation remains low in America, and importers have had difficulty passing their costs on to consumers.  The new tariffs, however, will hit “final goods” such as shoes and clothing, and could show up in household budgets in the fall
• For a year, trade threats against China and Mexico have depressed business investment in the US, which declined in the second quarter of 2019. But consumer spending, an important part of the US economy, has remained strong

 

Fed to lift lid on US growth, as bonds look to Labour Day boost and Hong Kong prepares for falls – Pg. 8

• The Fed will release its monthly “beige book” of data on the domestic economy on Wednesday. Poor data will indicate evidence pointing to a weakening global outlook has reached the US
• Last month, the beige book showed modest economic growth, easing concerns companies were cutting spending
• Labour Day, the first Monday of September, typically siganls the end of the summer doldrums for US capital markets, as companies ready sales of stock and bonds
• Investment grade bonds had their best August since 1982, …as fund managers loaded up on higher quality debt that could offer significantly higher returns than the US government

 

Answer: $24,243/year or $2,020/mo

31 August 2019

 

Question: According to MSN: Money, what is the 20-step guide to a horrible retirement?

 

Australia cuts Great Barrier Reef outlook to ‘very poor’ – Pg. 3

• The Great Barrier Reef is the world’s largest living structure and has become a potent symbol of the damage wrought by climate control
• The World Wide Fund for Nature warned the downgrade from “poor” could also prompt Unesco to place the area on its list of world heritage sites in danger – a move that could hit the $4.3bn economic contribution the reef makes through tourism

 

German retail sales fall as growth slows – Pg. 4

• German retail sales took a bigger battering than expected in July, retreating from a gain recorded in June to reveal the biggest drop this year in the latest indication that Europe’s largest economy could well slide into recession
• The Eurozone is developing a two-speed economy as rising US-China trade tensions and weakening global demand weigh on Germany and Italy, while France benefits from its stronger domestic demand base
• Seasonally adjusted sales in real terms fell 2.2% last month compared with June,…
• The single currency bloc’s central bank targets a level of below, but close to, 2%
• Excluding food, energy, alcohol and tobacco – which tend to have relatively volatile prices – the eurozone’s montly harmonized prices series rose 0.2% in August, the region’s statistics office said yesterday, in line with analysts’ expectations – up from 0.6% decline in July
• The same measure of core inflation rose 0.9% year-on-year,…
• Joblessness in the single currency area stayed at 7.5% in July,….

 

US consumers spend as Fed ponders further cut in rates – Pg. 4

• The core personal consumption price index was up 1.6% in July versus the same month last year, as it had been in June, …
• It was up 0.2% from the pervious month.
• Personal spending adjusted for inflation rose 0.4% in July from June, higher than analysts predictions of 0.3%. The trend was particularly apparent in durable goods, which rose 1.1% in July
• On inflation, the Fed aims at a core personal consumption expenditure target of 2% year-on-year growth, a goal it has had difficulty reading consistently since the global financial crisis. The index has remained below target all year, even as wage growth accelerates

 

Renminbi hit by biggest monthly slide for 25 years as Beijing braces for long trade war – Pg. 13

• China’s currency dropped 3.8% against the dollar in August, completing its biggest monthly fall in more than a quarter of a century as Beijing hunkers down for a protracted trade war with the US
• Beijing had allowed the currency, which it controls through a managed float, to fall to Rmb7.1567 a dollar late yesterday.
• The currency’s fall may draw the ire of Washington, which this month officially labelled China a currency manipulator. But it will also help mitigate the impact of US tariffs, which have expanded to cover virtually all goods imported from China
• Beijing this month allowed the currency to cross the threshold of seven to the dollar for the first time since the global financial crisis after Donald Trump, the US president, announced a duty of 10% of the $300bn of imports from China that were not already facing tariffs
• Mr Trump has continued to escalate the trade war, last Friday promising to raise that 10% tariff to 15% as well as increase existing tariffs on another $250bn-worth of Chinese imports from 25% to 30%
• The monthly fall for the onshore rate is the largest since China unified its official and unofficial, or market, exchange rates in 1994, which effectively halved the currency’s official dollar value
• China abandoned its currency peg and moved to a managed floating exchange rate regime in 2005

 

Answer: (1) Keep thinking retirement is so far in the future that there is no need to act now; (2) Avoid saving when you are young and instead play catch-up starting at age 50; (3) Bank on being able to work until age 75 or beyond; (4) Live for today; (5) Invest in individual stocks you pick personally; (6) Ignore all the retirement planning tools available to you; (7) Never contribute to your 401(k); (8) Keep the same mix of investments at age 60 that you had at age 25; (9) Take your social security at age 6; (10) Only save in tax-deductible accounts and do not bother with the Roth, let alone taxable accounts; (11) Ignore the need to provide for survivors; (12) Make sure all your savings are in tax-favoured plans, so they are not easily accessibly in an emergency; (13) Assume there will be a major drop in your spending when you retire; (14) Cancel that long-term-care policy you bought years ago; (15) You have been waiting so long to by that boat or RV. You deserve it; (16) Invest heavily in your employer’s stock; (17) Do not worry about inflation after you retire; (18) When someone tries to explain the power of compounding, do not bother listening to all that gobbledygook; (19) When there is a big drop in the stock market, make sure you shift into bonds; (20) Still got money left for retirement? Tell your adult kids you are always willing to help them out financially

30 August 2019

 

Question: According to MSN: Money, what is the median household income for Washington-Arlington-Alexandria?

 

Russians feel weight of debt burden – Pg. 2

• Average real incomes in Russia have stagnated for five consecutive years
• On average each person in Kalymkia…owes 83% of the local monthly salary – the highest rate in Russia
• Total consumer debt has grown 25% in the past year to about Rbs16tn, ….nearly double the total before sanctions and a commodities lump plunged the country into recession in 2014
• Half of that figure is the result of a boom in unsecured loans, which typically carry interest rates of 20 to 25%. GDP growth, which has dipped to 0.9% this year, would probably have been zero were it not for the rise in lending, ….

 

Falling yields on US Treasury paper act as incentive for investors to pick stocks – Pg. 17

• The plunge in yields on US Treasury bonds means investors can make more from dividends on S&P 500 shares than on the longest-dated government debt
• The upending of the traditional relationship between stocks and bonds has the potential to drive more savers towards the stock market
• The yield on 30-year Treasuries has this week fallen decisively below the 1.98% dividend yield from US stocks. On Wednesday the 30-year yielded 1.94%.  shorter-dated Treasury bonds and notes have offered less than dividends for some time
• While companies aim to increase their dividends and are loath to cut them even in times of crisis, the collapse in long-term bond yields and the inversion of the yield curve – in which short-term yields are higher than long-term yields – has in the past heralded a recession. A slowdown could put dividends at risk, not to mention the danger of a big fall in share prices, which were until recently setting record highs
• As a result, a higher dividend yield is no guarantee of stock market outperformance. The dividend yield for European stocks has been consistently above that of benchmark 30-year sovereign bonds yet European equities have underperformed global stocks
• The US-China trade war has hit investor confidence, and a waning profit outlook for US companies increase the risk that listed groups may curtail the dividends and share buybacks that have also helped prop up prices. S&P 500 companies are on course to increase earnings per share by 2.4% this year, against 7.7% anticipated at the start of the year

 

Answer: $99,669 also #8 for middle class not being able to afford housing