Category: Financial Times Summaries

Published by Roger Staiger

21 September 2018 FT — Articles to Read

21 September 2018

 

Question: According to MSN, what are four (4) retirement planning misakes you probably don’t even realize you’re making?

 

Markets at record high as boom in US drives investor confidence – Pg. 1

–          The S&P 500 index climbed 0.8% by midday in New York, led by technology stocks that have powered much of this year’s equity market rally as well as economy-sensitive sectors such as materials and banks

–          The DJIA also rose 1% to hit a new high, …

–          …domestic economy has received a big fillup from the Trump administration’s swingeing tax cuts

–          Investors now believe the US central bank will continue to raise interest rates in 2019, pushing the yield on the 10-year US government bond to a high of 3.09% yesterday, within touching distance of a seven-year high

 

OECD warns of chilling effect of trade conflicts – Pg. 4

–          The forecasts expect the world economy to grow 3.7% this year and next, a healthy rate compared with the early years of this decade.  Bu the OECD has cut its growth expectations from its May forecast by 0.1% in 2018 and 0.2% in 2019

–          The OECD’s forecast for UK growth was downgraded by 0.1% both this year and next, leaving the projections showing a sluggish 1.3% growth rate this year and 1.2% in 2019

–          The OECD expected jobs growth to remain strong in its largely rich country members

 

Trump threatens Beijing over global postal rates – Pg. 4

–          Mr Trump has threatened to take action if the Universal Postal Union, a UN body, does not change rules that make it cheaper to ship small items from China to the US than within the US itself.  …forces the US Postal Service to subsidize mail form China and other countries, damaging US retailers

–          If the US does take action, it could prompt other countries to increase the prices the US pays to ship packages internationally

–          The UPU sets terminal dues, which dictate how much national post offices must pay their counterparts for handling international mail.  China is classed among the least developed countries, so it pays only a fraction of what developed country post offices do

–          The USPS lost more than $125m handing inbound mail from across the world in 2016.  While a US business pays $7-$9 to send a 1lb package from Los Angeles to New York using priority mail retail rates, the USPS receives only $2.50 for a similar package originating in
China and travelling the same route

–          Terminal dues, which apply to packages up to 4.4lbs were set before the ecommerce explosion, which has connected US shoppers directly with retailers around the world through sites such as Amazon, Alibaba and Ebay

 

Answer: (1) Relying too heavily on Social Security (Prof Note: Be realistic early about the lifestyle desired in retirement and plan for it); (2) Assuming your living costs will drop drastically (Prof Note: I talk to a lot of expats on Nevis.  The general theme is that their costs went up in retirement, as their interests increased); (3) Not taking advantage of catch-up contributions; (4) Forgetting about taxes

Published by Roger Staiger

20 September 2018 FT — Articles to Read

20 September 2018

 

Question: According to MSN: Money, what are three (3) milestones everyone should reach by age 30?

 

Financial Crisis – Pg. 7

–          Until the financial crisis, private equity investors hewed closely to the “buyout” playbook pioneered by Henry Kravis and George Roberts when they founded KKR in the 1970s.  Acquiring companies whole, they would cut costs and load them up with huge amounts of debt while paying the bank back at a low interest rate

–          Now the biggest firms have all but privoted from private equity to private debt, joining a new breed of lightly regulated asset managers that have filled the voice as banks are forced to retreat from risky deals

–          Unlike banks, which are dependent on deposits and other short-term funding, these funds raise money from long-term investors such as insurance companies and pension funds.  Many of the companies they lend  to are owned by other private equity investors.  The funds provide a crucial source of credit for companies that cannot tap the bond markets, …

–          Ten years after the crisis, the rapid expansion in private credit raises the question of whether risks have simply been transferred to a different, less regulators part of the market

–          …$12tn global nonfinancial corporate bond market which now accounts for one-fifth of borrowing by companies other than banks.  There, too, credit quality has been deteriorating; most of the growth in bond issuance has involved companies that are either on the lowest rung of the investment grade ratings or else firmly in junk territory

–          Three of the four biggest US private equity firms now manage more money in credit funds than in their private equity arms

–          Strong covenants were attached to fewer than 30% of the leveraged loans written in the US last year…leaving creditors with little power to intervene if management teams behave recklessly or a company’s profit heads south

–          ..the differences between banks and asset managers are subtle.  Funds that raise their money from public pension funds are capable of inflicting losses on powerful political constituencies, even if they cannot bring down the banking system.  And while asset managers are usually far less leveraged than banks – typically matching a dollar of equity with every dollar or two of debt, compared with the $20 or $30 that banks were borrowing ahead of the crisis – they often have far fewer safe assets such as US government bonds

 

UK regulators put pressure on bank chiefs over plans to shift from Libor – Pg. 19

–          UK authorities have stepped up efforts to wean markets off the tarnished Libor interest rate benchmark, asking chief executives of major banks and insurers for detailed plans to move to alternative rates

–          City regulators are trying to gradually push the financial system off Libor, an interest rate underpinning about $170tn in interest rate swaps, mortgages, consumer loans and credit card rates but which in recent years has been tarnished by a series of manipulation scandals

–          …the FCA will no longer require banks to submit rates that are used in compiling Libor after 2021, it is leaving it up to banks and their customers to move to a new interest rate benchmark rate rather than mandating them to do so

–          In April, the UK began publishing an alternative sterling benchmark that has a reformation of an overnight rate called Sonia; it is based on transactions

 

Woman in Business – FT Special Report

 

Answer: (1) Have a fully loaded emergency fund; (2) Start building a nest egg; (3) Get free of credit card debt

Published by Roger Staiger

19 September 2018 FT — Articles to Read

19 September 2018

 

Question: According to MSN:Lifestyle, what are seven (7) signs you may have clogged arteries?

 

China hits back at trump tariffs by targeting $60bn of US goods – Pg. 1

–          Beijing retaliated against Donald Trump’s decision to impose duties on more than half of all Chinese imports by slapping new tariffs on $60n of American goods and scolding the US president for a lack of “good faith” in bilateral trade negotiations

–          R Trump continued to give few signs he is willing to compromise, warning on Twitter that he was willing to impose another round of duties if China targeted US farmers or blue-collar workers

–          Beijing is targeting fewer goods than Washington because China imports less from the US than vice versa.  US exports to China last year totaled about $130bn, compared to Chinese exports to the US valued at more than $500bn

 

Wall Street shake-up scatters US technology groups – Pg. 19

–          Tech investors are braced for what some have called a “de-Fannging” of the sector – a reference to a handful of big US tech companies that have led Wall Street to record highs in recent years

–          From next week, Facebook an Alphabet will move form information technology into communication services, a revamped sector whose creation is the most striking change in a shake-up of the widely tracked classification system that investors use to help navigate the world’s biggest stock market

–          When the dust has settle, seven tech stocks that represent roughly a fifth of the S&P500 information technology sector will be reclassified as communication services…

–          Some 16 stocks, including Netflix, whose combined market cap accounts for about 22% of the consumer discretionary sector, will also join the renamed sector that is home to just three companies including Verizon and AT&T

–          As a rough estimate, ….the entire sector reclassification will drive about $20bn in trading volume.  The changes mean that the tech sector, which has swelled to account for about a quarter of the total market value of the S&P 500, thanks, in part, to the meteoric rise of the Fanngs, will shrink to about a fifth

–          The revamp of what is currently called the telecoms serevices sector will force investors to rethink what has been considered a defensive part of the market with a high dividend yield

–          The proposed changes will also effect valuations.  The telecoms sector trades at a low forward price-to-earnings ratio of 10.2 Times, …while the forward P/E of the communication services to 18.6 times

 

Answer: (1) Erectile dysfunction (ED); (2) Baldness; (3) Ear Crease; (4) Calf pain when you walk; (5) A tight jaw; (6) Lower back pain; (7) A smoking habit

Published by Roger Staiger

18 September 2018 FT — Articles to Read

18 September 2018

 

Question: According to MSN:Money, what are 15 signs your employer wants you to retire?

 

Fed official eyes rate rise to balance jobs market risk – Pg. 4

–          US financial stability could be threatened if the Federal Reserve keeps borrowing costs too low and allows an overheating jobs market to encourage excessive risk-taking…

–          Concerns that America’s economic boom could lead to hazardous risk-taking in financial markets have begun to feature more prominently in Fed discussions, as the US experiences above-trend growth at a time when tax cuts and public spending rises are fueling the economy

–          The Fed is gearing up for a further rise in short-term interest rates from the current range of 1.75-2.00% in its September 25-26 meeting, with more tightening possible in December and next year as unemployment hovers well below Fed estimates of sustainable levels

–          Trade tension could add to those inflation pressures,…

–          Among the areas in the Fed’s spotlight are commercial real estate and sections of corporate debt

 

USA Inc faces growing threat from activist debt investors – Pg. 13

–          US companies are facing an escalating threat from activist debt investors, who want to push them into default to make a profit from bearish bets on their bonds

–          The corporate defence law firm Wachtell Lipton has labelled the practice “net-short debt activism”.  In such cases, a hedge fund buys a meaningful enough position in a company’s bonds to agitate for the company to be declared in default – and an even larger position in a company’s credit default swaps, which pay compensation when that default is confirmed

–          The practice of so-called “manufactured” defaults has sparked controversy, thanks to the case of Hovnanian, a US builder, which agreed to default on some of its bonds in return for new low-cost financing from a hedge fund, Blackstone’s GSO.  Blackstone stood to gain from the subsequent CDS payout

–          Lawyers and analysts say that the benign US economy and low corporate default rate means distressed debt funds, which normally invest in troubled companies, are looking at otherwise healthy companies to generate trading opportunities

 

Answer: (1) They stop assigning long-term projects; (2) You’re given projects that don’t require strategizing; (3) They stop investing in you; (4) Your salary and career growth has halted; (5) They try and make your role redundant; (6) Rude comments about your age; (7) Your supervisor becomes more hands-on; (8) You’re treated differently than younger colleagues; (9) Disciplinary Action is taken for no reason; (10) Your retirement becomes a topic of conversation; (11) A lot of talk about cost-cutting measures; (12) An incentive is thrown your way; (13) Your work hours are reduced; (14) You’re isolated from the group; (15) You’re not given the proper resources (Prof Note: I have seen all of these utilized to push someone out, i.e. not just for retirement)