Category: Financial Times Summaries

18 July 2018

Question: According to MSN:Lifestyle…you may be under the spell of a narcissist if the person you love has what five personality traits,

 

Chinese signal readiness to boycott US goods during tariff war – Pg. 2

–          The survey found that 54% of 2,000 respondents in 300 cities across China would “probably” or “definitely” stop buying US-branded goods “in the event of a trade war”.  Only 13% said they would not (Prof Note: For whatever reason, and probably due to the US press, I had the impression the Chinese students had minimal national pride.  Then, one day in class I asked about the disputed islands with Japan and the class said in unison, “OURS”!  My knowledge comes mostly from the Chinese students in classrooms but they have deep pride for their nation and home.  The U.S. needs to be careful about poking the Panda!)

–          China has avoided calling for any boycott of US goods

–          Japanese car exports also tumbled 32% in the 12 months after China launched a boycott over disputed islands in September 2012

 

China drives cashless revolution – Pg. 3

–          The mobile payments revolution in China has happened with breathtaking speed and scale

–          Almost half the world’s digital payments in 2017 were made in China, through apps such as Alipay and WeChat

–          This transformation has been spearheaded by Millennials, who were the early adopters of mobile payments, but it has rapidly spread across generations.  Millennials’ parents – the 40 – 60 age group – have adapted to the technology, especially in big cities, although they tend to use it for fewer purposes

–          ….by blending social, ecommerce and payment functions into single apps, customers could manage their finances at the same time as managing their social lives (Prof Note: This really concerns me a bit.  I track expenses to the penny and manually log each one.  It helps keep me abreast of all the businesses and I have fought using back-office support for fear of loss of knowledge (not loss of control but knowledge).  Be careful!)

–          Familiarity with mobile payments had also made people more comfortable with other innovations such as peer-to-peer lending, investing in money market funds and consumer loans

–          Savings rather than borrowings are how Chinese people typically pay for big purchases

–          …Millennials have become surprisingly adept at handling their money, despite being stereotyped as the least financially savvy generation (Prof Note: My students absolutely understand $$$.  My issue is they are saddled with too much education debt and there has been too little wage growth)

 

Powell warns trade tensions are threat to growth – Pg. 4

–          Jay Powell warned that rising trade tensions could hit growth if they resulted in higher tariffs over the longer term, …

–          The US job market has continued to strengthen and that “for now” the central bank believed it was best “to keep gradually raising” interest rates

–          Growth had accelerated in the second quarter, boosted by “robust job gains, rising after-tax incomes and optimism among households”.  An average of 215,000 net new jobs were created each month in the first half of the year

 

How we lost America to greed and envy – Pg. 9

–          In the postwar world, US policy has four attractive features: it had appealing core values; it was loyal to allies who shared those values; it believed in open and competitive markets; and it underpinned those markets with institutionalized rules.  This system was always incomplete and imperfect

–          The striking feature of the US economy is that, despite its unique virtues, it has recently served the majority of its people so ill.  The distribution of income is exceptionally unequal.  Labour force participation rates of prime-aged adults are exceptionally low.  Real median household disposable incomes are the same as they were two decades ago, while mean incomes are much higher.  Uniquely, mortality rates of middle-aged white adults have risen since 2000 in the US

–          …in 2016, there were just 5,000 murders in the EU, a rate of one per 100,000 people.  There were 17,250 murders in the US, a rate five times greater

–          (Prof Note: No matter the opinion of politics in the U.S., one can still enter a brokerage house with $300.00 and establish an account.  Nothing limits this individual from turning the $300.00 into $300,000,000.00.  Yes, knowledge but many of the pedigree universities place lectures online which can be accessed through public libraries.  We are not perfect, but I still believe we offer great dreams that can become reality!)

Answer: (1) Hypersensitive; (2) Attention hungry; (3) Excessively Needy; (4) Energy Consuming; (5) Obsessed with social media

16 July 2018

List-Serve Sage Advice/Comment: “This time I have to disagree with you and MSN on the “leave” advice.  Most women after 40 and men after 50 have a difficult time finding another job that pays the same or more than their existing one.  Period, end of story.  I was let go from XYS together with the tens of thousands of superfluous “people (who) are our greatest asset.”  In many subsequent interviews I was looked over by the hiring managers and either not offered a position or offered 50% of what I was making before.  A few lucky people can find jobs later in career if they have friends who can help them out, but most suffer the effects of ageism”

I would add:  If you cannot find another job before you leave your current one, reward your self-respect by becoming the best you can be in your current job, be helpful to those around you and ask yourself if you have learned everything you can at your current job. Also, remember that your job can change suddenly if your boss/coworkers leave, your duties are changed, etc.

Question: According to MSN:Money what are 9 money myths debunked?

Chinese banks seek more foreign partners – Pg. 4

–          China’s development banks – the biggest lenders in the sector worldwide – are ramping up co-operation with overseas financial institutions after a series of problems afflicted their international investment projects

–          The China Development Bank (CDB) and the Export-Import Bank of China (Ex-Im Bank) are seeking to spread the burden of funding international projects…

–          CDB is considering combining its lending efforts with western financial institutions that require adherence to “international standards” – including open, competitive tenders for project contracts as well as public studies on environmental and social impacts

–          By the end of 2014, the two Chinese policy banks, CDB and Ex-Im Bank, had outstanding loans to foreign borrowers of nearly $700bn, much the same as the total outstanding lending of the World Bank and the five leading regional development banks combined…

–          China’s policy banks eschew “international standards” when lending to infrastructure projects overseas, preferring to select contractors from a charmed circle of state-owned Chinese construction and engineering companies

Argentines learn to live with inflation as peso’s slide sends prices higher – Pg. 4

–          Prices could rise by as much as 30% this year -…

–          With the exception of a currency board experiment in the 1990s that ended with a disastrous financial crash in 2001, Argentines have lived with punishingly high inflation for longer than most can remember

–          Whether it is identifying the best moment to buy a product because it is relatively cheap, purchasing goods in as many instalments as possible since they get cheaper over time, or simply saving in dollars given inflation’s destructive impact on the peso, such practices are second nature to Argentines

–          Note only is the economy being hit by the contractionary effects of the devaluation, but the farming powerhouse has also suffered the worst drought in decades this year

Oil forecast to hit peak demand by 2036 – Pg. 14

–          …peak within 20 years, as a “tectonic” shift in the transport sector towards electric cars and autonomous vehicles gathers pace

–          In the next 10 years the biggest impact on slowing global oil demand growth – which is expected to hit 100m barrels a day for the first time this year – would be fuel efficiency

–          While the growing US supply, especially from shale, is expected to turn the US into the biggest oil producer by far by the middle of the next decade, output from other countries outside Opec is expected to slow around 2023, leading to more reliance on the cartel

Investors move in on Ireland’s property surge – Pg. 15

–          …the residential market is struggling to keep pace with an economy forecast to grow 5.6% this year and 4% in 2019.  Employment has passed pre-crash levels, driving office and residential markets as local companies recover and global companies take advantage of a low corporate tax rate

–          Double-digit price and rent increases for housing….

–          The hottest sector is private rented housing, with developers selling entire apartment blocks to institutional investors instead of individual buyers

–          The IMF has said that house prices appear “modestly overvalued” by some measures.  The OECD warned of “another property bubble” arising from a cycle of strong price rises, increasing construction activity and rising credit growth

–          The number of new dwellings – 14,446 in 2017, and 3.526 in the first quarter of 2018 – is far below the 35,000 per year needed to sustain demand

US banks warn on commercial real estate – Pg. 15

–          …putting the brakes on loans for office buildings, hotels and shopping malls

–          …competition from insurers, government-sponsored enterprises such as Fannie Mae and Freddie Mac and other non-banks

–          The concerns about CRE underwriting standards are being voiced as investors in US banks become more jittery about the effects of rising interest rates

Answer: (1) Bankruptcy is a clean slate (Prof Note: Cannot discharge student debt, child support and/or alimony + tax liabilities); (2) All debt is bad (Prof Note: High interest debt on non-revenue producing items, e.g. credit cards, is “bad”.  Mortgage debt, at low rates, on revenue producing properties is/are good.); (3) Credit cards can only cause financial trouble (Prof Note: Use them responsibly.); (4) You must carry a credit card balance to improve your credit score (Prof Note: It helps but not required); (5) Only high earners can achieve good credit (Prof Note: My credit score is about 720…due to the number of inquiries only); (6) You’re too young to save for retirement (Prof Note: You are never too young to save for retirement.  However, is “saving” even the right strategy?  I ponder!  Build a business that provides income to death and beyond.); (7) Your life insurance policy should cover 10-times your income (Prof Note: It is not about capital, it is about risk-free or risk-low passive income); (8) Your partner managers the money so you don’t have to worry about your financial health (Prof Note: Both partners need to be aware of all the finances of the unit); (9) Millennials are bad with money (Prof Note: I do not believe this.  I believe Millennials are burdened with excessive student debt)

14 July 2018

List-Serve Story:  This came from a daily report in construction regarding labor.  “2 more subcontractor employees lost to….Lost one because he was told by his foreman he could not drink his Pepsi in the building.  Employee said he would just quit then and did.  YOU GOTTA BE KIDDING ME!”  (Prof Note: You have to stand for something in life.  Not certain the freedom of drinking a Pepsi in a building is the right issue for which to stand, but kudos for believing in something.)

Question: According to CNBC, what are 5 money mistakes that can destroy a marriage?

New York’s Flatiron building set to be landmark for flexible office revolution – Pg. 1

–          The $20bn office space start-up WeWork is vying with Blackstone-backed rival to take over the lease of Manhattan’s Flatiron Building, potentially turning the century-old skyscraper into the flexible office sector’s most recognizable property

–          The potential takeover of a landmark such as the Flatiron, completed in 1902 with a distinctive triangular shape, has attracted high-level attention from potential tenants, including Blackstone, which bought a majority stake in Office Group last year

–          The stylish building is one of Manhattan’s best-known skyscrapers and has lent its name to the surrounding Flatiron District.  But its wedge layout also gives rise to challenges for tenants, including an unusually small footprint, ….

–          Class A office in the area carry asking rents of $77/sf/yr

–          Much of the growth in the flexible office sector has been propelled by WeWork…

JPMorgan and Citi shares slip on fears over higher US rates – Pg. 10

–          …concerns that the Federal Reserve’s interest rate rises will squeeze profit margins as the industry is forced to pay more for deposits

–          …WellsFargo, whose revenues and profits declined as it grapples with compliance problems

–          Wells, which is struggling to shake off the impact of a series of scandals, dropped as much as 4.3%

Rising debt leaves Ems at epicenter of worries as conditions tighten – Pg. 13

–          The amount of debt in the world increased by almost $25tn n the year to the end of March and by more than $8tn in the first quarter of 2018 alone….

–          Global debts also grew in relation to GDP, to more than 318%, the first such increase since the third quarter of 2016…

–          The size and the pace of change raise fresh concerns over the dangers posed to a global financial system already struggling to deal with rising US interest rates, a stronger dollar and widening risk premiums for borrowers, alongside the worry that world growth is slowing

–          For emerging markets, the dangers may be particularly acute.  The ultra-loose monetary policies pursued by the US Federal Reserve and others in the decade since the global financial crisis have pumped money into emerging assets on a gigantic scale

–          …world’s real debt problem is in mature economies and that emerging economies are much better prepared than previously to deal with their relatively small debt loads.  EM government debt, particularly, seems manageable at the equivalent of 48% of GDP on average, compared with 110% in mature markets

–          …many EMs have improved their public finances and found other means of funding than relying on international lenders

Answer: (1) Hiding money (Prof Note: While I do very little counseling and what I do is for the cost of my meal(s) I always recommend both partners be actively involved and understand where all the money goes.); (2) Hiding debt (Prof Note: I have heard several horror stories of older couples where the man passed and the woman was left with debt for which she was unaware.  Thomas Jefferson did this to his daughter Martha!  Some founding “father”!); (3) Overspending (Prof Note: I know I keep saying it but a sunset is free.  Retail therapy is dangerous.); (4) Underspending (Prof Note: There needs to be a balance.  When I was younger I worried about not spending enough.  Now, it is sort of like eating, I am comfortable not eating the full amount on my plate.  I am comfortable not spending the money and/or declining an expensive restaurant due to cost.  Personal note, I am generally not a fan of expensive restaurants.  Why make others wealthy.  Come to the cottage, we will throw some first-of-season corn on the grill with local crab cakes and have a feast.  The fire pit is ready and I know just when to hope for the green flash); (5) Financial abuse

13 July 2018

Question: According to MSN:Money and The Motley Fool, what are 10 signs you need to quite your job?

China and the world – Pg. 9

–          …the Communist party decided last year to abolish presidential term limits, thus allowing Xi Jinping to remain as head of state for lfe, ….

–          Using third-party outlets to mask party content has become such a common tactic that party officials have even given it a name – “borrowing boats to go to sea”, meaning to use another’s resources to fulfil one’s goals (Prof Note: Sort of like Western finance’s method of doing a deal with no money?)

–          China News Service is controlled by the Overseas Chinese Affairs Office, a key organization behind the Communist party’s influence operations abroad

–          Since 2003, China News Service has hosted annual conferences in China to which hundreds of editors from overseas media organizations in print, television and radio are invited

–          Independent Chinese-language writers find it increasingly difficult to publish work not sanctioned by party-backed media…

–          Beijing’s increased global economic clout has put additional pressure on Chinese-language media abroad

–          In some cases, the threats against reporters for non-compliance are less than subtle

Morningstar targets $19tn market – Pg. 13

–          Morningstar is to go to battle with its clients for a greater slice of the $19tn US mutual fund market as the investment research and ratings provider prepares to launch a range of in-house products

–          The group’s “managed portfolio service”, which enables financial advisers to outsource investment decisions to Morningstar, already has $44bn of assets mostly overseen by external fund managers

–          Instead of Morningstar selecting external funds to include in its managed portfolio, it will rely on the in-house mutual funds as the building blocks

–          Morningstar said its mutual funds would not be qualitatively rated by its analysts but they would be eligible for an in-house, algorithmically assigned star rating after a three-year performance record, ….

–          Having started life as a boutique research provider that compiled data on 400 mutual funds three decades ago, Morningstar now employs 5,000 staff and overseas more than $200bn of assets, while publishing data on 233,000 mutual funds

Global regulators demand banks must abandon reliance on scandal-hit Libor – Pg. 21

–          Global markets regulators issued stern warnings yesterday that banks must speed up their plans to abandon Libor in favour of “risk-free” reference floating interest rates

–          …authorities raise pressure on banks to find an alternative to Libor, which sets the cost of unsecured borrowing for a variety of periods, usually over one, three, and six months

–          Authorities argue the four-decades-old benchmark no longer reflects actual bank funding activity and are also seeking to restore public trust after a series of manipulation scandals.  After 2021, banks will no longer be required to submit rates that are used in compiling Libor

–          Around $170tn in interest rate swaps are based on Libor

Answer: (1) You’re overwhelmingly bored (Prof Note: Come on…find something to do and build those resume bullet points for the next job!); (2) You’re underappreciated (Prof Note: Find appreciation and meaning in family and friends!  It is dangerous and very Western to find it at a job that could be gone tomorrow!); (3) Your manager isn’t helpful (Prof Note: Grow up!  Build your resume and leave!); (4) Your coworkers aren’t supportive (Prof Note: Figure out if it is them or you.  If you, time to go!); (5) Your work-life balance is nonexistent (Prof Note: There better be a GREAT reason you are missing sunsets!); (6) You don’t like the company culture; (7) Your health is suffering (Prof Note: Unless it is your company, it simply is not risk loss of health!); (8) You’re in a dead-end position (Prof Note: Then…do the hustle!); (9) Your compensation stinks (Prof Note: I cannot stand it when people say this!  Then why did you accept the position?!  When you outgrow the position, and you are not recognized, leave!); (10) You no longer care about your performance (Prof Note: This means your self-esteem is gone or has been taken.  Time to go)  (Prof Note: I heard an expression on the radio from a very disgruntled employee that apparently quit in a “colourful” manner.  His quote, that I absolutely loved (I am not saying to resign in colourful ways…only that I LOVE the quote), “Let the burning bridges light my way!”  An instant Classic!!! J)