Category: Financial Times Summaries

13 June 2018

Question: According to MSN:Money, what is the average rate for a credit card interest?

US Fed Low-rates guidance shuffles towards retirement – Pg. 2

–          Accelerating growth and blockbuster hiring numbers will keep the US Federal Reserve on a steady path towards tighter monetary policy this week despite global risks including the threat of a Donald Trump-induced trade war and emerging market strains

–          The target range for the federal funds rate is likely to be lifted by another quarter point, bringing rates to 1.75-2.00%, in the seventh rise of the current cycle

–          One or two further increases will be signaled for the remainder of the year, with more to come in 2019

–          …could start phasing out the low-rates guidance the central bank deployed during the crisis

–          Unemployment has fallen to 3.8%, far below the Fed’s 4.5% estimate of its sustainable level.  Core inflation is getting nearer to target after repeated disappointments last year

–          Adding zest to the rebound is a fiscal stimulus package that twins $1.5tn of tax cuts with a $300bn rise in federal spending, boosting the growth rate of real GDP by about 0.75% this year and next

–          The most recent set of forecasts from the Fed put the federal funds rate at 3.4% in 2020, above the estimated long-run level of 2.9%

–          The central bank has also been signaling it will be comfortable if inflation overshoots its inflation target for a while

–          Trade is among the threats on the Fed’s radar, given the danger of further tit-for-tat escalation…

–          Emerging market vulnerabilities are another, given the possibility of capital flight driven by tightening monetary policy in the US and euro area

Fund managers worry about corporate debt and rekindle interest in US stocks – Pg. 19

–          Fund managers are growing increasingly nervous about the amount of corporate debt, and want companies to improve their balance sheets

–          The IMF has repeatedly raised concerns that the climate of easy monetary policy has led to an excessive allocation of credit to companies.  S&P global warned that the proportion of highly leveraged corporates had risen from 32% in 2007 to 37% ten years later, a risk that was marked by the low rate of defaults

–          Nearly two-thirds of respondents say the US is the best region for offering a return on profit

–          If the US is in vogue, alongside defensive stocks, out of favour are banks, emerging markets and Eurozone stocks

–          Commodity allocations are at there highest in eight years, and tech stocks are still strongly favoured for the fifth month in succession

–          Fund managers were confident in the Fed’s rate policy but thought a fall in US inflation would be the most likely reason for the central bank to stop tightening.  They also believed the S&P 500 would peak at 3040 – a 9% premium to current levels – and did not expect a recession until the first half of 2020

–          They considered the biggest risks to be a trade war, a central bank policy mistake, and a euro or emerging market debt crisis

 

Answer: 17%

12 June 2018

Question: 20 Expert-backed ways to improve your mental health everyday?

Stark warning from Citi over automation of bank jobs – Pg. 1

• Citigroup’s investment bank head has suggested that it will shed up to half its 20,000 technology and operations staff in the next five years, as machines supplant humans at a growing pace
• If replicated across the industry, the potential job losses would represent a steeper rate of cuts than in 2007-17, when almost 60,000 jobs were slashed from eight of the world’s top-10 investment banks…

Financials – Pg. 9

• At JPMorgan, the world’s biggest investment bank by revenue every year since 2010, investment bank head Daniel Pinto sees global growth driving revenue higher in the coming years, while big banks like his deploy technology to cut costs and win clients
• Investment banks have spent much of the decade under a shadow since the meltdown of the US mortgage market. They have watched private equity firms and hedge funds take their place at the top of the finance food chain
• Investment banks have also regained their cachet among ambitious graduates
• …investment banks have to navigate a very different environment. Regulations have in effect banned them from once-lucrative activities such as trading stocks on their own behalf and co-investing in funds with clients
• Europe’s investment banks have fallen out of the world’s top five since 2015 after a series of strategic exits from Asia, the US and continental Europe

Answer: (1) Plan your day more efficiently; (2) Use the buddy system; (3) Call a time-out; (4) Know how to say “no”; (5) Develop a healthy arrogance; (6) Prioritize you; (7) Delegate ruthlessly; (8) Respect the unexpected; (9) Generate a solution that you can implement immediately; (10) Be comfortable with discomfort; (11) The bend over backwards; (12) Focus on somebody other than yourself; (13) Turn trouble into transformation; (14) Pick the low hanging fruit; (15) Relieve the past to face the future; (16) Use a spotter; (17) Create a three-legged life (home, work, self); (18) Recognize the power of your imagination; (19) Stop comparing yourself; (20) Call someone (National Suicide Prevention Lifeline, (800) 273-8255)

11 June 2018

Question: According to MSN:Lifestyle, what are 11 signs someone is lying to you?

Argentine businesses battle to survive 40% interest rates – Pg. 2

• …Argentina’s $50bn deal last week with the IMF has made clear that high interest rates are set to stay. The standby agreement demands greater independence for the central bank and makes fighting inflation a priority
• That makes day-to-day life intensely difficult for the businesses that the government and the IMF hope can bring the Argentine economy back to health
• Real estate companies will suffer from higher interest rates because of the impact on Argentina’s nascent mortgage sector

Big Bank profits beat pre-Lehman levels – Pg. 14

• Leading investment banks made more money in 2017 than in the year before the collapse of Lehman Brothers, highlighting the industry’s resilience to a crisis that threatened to overwhelm it
• The solid profitability shows investment banks have emerged from a decade of change in much better shape than many people would have predicted, despite the impact of tougher regulation and new competitors offering online sales and trading at wafer thin margins
• While net income is up, return on equity is still well below the high-teen and low-20s levels enjoyed before the crisis, after regulation forced the banks to increase their shareholders’ equity by 60% over the decade to 2017
• Revenues in some parts of the investment banks have shrunk significantly since 2007, particularly equities, where they fell 36% in the decade across the eight banks that disclosed the data
• Fixed-income revenues were more resilient but only because 2008 was a low point for some banks…
• Low volatility hampered trading revenues for much of 2017, before a spike in volatility in February delivered bumper results for the first quarter this year. Since then, markets have been calmer and banks have flagged poorer trading in the current quarter

Small US banks push for further deregulation – Pg. 16

• Shares in smaller banks have been boosted as a result, with the Russell 2000 banks index outperforming the S&P banks by about 10% since the turn of the year
• The Economic Growth, Regulatory Relief, and Consumer Protection Act contains a number of provisions related to capital, mortgage lending and data collection, mostly targeted at banks deemed too small to present a serious risk to the US financial system

Answer: (1) They change their head position quickly; (2) Their breathing changes; (3) They stand very still; (4) They repeat words or phrases; (5) They provide too much information; (6) They touch or cover their mouth; (7) They instinctively cover vulnerable body parts; (8) They shuffle their feet; (9) It becomes difficult for them to speak; (10) They stare at you without blinking much; (11) They tend to point a lot

9 June 2018

Question: According to MSN:BestLife, what are suicide warning signs hidden in plain sight?

‘Bitcoin whales’ control a third of market with holdings of $37.5bn – Pg. 1

• A mysterious cluster of 1,600 investors known as “bitcoin whales” collectively hold $37.5bn of the cryptocurrency, or close to a third of the available total, revealing the extent to which wealth is concentrated in the nascent market
• That the bitcoin market is so tightly held stands at odds with bitcoin’s mission to democratize finance by setting up an alternative monetary system free of central bank control and open to all. It also brings risks for smaller speculators
• Bitcoin, the most popular cryptocurrency, enjoyed a dramatic bull run last year as retail invfestors rushed to try to cash in on its rise. Its price rose more than 1,000% in 2017, peaking at about $20,000 in mid-December, but it has since fallen back to trade at around $7,500 as regulators begin to circle the freewheeling sector

Chef who built global media franchise found dead in Paris – Pg. 6

• The 61-year-old was found dead in his hotel room in Paris yesterday morning…Anthony Bourdain….cause of death was suicide
• Bourdain sometimes struggled with his success. In the Sardinia episode of Parts Unknown, he asked in a voiceover: “What do you do after your dreams come true?”
• (Prof Note: It seems we have had two high profile suicides, i.e. Kate Spade and Anthony Bourdain, in as many days. These have shaken me as they, at least from my external perspective, seem to have occurred to two individuals that had the world by the tail.  I do not understand mental health but wonder if we, as a society, should be doing more.  Why are people who are seemingly at the pinnacles of careers, offering the world so much, leaving us so early?  Are these losses symptoms of a much larger issue(s)?  Personally, I believe every person has much to offer.  I am saddened by all of these losses.)

Investors risk missing out on US small-cap rally if they back wrong index – Pg. 14

• Small companies are setting a record pace on Wall Street this year, but many investors are missing out on the cream thanks to a divergence between the two main benchmarks that define the sector
• US small companies tend to be more domestically focused than their larger counterparts, bringing a host of benefits in the current economic and fiscal climate
• This year’s corporate tax cuts and strengthening US economic recovery are hefty tailwinds for smaller companies, in contrast to the outlook for multinationals…
• The result is that small-cap equity benchmarks have set fresh all-time highs and have left the S&P 500’s performance well behind so far this year: the S&P 500’s 3.5% rise pales when compared with 10.6% for the S&P 600 index and 8.6% for the Russell 2000, the two main indices tracking small-caps
• …more money tracks the Russell 2000 – $1.6tn versus the S&P 600’s $89bn, including money in index funds and mutual funds whose managers use the indices as a benchmark,…
• Proponents of the Russell index say it is indicative of the broad university of small companies, but critics argue that the quality of its constituents – it contains 1,966 companies, of which one-third are unprofitable – makes it easy for fund managers to beat
• In contrast, the smaller S&P 600 contains companies that need to meet certain performance requirements….its members must have turned a profit in the aggregate over the past four quarters and in the previous quarter,…
• The S&P 600 is more heavily weighted to areas benefiting from the brightening outlook, such as industrials and consumer discretionary secdtors…
• Other notable variations between the indices relate to biotech, which has been underperforming sector this year. Biotech companies have a 7.3% weight of the Russell 2000, but 2.4% of the S&P 600
• It trades [S&P 600] at 18.9 times forward earnings versus the Russell’s 24.3 times, …

Answer: (1) They talk more frequently about “The Meaning of Life”; (2) They are perfectionists to a fault; (3) They spend too much time with technology; (4) They complain of physical pain; (5) They’re partying more; (6) They obsess about their figure; (7) They are becoming increasingly hostile; (8) They suffer from a mental disorder; (9) They have nightmares; (10) They’ve stopped hanging out with friends; (11) They’ve slashed their calorie intake; (12) They suffer from insomnia (National Suicide Prevention Lifeline, (800) 273-8255)