Financial Times Blog

4 May 2019

 

Question: According to MSN: Money, how much retirement savings will you need?

 

US jobless rate falls to 49-year low – Pg. 1

–          Non-farm payrolls rose 263,000, …soaring above Wall Street forecasts of a gain of 190,000.  Average hourly wages were up 3.2% year-on-year, unchanged from the previous month, when expectations were for a slight increase

–          The unemployment rate fell from 3.8% to 3.6% – the lowest since December 1969.  The drop resulted in part from the departure of nearly 500,000 people from the labour force

–          …S&P 500 and the Nasdaq Composite both setting new highs this week

 

Investors flock back to credit product blamed for inflaming 2008 global crisis – Pg. 1

–          The vehicle, known as “synthetic” CDOs, short for collateralized debt obligations, bundle together derivatives whose returns depend on the performance of bonds, loans and other debts.  They provide hedge funds and other investors with another way to bet on the creditworthiness of corporate America

–          In contrast to standard CDOs, which bundle the bonds and loans themselves, synthetic CDOs proved destabilizing during the crisis because they allowed multiple bets on the same subprime mortgages

 

Moore exit fails to end Fed independence fears – Pg. 3

–          For Mr Moore, these included his past criticisms of pay equality between men and women, and a Virginia court’s decision to hold him in contempt for failing to make spousal and child support payments

 

Powell struggles with messaging clarity – Pg. 3

–          The new message from the Federal Reserve chairman – that “transitory” drags may be slowing price growth, rather than more persistent problems – marked a rude awakening for investors who had hopes he would signal an “insurance” interest rate cut this summer because of low inflation

–          …inflation readings have been bafflingly weak, with the Fed’s favoured measure of core price growth decelerating to 1.6% in March, even as unemployment hovers at just 3.6%

 

Chinese family defends $6.5m ‘donation’ – Pg. 4

–          Her daughter, a sophomore, was expelled from Stanford in April after being admitted in 2017 (Prof Note: What about Loughlin’s daughters?  Are they still Trojans?)

 

Answer: 16X final salary (Prof Note: It is about passive income NOT net worth!)

3 May 2019

 

Question: According to MSN: Money, what is the largest nonessential expense for Americans?

 

Moore withdraws Fed candidacy after Republicans oppose move – Pg. 1

–          The decision marks the second time in less than two weeks that a Fed candidate backed by Mr Trump has had to step back because of personal controversy

–          …forced to define past writing dismissing female athletes’ bid for pay equality with men, as well as comments describing parts of the US mid-west as “armpits of America”

–          (Prof Note: ???  Amazing…)

 

UK economy – Pg. 7

–          …Britain’s unemployment rate of 3.9% is low…

–          In hotels, that often takes the form of being paid per room cleaned (Prof Note: The goal then becomes speed at the expense of quality, i.e. how quickly the worker can do the minimum for the paycheck!)

 

Class war and revolution anxieties tax US elites – Pg. 14

–          Despite widespread optimism about the outlook for the US economy and financial markets, some of the biggest names on Wall Street and in corporate America revealed their anxiety about the health of the economic model that made them millionaires and billionaires

–          …played a video of Thatcher from two years before she became UK prime minister.  “Capitalism has a moral basis,” she declared, and “to be free, you have to be a capitalist”…

–          The younger generation that support socialism are “people who do not know history”…

–          (Prof Note: In my opinion, there needs to be a more clear path to success.  What I consider my “break out” role, i.e. job, does not even exist today due to regulation (it has been split into two roles).  The high cost of education couples with the exorbitant price of houses is making the “American Dream” unrealistic.)

 

Green Reit sale provides acid test for Irish commercial real estate – Pg. 15

–          Shares in the Reit are trading at a 20% discount to the value of its extensive property assets

–          The central bank of Ireland noted last month that the growth in commercial property prices “is now at its lowest” since the latae-2013 turn in the market led to intense deal making

–          The annual increase was 5% at the end of 2018,…

–          Growth will now be 3.9% this year, down from an earlier projection of 4.2%.  Next year’s forecast was trimmed to 3.3% from 3.6%

 

Accounting body to help lenders move from scandal-hit Libor benchmarks – Pg. 19

–          The IASB will today publish proposals offering relief on the treatment of old Libor-type benchmarks and newer ones, such as Sofr, the US benchmark

–          If adopted, such a move by the IASB, which sets the accounting rules followed by 144 countries, would help banks and others avoid penalties as they take on the tricky task of transitioning away from scandal-tainted benchmarks

–          Global regulators want the market to scrap Libor and instead price thousands of loans, mortgages and derivatives contracts using overnight lending rates, which are based on transactions, by the end of 2021

–          The Libor rate, which measures the cost of unsecured borrowing between banks for a specific period, is made up largely of banks’ estimates

–          More than $370tn of deals are tied to it [Libor]

–          …transactions referring to new rates accounted for less than 3% of the notional derivatives market in the first quarter of this year….

–          The IASB said its existing standards require companies to use forward-looking information to apply hedge accounting

–          This is a conundrum given there is little agreement about when the current benchmarks will be replaced, or even which interest rate would be used

–          Reform of Libor has been further complicated because Libor and the newer overnight rates do not always move in concert

–          The spread, or the difference between the two rates, can sometimes rise to as much as half a percentage point during volatile periods

 

Answer: Restaurant Meals

1 May 2019

 

Question: According to MSN: Money, how much money should you actually save for retirement?

 

Arab youth rank living costs and jobs as leading concerns – Pg. 3

–          Unemployment has reached more than 30% in many countries across the Middle East and north Africa, and the IMF says this year’s projected regional growth of 1.3% is insufficient to create enough jobs for the 2.8m youths joining the workforce annually

–          Two-thirds said religion played too large a role in the Middle East, while half said religious values were holding the region back

–          The share of young Arabs regarding the US as an enemy has almost doubled since 2016, yet Russia’s standing ahs risen, with 64% seeing it has an ally.  Two-thirds view Iran as an enemy with a third seeing the Islamic republic as an ally (Prof Note: Some of my best mates are Iranian!)

 

Oil price hits economies more than markets – Pg. 4

–          A spike in the oil price has preceded every big meltdown in the world economy since the 1970s.  So a 45% price rise within five months would generally be cause for alarm

–          There are two main explanations for the apparent lack of concern…First,…recent price gains reflect an improved outlook for global growth…Second, many energy economists say the transformation of the oil market since 2010, with falling production costs and rapid growth of US shale production, means future supply shocks will be smaller and more shortlived

–          The Eurozone is likely to be less vulnerable, since consumption and production have become less oil intensive

–          …the most significant change in the past decade has been the link between oil prices and US growth.  US interest used to be clear cut: a rise in gasoline prices rapidly high GDP through its effect on consumers.  The 2014 oil slump could have been expected to add about 1% to output growth.  But research….showed the net stimulus was close to zero, because gains for consumers were offset by a dramatic decline in investment by the oil sector

 

Investment alone cannot save distressed communities – Pg. 9

–          Investors across the US are salivating at the tax incentives announced recently for investing in depressed “opportunity zones”

–          Many of these depressed communities are in semi-rural areas, but some are also found in thriving cities

–          What has changed is that the information technology revolution has now made a very good education or highly developed skills prerequisites for well-paying jobs.  It is much harder for young people to acquire them as social institutions collapse in communities hit by economic adversity, and the quality of local schools deteriorates.  The most able people escape, leaving the rest even more deeply mired

–          The praiseworthy objective of the opportunity zone initiative is to channel economic activity directly to these areas in an attempt to halt, and even reverse, the vicious cycle of hardship and social decline

–          Funding is important.  Untied government funds can be devolved to the local community giving it the equity to seed necessary projects.  Private capital, drawn by opportunit zone incentives, can augment these funds.  But it has to be built initially around the community’s own development plans

–          If the tax incentives granted to opportunity zones support bottom-up policymaking, they can work well (Prof Note: Opportunity Zones are a way to marry investor’s financial goals with their philanthropic ideals)

 

FX experts caught out as Fed shifted direction but dollar did not – Pg. 19

–          The US dollar index, which measures the dollar’s strength against a basket of other major currencies, powered to its highest level since May 2017 last week.  The euro, its most traded counterpart, has slipped to a two-year low

 

Answer: (Prof Note: I am not providing the “answer” to this question as the question is a perversion of retirement and I want to make a point!  It is NOT how much you have but how much passive income assets generate.  Decide the lifestyle desired, the cost in income require to maintain including healthcare, etc, and work backwards.  Passive Income Baby, Passive Income!!!)