Financial Times Blog

The Financial Times Blog is where the P(Gain) team shares our views on everything that affects real estate and capital markets. We observe macroeconomic and geopolitical trends as well as market narratives to provide an eclectic view of the investment landscape. Our views are primarily influenced by both history and current events, as well as academic and practical themes we see as recurring and relevant.

22 February 2019 FT — Articles to Read

22 February 2019

 

Question: According to MSN: Money, what group of Americans will most likely see the largest tax refunds?

 

US insurers warned over vulnerability to risky debt after ‘stretch’ for yield – Pg. 11

–          US life insurers have loaded up on risky investments since the financial crisis with their search for yield drawing them into potentially treacherous places…

–          The shift leaves insurers vulnerable to downgrades in their own ratings in a recession, as their capital could be eaten up by losses in their portfolios

–          Before the crisis, A-rated bonds made up 69% of the insurers’ portfolios.  By the third quarter of last year, that had slipped to 61%

–          …holdings of triple-B rated bonds, which are the last notch before junk, have increased from 25% of the portfolio to 34%

 

Investors in India spooked by the shadow financiers – Pg. 19

–          Particular scrutiny has fallen on the companies behind aggressive property development in Mumbai, where the number of unsold homes rose 9% year-on-year in the second half of 2018, ….Average prices, meanwhile, dropped 7%

 

Leading US official paints gloomy picture for domestic soyabean farmers – Pg. 19

–          …record high stocks should weigh on prices even if America resolves its trade dispute with China

–          China resumed modest purchases volumes of US soyabeans after president Donald Trump and Xi Jinping agreed a 90-day trade truce late last year

–          …China needed to address the theft of intellectual property, a serious concern for western companies in the country, and address restrictions on biotech crops

 

Answer: Families with children

21 February 2019 FT — Articles to Read

21 February 2019

 

Question: What are seven (7) surprising facts about depression, according to Healthgrades.com?

 

Japanese exports fall on China slowdown – Pg. 4

–          Japanese exporters slumped last month in the latest sign that economies across Asia are suffering because of China’s slowdown and uncertainty over the outcome of US-China trade talks

–          Exports from Asia’s biggest advanced economy fell 8.4% in January compared with a year earlier, the steepest decline since October 2016, with china the biggest culprit

–          …may prompt Asian central banks to keep interest rates on hold this year

–          Japan’s exports to china fell by 17.4% compared with a year earlier

–          China’s exports unexpectedly rose 9.1% year-on-year in January

 

Brazil plans rise in pension age to cut deficit – Pg. 4

–          Spending on pensions absorbs more than a third of federal tax receipts and is one of the biggest causes of a budget deficit equal to about 7% of GDP

–          Among other changes to the system – under which many public sectdor woerks can retire on full pay in their early fifties – the proposal sets a minimum retirement agefor both public and private sector workers of 65 for men and 62 for women, to be phased in over 12 years

 

Illicit Drugs – Pg. 7

–          The DEA estimates that Mexican heroin production increased 37% …in 2017

–          Border seizures of fentanyl, a powerful synthetic opioid produced in China and Mexico and increasingly mixed with heroin to make it more powerful, also rocketed 135% in 2017

–          (Prof Note: A few weeks ago I had a “Meth Head” jump into my car.  I was driving in Southern, MD, i.e. “Americana”, when a women with blond hair sprinted from the woods in obvious distress, arms waving as if she was being chased by her capture, to flag down the car for an emergency.  I stopped the car, unlocked the door and she leapt in.  Her yellow skin, missing teeth had not been visible in the 5 seconds I had seen her.  In panicked voice she had a crisis and needed to be taken somewhere.  Fearing for my own safety, I let loose a spate of loud words knowing one of us was getting out of the car in the next five seconds.  (note, I have a car that requires no key.  If I jump from the car, it is a 2,000lb paper weight.)  She leapt out and the next car coming picked her up.  What did I learn? NEVER pick anyone up regardless of an apparent emergency.  Call 911 and move yourself far enough from harms way.  Drugs have hit Americana!  Also, I confirmed the woman was a “Meth Head” as the head of the fire department showed me her mug shot and confirmed.)

 

Investors quaff US corporate debt in reaction to Fed policy pivot in January – Pg. 19

–          Corporate bond markets have staged their bets start to the year in two decades, roaring back from a bout of volatility after the Federal Reserve pulled off one of its sharpest policy U-turns

–          The strong start to the year comes after the Fed stunned markets in January, distancing itself from its December talk of another two rate-rises in 2019 and raising the possibility that the next move in rates could be down, rather than up

–          That shift – apparently prompted by the fierce market sell-off towards the end of the year – is prompting investors to funnel cash into bonds, whose fixed interest payments become more valuable if base rates flatline or fall

–          High-yield bonds have also benefited from a shift in sentiment away from the previously red-hot loan market, where typically lower-rated or already heavily indebted companies seek out financing

 

Answer: (1) Women are more likely to be depressed than men; (2) Your genes play a role; (3) You might not respond to the first treatment; (4) Talk therapy can work as well as medication; (5) Depression can cause hallucinations; (6) Magnets might relieve depression; (7) Children also get depressed

20 February 2019 FT — Articles to Read

20 February 2019

 

Question: According to MSN: Lifestyle, what should one do if your loved one struggles with depression? (Prof Note: Everyone’s well wishes were incredibly meaningful to me regarding the loss of my peer (our peer) due to suicide.  While I did not know this person that well, I was honoured to be on his “list” of people to be notified of his passing.  At his wake I was touched and moved by the number of people that this individual had touched and moved.  A skill worth having is the ability to speak for 2 – 3 minutes about any individual in an extremely positive tone.)

 

Walmart sees year-end sales surge – Pg. 11

–          Walmart eased fears over the financial health of the US consumer yesterday, with the country’s largest retailer disclosing its biggest rise in domestic sales for the festive season in 15 years

–          …annual revenues rose almost 4%…

–          Footfall at Walmart stores rose only 0.9%, although those customers who did shop in store spent more, driving the average transaction value up 3.3%

 

France revels in sovereign debt ‘sweet spot’ as demand for 30-year deal soars – Pg. 19

–          France has ventured into the 30-year bond market for the first time in two years, attracting strong demand from investors seeking solid yields while central banks around the world seem committed to keeping rates low

–          …boon for European governments with a lot of debt to sell as investors are drawn to the additional yield on offer from longer dated bonds

–          France sold its new bond with a coupon of 1.5% – 50 bps below its last 30-year bond, which sold in May 2017 amid a relief rally after the election of Emmanuel Macron as president

–          By the start of this week, France had raised 14% of the debt it needed this year…Germany, by comparison, had raised 15%, Spain 18% and Italy 22%

–          Smaller neighbours are further ahead: Belgium, Austria, the Netherlands, Portugal, Finland and Ireland have all raised around one-third of their total annual funding needs

 

Answer: (1) Learn more about depression; (2) Express concern the right way (Prof Note: I have learned/am learning to embrace the pain of others.  Let them own it and acknowledge it…it is their pain); (3) Do not judge or criticize their behavior (Prof Note: remember that, for the most part, the only actions/behavior one controls is their own); (4) Encourage them to seek treatment; (5) Offer to help them plan for their first therapy visit; (6) Encourage them to stick with treatment; (7) Ask how you can help (Prof Note: I find this tricky.  Puts the responsibility on the wrong person.  Showing up is most important); (8) Offer to listen (Prof Note: Rather than “offering”, just listen); (9) Set clear boundaries (Prof Note: Another tricky issue…); (10) Point out the positives; (11) Watch for warning signs of suicide; (12) Make plans with them often (Prof Note: This can be tough as a depressed person can be a downer); (13) Practice Self-care; (14) Be patient; (15) Help them to reduce anxiety

19 February 2019 FT — Articles to Read

19 February 2019

 

Question: How much U.S. student debt is in serious delinquency according to MSN: Money?  (serious delinquency is defined as 90 days past due)

 

Fed nears decision on ending balance sheet cuts – Pg. 3

–          Even if the Fed decides when to halt the scheme, it still leaves open questions over the future composition of the Fed asset holdings – an issue that could have market ramifications of its own

–          The Fed swelled its balance sheet to $4.5tn as it battled the financial crisis and economic downturn, purchasing Treasuries and mortgage-backed securities in a bid to buoy markets and the economy.  Former Fed Chair Janet Yellen put the process into reverse in 2017, gradually allowing the asset holdings to shrink as the central bank withdrew its monetary support for the economy

–          The flipside of the Fed’s asset holdings are liabilities, including currency in circulation and commercial bank reserves held on deposit with the Fed.  The Fed wants to keep more of these deposits than before the crisis, but gauging the exact levels of reserves it needs to limit volatility in money markets is difficult

–          Reserves are now about $1.6tn, down 40% from their peak but far above pre-crisis norms

–          ….reserves would need to be $1tn-$1.3tn to prevent excessive money market volatility, plus a buffer to cover fluctuations in demand and supply

–          After the balance sheet reduction process is over, the Fed is expected to continue letting its holdings of mortgage-backed securities run off – and a looming question is whether to actively sell some to clean them off its balance sheet more quickly

–          To maintain its balance sheet it will eventually have to become a net buyer of Treasury securities again

 

German economy – Pg. 7

–          The slowdown has exposed a thorny problem for Germany.  An export champion, it has been one of the biggest beneficiaries of globalization, free trade and open borders: exports are equivalent to 50% of its GDP

–          Yet its export success also makes it uniquely vulnerable to external shocks

–          Many fundamentals continue to be strong: employment is at a post-reunification high; household spending is healthy; and wages and pensions have been rising at rates above inflation

–          Carmakers are already feeling the pressure from these external factors.  They have been directly affected by a decline in China, where 2018 car sales fell 2.8% to 28.1m – the first contraction in the market since the 1990s.  forecasts had predicted growth of 3%

 

Developers drive consolidation by snapping up distressed Chinese real estate debt – Pg. 12

–          Property developers have found a new play on the Chinese market: buying up the soured debts of their rivals

–          China’s economic slowdown has also resulted in record sales of bad debt, ….

–          Property developers are among the most indebted companies in China…

–          There are 90,000 property development companies in China but the top 100 groups account for 67% of total sales

 

Answer: $166.0bn (highest EVER)