Financial Times Blog

30 January 2019

Question: What is the size of the Federal Reserve’s Balance Sheet?

Mind-reading step closer to reality after breakthrough in artificial voice research – Pg. 1

–        Researchers have for the first time constructed clear speech using computer processing of human brain activity, in a significant step towards creating technology that can read people’s thoughts

–        The development would give an artificial voice to people deprived of speech due to disease or injury by reading their thoughts rather than relying on input from a keyboard or facial movements

Five factors will decide if investors still like Facebook – Pg. 13

–        Will revenue growth decelerate further?

–        Will margins beat Facebook’s forecasts?

–        Has Facebook maxed out in mature markets?

–        Can Facebook make money from WhatsApp?

–        How quickly can Instagram grow?

Big drop in US homebuilders’ shares is a sign of potential trouble ahead – Pg. 19

–        The US housing market was at the heart of the financial crisis that rippled through the global economy a decade ago.  Today, emerging cracks in a property recovery are darkening the outlook for housing-related stocks – and possibly further afield

–        US house prices kept deflating until 2012, but since then they have climbed more than 50%, propelled by a slowly healing economy, falling unemployment and interest rates at record lows

–        But the bloom came off last year, as the index fell more than 40% from peak to trough.  While homebuilder stocks have enjoyed a welcome bounce over the past couple of months, they are still down 32% from the top

–        The Federal Reserve lifted rates four times last year, nudging the cost of new mortgages higher, keeping would-be buyers at bay (Prof Note: this 100bp increase roughly increases the cost of financing, over 30-years, by $100,000)

–        Yet long-term prospects for the sector remain more challenging.  In addition to interest rates, more structural headwinds – including affordability after the dramatic rise in prices, unexpected demographic changes and the rising cost of construction – have dimmed the outlook for homebuilders.  High prices have deterred younger buyers while older owners are staying in family homes, bucking expectations they will sell up for a smaller place

Answer: $4tn +

28 January 2019

Question: According to MSN: Money, what are twenty (20) steps to retiring this year?

Questions grow over Giuliani’s competence – Pg. 3

–        Earlier this month he opened the door to possible collusion between the Trump campaign and Russia, telling CNN in a tetchy exchange: “I never said there was no collusion!” – denying only that the president was involved

–        Months earlier, he appeared to implicate his client in a campaign finance violation when he volunteered to Fox News’ Sean Hannity that Mr Trump had reimbursed his personal lawyer, Michael Cohen, for a $130,000 payment to adult film actress Stormy Daniels that, prosecutors say, was meant to buy her silence during the campaign

–        Mr Guiliani even called the pay-off “a very regular thing for lawyers to do” – …

–        As Mr Giuliani, now in the midst of this third divorce, has appeared more erratic…

–        But one former colleague pointed to Mr Giuliani’s age, 74, noting that after growing wealthy in the private sector he no longer had the same hunger and discipline

US coal output forecast to fall despite Trump efforts – Pg. 16

–        The government’s EIA projected its latest annual outlook that US coal production would drip 21% over the next 20 years.  An 18% decline was forecast two years ago under the assumption that Barack Obama’s Clean Power Plan would come into force

–        Coal producers that have been through bankruptcy in the past five years, shedding debts and re-emerging on to the stock market, have fared better

–        Market forces have been driving electricity generators away from coal and towards natural gas and renewable energy, however, and those trends are expected to continue

–        Employment in US coal mining has risen from 51,000 two years ago to 54,000 last month, due mainly to the sector’s strong exports, which rose by 61% in 2017 and about 20% last year.  They are expected to fall back this year and the longer-term outlook looks challenging

–        The EIA projected this week that coal would drop from providing 29% of US electricity last year to 21% by 2035.  Over this period gas is expected to rise from 30% to 37% of power generation, and renewables from 17% to 24%

Answer: (1) Know how your lifestyle expenses will change in retirement; (2) Figure out your healthcare expenditures; (3) Make sure your insurance needs are covered in early retirement; (4) Create a budget for yourself; (5) Know that Social Security may not be enough; (6) Line up part-time work if you need it; (7) Have a tax strategy for savings and investments; (8) Diversify your investments for the best return during your retirement; (9) Figure out how much you’ll be withdrawing from retirement accounts; (10) Make “catch-up” contributions to your retirement accounts if possible; (11) Keep some savings for emergencies; (12) Have a strong social network; (13) Pay down your debt; (14) Pay yourself first; (15) Update your will; (16) Use your accumulated vacation time before you retire; (17) Find some hobbies; (18) decide where you’re going to live; (19) Make an appointment with a retirement planner; (20) Be prepared to try new things

26 January 2019

Question: According to MSN: Money, what are several tax loopholes and strategies the rich do not want you to know?

Loss of men in Syria conflict drives women into workforce – Pg. 4

–        The government’s military campaign and sweeping conscription efforts have created a demographic crisis.  Of the nearly 500,000 people killed during the war, 80% were men…..which found male life expectancy fell from 70 years in 2010 to 48 by 2015.  Men aged 15-24 have experienced the sharpest decline in life expectancy

–        Women are now the primary breadwinners and carers in about one-third of Syrian households, …

–        More fundamentally, the absence of men has changed the labour force.  Before the war, just one-fifth of women worked….

–        With men in short supply, many employers have no option but to hire women

Hedge funds – Pg. 5

–        Rising pressures on fees, mounting regulatory and investor scrutiny and a trading environment that has tripped up many managers have caused several industry grandees to convert hedge funds into family offices – in practice private, unregistered hedge funds with no outside investors

–        Returns have been slowly fading for some time.  Hedge funds have made 3.4% on average a year since 2010, compared with 6.4% in the previous decade and 18.3% in their 1990s heyday, …

–        The industry historically charged “two and 20”, or a 2% annual management fee and 20% of profits, …

–        However, only 3% of hedge funds now charge a 2% management fee and 16% take a fifth of profits, …

Answer: (1) Deduct business expenses; (2) Hire your children; (3) Earn income from investments, not your job; (4) Sell Real Estate you inherit (Prof Note: Love the step-up!); (5) Buy whole life insurance; (6) Deduct theft and casualty losses; (7) Buy a yacht or a second home