Financial Times Blog

7 January 2019

 

Question: According to MSN: Money, what are painless ways to cut costs in 2019?

 

Saudi women win right to notification by text when husbands divorce them – Pg. 1

–          Women in Saudi Arabia who were previously divorced by their husbands without their knowledge will now receive a text message when a court ruling confirms their separation

–          …courts would send messages informing women of their marital status after decisions on divorce filings had been finalized

–          Men were previously allowed to divorce their wives, including the registration of divorce deeds at the court, without the woman’s knowledge

–          Women in Saudi Arabia have gained more rights over the past two years, following the launch of Crown Prince Mohammed bin Salman’s “Vision 2030” plan for economic and social reform

–          The kingdom lifted the ban on women driving last year, and restrictions have been loosened on female employment and mixing with the opposite sex

–          …female unemployment remains high at 31%,…

–          Saudi women remain forced to live under restrictions imposed on them by male guardianship rules.  They require the approval of a male relative to get married, travel abroad or leave prison

 

Why MBAs should keep going back to school – Pg. 11

–          When the Association of MBAs, the accreditation body for postgraduate management education, gives its approval to a business school’s MBA programme, it does so for a maximum of five years.  But when that same business school awards one of these degrees, it is for life

–          …argues for a new MBA business model, in which the degree is “rented”

–          The most enthusiastic early adopters of the lifetime access programmes have been graduates with less than 15 years of working experience

–          A more time-consuming way of accessing learning is to earn more than one masters degree

 

US banks ease loan payment rules for government staff laid off in shutdown – Pg. 13

–          Banks are offering hard-pressed US government employees forebearance on loan payments and fees, ….

–          …is waiving all current account fees, including overdraft charges, for those whose pay has stopped and whose pay cheque is deposited directly with the bank.  It has pledged to work with customers at risk of missing payments on home, car or credit card loans

–          The shutdown affects roughly a quarter of the federal agencies – those deemed “non-essential”, including national parks and the work for the IRS.  Some 800,000 workers are affected, either by being put on leave of absence or working without pay

–          (Prof Note: Today I had a long conversation with an individual in this “non-essential” category.  It is real and it is tough.  This person is fiscally disciplined but their tenants are also “non-essential” creating a larger burden if tenants cannot make rent payments.)

 

Answer: (1) Raise your auto insurance deductible (Prof Note: Be certain that the deductible is not raised to a point it is an issue if an incident occurs); (2) Delay big purchases (Prof Note: Research and determine the best discounts and times of year for these purchases); (3) Improve your credit score (Prof Note: Remember home mortgages are based on credit score and a lower score can mean higher mortgage rate.); (4) Use credit cards that offer rewards (Prof Note: I am a HUGE fan of this.  Just be responsible with credit card purchases); (5) Reach for a sweater instead of the thermostat; (6) Read books on mobile devices; (7) Close your self-storage unit (Prof Note: Mixed feelings about this.  A cluttered home can/may lead to sadness.  Be mindful of personal well being); (8) Compare prices online; (9) Use coupons when you shop (Prof Note: While this is prudent, I personally cannot stand coupons, e.g. Bed Bath & Beyond 20% off…arrggg…I just want to purchase the product); (10) Stop paying for recorded music (Prof Note: But for concerts, I do not know how musicians support themselves); (11) Sign up for a retail store credit card to get a one-time discount; (12) Don’t forget to ask about senior discounts; (13) Buy health insurance; (14) Get rid of your telephone landline; (15) Set up an automatic savings plan; (16) Get a roommate; (17) Don’t buy a brand new car; (18) Pay attention to the price per unit when grocery shopping; (19) Take time to read grocery expiration dates (Prof Note: I specifically look at the milk cartons and purchase these latest expiration date available)

5 January 2019

 

Question: According to MSN: Money, what are ten (10) money mistakes everyone makes at the beginning of the year?

 

Powell seeks to soothe markets after year’s shaky beginning – Pg. 1

–          Federal Reserve chair Jay Powell offered an upbeat assessment of US economic prospects following a strong jobs report yesterday, easing fears of a 2019 downturn that had spooked global investors in recent weeks

–          …Mr Powell said the Fed would take a “patient” approach to monetary policy tightening, contributing to a rally which sent the S&P 500 up 3% by afternoon…

–          As markets soured in recent weeks, Mr Trump lashed out at Mr Powell over the Fed’s plans to increase interest rates.  But Mr Powell brusquely asserted his independence.  Asked if he would quit if asked to by Mr Trump, he replied, “No” (Prof Note: Central Bank independence is critical and, I fear, lost in today’s global market)

 

US shutdown exposes Democratic faultlines – Pg. 2

–          (Prof Note: I will provide a rare opinion of this silliness.  Our elected officials are elected to benefit constituents.  While I am not naïve and can understand a “greater good” argument, i.e. short suffrage for a greater good, the willingness of Congress to shutdown for the holidays and go home disgusts me.  You stay there, while the public suffers, and you work it out.  One does not leave for the holidays.  Being a member of Congress is not a job that one leaves at 5:00pm but it is an honour earned and bestowed.  It must be treated as such!  90% of a job is showing up on time (and staying there).)

 

Beijing to cut bank reserves by $117bn in latest move to lift economy – Pg. 3

–          China’s central bank will inject $117bn into the banking system by cutting the share of deposits that commercial banks must hold in reserve, …

–          Global markets fell this week on China slowdown worries,…

–          The People’s Bank of China said yesterday on its website it would cut the required reserve ratio (RRR) by 1%, with the cut divided into two stages of 0.5%, each effective on January 15 and January 25

 

Answer: (1) Not having a plan in place (Prof Note: I spent no less than a full day over the holidays putting together the 2019 plan); (2) Not reassessing an automatic savings strategy (Prof Note: I spent no less than a day regarding investment strategies, cash flow needs, etc.); (3) Ignoring retirement account contributions; (4) Putting off taxes (Prof Note: I pay taxes quarterly so am unclear why someone would put this off but understand how it can be done); (5) Not adjusting tax withholding (Prof Note: Be diligent and ensure you have cash as soon as possible); (6) Not checking life insurance beneficiaries (Prof Note: this should be part of your wealth management plan.  Beneficiaries need review for EVERY major life change); (7) Staying disorganized for yet another year (Prof Note: I truly believe that organization is correlated to happiness.  Also, create that home inventory…finally); (8) Not paying off debt (Prof Note: There is good debt and bad debt…be certain you are paying off the correct kind); (9) Not reviewing investments (Prof Note: GUILTY!  I need to be better about this but also focus largely, at this point in life, on blue clips and passive investment in indices); (10) Biting off more than you can chew (Prof Note: This thought is omnipresent with me.  What can I afford?  What do I want to afford?  What developments do I want to embark?  What responsibilities can I accept and comfortably carry?)

4 January 2019

 

Question: According to MSN: Money, what are six (6) tax surprises new retirees face?

 

Apple’s China warning sends tremors through stock markets – Pg. 1

–          Apple’s abrupt warning over weak Chinese sales has stoked fears for the health of the global economy, rattling financial markets and leading traders to ramp up bets that the Federal Reserve is more likely to cut interest rates than raise them in 2019

–          The iPhone maker’s first cut to its revenue forecast in 16 years put its shares on track for a 9% decline yesterday – its biggest one-day drop in five years….

–          The tech-heavy Nasdaq index was down 2.3% by afternoon trading in NY…while the S&P 500 fell 1.9%

–          The sharp drop in Apple shares means the company’s market capitalization has fallen below Alphabet, at $680bn.  The iPhone maker’s valuation had already been overtaken by tech rivals Amazon and Microsoft at the end of last year.  Apple’s value peaked at $1.12tn in early October

–          ..US 30-year Treasury yield to a one-year low of 2.9%, …

–          The Fed Funds futures market, where traders speculate on the direction of interest rates, indicated that there was no chance the Fed would lift rates in 2019, and a 30% chance the US central bank would ease policy this year

–          The US yield curve, a popular gauge of impending economic downturns, has also signaled danger ahead

 

Median price for a Manhattan apartment falls below $1m – Pg. 2

–          The median price of a Manhattan apartment has fallen below $1m for the first time in three years, …

–          The median price paid for co-operatives and condominiums in the prime borough of New York City – some of the most expensive properties in the US – fell 5.8% to $999,000….

–          There was a 25.5% fall in the median sales price of new developers compared to the same period a year earlier, reflecting fewer sales of the highest priced apartments.  The median sales price for resale co-ops and condos rose 2.8%

–          (Prof Note: Simple Math…over the past year jumbo mortgages have increased 100bps.  So, assuming a $1,000,000 purchase price, 40% downpayment, i.e. $600,000 mortgage, and current 4.60% rate, how much more does the 100bps increase cost the purchaser?  Answer: $125,000 over the 30 years.  Now, couple this with the tax law change of limited deductibility of property taxes and the market is finally pricing reality.)

 

US car sales defy downturn prediction – Pg. 12

–          General Motors estimated that US auto sales rose slightly last year to 17.3m, defying predictions that 2018 would be a down year for the US industry – …

–          Ford also announced a 3.5% drop in 2018 …

–          GM predicted a cyclical slowdown in November when it announced it was cutting 11,000 jobs and idling four US factories to prepare for it

–          Profits held up well in 2018 too, despite the impact of US tariffs on commodity prices

 

Answer: (1) You stop paying Social Security payroll tax on your income; (2) You may start paying taxes on your Social Security Benefits; (3) You stop paying Medicare payroll taxes on your income; (4) Your standard deduction increases once you reach 65; (5) You may qualify for a homestead exemption on your property taxes; (6) You may see your taxes and other costs increase as a result of RMDs

3 January 2019

 

Question: According to MSN: Money, what are ten (10) frugal resolutions for the new year?

 

Tesla tumbles as sales figures suggest tough year ahead – Pg. 1

–          Tesla’s charmed run amid recent carnage on Wall Street ended abruptly yesterday, as sales figures and a price cut suggested 2019 was shaping up to be a tougher year for the electric car maker

–          The company’s shares fell sharply after the news, falling more than 7% in NY morning trade, reflecting concerns about the prospects for the Model 3, designed to be the first mass-market electric vehicle

–          Some of that enthusiasm evaporated on the first trading day of the new year as Tesla said it had delivered fewer vehicles in the final three months of 2018 than most analysts expected.  At 90,700, deliveries were more than three times the same period in the year before

–          …ahead of an end-of-year reduction in the tax credit US buyers could claim on their purchases

–          The tax credit was halved to $3,750 from the start of this year

 

Hackers steal 9/11 insurance and legal data – Pg. 13

–          The FBI is investigating the theft of 18,000 insurance and legal documents relating to the September 11 attacks on the World Trade Center by a hacker with a long record of holding companies to ransom…

–          Posting under the name “The Dark Overloard”, the hacker or hackers claimed on New Year’s Eve that they had taken emails and non-disclosure agreements relating to the 9/11 attacks that were sent and received by the insurers Hiscox and Lloyd’s of London and the law firm Blackwell Sanders Pepper Martin, now called Husch Blackwell

–          The Dark Overlord said they would sell the documents for bitcoin, inviting Isis, al-Qaeda and nation states to bid for them online

–          The September 11 attacks cost the insurance industry the equivalent of $45bn in 2017 terms,…

–          Lloyd’s said it had no evidence its systems had been compromised

 

Deal surge in local US television stations raises diversity concern – Pg. 14

–          More than $13bn of local US television networks have changed hands in the past two years as a loosening of Obama-era regulations on station ownership has fueled a frenzy in dealmaking in the sector that controls how most Americans watch their news

–          While social media sites and online news sources have become more popular, television is still the prime source of news for Americans and they prefer local stations to cable channels

–          About 50% of Americans said they consume their news through television, compared with 43% who said they often get news online,… (Prof Note: I am in the 43% category…)

–          Some observers are concerned that as a handful of large players consolidate the local television market, there will be a loss in diversity of the voices reaching US households

–          The buying spree has been hastened by changing US regulations.  The FCC, …in 2017 reinstated arcane channel ownership rules that has been scrapped by the Obama administration – a move that in effect lifted a barrier to companies owning more television stations

 

Answer: (1) Stop impulse buying (Prof Note: One way to do this is to purchase online and pick up at store.  I do this with Target and never truly enter the store.); (2) Put $10 a week toward retirement (Prof Note: You can transfer the money effortlessly online); (3) Pay credit card bills in full; (4) Take your budget seriously (Prof Note: I spent half a day developing the 2019 budget); (5) Commit to living within your means; (6) Take the ‘Uber frugal month’ challenge; (7) Surround yourself with frugal people (Prof Note: I was on the phone, literally for 45 minutes last night and 30 minutes today with a fellow frugaler, i.e. Chander D.  We regularly phone each other complaining about the expenses of life for which we cannot escape!  Find support!); (8) Build an emergency fund (Prof Note: While I agree with this I also believe an emergency needs to be an EMERGENCY.  Better to build other sources of income); (9) Consult your partner and family; (10) Take stock of where your money is going (Prof Note: Kill the autopayments.  You can lose control.  Hand write checks (or do online).  Know where the bleed is located and cauterize!)