Financial Times Blog

7 August 2018

 

Question: According to MSN:Money, what are 40 secrets only divorce lawyers know?

 

Chinese police lock down financial district – Pg. 4

–        Investors who had lost money in the recent collapse of P2P platforms had organized a protest in Beijing yesterday, ….

–        China’s online P2P lending market is the biggest in the world, with $175bn in loans outstanding at the end of last year, …

–        But over the past two months a wave of defaults shocked families who believed their investments were safe

 

Renminbi decline overwhelms central bank intervention as Chinese stocks slide – Pg. 17

–        The renminbi resumed its drop yesterday as the downward pressure on the Chinese currency overwhelmed the first effort from the country’s central bank to temper its four-month slide

–        In contrast to notable renminbi drops in 2015 and 2016, the currency’s 9% slide against the US dollar since April has yet to alarm global investors, who believe it is in the crosshairs of both the trade war and attempts by Beijing policymakers to reverse a recent tightening in monetary policy as the economy slows

–        Some $2.3tn has been wiped off the value of Chinese stocks since their high in January

 

Answer: (1) Don’t let emotions dictate your financial decisions (Prof Note: I remember a student calling me with a problem.  It started like this, “Prof, I did what you say do not do, I bought a house with my gf.”  I said, “Great, now marry her!”  He said, “Welllllll, she’s not my girlfriend anymore.”  I said, “Ok, talk to me…”  He said, I have this spreadsheet showing I have contributed 91.7% to the household expenses you would be proud!”  I said, “I am proud.  Now give her half, move on with your life and listen to me from the beginning!” J), (2) Everything is fair game (Prof Note: Make certain you know what “everything” is!); (3) Make big purchases before filing; (4) Keep track of your spouse’s spending (Prof Note: The devil is in the details); (5) Gather key evidence before filing (Prof Note: I have advised so many, female and male, on this.  Everyone wants to confront the other person.  Get your ship ready to sail first!); (6) Get property appraised before you part ways; (7) Don’t hide assets (Prof Note: Be transparent but also be strategic); (8) You can write off alimony payments on your taxes (Prof Note: I thought, but am not a tax accountant, this was negated with the tax changes); (9) If you receive alimony, you must report it; (10) Watch out for Hidden Tax Implications; (11) Get job training or update your education before filing (Prof Note: A spouse that works at home for the family has value!  Replacing the person that cooks, cleans, drives carpools, loves on everyone when they are sick, is priceless…remember this!); (12) Familiarize yourself with your finances before you split (Prof Note: I recommend both spouses understand the finances.  In fact, part of my estate plant explains my finances); (13) Consider mediating your divorce (Prof Note: One of my good friends is a divorce mediator.  The few people I have sent his way have spoke highly of him and the services provided); (14) Know what your biggest asset is; (15) If your lawyer recommends a PI, hire one (Prof Note: In my family saga I hired two PIs.  What a joke!  All they did was google search.  I would have been better off hiring two 12 year olds!); (16) The most expensive lawyer isn’t always the best (Prof Note: It is important to have benchstrength.  Single practioners are just that, single.  Benchstrength baby!); (17) Understand debt obligations; (18) Don’t forget about beneficiary designations (Prof Note: Change your Will!); (19) Pay court-ordered attorney fees; (20) Consider your income before asking for all deductible items; (21) Take advantage of free legal advice (Prof Note: Remember, you generally get what you pay for); (22) Be mindful of the date when initiating divorce; (23) Design a joint parenting arrangement wisely; (24) Plan finances for after the divorce; (25) Have a paper trail; (26) Division of property can be complex; (27) Retirement accounts are not worth the balance; (28) Division of property depends on where you live; (29) Some states are better for getting a divorce; (30) Be mindful of the worst states for divorce (Prof Note: Remember, the most important finance decision one makes in life is their spouse!  Also remember the greatest destroyer of wealth is NOT a financial crisis but rather….DIVORCE!!!)

4 August 2018

Question: According to MSN|Money, CNBC, how does one avoid becoming a human ATM?

 

Static US wage growth adds to argument for rate rise caution – Pg. 4

–          Solid hiring by US employers failed to boost the annual rate of wage growth in July, feulling arguments for the Federal Reserve to tread carefully as it raises rates

–          Unemployment dropped to 3.9%.  a broader measure of labour market strength that includes people who are in part-time work but want a full-time position was just 7.5%, a full point below where it was a year earlier and its lowest level since 2001

–          …wage growth flatlines at 2.7%

–          The Fed is widely expected to move rates up by another quarter-point next month as it continues its gradual process towards tighter policy

 

Trial paints Manafort as big spender – Pg. 4

–          The prosecution has sought to paint Mr Manafort as a man who lied to dodge taxes when times were good and lied to obtain bank loans when times were bad

–          Mr Manafort is the first person to be tried in Mr Mueller’s investigation into alleged links between the Trump campaign and the Russian government (Prof Note: How is Mr Manafort involved with the Russians?  How are these charges related to Mueller’s investigation?  I am NOT saying Mr Manafort is guilty/not guilty, I just do not see the connection!)

–          The allegations concern some $60m Mr Manafort earned between 2005 and 2014 in Ukraine…

 

Answer: (1) Ask what it is for (Prof Note: If someone asks you for $$$, be certain you understand the need.  Do not be frightened to pay the bill directly.  Also, be certain the money is not being used to buoy an unsustainable lifestyle); (2) Feel free to say no; (3) Set terms; (4) Accept that you might never get it back (Prof Note: While not for everyone, consider funding a Foundation.  This way your philanthropic goals are met and you can address the ask with, “Please contact my Foundation for a donation.”)

3 August 2018

 

Question: According to MSN|Money, Motley Food, what are four times when diversifying your portfolio may not make sense?

 

Apple becomes first company to break through $1tn value barrier – Pg. 1

–          …beating old foes such as Microsoft and younger tech rivals Amazon and Alphabet to the milestone

–          Tracking Apple’s rise to the $1tn milestone has been complicated by the company’s enormous share buybacks, including $20bn in the past quarter alone.  The company’s latest regulatory filing showed a share count of 4.83bn shares as of July 20

–          Market capitalization is only one measure of a company’s success.  Amazon’s enterprise value, which takes into account debt, is already ahead of Apple’s by about $50bn

–          …11-year-old iPhone, which still accounts for about two-thirds of annual revenues….

–          The company’s share price rally in recent months has been attributed, at least in part, to its plan to repatriate overseas profits and return most of its more than $100bn in net cash to shareholders, under new US tax rules

 

White House push to cut taxes for rich faces thorny obstacles – Pg. 2

–          The hurdles would include challenges to the legality of the move, on top of political criticism and doubts over the economy benefits

–          The Treasury has been examining the merits of adjusting capital gains taxes for inflation – in effect a tax cut that would confer large benefits on well-off Americans

–          ….as much as 90% of the benefits would go to the top 1% of households

–          Presently, when assets are sold the tax is calculated on the nominal difference between the initial cost and sale price

–          ….the Treasury could redefine what is meant by “cost” without the need for new legislation, meaning only returns in excess of inflation would be subject to tax

 

German government debt falls below $2tn – Pg. 4

–          Debt fell last year by 2.1%…

–          The debt ratio is expected to fall to 58.25%, down from 61% this year.  As recently as 2012 it was at 81% of GDP

–          Germany passed another important symbolic milestone in January when its “debt clock” started running backwards for the first time in more than 20 years

 

BoE interest rate increase to 0.75% is highest level in nine years – Pg. 4

–          The BoE raised interest rates to their highest level in almost a decade yesterday, ….

–          …central bank’s benchmark interest rate to 0.75% – the highest level since 2009 in the aftermath of the financial crisis

–          The BoE is the third major central bank to meet this week, and has joined the US Federal Reserve in signaling further interest rate rises are on the way

 

Passive investing is storing up trouble – Pg. 9

–          A fundamental shift in market structure towards rules-based, passive investing over the past decade means a lot of trading is no longer based on fundamentals

–          …only about 10% of US equity investment is now done by traditional, discretionary traders

–          Passive investments, such as ETFs and index funds, similarly ignore fundamentals.  Often set up to mimic an index, ETFs have to buy more of equities rising in price, sending those stock prices even higher

 

Answer: (1) If you’re investing with a relatively small amount of money (Prof Note: A MAJOR criticism I have with academia is that it prepares everyone to manage someone else’s $100.0m portfolio and not their own $500,000 retirement savings.); (2) If you’d have to dip into margin in order to diversify; (3) If you ‘re struggling to keep up with the headlines of what you already own; (4) If it reduces the quality of your investment holdings