Financial Times Blog

2 August 2018

 

Question: According to MSN:Money, what are 15 things men get wrong about women and money?

 

Fed stays on course for September rate rise after bullish review of US economy – Pg. 1

–          The Federal Reserve stayed on course for a further increase in short-term interest rates as soon as next month as it highlighted the strength of the US economic expansion alongside inflation that is hovering close to target

–          The central bank held the target range for the federal funds rate at 1.75% to 2.00%, as widely expected….

–          It gave a bullish assessment of the economy following its latest two-day meeting, describing a range of economic indicators as “strong”

–          …the ECB is penciling in an end to its quantitative easing programme at the end of the year, while the BoE is poised for another rate increase

–          The BoJ stood as the exception this week, pledging to maintain extremely low rates, although it also jolted bond traders by introducing extra flexibility into its stimulus programme

–          Having raised rates twice, the Fed’s median forecast is for a total of four rises this year, with three in 2019.  That could push rates towards “neutral” levels – at which growth is at its trend rate and inflation stable – as soon as next year

 

China eases war on debt in hunt for short-term growth – Pg. 4

–          China’s leadership has signaled a shift towards supporting short-term economic growth after battling excessive debt for nearly two years, just as a trade war with the US also threatens the economy

–          China’s economy expanded at its weakest pace since 2016 in the second quarter, and most economists expect further deceleration.

–          Overall lending growth from banks and off-balance-sheet sources hit record lows for four consecutive months to June, …

 

Auditing in crisis – Pg. 7

–          The word audit means to survey or check.  Ferreting after facts was once the auditors’ main vocation: certifying information to assure investors that a company’s numbers were “true and fair”

–          In the UK in the past three decades, standards setters have progressively dismantled the system of historical cost accounting, replacing it with one based on the idea that the primary purpose of accounts is to present information that is “useful to users”.  The process allows managers to pull forward anticipated profits and unrealized gains, and write them up as today’s surpluses

–          Modern auditing in Brain sprang from a great failure; the collapse in 1878 of the City of Glasgow Bank

–          Their purpose was to assure investors that companies’ capital was not being abused by over-optimistic or fraudulent managers.

–          The idea that accounts should be primarily “useful” springs from the same source as the so-called efficient markets hypothesis.  Indeed, it is an adjunct to that now somewhat discredited theory

–          Fair value accounting has been firmly shunned by the US SEC for contributing to the losses of the 1929 crash

–          Soaring inflation in the 1970s made historical cost balance sheets seem misleadingly out of whack with property values, leading to asset stripping.  American’s savings and loan crisis in the 1980s was partly blamed on these institutions having out-of-date boosk

–            From the 1990s, fair values started to supplant historical cost numbers in the balance sheet, first in the US and then, with the advent of IFRS accounting standards in 2005, across the EU.  Banking assets held for trading started to be reassessed regularly at market valuations.  Contracts were increasingly valued as discounted streams of income, stretching seamlessly into the future

–          Between 1992 and 2014, equity-based pay at S&P 500 firms rose from 25% to 60% of their total remuneration, …

–          “The problem with fair value accounting is that it’s very hard to differentiate between mark-to-market, mark-to-model and mark-to-myth”

–          Until the turn of the century there was a general convention that when one company bought another, goodwill was an effective cost of the transaction that needed to be amortized – or written down annually against group profits

–          …standards setters softened the rules on goodwill in 2000

–          Since 2007, the total goodwill on the balance sheets of S&P 500 companies had rocketed from $1.8tn to $2.9tn by 2016,…

–          From a Big Eight in 1987, the industry consolidated to a BigFive in 1998

–          …collapse of Arthur Anderson in 2002….”it makes the Big Four too big to fail”

–          There is also the perception that the dominant Big Four, which are now profit-hungry professional services conglomerates, are not that worried about audit quality anyway

 

Answer: (1) Myth: woman have worse credit scores; (2) Myth: Women are not good investors; (3) Myth: Women are more likely to make impulse purchases; (4) Myth: Women are more interested in getting married; (5) Myth: Women don’t make successful entrepreneurs; (6) Myth: there is no glass ceiling; (7) Myth: Women do all the grocery shopping; (8) Myth: Women have lower salaries because they don’t negotiate; (9) Myth: Women don’t know how to save money; (10) Myth: Women aren’t interested in learning about investing; (11) Myth: woman are born to shop; (12) Myth: women aren’t nature leaders; (13) Myth: Woemn are naturally bad at math (Prof Note: My 24 years of lecturing has proven to me that women are actually superior in math. Women are more likely to state the problem and prove the solution.  Men are more like to write a single number and be at the bar in time for happy hour); (14) Myth: women can’t manage money; (15) Myth: The general pay gap doesn’t really exist (Prof Note: Overall comment, in my 24 years of University lecture I have noticed no intellectual gap between any group of individuals.  What I have noticed is a difference in maturity, i.e. woman are more mature, especially at younger ages than men.  Also, woman with professional and familial responsibilities that have NO time, tend to be the best students, in general, in graduate school….because their children/family need them!)

1 August 2018

 

Nevis News: Crime continues to increase on the island.  17 total murders to date this year: 5 on Nevis, 12 on St. Kitts.  This year three expat couples were robbed at Paradise Estates and the island is full of activists.  Apparently the crime has caught the attention of authorities.

 

All beautiful days on Nevis with few rain drops.  It is dry as it is July and the grass is a slight brown but all is well.  A night photograph is attached with the full moon.

 

The humourous story thus far is arrival at St. Kitts.  In Miami I was trying to arrange fresh pastries at the house for George M., developer from states redeveloping Cat Ghaut.  I told Atahlia, Jeffers daughter, “I will die if they are not there.  Nothing else is acceptable.”  Well, when I arrived on St. Kitts several people came up to me asking, “What is it you must have or you will die?”  I said, “The raison scones and coconut cookies from Good Taste bakery.”

 

This is the third trip for George M to Nevis.  It is interesting seeing and hearing him experience the island.  The first trip he enjoyed the island.  The second trip he fell in love with the island (I was not with him for this trip).  This third trip, each time we go anywhere someone says, “George!!!” J  It is just that kind of island.  I think the third trip makes it “home”.  The restaurants for this trip have been Yachtsman Grille (Ehhhhhh…forgettable); Turtle Time (Highly recommended for the Millennials looking to meet other Millennials…that’s all I am saying….food….ehhhhh); and Indian Summer (unexpected hit for Indian food…excellent.  Local hang out and we bumped into owner of Bananas and Jeffer’s daughter.  P.S. Going back to George: Trip 1: new clothing and Four Seasons Worthy; Trip 2: was not here; Trip 3: Old clothing, fits right in! J

 

Question: According to MSN:Money, what are the two factors that determine the amount necessary to retire early?  (Prof Note: In actuality, to retire at all)

 

BoJ bucks central bank trend to stick with ‘extremely low’ rates – Pg. 1

–          The BoJ announce yesterday it would maintain “extremely low” interest rates for an extended period, making clear it would not join other big central banks in rolling back crisis-era stimulus policies

–          …strengthening the framework for “continuous powerful monetary easing”

 

Eurozone grows at weakeast rate in two years – Pg. 2

–          Concerns over a slowdown in the eurozoe rose yesterday after quarterly figures showed growth in the bloc hit its weakest rate in two years in the second quarter

–          GDP expanded 0.3% from the first to second quarter, …

–          The news comes amid fears that the bloc is in the midst a soft patch after a blockbuster 2017 and supports the view held by the region’s senior monetary policymakers that the central bank must be patient in easing its crisis-era support

–          Higher oil prices have weighed on businesses in the region this year, but the fear is that growing tensions between the US and the rest of the world on trade barriers will unsettle businesses, leading to sluggish investment and fewer exports

–          …unemployment remained at 8.3% in June, its lowest level since December 2008

 

Jury selection starts in Manafort fraud case – Pg. 3

–          …accused of tax and bank fraud in the eastern district of Virginia

–          A conviction would complete the downfall of Mr Manafort…

–          If he is acquitted, it would deal a blow to the credibility of Mr Mueller’s investigation, which is under daily attack from the president as part of a public relations campaign designed to sow doubt among voters about the Russia probe (Prof Note: I still remain unclear what Manafort has to do with the Russian probe!)

–          Mr Manafort is accused of hiding at least $30m of that money from US tax authorities in offshore bank accounts in Cyprus, Saint Vincent and the Grenadines and the Seychelles

–          The US government claimed that the misrepresented his income and that his consulting company, and failed to disclose existing loans on his properties when seeking additional mortgages

 

British universities face a crisis of over-ambitious expansion – Pg. 9

–          For most graduates, the economic return on their investment of time and money is good, but it gets harder and harder to make a beneficial choice; there is now an enormous range of places and courses to study

–          Higher education is ow a mess.  Two-thirds of UK students will never pay off their loan debt

 

Answer: (1) Your cost of living (Prof Note: Basically your monthly active expense in your retirement years); (2) The potential for investment growth and passive income (Prof Note: Basically your monthly passive income)

31 July 2018

 

Question: According to MSN:Money, what are three things you should do if in your 40s without any savings?

 

Fall in Chinese home sales signals growth slowdown – Pg. 3

–          China’s housing sales suffered a broad-based decline in July in a further sign that growth in the second-largest economy is ebbing just as the US-China trade war appears set to escalate

–          Real estate is a driver of the Chinese economy, so slackening property sales can have broader implications for GDP growth

–          China’s GDP grew by 6.8% in the first half of this year, but signs of a mild slowdown are spreading as the US-China trade war bites and Beijing gets tough on the unruly shadow finance sector

–          Investment in residential and commercial real estate rose 8.4% in June, down from a 9.8% rise a month earlier, …

 

Designers drive trend for sharing on home front – Pg. 4

–          A new frontier for Space10 is “co-living”.  Such housing shared by two or more people who are not related is seeing a revamp, driven by young urban professionals, who may be more digitally linked yet feel lonelier than ever

–          You get shorter, flexible leases and the flat monthly fee includes rent, utility bills and cleaning, access to fully-furnished smaller private bedrooms and shared kitchens, office and recreational spaces

–          Grasping these issues is vital not only as millennials dictate consumer trends, but also as the global population swells, house prices rise and incomes fail to keep up

–          Collective living has been practices across cultures throughout history, but the modern concept of co-living was pioneered in Denmark in the 1960s.  Denmark has since become home to more realistic models (Prof Note: No less than three construction crews were on Cat Ghaut today.  Many brought their families including young children to golf, swim, run, and play.  It was amazing how vibrant everything was with the laughter of children, backhoe digging, stone being chiseled and boards cut.  I understand the attraction but also know I was in my A/C office watching everything and smiling.)

 

Lending to the limit – Pg. 7

–          Over the past 18 months, regulators have unleashed a “windstorm” against Chinese banks, with rules to prevent out-of-control lending growth and risky funding practices that are especially prevalent among regional players

–          Several regional banks have already gone bankrupt in all but name before being  bailed out and restructured by local authorities.  Others have become piggy banks for local governments or politically-connected tycoons with an outsized influence over local banks

–          Problems at small banks matter because their role in China’s financial system is growing.  The country last year surpassed the Eurozone to become the world’s largest banking system by assets.  Meanwhile, small and mid-sized banks have more than doubled their share of total Chinese banking assets to 43% in the past decade

–          In china, regional banks struggle to attract deposits because regulators rarely allow them to open branches outside their home provinces

–          With modest deposit growth unable to satisfy their appetites for balance-sheet expansion, small banks turned to volatile, wholesale borrowing from other banks

 

Answer: (1) Lower some major living costs; (2) Get a side job (Prof Note: I was so honoured when a younger person called me on a recommendation from another saying, “I understand you are an expert in side hustles.”  I said, “Not quite but I am an advocate!” J); (3) Take steps to advance your career

30 July 2018

 

Question: What are the seven types of financial misconduct?

 

Asset Management – Pg. 7

–          Asset managers play a critical role in the global economy, such as investing the retirement savings of hundreds of millions of workers.  But while their influence has grown, the industry is undergoing profound changes that threaten the way they do business

–          Fees are under pressure as customers move to cheaper products and costs are rising because of new regulatory burdens.

–          ..unlike the largest US managers, which invested heavily in developing passive funds over the past two decades, Europe’s managers have tended to focus on more traditional pricier products such as actively managed funds

–          European asset managers are being forced to pull out of markets and lay off staff

–          M&A strategies have become less about market domination and more about survival

–          One of the main drags has been the continual downward pressure on fees that began in the US and has spared to Europe

–          Over the past two years, the amount of new investor money flowing into passive funds increased their total assets by 19%, while active funds grew by just 1%…

–          Since the financial crisis, the fund industry has been hit by an avanlanche of regulation resulting in increased operational spending

–          Lower fees and higher costs result in squeezed profits

 

Seven sins of financial world stuck on repeat, study finds – Pg. 16

–          The seven broad types of financial misconduct it identified were: price manipulation, inside information, circular trading, reference price influence, collusion and information sharing, improper order handling and misleading customers

–          In the field of price manipulation, the research found that the media by which false information was published had changed, but the techniques remained the same

 

US lenders face M&A skepticism – Pg. 16

–          Us regional bankers face rising shareholder disapproval over dealmaking in the sector, clouding the prospects for further consolidation between the country’s 5,600 lenders

–          US bank deals worth $21bn have been announced so far this year….compared with $26bn for the whole of 2017

 

Answer: (1) Price manipulation, (2) Inside information, (3) Circular Trading, (4) Reference price influence, (5) Collusion and information sharing, (6) Improper ordering handling, and (7) Misleading customers