7 September 2019 FT — Articles to Read

7 September 2019


Question: According to MSN: Money, what are the hardest top ten (10) colleges to gain admissions?


Gloom deepens for global economy – Pg. 1

  • The slowdown afflicting the world economy was reflected in disappointing data on US jobs and German manufacturing yesterday, piling pressure on to central bankers to launch a stimulus push
  • In July the IMF said it predicted the world economy to grow 3.2% this year – less than its estimate at the beginning of 2019. While the fund has predicted a rebound to 3.5% growth in 2020, it has warned that such a recovery was “precarious” since it was premised on stabilization in emerging markets and progress on trade disputes
  • In the US, jobs growth slowed to its weakest pace in three months in August despite a boost from temporary hiring from census workers…
  • Non-farm payrolls rose by 130,000 last month…


Goldman cuts its partners down to size – Pg. 12

  • Not since it went public in 1999 has Goldman been a true “partnership”, but it has retained the title, which still brings perks and status that are unique on Wall Street
  • Goldman has about 450 partners, already down from the almost 500 that Mr Solomon inherited when it took over as chief executive last October, but well above the 221 the bank had when it went public in 1999
  • “Departnering” can be brutal. Goldman announces new partners with fanfare, but a handful each year are quietly ejected.  At the same time, other partners retire or leave voluntarily to run businesses or move into government
  • Along with salaries of about $950,000 and the potential for sizeable bonuses, the real financial benefit has been privileged access to investment opportunities in companies that have included live sciences firm Avanto and China’s ICBC bank. The private equity investments are available to all partners, fee free
  • About a quarter of the current partners work in trading, which contributes over a third of annual profits. Investment banking has traditionally had a higher concentration of partners relative to its revenue contribution, partly because partnership status can help investment banks to win clients


Fitch cites damage to rule of law in Hong Kong downgrade – Pg. 13

  • Fitch Ratings has lowered its rating on Hong Kong, citing uncertainty about the stability of the business environmental following months of protests and looming challenges stemming from the city’s closer integration with mainland China
  • …lowering its ranking of the Asian financial hub from double A plus to double A with a negative outlook, signaling the potential for further falls
  • Fitch said that months of persistent conflict and violence had inflicted long-lasting damage to international perceptions of Hong Kong’s governance system and rule of law, as well as calling into question the stability of its business environment


Answer: (10) Princeton University; (9) Harvey Mudd College; (8) Franklin W Olin College of Engineering; (7) Johns Hopkins University; (6) Rice University; (5) Yale University; (4) University of Chicago; (3) Harvard University; (2) Massachusetts Institute of Technology; (1) California Institute of Technology (Prof Note: My two alma maters, Bucknell University and George Washington University did not make this list which was top 50.  As I age, I ponder, “What did I really pay for?”  There were a few stand-out professors, but not many, that had a personal impact on me.  GW’s Jabbour expanded my market understanding eight fold with derivatives.  This knowledge enabled me to see what others were not seeing in ‘06/’07’.  I continue to ponder, given the high cost of education, the value.  I do not believe my alma maters have opened doors for me (though I do believe they have not closed them).  What has opened my doors is knowledge and work experience.  There is just so much to be said for the community college route and then finishing the final two years at a four-year university given educational costs.  Also, there is honour in trades.  Look at the average age of tradesman.  Learn a trade, build a business, that is how equity and wealth are truly built, right?!)

6 September 2019 FT — Articles to Read

6 September 2019


Question: According to MSN: Money, what are twelve (12) reasons your home is not worth as much as you think?


WeWork’s valuation slashed to $20bn from $47bn ahead of IPO – Pg. 1

  • The sharp fall comes after prospective investors raised doubts about the ability of the lossmaking shared-office provider to become profitable in the near future, …
  • WeWork is expected to begin a roadshow as soon as next week ahead of the IPO, which would rank as one of the year’s biggest.
  • The lower valuation will leave co-founder and chief executive Adam Neumann stretching to reach targets attached to part of his incentive package, which includes several tranches of profit interests that would vest if the company attained market capitalizations above $50bn, $72bn or $90bn
  • …noted the gulf between WeWork’s valuation and its largest rival, London-listed IWG, which has a market capitalization of 3.7bn (sterling) despite having more sites than WeWork
  • WeWork reported net losses of $1.9bn for 2018 and said that losses had continued to grow in the first half of this year, from $723m to $904m, despite revenues doubling from $764m to $1.54bn


ECB to consider damage done by negative rates – Pg. 2

  • The ECB’s main deposit rate hit zero that year and successive cuts have left it at minus 0.4% since 2016
  • Critics say that negative rates weaken the eurozone’s already struggling banking system, discouraging lending and motivating insurers, banks and savers to hoard physical cash
  • Banks are the main source of finance for European companies and households, making them an important transmission mechanism for monetary policy
  • The debate about negative rates hinges on the idea of a point below which further cuts in a central bank’s deposit rate subdue lending activity by banks
  • It has become more common for European banks to charge fees for current accounts, but they only mitigate a fraction of the extra cost of negative rates
  • Bank lending to households in the Eurozone has increased more than 10% since the ECB first cut into negative territory in June 2014, while corporate lending has grown by almost 4%
  • Open option is a tiering system in which a portion of banks’ excess deposits are exempt from negative rates. Other countries with negative deposit rates, including Switzerland, Denmark and Japan, have similar ones
  • And the ECB has another option: subsidized lending. A third progamme of subsidized loans is set to launch this month.  The targeted longer-term refinancing operation will lend at a slightly more expensive rate than the previous two, but the ECB could choose next week to sweeten terms


Indian households tighten belts as economic gloom deepens – Pg. 3

  • India’s GDP growth is in its fifth consecutive quarter of deceleration, …tumbling to a six-year low of just 5% year-on-year between April and June. That was down sharply from the disappointing 5.8% in the first three months of 2019, and from 8% in the same quarter the previous year
  • One of the biggest drags on growth was a sharp deceleration in private consumption, which had been one of the economy’s major growth engines over the past few years. Private consumption grew just 3.1% year-on-year from April to June, down from 7% growth in the previous quarter
  • Household savings – the biggest component of a nation’s overall savings rate – have fallen from 23% of GDP in 2012 to 17% this year. Household indebtedness rose from 9% to 11% of GDP in the same period


America’s debt-laden students require better policy solutions – Pg. 9

  • Since 2006, outstanding student debt has quietly tripled to $1.6tn – nearly $35,000 per borrower
  • That makes it the biggest source of non-mortgage consumer lending, representing around 7% of economic output.  It also makes the American government “the largest consumer lender in the United States”, since most loans have federal backing …
  • The debt creates a debilitating economic drag by reducing consumption, entrepreneurial activity and household formation among millennials
  • ….college attendance is a defining trait of middle class identity (Prof Note: I use to agree with this; my beliefs are shifting…)
  • …other ideas are being tossed around that should be adlopted….one is to develop occupational alternatives to college
  • …interest rate on loans….this currently stands at 4 to 7% for federal loans, and close to 10% for private debt…


Answer: (1) Not loving laminate; (2) Bar None (Prof Note: Article suggests built-in wine coolers and bars are not trending today); (3) Banish weeds; (4) Good fences make good sales; (5) Cannot have carpet; (6) Pave paradise; (7) Draft dodgers (Prof Note: Article suggest fireplaces are in the past); (8) Put your house in order; (9) Screen savers; (10) Repaint your rooms; (11) Look up; (12) location, Location, LOCATION

4 September 2019 FT — Articles to Read

4 September 2019


Question: According to MSN: Money, what are seven (7) things one should not put on a resume?


US factory sector dragged down by trade war as growth fears rise – Pg. 1

  • The US manufacturing sector has contracted for the first time in three years as the US-China trade war weighed on the industrial economy and added to fears over slowing domestic growth
  • Manufacturing, which in the 1950s employed one in three Americans, has drawn only about 8% of the workforce since the end of the great recession and provided 11% of GDP
  • Stocks fell after the release of the data, with the S&P 500 down 0.75%, while Treasuries extended their rally. The yield on the US 10-year was 4.9bps lower at 1.457%.  Yields move inversely to price


Fall in Turkish inflation raises expectations for cut in rates – Pg. 4

  • Consumer prices last month were 15.01% higher than a year ago- leaving inflation at its lowest level since May 2018
  • Falling inflation, combined with a more stable currency, enabled Turkey’s central bank to cut rates for the first time in almost a year in July


The Fed is the most reluctant combatant in global currency war – Pg. 18

  • Years of aggressive monetary easing by the ECB has hacked away at interest rates. Negative deposit rates, rather than supporting bank lending, have instead hindered it.  Monetary policy has reached the limits of its effectiveness.  Of course, the ECB knows all this.
  • The simple answer is that easier policy trends to cheapen a country’s currency and the foreign exchange channel has become one of the few ways that the ECB can juice up the Eurozone economy
  • A weaker euro acts as a shock absorber to cushion the blow of weak internal Eurozone economics by improving external dynamics
  • The US-China trade conflict has created more complications. China’s decision to permit renminbi depreciation as an automatic stabilizer creates friction for other Asian central banks, pressuring them to engage in competitive depreciation – a kind of beggar-thy-neighbour policy.  Over the past few months, a succession of central banks has eased policy.
  • …the Fed is understandably reluctant to indulge in aggressive monetary stimulus. The US consumer has stayed resilient amid slowing economic activity, suggesting that the problem is not that interest rates are too high
  • If the Fed allows interest rates to deviate too far from the ECB’s, the US dollar will strengthen
  • The dark side of falling interest rates is the prospect of riskier investor behavior
  • Fiscal stimulus is an obvious circuit breaker in this race to the bottom in currencies and yields. The market is making it easy for countries to borrow more, yet governments remain strangely reluctant
  • Companies are also failing to take advantage of negative yields. To date, only a handful have locked them in the primary market


Answer: (1) Criticism of past employers (Prof Note: Comey drove this point home to me.  I found myself not caring if he was right/wrong.  I just wanted him to go away.  Now he is the one under investigation!); (2) Excuses for past problems (Prof Note: Own your issues, also, do not advertise them!); (3) Irrelevant skills; (4) Old Achievements (Prof Note: That said, I think “Eagle Scout” and other similar accomplishments make a very positive statement about a person.  I do struggle, however, if this should be on a professional resume); (5) Poor grammar and spelling (Prof Note: This is ridiculous!  Hire a high school English teacher to proofread); (6) Too much information; (7) Anything that is not true (Prof Note: I still remember looking forward to interviewing someone that has designed and implemented a covered strategy for commodities using options.  When I asked him about it he literally said, “I was really part of a team and did not understand what was happening.  However, I thought it sounded good for the resume.”  I was deflated and he was DONE!)

29 August 2019 FT — Articles to Read

29 August 2019


Question: According to MSN: Money, what percentage of married couples in Washington DC earn over $100k and what is there monthly disposable income?


Uproar as Johnson shuts down parliament to protect Brexit plan – Pg. 1

  • Boris Johnson plunged Britain in to a constitutional uproar yesterday when he announced plans to shut down the UK parliament for five weeks, daring opponents of his Brexit strategy to vote down his government in a sharp escalation of tensions in Westminster
  • The prime minister asked the Queen to prorogue parliament between the second week of September and October 14 – the longest suspension since 1945
  • Mr Johnson has insisted that the UK will exit the EU on October 31, with or without a deal
  • …Mr Johnson hopes that it will focus minds in Brussels on delivering a new Brexit deal without the Irish border backstop – an insurance policy to avoid a hard border with Ireland through a temporary customs union


DeBeers diamonds in a rough patch as oversupply and artificial gems hit sales – Pg. 1

  • DeBeers, the world’s largest diamond miner by value, said yesterday that sales of rough diamonds plummeted 44% at its auction last week in Botswana, down to $280m compared with $503m in the same period a year ago
  • Macroeconomic uncertainty and, in particular, the trade war between the US and China, the world’s two largest diamond-consuming countries, has fueled nervousness among wholesalers and retailers
  • Diamond buyers, who polish and cut diamonds for retailers, are struggling to make money this year because of lower prices and tighter credit, prompting them to delay purchases
  • Shares in Signet, the world’s largest retailer of diamond jewellery, have fallen more than 60% this year


China considers corporate ‘social credit’ system – Pg. 12

  • Foreign companies operating in China are unprepared for tougher sanctions under a corporate “social credit” system imposed by Beijing,…
  • Sanctions that can be imposed by regulators depending on compliance include fines, targeted audits, restricted issuance of government approvals and exclusion from preferential policies and public procurement contracts,…
  • The system aims primarily to improve the enforcement of existing regulations, and in many foreign companies could benefit as they often have better compliance in areas such as environmental pollution…
  • The measure could give Beijing more leverage over companies perceived to have violated China’s stance on politically sensitive issues…


Norway oil fund eyes unlisted holdings – Pg. 14

  • Norway’s $1tn oil fund should be able to take stakes in large unlisted companies, the investor’s manager has proposed, as it seeks greater exposure to private technology groups
  • …recommended yesterday that it be allowed to hold up to 1% of its equity portfolio in unlisted companies, equivalent to about $7bn
  • Norway’s central bank yesterday proposed getting rid of the requirement for “an intention” to float and instead allow the fund to own “large companies that are not yet listed”
  • …the fund has record holdings in equities, with 69.3% of its assets in shares. It began in 1996 only investing in bonds


Outlook for S&P 500 profits dim as trade war bites – Pg. 17

  • Companies in the S&P 500 index will increase profits 2.4% on a per-share basis this year, down from the 7.7% growth expected at the start of the year…
  • The 5.3%-point drop in full-year earnings expectations marks the largest decline on a year-to-date basis since 2016
  • Trade tension between the US and China escalated last week when Beijing said it was preparing to slap tariffs on $75bn of US imports and President Donald Trump responded with a plan to increase levies on Chinese goods and what he called an order for US companies to “immediately” find alternatives to China
  • The lower profit outlook follows anaemic growth in US capital spending this year after a surge in 2018 when lower corporate taxes came into force


Answer: 66.7% and -$700/mo (Prof Note: That is a negative $700/mo, i.e. lose money per month)