Tag: Prof Note

9 May 2019

 

Question: According to MSN: Money, what are your do-or-die retirement plans if you have nothing saved?

 

US growth Impressive first-quarter performance unlikely to last – Pg. 2

–          While European economies slowed in 2018, the US annual growth rate continued to improve on the back of the tax cuts Mr Trump enacted in late 2017

–          Rising inventories accounted for 20% of US growth in the first quarter and imports fell because traders had bought foreign goods to get ahead of the initial tariff increases Mr Trump had announced

–          …industrial production peaked in December and fell in the first quarter of this year, after a strong 2017 and 2018

 

American’s young have little interest in the world – Pg. 9

–          …finds that 59% of baby-boomers – those born between 1946 and 1964 – and their elders believe the US should take a “leading role in the world”

–          Just 45% of Millennials and their juniors do

–          …the Americans how are most keen on global burden-bearing will, to put it tactfully, stop voting over the coming decades.  Governments must increasingly answer to an electorate that prioritises the domestic

 

Where home is still matters for a business – Pg. 9

–          Industrial companies of the 19^th and 20^th century tended to be firmly rooted in one place because of physical need.  Workers had to be drawn to their factories, often on the banks of rivers, with access to transport and power supplies….

–          …thirst for natural resources has been succeeded by one for human resources

–          Big cities with research universities gather graduates and skilled workers and companies cluster around – the Silicon Valley model has been replicated in cities such as Paris and New York

–          …globalization has loosened the bonds of corporate origin; for London this is exacerbated by the prospect of Brexit, leading companies such as Sony to shift their European headquarters

 

Answer: (1) Take a side job; (2) Increase your retirement plan contributions; (3) Cut expenses; (4) Invest; (5) Sell Possessions; (6) Access the value of your home (Prof Note: This is VERY dangerous and should be highly considered!); (7) Eliminate credit card debt

8 May 2019

 

Question: According to MSN: Money, what are three (3) expenses to avoid if you want to retire in 10 years?

 

Interest-only commercial loans rise to pre-crisis level – Pg. 1

–          Interest-only mortgages accounted for 77% of the loans backing $16.5bn of new commercial mortgage-backed securities in the US during the first quarter…up from 68% a year earlier

–          The trend means greater risks for the lenders, which face bigger losses on unpaid principal if stretched borrowers start to default on their loans.  If the economy weakens and commercial property prices begin to drop, the collateral backing the loans also creates in value, increasing the threat of write-downs that could open up big holes in lenders’ balance sheets

–          The growth of interest-only mortgages is a sign of more intense levels of competition within the industry, …

 

How our low inflation world was made – Pg. 9

–          …prior to 2009, the BoE never lent to banks at a short-term rate below 2%.  That ha been low enough to cope with the Napoleonic wars, two world wars and the Depression

–          Yet for a decade its rate has been close to zero

–          The US Federal Reserve has managed to raise its federal funds rate to 2.5%, but only with difficulty

–          The ECB’s rate is still near zero, as I the BoJ’s

–          …we should not be surprised by this world of persistently weak inflation and ultra-aggressive monetary policies, including outright asset purchases by central banks and favourable long-term lending to banks

–          US policymakers were the most successful in reacting comprehensively.  In the 1990s, Japan took too long to adopt the right combination.  So did the Eurozone after 2008, largely because of obstacles to active fiscal policy in such a currency union, but also because of ideological resistance to using the full capacities of the central bank

–          First, while financial and household debt have fallen relative to incomes in mature economies, that is not true for debts of governments or non-financial corporates.

–          Second, the transatlantic crisis triggered offsetting debt explosions elsewhere, notably in China

–          Third, crisis-hit economies are still far below pre-crisis trend output levels

–          Finally, the populist politics on left and right remain in full force

 

Answer: (1) Owning a second home (Prof Note: Owning a second home is a quality of life/life goal rather than an investment decision); (2) Taking out loans for your child to go to college (Prof Note: Address the payment of college through estate asset transfer upon death); (3) Whatever your largest expense is (Prof Note: Rarely is it not possible to downsize…)

7 May 2019

 

Question: According to MSN: Money, what are the Pros/Cons of having a mortgage?

 

EU failure to entice rich nations to ‘catastrophe’ – Pg. 4

–          The EU needs to “look in the mirror” and work out why it is failing to attract the continent’s most prosperous countries to play a full part in the union….

–          …”catastrophe” that countries such as Norway did not want to join the EU, others such as Denmark were opting out of projects such as the euro, while Britain was set to leave

–          …looking loss of the UK, the Netherlands has sought other allies to fight for a smaller EU budget and more deregulated single market

 

Short sellers’ growing bets against Lyft cast long shadow over rival Uber’s IPO – Pg. 11

–          As of Friday, more than 19m Lyft shares – about 60% of the free-float – were on loan, indicating that the stock is subject to heavy short selling, …

–          Short sellers, who borrow shares in anticipation of the stock price falling, have been increasing their bets against the company over the past two weeks, …

–          Lyft has been dogged by heavy short selling since it listed…

 

Answer: Pro: Having a mortgage can help boost your credit score; Con: Your house will cost you more in the long run (Prof Note: I though debt was a lower cost of capital than equity?!); Con: It puts pressure on you in retirement (Prof Note: Only if misunderstood and not planned); Pro: You might get a tax deduction; Con:  Mortgage creates uncertainty in your life (Prof Note: Not correct.  In my opinion, the mortgage can be grounding and provide focus for the family to work harder)

6 May 2019

 

Question: According to MSN: Money, what are eleven (11) reasons millennials think they have it tougher than their parents?

 

Global economy emerges from gloom into a bright spring – Pg. 3

–          Over the past few days the three largest economic blocs in the world – the EU, US and China, comprising almost half of global output – have published first-quarter estimates and all three have been stronger than expected

–          In Europe, the eurzone grew 0.4% in the first quarter, …significantly higher than expected.  Italy has emerged from recession and Germany, which has not published its figures yet, is also likely to show improved performance

–          The BoE las week upgraded its forecast for the UK’s performance this year from 1.2% growth to 1.5%,…

–          In China, growth stabilized at an annual rate of 6.4% and more up-to-date figures suggested the government infrastructure stimulus was having its desired effect, with industrial production rising at an annual rate of 8.5% in March – much stronger than analysts had expected

 

Debt deluge, falling copper prices and Chinese inflation hog foreign investment limelight – Pg. 10

–          Investors are bracing for a busy month in corporate bond markets with a rush of big debt sales to fund tie-ups

–          The pick-up of new debt could dent the 5.6% returns for investment grade bonds seen since the start of the year, with yields on a widely tracked index run by Ice Data Services levelling in recent weeks at around 3.65%

 

Equality at work – Pg. 14

–          Organizations work “very hard” to make pay opaque, ….

–          Such secrecy puts workers at a huge disadvantage in negotiating salary, …

–          In the US and UK, listed companies are required to publish the pay ratio between chief executives and workers’ averages.  Gender pay gap reporting has been introduced in the UK and France.  A new law in Germany allows women to ask for the median salary of a group of at least six men doing similar work, and vice versa

–          Learning that a peer earns more than you may be demoralizing and trigger a hunt for a new job, but the converse is true of your manager.  Discovering the boss has a higher salary can motivate an employee to strive harder

–          While quitting to seek better pay may be rational, some argue that most workers are delusional about their ability and value

–          If employers are considering transparency, they need to be clear about job roles and justifications for pay differences and rewards

 

Answer: (1) Millennials have higher college costs (Prof Note: Agree); (2) Millennials are graduating with more student loan debt (Prof Note: Agree); (3) the job market has been tough for both generations, but worse for millennials (Prof Note: 92’ was pretty bad when I graduated…); (4) Economic conditions favour boomers, but not by much (Prof Note: Agree); (5) Millennials earn less than boomers did at their age (Prof Note: Agree); (6) Millennials are less likely to own homes (Prof Note: sadly…agree); (7) Millennials are now more likely to live at home; (8) Healthcare costs are heftier now (Prof Note: Agree); (9) Most millennials and boomers do not have the benefit of pension plans; (10) neither millennials nor boomers are saving enough for retirement; (11) Millennials are not optimistic about retirement