Tag: Prof Note

13 November 2018

 

Question: According to MSN: Lifestyle, What are five (5) reasons why Millennials are not as well as they think?

 

Oil used by cars to peak in 7 years as more electric vehicles hit the road – Pg. 1

–          Ever since the first Model T Ford rolled off the production line in 1908, cars and oil have shared a relationship that has transformed the world

–          Global oil demand from cars makes up 21.4m barrels a day of the close to 100m b/d the world consumes.  This will rise to about 23m b/d in the late 2020s, after which car consumption falls back to current levels by 2040, even as global car numbers increase by 80%

–          Total consumption across motor vehicles, aeroplanes, ships, trucks and the petrochemicals sector is set to grow by 2040 at half the rate of the past two decades…

–          Companies such as Tesla are leading the fight against oil use, with as many as 300m electric cars forecast to be running by 2040

–          …the bigger impact will come from more economical fuel standards in conventional cars, which will cut consumption by 9m b/d

–          The IEA said oil demand would fall sharply in advanced economies, with the EU falling 45% by 2040 and North America 25%

 

Bond fund bulls confident of picking the low-risk bets – Pg. 21

–          The value of triple B bonds in the Bloomberg Barclays index, a widely followed benchmark for corporate debt buyers, has grown from $670bn at the end of 2008 to $2.5tn at the end of 2017

–          …Triple B, which now accounts for 49% of investment grade debt, up from a third in 2008 and just 25% in 2000

–          The category of triple B sits just one downgrade away from high-yield, or junk, bonds – the poorer but richer-yielding relative that investment-grade funds are not allowed to own much of

–          Given triple B debt now makes up a big slice of the major indices investors benchmark their performance against, the fear is that a tougher economic backdrop triggers a wave of downgrades that unleashes forced selling

–          …within the triple B bucket there are subtle differences.  At S&P Global, for example, its ratings range from triple B plus to triple B minus while at Moody’s they span Baa1 to Baa3

 

Answer: (1) Mental health (Prof Note: some 70% of millennials surveyed noted that depression undermined their ability to function at full capacity at work….mental health is real.  If I can assist anyone, please reach out to me.  This “Prof Note” is me reaching out to you to say, “I want to help.”); (2) Binge drinking; (3) Sexually Transmitted diseases (STDs) (Prof Note: The article states that “young people” are choosing riskier sex and paying the price.  Prof Note1: An STD test is one that you want to FAIL!!!); (4) Colon and rectal cancers; (5) Stroke

12 November 2018

 

Question: According to MSN: Money, what seven (7) things can you do if you regret retirement?

 

Looming maturity of Chinese property debt worth billions triggers default fear – Pg. 1

–        A wall of onshore debt worth tens of billions of dollars issued by Chinese property developers is due to mature next year, sparking concerns over defaults at a time of economic slowdown

–        China’s property market is a bedrock for growth and economists fear that signs of distress in developer debt would send ripples through the financial system just as other problems are mounting

–        Property developers have struggled to issue new debt and refinance maturing bonds this year as the Chinese government attempts to control the runaway credit-fuelled growth that has helped power the sector in recent years

 

Warning over Brazil’s ‘unsustainable’ public finances – Pg. 4

–        Successive governments have tried but failed to address Brazil’s pensions problem, the main cause of a budget deficit equal to more than 7% of GDP

–        The danger of delay was that falling investment and rising borrowing costs, as investors lost confidence in the new government, would tip the country back into recession

 

Americans need skills, not credentials – Pg. 9

–        I cannot think of a market that is more dysfunctional in America right now than education.  Total student debt topped $1.5tn this year and a Brookings study found that nearly 40% of those borrowers are likely to default on their loans by 2023

–        The imprimatur of a $75,000 Harvard degree is in such demand that the school is now being sued by a group of Asian-American students who say more of them should be allowed in on the basis of high test scores

–        One recent survey found that 43% of college grads are underemployed

–        Ivy League colleges are great for those who can afford them but most education has become completely disconnected from the needs of both students and the labour market (Prof Note: More and more employers are telling me they specifically want “Ivy”.  The competition in the world is fierce!)

–        There are myriad factors that have created this dysfunctional system, but one that has not been talked about enough is the unfair bias towards schools rather than skills (Prof Note: AMEN!!!  How can one teach real estate “online” when so much of it is softer skills?  Even worse, the attempt dilutes the value for all students, i.e. online and in classroom)

 

Answer: (1) Pick up a part-time job; (2) Volunteer for a worthy cause; (3) Get fit; (4) Educate yourself; (5) Purchase a rental property; (6) Adopt a pet; (7) Relocate (Prof Note: Many on the list-serve are familiar with “Nevis News”.  Well, it is published from Cat Ghaut, Nevis where my grandparents spent the last 30 years of their lives.  In “retirement” my grandfather met tourists on the island coming to play the course and spent his days explaining island history, proudly showing the gardens and clearing new walking trails and paths.  My grandparents, from my perspective, had a blessed retirement which was birthed on the salary of a college professor and librarian, i.e. they were not born to wealth nor, while they absolutely were savers, did they achieve large amounts of wealth.  They built upon what they earned/had over decades.  We still get visitors that remember my grandfather (and grandmother though “Granny”, ever the librarian, rarely left the house and always had a book in hand) on the course.  Some will say, “Your grandfather let me play for free” and I will respond, “I am not my grandfather.” J  (in truth, the cost of play/admission is honourary))

10 November 2018

 

Question: According to MSN: Money, what are eight (8) ways to battle rising mortgage rates?

 

Sell-off drives oil into bear territory after US presses allies to boost output – Pg. 1

–        …Brent crude below $70 a barrel yesterday, a 20% drop on the four-year highs the international benchmark just hit a month ago

–        The sharp sell-off, which pushed oil into bear market territory, has been exacerbated by a White House decision to grant waivers to US sanctions that allow Iran’s largest importers, including China, India and Japan, to continue buying crude from the Islamic republic

–        Donald Trump, the US president, has pressed the Saudis and other Gulf producers to pump flat out to help replace Iranian supplies.  The falling prices will be taken in Washington as a victory

 

Amazon HQ2 talks are ‘stamp of approval’ for New York tech scene – Pg. 14

–        Although Amazon has not finalized its plans, several people familiar with its deliberations expect Long Island City – along with Crystal City in northern Virginia – to be crowned joint winners as early as this week after an unusual nationwide beauty pageant

–        In just a few years, a rustling Queens Manhattan has been transformed: Long Island City has built 16,800 apartment units since 2006 – more than any other US city – and has another 11,700 expected to open by 2020

–        Amazon’s arrival would be overwhelming popular with one constituency: New York developers, who stand to reap a windfall

 

Demand for US debt drives strongest weekly fund inflows in four months – Pg. 15

–        Global fixed income funds enjoyed their strongest inflows in four months over the past week, showing how bond investors are tiptoeing back into the market after rising interest rates triggered an exodus in October

–        Signs of some tentative stability have begun to lure investors back.  The Bloomberg Barclays Aggregate, the biggest US fixed income gauge, is still nursing a 2.5% loss for the year – which would be the biggest annual reversal since 1994 – but has seen a small bound since the beginning of November

–        Benchmark US government bond yields remain near multiyear highs – the 10-year Treasury yield stands at 3.23%, the highest since 2011 – but the recent midterm elections have calmed concerns that another republican sweep could trigger more deficit-busting tax cuts

–        The Fed held interest rates steady on Thursday but did nothing to dissuade traders from pricing in another rate increase next month.  It also continues to shrink its balance sheet

 

Answer: (1) Make a bigger down payment (Prof Note: Live with parents/in laws or with lots of roommates and save.  Forgot consumption.  SAVE!); (2) Pay Points; (3) Equity sharing (Prof Note: Do you really want partners?); (4) Switch loan products (Prof Note: This is REALLY dangerous.  You MUST understand your loan product completely.  I am proud to say, “I wrote the book on Real Estate Financial Modelling”, and I continue to learn every day.  I see cost of money differently (slightly) each day.  Be careful to understand how/what one is borrowing); (5) Shorter Terms (Prof Note: What I like the most of 15-year CPM mortgages, is that at current rates one is always paying Main Street more than Wall Street); (6) Downsize expectations (Prof Note: Happiness is between the walls of a house.  Forgo some size, add some minutes to the commute, all for less stress and increased happiness between the walls); (7) Buy with friends or relatives; (8) Bring a renter (Prof Note: This is dangerous.  You must underwrite to no renters and then view the renter as “upside”)

9 November 2018

 

Question: According to MSN: Money, what are 20 reasons you do not want to live in a tiny house?

 

Fed readies rate rise next month as it remains bullish on economy – Pg. 1

–        The FOMC kept its target range at 2-2.25% yesterday, and gave a bullish verdict on the US economy, noting that unemployment had dropped further as growth in economic activity and household spending remained strong.  Investment growth has decelerated compared with earlier this year

–        Wage growth has accelerated to its quickest pace in almost a decade, job gains are averaging more than 200,000 a month, unemployment is hovering at multi-decade lows, and the economy has recorded two straight quarters of annualized growth well in excess of 3%

–        The Fed has boosted rates eight times in the current cycle, with a further move predicted at the December 18-19 meeting

 

Voters give strong economy and tax cuts a tepid response – Pg. 3

–        The party’s $1.5tn tax-cutting package, in particular, failed to galvanize many voters, in part because the Democrats successfully branded it as a handout to the rich, …

–        …while Mr Trump’s trade tariffs do not appear to have had an adverse effect on Republican support, they did not trigger a surge in support

 

Investors start to fret about ballooning US public debt – Pg. 9

–        …US government currently pays $1.43bn/day to service its public debt – 10 times more than any other G7 country (Italy is a distant second in this grim league)

–        …$1bn bill has materialized when interest rates are still fairly low by historical standards

–        …America’s debt pile swelled above $15tn

–        …assuming that interest rates rise towards their long-term average of 3.7% and 2.8% for 10-year bonds and three-month bills repsecitvely (or slightly above the current levels of 3.2% and 2.34%)

–        …interest payments will soon become the third largest item on the budget, eclipsing even military spending

–        …US Treasury quietly revealed that the deficit is poised to top $1tn for the first time in history

–        To plug this gap, Steve Mnuchin, the US Treasury secretary plans to sell $83bn of bonds, which is also a record, eclipsing even the level of bond sales after the global financial crisis.  Strikingly, Mr Mnuchin predicts that almost half of this tally – some $37bn – will have a maturity of just three years.  This short maturity makes the debt more prone to rollover risks

 

Breaking up the Big Four is not the answer to audit problems – Pg. 9

–        We propose banning all non-audit services to FTSE 350 and large public interest entity audit clients.  As part of this, we need a clear definition of what an audit service is

–        We support a UK equivalent of American’s Sarbanes-Oxley Act of 2002, which sought to improve the accuracy and reliability of corporate disclosures in the wake of the Enron scandal

–        …Big Four accounting firms (Deloitte, PwC, KPMG and EY)…

 

Answer: (1) The initial home price can be deceptive; (2) Cost per sf can be significantly higher; (3) Space will be extremely limited and might cramp your lifestyle; (4) Storage costs can quickly add up (Prof Note: Love the Sea Containers…I have four); (5) Land costs can get expensive, even if you move around; (6) Laws might not work in your favour; (7) Utilities could end up costing you just as much; (8) Appliances for tiny homes are often more expensive; (9) Moving a tiny home is not cheap; (10) The logistics for moving a tiny home are complicated; (11) It could take years to see any savings…if you ever do; (12) Insuring a tiny home is difficult and potentially expensive; (13) Mortgages are difficult to get with a tiny home and costly; (14) Shopping can be challenging with limited space; (15) Garbage storage and disposal can get complicated; (16) Having mail delivered can get tricky; (17) Cleaning a tiny home is not easy and has to be done more often; (18) Living in confined space can test your patience; (19) Neighbours can be hostile towards tiny-home owners; (20) The resale value can drop dramatically