Tag: Prof Note

27 October 2018

 

Question: What are 10 costly mistakes real estate investors make?

 

Tech gloom drags down Wall Street – Pg. 1

–        Wall Street is heading for its worst month since the financial crisis after discouraging forecasts from big technology groups triggered a wider sell-off, reigniting fears that the longest bull market has come to an abrupt halt

–        …US economy was still growing at a robust 3.5% annualized rate in the third quarter.  The S&P 500 fell as much as 2.9%, wiping out this year’s gains

–        Investors are concerned that most big central banks will continue to wind down crisis-ear stimulus programmes despite signs that economies outside the US are slowing, with mounting trade tensions threatening more damage

–        The S&P 500’s lows yesterday took its drop from a September 21 peak to more than 10% – the accepted definition of a correction.

 

Draghi warns on central bank independence – Pg. 4

–        In the US, President Donald Trump has assailed the Federal Reserve as “loco” for raising rates, which he blames for recent falls on Wall Street

–        Tensions between Italy and the ECB has hit a high over Rome’s plans to run a big budget deficit, which have contributed to a rise in the country’s borrowing costs

 

German housing costs leave Merkel party vulnerable – Pg. 4

–        The scarcity and cost of housing have become an issue for German voters and politicians alike

–        …concluded that the country needs 1.5m new flats over the next four years

–        Analysts say Germany’s housing problem has its roots in the years after the turn of the millennium, when policymakers became convinced that the challenge for city planners was the management of population decline.  New housing projects fell dramatically.  At the same time, local and state governments sold social housing stock and stopped investing in affordable homes

 

Self-driving cars receive their first fee-paying passengers – Pg. 10

–        Waymo has begun charging passengers in Arizona for rides in its autonomous cars, making it the first self-driving car developer to launch commercial services

–        (Prof Note: I truly believe that autonomous cars are going to put real estate pricing on its head.  No longer will a two-hour commute be a chore.  The time can be used productively)

 

Diversification breaks down with no hiding place for investors – Pg. 13

–        …for the first time in a very long while almost every major asset class has now slumped into negative territory for the year

–        The US stock market and US junk bonds were the last two corners to still hold on to narrow gains for 2018 but this month high-flying tech stocks have been pummeled and the last of the S&P 500’s advance evaporated this week and left investors facing a sea of red

–        A fourth interest rate rise for the year has been considered a foregone conclusion but some doubt is now creeping in

–        Fed funds futures – derivatives that allow traders to bet (Prof Note: Or “hedge”) on US interest rates – now imply a 33% chance the central bank will blink and hold steady in December, up from just 19% a week ago

–        The biggest danger confronting investors is therefore that the “rolling bear market” – as MS has dubbed the expanding sequence of asset classes suffering losses this year – continues to rumble on and plays havoc with many popular portfolio construction methods.  What is so nerve-wracking about this rolling bear market is that it leaves even big diversified investors very few places to hide

 

Answer: (1) Planning as you go (Prof Note: One must have a plan at the beginning); (2) Thinking you’ll get rich quick (Prof Note: I cannot stand those flip shows on tele.  Real estate is a long wait game…); (3) Not having the right people around you (Prof Note: The “team” is crucial!  I feel blessed with this list-serve and all my peers/friends.  Everyone enables me to assemble a class-A team instantaneously.); (4) Paying too much (Prof Note: Sometimes you have to walk away.  Patience and cash wins the purchase.); (5) Not doing your homework (Prof Note: Real Estate is asymmetric with the seller typically knowing more.  The buyer must close the gap as much as possible.); (6) Ducking due diligence (Prof Note: Much of real estate starts in the office(s) and requires long hours.  It concludes in the field and one must be comfortable in both areas.); (7) Misjudging cash flow (Prof Note: One lives and dies by cash flow.  Property Taxes, HOA, Association Dues, Maintenance, etc.  All must be paid and there must be sufficient reserves, note: credit lines can be considered reserves); (8) Lowering the volume (Prof Note: One must have pipeline.  Always be working on deals.  You must be in the game.); (9) Not having backup plans (Prof Note: Stress test your portfolio.  I always ask younger investors, “If all hell breaks loose, will your family bail you out?”  Great if they will, no shame at all and best to have a supportive family.  If not, you better grow to a size where a default is the bank’s problem and not yours! J); (10) Miscalculating estimates (Prof Note: Get several estimates)

24 October 2018

 

Question: According to MSN: Money, what are six (6) hidden costs of being a homeowner?

 

Markets sell-off continues after US industrial groups warn over tariffs – Pg. 1

–        US industrial companies unnerved investors yesterday with reports of rising prices and costs for products ranging from earthmoving equipment to Post-it notes, raising concerns that tariffs will add to inflationary pressure

–        ….S&P 500 was down 1.4%

–        There were also signs of weaker demand in some markets, adding to investors fears of a squeeze on earnings if companies could not pass on costs

–        The IMF said this month that it expected the steady expansion in the world economy to continue into 2019, but warned that growth might have peaked in some economies

 

UN goal of globally affordable internet access rest at 2043 – Pg. 3

–        …more than 2.3bn people, about 30% of the global population, lived in countries where a monthly mobile data allowance of 1GB was unaffordable, costing more than 2% of the average salary

–        Growth in the number of internet users has slowed dramatically, in part because of a lack of affordability

–        …almost two-thirds of the 3.4bn living offline are in Asia, with 1.5bn in China and India alone….

 

European Central Bank faces Rome dilemma over maturing QE bonds – Pg. 19

–        The central bank plans to stop buying government bonds from the end of December, but next year will continue to reinvest billions of euros worth of maturing debt it holds back into the eurozone’s sovereign bond markets

–        As with the QE programme, the purchases will be conducted according to the size of each Eurozone country’s economy and population, using a calculation known as the capital key

–        The ECB will reveal the new calculations for the capital key at its last meeting of 2018 on December 13, when it will also say whether it intends to adopt the new key – or stick with the old – for the reinvestments

–        The capital key methodology originated as a way of balancing the competing priorities of differing Eurozone members

–        The solution was found in the capital key, which is used to determine the proportion of capital each of the national central banks must contribute to the ECB, and the portion of the ECB’s profits they would receive in return

–        Thus the QE programme is linked not to the size of each country’s bond market, but to the size of its contribution to the monetary union’s economy and population

 

Answer: (1) Turning your house into a home (Prof Note: The cost of nik-naks, insta-hot, etc); (2) Regular maintenance; (3) Emergencies; (4) (Prof Note: No joke….the article had no #4); (5) Homeowners Insurance; (6) Increases in property taxes (Prof Note: Be very aware of the costs that are uncontrollable, e.g. Home Owners Association, Community Association, Property Taxes, emergencies that must be addressed (roof implosion), Insurance.)

23 October 2018

 

Question: According to MSN: Lifestyle, what are 21 annoying coffee shop habits you have, according to Starbucks Baristas?

 

Rome defies Brussels with refusal to pare back spending – Pg. 1

–        …insisting that breaking the EU’s fiscal rules would not threaten the currency union’s stability

–        Rome’s refusal to budge marks the first time a member of the currency union has ignored a Brussels reprimand since EU fiscal rules were overhauled at the height of the Eurozone crisis

–        It also sets Italy’s governing coalition on a collision course with the European Commission, which is expected today to demand that Rome resubmit its 2019 budget, an unprecedented move by Eurozone authorities.  If Italy fails to comply, it faces millions of euros in fines

 

Chinese stocks surge after encouragement from Beijing – Pg. 1

–        China stocks had their biggest one-day gain in almost three years yesterday in a dramatic rebound…

 

US midterms poised for millennial moment – Pg. 3

–        Of those motivated millennials and Generation Z post-millennial voters, the majority were “heavily leaning” towards Democratic candidates,…

–        This is in contrast to other age groups, which tend to be evenly split between the two parties.  If close to 30% of the under-30 voting population does turn out in November, it would be the highest proportion for that demographic in more than three decades

–        Millennials, or those born between the early 1980s and the mid-1990s, had been notable as a generation for wanting to improve their community through volunteering or philanthropy,…

–        …while the post-millennial generation had been interested in using the existing political system to improve their community…

 

Tech trade no longer safe bet for investors – Pg. 19

–        On Wall Street, the outlook for tech companies is at the heart of the debate over the health of the wider bull market for US stocks which, by some measures, is the longest on record

–        Tech accounts for more than 20% of the market value of the S&P 500 whereas a more than fivefold gain for the information technology sector since equities bottomed in 2009 has helped drive stocks higher

–        The bank calculated that the tech companies account for about 30% of the market capitalization of the S&P 500 if you cut across the official sector breakdowns…

 

Answer: (1) You are totally unprepared; (2) You’re an indecisive Starbucks addict; (3) You ask a million questions; (4) You don’t care about my answers; (5) You refuse to put your phone down; (6) You take your morning stress out on your barista; (7) You don’t have your money ready; (8) You think mobile ordering is instant; (9) You don’t read the large print; (10) You keep pushing for something that’s run out; (11) You act entitled; (12) You have your nose in your phone while waiting; (13) You get impatient waiting for a complicated drink; (14) You don’t trust my judgment; (15) You don’t realize what you’re ordering; (16) You blame me when you order wrong; (17) You think you know better than me; (18) You decide you don’t like it halfway through; (19) You ask for multiple remakes; (20) You leave your trash lying around; (21) You’re messier than you should be (Prof Note: I remember when I worked for the fund.  Every day I was in DC (no more than one day a week) I purchased Starbucks for the office.  The two analysts would go out armed with my credit card/cash.  Finally, one day one of them came to me and said, “Can you talk to the secretary.  It is embarrassing.  She gets half a squirt of this, 2.5 squirts of that.  What is worse, she then calls the store, complains, and they give her a free voucher for another coffee.  The Starbucks knows us and hates us now!”  I said, “WHAT???  That is MY free voucher!”  The result was that I spoke to her later that day and said she had to order directly off the Starbucks menu or no more free coffee.  The analysts were not doing anything custom.”)

20 October 2018

 

Question: According to MSN: Money, what are seven (7) ways to guarantee you’ll never have enough to retire?

 

China stocks head for steep decline – Pg. 1

–        While volatile in US equities has garnered most investor attention over the past two weeks, the declines in China have been steeper and extend a plunge that has sent the country’s main index down 22% this year

–        The sell-off, which also prompted a drop in the Chinese currency towards the Rmb7 level against the dollar, has been sparked by the trade war with Washington, a souring of sentiment on big tech and underlying concern over the health of the Chinese consumer

 

Trump property tax revamp stirs suburban ire – Pg. 2

–        The reform cut tax rates for corporations and individuals.  But it also capped at $10,000 the amount of state and local property tax that households can deduct from their federal income tax

–        96% of any tax cut resulting from repeal would go to the highest 20% of US households by income….the deduction is worth little to people who rent flats

 

Financial Markets – Pg. 7

–        BlackRock, the company he founded in 1988, was comfortably the biggest investment group on the plant, with more than $6tn of assets under management

–        …BlackRock celebrates its third decade, its vast money-gathering machine has begun to sputter, …

–        The company’s overall assets under management have also been buoyed by rising markets, hitting a record of $6.44tn in the third quarter…

–        …BlackRock’s shares have been pummeled this year.  After hitting a record $593.26 on January 22 – up more than 500% from their post-crisis nadir in March 2009 – its stock has tumbled over 30%

–        The US economic recovery has spurred the Federal Reserve into a series of interest rate rises since 2015, to ward off the danger of overheating.  That has echoed through bond markets, and pushed up short-term debt yields to levels not seen since before the financial crisis

–        …investors who have long complained about “Tina” – the idea that There is No Alternative (to buying equities) – now have some other options

–        Global growth is weakening, and while the US economy is red-hot at the moment, that has fanned fears that the Fed will have to keep raising interest rates – which could spell more strife for emerging markets in particular

–        The global asset management business is facing intensifying pressure from cheap, index-tracking funds, which have been sucked in hundreds of billions of dollars since the financial crisis and contributed to a broader reappraisal by investors of how much they should have to pay

–        The average cost of US bond and equity funds has slipped from 0.76% and 0.99% of the investment respectively in 2000 to 0.48% and 0.59% last year,….

 

#MeToo and the new work rules – L&A 1

–        80% of Americans now think that women not being believed is a problem, and two-thirds (64%) now say that in their workplace the victim is more likely than the accuser to be believed…

–        All this makes the reputational damage from a sexual harassment claim much steeper, which has changed companies’ risk assessments

–        As of May 2018, nearly 300 high-level US executives had been fired due to sexual improprieties

–        Companies now evidently believe that the reputational risk of not parting ways very publicly with sexual harassers is greater than the risk of a successful defamation suit

–        Four out of every 10 men (43%) now say that #MeToo has made them reflect on their own behavior…

–        Some simple guidance can help allay men’s fears…

–        First, if you want to date a colleague, feel free to ask her.  But if she says no, that’s your answer

–        The second rule is simple: treat male and female colleagues equally

–        The third rule concerns the widespread panic about whether a guy can give a girl a compliment…making someone uncomfortable, cease and desist…

–        The fourth rule concerns sexual joking

–        The final rule concerns touching.  Don’t do it!!!  (Prof Note: When I was in residential building, the touching was WAY over-the-top.  The sales people were the absolute worst!  As head of HR and CFO I had to deal with this.  I 100.0% believe that the touching was to solicit favours, e.g. needing something done, etc.  I also 100.0% believe these touches were occasionally misconstrued leading to my eventual involvement as HR.  Personally, I believe the solution to be bodycams on all employees. Now, how practical is that?!)

 

Answer: (1) Taking social security early; (2) Being too safe with your savings; (3) Banking too much on retirement calculators; (4) Failing to know what your fixed expenses will be in retirement; (5) Spending your savings on optional stuff; (6) Having no plan to cover income gaps; (7) Failing to keep your eye on the ball