Tag: Prof Note

18 August 2018

 

Question: According to MSN:Money, what are 15 hidden fees to watch out for in retirement?

 

Scrap quarterly reports, says Trump – Pg. 1

–          President Donald Trump has asked the SEC to consider scrapping the demand that public companies in the US report their earnings every three months, weighing in on a practice many blame for corporate short-termism

–          Critics of the quarterly system have argued that the longstanding tradition is costly, distracts companies from focusing on longer-term goals, and may deter companies from going public

–          Its defenders say it improves transparency and argue that longer intervals between financial disclosures create more incentive for insider trading (Prof Note: The short the periods, the more seasonality investors can understand.  In my opinion, critical to investing, especially when layering macro-economic trends atop)

–          US companies are not obliged to provide such forecasts but most do, running the risk of being punished by investors if they miss their targets

 

US grocers scramble for position in ecommerce battleground – Pg. 8

–          Does the future of grocery shopping depend on diverless cars, meal kits or automated warehouses….Kroger, one of America’s largest grocers, is betting on all of the above

–          Walmart is rolling out same-day delivery across the US and testing robots to assemble “click and collect” orders, where shoppers order items online and pick them up at stores

–          The escalating competition was underscored by Amazon’s announcement this month that subscribers to its Prime service in two small cities could order groceries from While Foods via a mobile app for roadside pick-up 30 minutes later

–          The proliferation of options is allowing customers to spend less time in stores and divide their shopping among multiple retailers, making it hard for any one company to corner the market,…

–          While online food shopping has become even more common across Europe and Asia, Americans have remained stubbornly loyal to physical grocery stores.  Online sales accounted for about 2% of the $800bn in US grocery market last year, compared with more than 5% in France, more than 7% in the UK and nearly 17% in South Korea…

 

Global markets shrink as buybacks surge – Pg. 11

–          The global equity market is shrinking at the fastest pace in at least two decades, as a wave of corporate share buybacks swamps the overall volume of companies going public, issuing new stock or selling convertible debt

–          US companies have been particularly hyperactive buyers of their own stock, thanks to the earnings boost delivered by tax cuts and the robust economy

–          …recasts that the overall volume of US buybacks will reach a record-breaking $1tn in 2018

–          The overall value of the global equity market is still increasing, thanks largely to rising stock prices – something that is partly attributable to buybacks.  The total market capitalization of the FTSE All-World index has climbed from about $35tn a decade ago to $57tn on Wednesday

 

Subprime mortgages: say a little prayer – Pg. 16

–          The non-QM [Qualified Mortgage] segment is still a tiny fraction of America’s $1.7tn mortgage market – a total of some $12bn in origination this year

 

Answer: (1) Advisory fees; (2) 401(k) Ratios; (3) 12b-1 fees; (4) Annuity Fees; (5) Yearly fees; (6) Loads (Prof Note: Front- and Back-end fees); (7) Taxes; (8) Retirement Plan Early-Withdrawal Penalties; (9) Trading Fees; (10) Penalties for failing to take required distributions; (11) Annuity Rollover fees; (12) Surrender Fees; (13) Inactivity Fees; (14) 401(k) Administrative Fees; (15) Beneficiary Fees

17 August 2018

 

Question: According to MSN:Money, what are 50 mindless ways you’re burning through your paycheck?

 

Walmart basks in US economic glow – Pg. 11

–          Walmart unveils its strongest US sales growth in more than a decade yesterday as the number of visitors to its stores climbed and ecommerce accelerated

–          …Walmart shares up almost 10%, established the company as one of the winners from a US economy characterized this year by low unemployment and robust consumer spending

–          The retailer said comparable store sales in the US rose 4.5% in the quarter that ended in July, driven by groceries, clothing and seasonal items like air conditioners and paddling pools

–          DIY retailer Home Depot, a housing market bellwether, said low employment, rising home prices and wages pushed consumer confidence to record highs, supporting its business

–          …US consumer spending has accelerated

–          (Prof Note: Last week after my flight from Nevis I stopped in a Walmart for groceries around 2am.  I saw one of the ugliest scenes in a retail store.  Two young girls, 20s, were berating the cashier for not offering a price they saw but the cashier was holding to the price as marked.  I still remember them saying, “That is why you work at Walmart.”  (they said other things but I will spare everyone the ugliness)  I remember thinking at the moment, as both parties looked to me in line to support their position, “Just do not drag me into this.  I am too tired for a battle.  I do not want to be involved.”  The young women stormed out and I settled my transaction and departed telling the cashier, “There is honour in working at Walmart!”.  However, I still wonder if I should have engaged on behalf of the cashier.  I remember thinking, “There is honour is working at Walmart at 2:00am.”  However, I just felt exhausted.  I wonder if I did the right thing.  Perhaps I should have risen…only so many battles one can fight in life.  However, my point, there is honour in working all jobs!)

 

Rising rates and China slowdown imperil Hong Kong property sector – Pg. 17

–          As a revitalized US dollar hits the highest level in more than a year, it is not simply emerging markets that are grappling with the fallout.  A booming Hong Kong  property market is at risk

–          The Hong Kong Monetary Authority was forced to intervene and buy the local currency this week for the first time since May to prevent the breaking of a peg with the US dollar that has been in place since the 1980s

–          …spaces as small as 117 sf have been sold for $290,000 this year ….

–          Shares in large Hong Kong-focused developers have fallen this year, ….

 

Growing cost of US companies’ junk debt raises doubts about length of expansion – Pg. 17

–          Companies with speculative grade credit ratings are spending a growing portion of profits on interest payments as debt costs rise, causing concern as investors and economists debate the durability of the US expansion

–          The deterioration in riskier company balance sheets comes after a surge in borrowing by groups, boosting their reliance on floating rate debt as they take advantage of low funding costs and a hefty appetite for their obligations by lenders

–          …nearly $3tn of loans are outstanding from junk-rated groups.  Most are pegged to a floating rate such as Libor.  Three-month Libor has risen more than 60bps this year to 2.3%, lifting floating rate loans higher alongside it

–          Coverage ratios on all new loans tracked by S&P Global Market Intelligence’s LCD this year have fallen to the lowest levels since 2008 but have yet to collapse to the troughs seen during the dotcom boom and bust and financial crisis

 

Answer: (1) Paying too much on housing (Prof Note: Yes, a commute is generally not pleasant but you are actually paying yourself during that time if traveling to less expensive housing option(s)); (2) Pending too much on car costs (Prof Note: Compare car insurance rates); (3) Wasting Energy (Prof Note: Motion sensors and timers); (4) Buying movie theater popcorn (Prof Note: Can you say, “Monopolistic pricing?!”); (5) Not planning meals ahead of time (Prof Note: Planning does save $$$); (6) Grocery shopping without a list (Prof Note: Just this AM I was purchasing a gallon of milk, ONLY a gallon of milk, when the man behind me in line was there with two containers of bleach.  As he was waiting he grabbed a box of donuts…clearly an impulse purchase); (7) Buying coffee (Prof Note: we all know my views of Starbucks and the associated costs!); (8) Paying for cable (Prof Note: I cut the cord over a year ago, if not longer); (9) Buying brand-name products; (10) Not changing the thermostat (Prof Note: I have actually gone to window units and A/C smaller spaces); (11) Ignoring your phone bill (Prof Note: Read EVERY bill carefully); (12) Drinking bottled water (Prof Note: Those silver things against walls actually dispense free water….amazing); (13) Using regular lightbulbs (Prof Note: Daylight LEDs); (14) Smoking cigarettes (Prof Note: Do people even still do this?!); (15) Buying lunch at work (Prof Note: Do the math…brown bag it!); (16) Eating out for dinner (Prof Note Do the math…AGAIN!); (17) Grabbing fast food; (18) Ordering Appetizers (Prof Note: Hands off my Nachos!); (19) Shopping online (Prof Note: What??? Pay attention in class?  Blasphemous!); (20) Requesting faster shipping; (21) Paying ATM fees; (22) Withdrawing Money at the ATM (Prof Note: Do people still use money?); (23) Putting your money in a high-fee checking account (Prof Note: Now this is just silly!); (24) Paying unnecessary bank fees (Prof Note: I am not joking when I tell you I told my bank, “You must FEAR me if I get a fee!”); (25) Putting your paycheck in a regular bank account; (26) Carrying credit card debt (Prof Note: Unless for emergencies…true emergencies); (27) Using a credit card with a high annual fee (Prof Note: This actually reminds me that I need to check this); (28) Paying unnecessary fees, in general; (29) Collecting stuff you don’t need (Prof Note: I NEED the original Buddy L Steam Shovel!); (30) Spending too much on snacks; (31) Signing up for a gym membership (Prof Note: I did not develop my washboard abs by going to a gym!); (32) Throwing your child a huge birthday party; (33) Shopping impulsively; (34) Buying books (Prof Note: But for Foundations of Real Estate Financial Modelling, Second Edition, Routledge, 2018.  In fact, purchase extras for gifts to family and friends); (35) Not using coupons (Prof Note: I have walked out, more than once, from a Bed, Bath and Beyond, over a manager not providing me the 20% coupon!); (36) Buying new instead of used; (37) Skipping breakfast; (38) Paying multiple student loans; (39) Ignoring your credit reports (Prof Note: Again…silliness!); (40) Not using your benefits package; (41) Driving around with flat tires; (42) Manually paying your bills (Prof Note: I 100.0% do NOT agree with this at ALL!!!!  Manually pay ALL your bills.  Set a scheduled and review and pay everything manually.  It takes me about 8 – 10 hours a month to pay everything but I know where every penny goes!); (43) Hitting the bars (Prof Note: At least take a shot or two prior to entering!  Also, take Uber home!); (44) Throwing out leftovers; (45) Buying basic items at the grocery store; (46) Paying too much for car insurance; (47) Gambling (Prof Note: I actually think gambling, in moderation, is a great business tool to just judge other’s risk tolerances.  Plus, the drinks are free.); (48) Paying too much in 401(k) fees; (49) Shopping at the wrong retailers (Prof Note: In southern, Maryland there are only two stores open 24 hours, i.e. Walmart and Harris Teeter.  There is $1 difference in a single bag of lettuce and the Walmart lettuce is bigger!); (50) Paying too much in taxes (Prof Note: Hire the experts BUT they must know they are being watched and scrutinized.  Two years ago my accountants and I had a blowout of biblical proportion over losses, i.e. passive or active.  Classification matters and knowledge is power and CASH in your pocket!)

16 August 2018

 

Question: With 12 of the 13 tax liens redeemed for the investment within a partnership made in 2017 for Baltimore City Tax Liens, what is the currently Portfolio Return?

 

Spooked investors push emerging market stocks into bear territory – Pg. 1

–          Emerging markets fell by the most in six months yesterday, tumbling into a bear market as investors were spooked by a commodity price rout, currency turmoil and disappointing results from one of China’s technology giants

–          Emerging markets have faced mounting pressure over recent months, led by concerns over escalating trade disputes between Washington and Beijing.  Rising US interest rates and the dollar’s renaissance have also dented emerging markets, fueling crises in more vulnerable countries dependent on capital inflows, such as Argentina and Turkey

 

New Zealand property ban slams the door to wealthy foreign ‘survivalists’ – Pg. 1

–          New Zealand has banned foreigners from buying existing residential property in a blow to the global super-rich, who have snapped up scores of luxury estates in recent years to use as holiday homes and provide a “bolt-hole” in case of global catastrophe

–          Last year the New Yorker pinpointed New Zealand as a favoured destination for rich “survivalists” preparing for apocalypse

–          The law follows a 60% surge in house prices during the past decade that has driven local home ownership levels down to their lowest in almost 70 years. Immigration, a shortage of affordable homes and high rents have placed housing at the top of the political agenda

 

Convertible debt outperforms amid rally for US tech stocks and rising interest rates – Pg. 17

–          US corporate bonds that convert to stock at a given price have generated a return of 6% this year…

–          In contrast, investment grade rated corporate debt has lost 5.8% and high-yield bonds have dropped 2.4% in 2018

–          Higher interest rates also encourage issuance because convertibles can typically offer lower coupons than other bonds.  This has become increasingly advantageous given Changes to the US tax code, which limit the amount of interest payments companies can deduct from their adjusted income

 

Answer: 9.44% (Prof Note: I am learning about tax lien investing.  It is not as straight-forward as I once thought and the partnership, in which I invest, almost ended up owning a “Jerk Chicken” restaurant.  It is fascinating as there is not YtC but rather YtR, i.e. Yield-to-Redemption.  So far I would classify this as a high return given the risk, however, one must have the appetite for “Jerk Chicken” ownership!)

15 August 2018

 

Question: According to MSN:Money, what are three (3) times you should not use your credit card?

 

German shoppers spur Eurozone growth but trade war fears linger – Pg. 1

–          A jump in spending in Germany boosted Eurozone growth in higher levels than initially indicated in the second quarter, easing concerns over an export-led slowdown

–          Estimated growth in GDP in the second quarter was 0.4%, in line with the previous three months…

–          …eurzone growth remains much lower than last year – when the economy expanded 0.7% in each quarter – with the trade war denting business-confidence and foreign sales

–          Record-low unemployment and better pay rises are expected to keep German shoppers spending

–          The eurozone’s fifth-biggest economy, the Netherlands, saw GDP growth expand 0.7% because of better figures for trade and investment.  Consumer spending was also strong

 

Bridge collapse leaves dozens dead in Genoa – Pg. 2

–          The 80-metre section of the viaduct that collapsed stood about 45 metres above the Polcevera river, railway tracks and an industrial and retail estate, which includes an Ikea store and other outlets, which would normally have been packed with shoppers on a rainy day

–          (Prof Note The most coveted professional designation to me personally, the Professional Engineer designation (PE), I never pursued due to advice from my father, a PE.  He said, “Do not get the PE designation as you could be pressed to stamping drawings you do not understand at an early stage in your career.”  He was right.  Also, there are criminal implications for bad workmanship by engineers and architects.  Are both professions compensated enough for the risk accepted?  Compare both professions to finance careers, and re-ask the question.  Something to consider…)

 

Student loan woes ease amid US jobs growth – Pg. 3

–          Student loans are going soar at the slowest rate since before the financial crisis as America’s steadily strengthening economy offers more job opportunities to graduates, …

–          About 8.8% of up-to-date student loan balances went overdue by 30 days or more in the second quarter, the lowest share since early 2006, …

–          Student debt remains a big US policy concern as individuals struggle to keep up with their commitments, and the legacy of indebtedness impairs their ability to buy a home or start a business.  Student loans surpassed credit cards in 2012 as having the worst delinquency rates in consumer credit

–          …$1.41tn at the end of June, well over twice the level 10 years ago

–          …mortgage debt stood at just under $9tn

–          A flashpoint in the student loan debate is the high prevalence of repayment problems at corporate-owned, for-profit colleges – run as businesses to make money for owners and shareholders – which have aggressively courted lower-income students

–          (Prof Note: There needs to be more understanding on the front-end by students of what debt means.  I literally wrote the book on real estate financial modelling (I say this proudly), but my point is, I am still learning about debt and my thoughts are maturing on the subject.  How can an 18 year old, with no perspective, possibly grasp the HUGE financial implications of a large debt load and/or the complex debt structures provided?!)

 

Planning rules are driving the housing crisis – Pg. 9

–          …the cause of those high costs has become more widely understood: restrictive planning and zoning rules lead to a chronic lack of supply in the places where people want to live

–          In Britain, where house prices have soared to nearly eight times average earnings, …economics argue that there is no shortage even in London

–          The number of dwellings is not supply: it ignores location, quality, size, age, tenure, transportation links, amenities and everything else that matters to a house

–          …number of households is not demand

–          Imagine a house that had become very expensive.  Now you either have to find a rich buyer or get planning permission to convert it to flats.  Both take time, so the house sits empty

 

Majority of fund managers say profit outlook in US is brightest of all regions – Pg. 17

–          Investors’ growing preference for the US at the expense of the rest of the world has spurred them to take the biggest overweight positions in US equities since the start of 2015, with record high sentiment about the outlook for US profits, …

–          The most crowded trade, for the seventh straight month, was in the Fanng (Facebook, Amazon, Apple, Netflix and Alphabet) and Bat (Baidu, Alibaba and Tencent) stocks.  Shorting US Treasuries was the third most crowded trade, offering further evidence of the widespread anticipation in the markets of a positive US growth narrative

–          In addition to shorting bonds, investors are moving into bank stocks, and believe the US Federal Reserve’s monetary policy tightening will continue

–          …investors are holding 5% of their portfolios in cash, p from 4.7% in July – above the 10-year average of 4.5%

 

Answer: (1) If there is a fee; (2) If you are approaching your credit limit; (3) If you cannot afford your purchase