Tag: Prof Note

19 July 2018

Question: According to CNN:Money, what are 4 financial goals you need to meet by age 40?

 

China curbs foreign university tie-ups – Pg. 4

–          Chinese regulators have closed more than a fifth of partnerships between local and foreign universities in the past year as the Communist party tightens its grip on mainland tertiary education

–          Reasons cited for the closures include poor quality, lack of enrollment and financial mismanagement

–          Six of the partnerships closed this year were with Peking and Tsinghua universities, China’s most prestigious…

–          In the early 2000s, China attracted western universities seeking revenue streams abroad, and the ministry announced in 2003 that it would allow independent joint-venture colleges

–          …approvals for undergraduate programmes where the student spends two years on the Chinese campus and two years at the partner institutions have all but stopped

–          Officials have to keep students in China for three, if not all four years, and institutions must charge lower tuition fees, meaning margins are narrower and quality control more difficult

 

Fed’s steady tightening may be taking it too far – Pg. 8

–          Headline consumer price inflation hit 2.9% in the 12 months to June, the highest rate since February 2012.  But the measure has temporarily been boosted by the rise in fuel costs.  The Fed’s preferred measure, the deflator for personal consumption spending excluding volatile food and energy price, has only just managed to crawl up to the Fed’s 2% target after six years of undershooting

–          …nominal wages have risen modestly, they have failed to do more than keep pace with consumer price inflation.  Real wages are essentially unchanged over the past year

–          Wage inflation has undershot expectations so consistently over the past decade that it would be reckless automatically to assume that a wage-price spiral will take off

–          The yield curve has flattened, traditionally a harbinger of economic slowdown, pushing the spread between 2-year and 10-year Treasury bond yields down to its lowest since 2007

 

Powell downplays recession fears that yield curve is said to signal – Pg. 19

–          In late 2005 Alan Greenspan assured Congress that the bond market’s ability to predict recession was not what it used to be

–          …$14tn US government bond market

–          …Mr Powell, who has been at the helm of the Fed for six months, was that the economy was robust enough and inflation firming sufficiently for the central bank to continue to raise interest rates

–          …the difference between two-year and 10-year Treasury yields – a widely watched metric – has narrowed aggressively.  It stood at 25bps yesterday, its lowest level since 2007 and down from 100bp a year ago

–          The Fed chief spent two decades at private equity firm Carlyle and is seen as more closely attuned to markets than his academic predecessors

–          Global demand for US Treasuries remains strong given their status as a haven from tumultuous geopolitics and the low level of yields available in other developed bond markets

–          The reliability of an inverted yield curve as an indicator of recession was called into question this week by former Fed chair Ben Bernanke, who introduced the central bank’s bond-buying programme during the financial crisis. He pointed to “regulatory changes and quantitative easing in other jurisdictions” as factors muddying the picture

–          Although the yield curve inverted a matter of weeks after Mr Greenspan’s testified to Congress, the Fed continued to raise interest rates until June 2006, which was their final peak before the financial crisis and subsequent recession

 

  Answer: (1) Have a fully loaded emergency fund (Prof Note: NOOOOO…have access to capital in case of emergency.  This could be a HELOC.  This could be Mom!.  This could be an asset with liquidity.  Also, this could be a side hustle that could/can be ramped up in time of need.  I remember a peer telling me that it took him and his wife 6+ years to build their Emergency Fund and it was gone in 7 months of unemployment.); (2) Have three times your salary saved for retirement (Prof Note: This Capital amount is antiquated thinking!  Have a percentage of retirement monthly expensive identified using a passive source, e.g. a rental unit that will be paid off in retirement.  Stop thinking one needs X amount to retire….NO….one needs to fund the lifestyle they desire in retirement and that means passive income.); (3) Have no debt other than your mortgage and vehicle payment (Prof Note: This could NOT be more wrong!  Hello, McFly, what about leverage?!  I think they mean have no debt without a revenue offset…); (4) Have a Will (Prof Note: This is so simple I worry it is wrong!  Yes, it is correct, one needs a will BUT one also needs Powers of Attorney (Medical and Financial) and a wealth management/estate plan.)

18 July 2018

Question: According to MSN:Lifestyle…you may be under the spell of a narcissist if the person you love has what five personality traits,

 

Chinese signal readiness to boycott US goods during tariff war – Pg. 2

–          The survey found that 54% of 2,000 respondents in 300 cities across China would “probably” or “definitely” stop buying US-branded goods “in the event of a trade war”.  Only 13% said they would not (Prof Note: For whatever reason, and probably due to the US press, I had the impression the Chinese students had minimal national pride.  Then, one day in class I asked about the disputed islands with Japan and the class said in unison, “OURS”!  My knowledge comes mostly from the Chinese students in classrooms but they have deep pride for their nation and home.  The U.S. needs to be careful about poking the Panda!)

–          China has avoided calling for any boycott of US goods

–          Japanese car exports also tumbled 32% in the 12 months after China launched a boycott over disputed islands in September 2012

 

China drives cashless revolution – Pg. 3

–          The mobile payments revolution in China has happened with breathtaking speed and scale

–          Almost half the world’s digital payments in 2017 were made in China, through apps such as Alipay and WeChat

–          This transformation has been spearheaded by Millennials, who were the early adopters of mobile payments, but it has rapidly spread across generations.  Millennials’ parents – the 40 – 60 age group – have adapted to the technology, especially in big cities, although they tend to use it for fewer purposes

–          ….by blending social, ecommerce and payment functions into single apps, customers could manage their finances at the same time as managing their social lives (Prof Note: This really concerns me a bit.  I track expenses to the penny and manually log each one.  It helps keep me abreast of all the businesses and I have fought using back-office support for fear of loss of knowledge (not loss of control but knowledge).  Be careful!)

–          Familiarity with mobile payments had also made people more comfortable with other innovations such as peer-to-peer lending, investing in money market funds and consumer loans

–          Savings rather than borrowings are how Chinese people typically pay for big purchases

–          …Millennials have become surprisingly adept at handling their money, despite being stereotyped as the least financially savvy generation (Prof Note: My students absolutely understand $$$.  My issue is they are saddled with too much education debt and there has been too little wage growth)

 

Powell warns trade tensions are threat to growth – Pg. 4

–          Jay Powell warned that rising trade tensions could hit growth if they resulted in higher tariffs over the longer term, …

–          The US job market has continued to strengthen and that “for now” the central bank believed it was best “to keep gradually raising” interest rates

–          Growth had accelerated in the second quarter, boosted by “robust job gains, rising after-tax incomes and optimism among households”.  An average of 215,000 net new jobs were created each month in the first half of the year

 

How we lost America to greed and envy – Pg. 9

–          In the postwar world, US policy has four attractive features: it had appealing core values; it was loyal to allies who shared those values; it believed in open and competitive markets; and it underpinned those markets with institutionalized rules.  This system was always incomplete and imperfect

–          The striking feature of the US economy is that, despite its unique virtues, it has recently served the majority of its people so ill.  The distribution of income is exceptionally unequal.  Labour force participation rates of prime-aged adults are exceptionally low.  Real median household disposable incomes are the same as they were two decades ago, while mean incomes are much higher.  Uniquely, mortality rates of middle-aged white adults have risen since 2000 in the US

–          …in 2016, there were just 5,000 murders in the EU, a rate of one per 100,000 people.  There were 17,250 murders in the US, a rate five times greater

–          (Prof Note: No matter the opinion of politics in the U.S., one can still enter a brokerage house with $300.00 and establish an account.  Nothing limits this individual from turning the $300.00 into $300,000,000.00.  Yes, knowledge but many of the pedigree universities place lectures online which can be accessed through public libraries.  We are not perfect, but I still believe we offer great dreams that can become reality!)

Answer: (1) Hypersensitive; (2) Attention hungry; (3) Excessively Needy; (4) Energy Consuming; (5) Obsessed with social media

16 July 2018

List-Serve Sage Advice/Comment: “This time I have to disagree with you and MSN on the “leave” advice.  Most women after 40 and men after 50 have a difficult time finding another job that pays the same or more than their existing one.  Period, end of story.  I was let go from XYS together with the tens of thousands of superfluous “people (who) are our greatest asset.”  In many subsequent interviews I was looked over by the hiring managers and either not offered a position or offered 50% of what I was making before.  A few lucky people can find jobs later in career if they have friends who can help them out, but most suffer the effects of ageism”

I would add:  If you cannot find another job before you leave your current one, reward your self-respect by becoming the best you can be in your current job, be helpful to those around you and ask yourself if you have learned everything you can at your current job. Also, remember that your job can change suddenly if your boss/coworkers leave, your duties are changed, etc.

Question: According to MSN:Money what are 9 money myths debunked?

Chinese banks seek more foreign partners – Pg. 4

–          China’s development banks – the biggest lenders in the sector worldwide – are ramping up co-operation with overseas financial institutions after a series of problems afflicted their international investment projects

–          The China Development Bank (CDB) and the Export-Import Bank of China (Ex-Im Bank) are seeking to spread the burden of funding international projects…

–          CDB is considering combining its lending efforts with western financial institutions that require adherence to “international standards” – including open, competitive tenders for project contracts as well as public studies on environmental and social impacts

–          By the end of 2014, the two Chinese policy banks, CDB and Ex-Im Bank, had outstanding loans to foreign borrowers of nearly $700bn, much the same as the total outstanding lending of the World Bank and the five leading regional development banks combined…

–          China’s policy banks eschew “international standards” when lending to infrastructure projects overseas, preferring to select contractors from a charmed circle of state-owned Chinese construction and engineering companies

Argentines learn to live with inflation as peso’s slide sends prices higher – Pg. 4

–          Prices could rise by as much as 30% this year -…

–          With the exception of a currency board experiment in the 1990s that ended with a disastrous financial crash in 2001, Argentines have lived with punishingly high inflation for longer than most can remember

–          Whether it is identifying the best moment to buy a product because it is relatively cheap, purchasing goods in as many instalments as possible since they get cheaper over time, or simply saving in dollars given inflation’s destructive impact on the peso, such practices are second nature to Argentines

–          Note only is the economy being hit by the contractionary effects of the devaluation, but the farming powerhouse has also suffered the worst drought in decades this year

Oil forecast to hit peak demand by 2036 – Pg. 14

–          …peak within 20 years, as a “tectonic” shift in the transport sector towards electric cars and autonomous vehicles gathers pace

–          In the next 10 years the biggest impact on slowing global oil demand growth – which is expected to hit 100m barrels a day for the first time this year – would be fuel efficiency

–          While the growing US supply, especially from shale, is expected to turn the US into the biggest oil producer by far by the middle of the next decade, output from other countries outside Opec is expected to slow around 2023, leading to more reliance on the cartel

Investors move in on Ireland’s property surge – Pg. 15

–          …the residential market is struggling to keep pace with an economy forecast to grow 5.6% this year and 4% in 2019.  Employment has passed pre-crash levels, driving office and residential markets as local companies recover and global companies take advantage of a low corporate tax rate

–          Double-digit price and rent increases for housing….

–          The hottest sector is private rented housing, with developers selling entire apartment blocks to institutional investors instead of individual buyers

–          The IMF has said that house prices appear “modestly overvalued” by some measures.  The OECD warned of “another property bubble” arising from a cycle of strong price rises, increasing construction activity and rising credit growth

–          The number of new dwellings – 14,446 in 2017, and 3.526 in the first quarter of 2018 – is far below the 35,000 per year needed to sustain demand

US banks warn on commercial real estate – Pg. 15

–          …putting the brakes on loans for office buildings, hotels and shopping malls

–          …competition from insurers, government-sponsored enterprises such as Fannie Mae and Freddie Mac and other non-banks

–          The concerns about CRE underwriting standards are being voiced as investors in US banks become more jittery about the effects of rising interest rates

Answer: (1) Bankruptcy is a clean slate (Prof Note: Cannot discharge student debt, child support and/or alimony + tax liabilities); (2) All debt is bad (Prof Note: High interest debt on non-revenue producing items, e.g. credit cards, is “bad”.  Mortgage debt, at low rates, on revenue producing properties is/are good.); (3) Credit cards can only cause financial trouble (Prof Note: Use them responsibly.); (4) You must carry a credit card balance to improve your credit score (Prof Note: It helps but not required); (5) Only high earners can achieve good credit (Prof Note: My credit score is about 720…due to the number of inquiries only); (6) You’re too young to save for retirement (Prof Note: You are never too young to save for retirement.  However, is “saving” even the right strategy?  I ponder!  Build a business that provides income to death and beyond.); (7) Your life insurance policy should cover 10-times your income (Prof Note: It is not about capital, it is about risk-free or risk-low passive income); (8) Your partner managers the money so you don’t have to worry about your financial health (Prof Note: Both partners need to be aware of all the finances of the unit); (9) Millennials are bad with money (Prof Note: I do not believe this.  I believe Millennials are burdened with excessive student debt)

14 July 2018

List-Serve Story:  This came from a daily report in construction regarding labor.  “2 more subcontractor employees lost to….Lost one because he was told by his foreman he could not drink his Pepsi in the building.  Employee said he would just quit then and did.  YOU GOTTA BE KIDDING ME!”  (Prof Note: You have to stand for something in life.  Not certain the freedom of drinking a Pepsi in a building is the right issue for which to stand, but kudos for believing in something.)

Question: According to CNBC, what are 5 money mistakes that can destroy a marriage?

New York’s Flatiron building set to be landmark for flexible office revolution – Pg. 1

–          The $20bn office space start-up WeWork is vying with Blackstone-backed rival to take over the lease of Manhattan’s Flatiron Building, potentially turning the century-old skyscraper into the flexible office sector’s most recognizable property

–          The potential takeover of a landmark such as the Flatiron, completed in 1902 with a distinctive triangular shape, has attracted high-level attention from potential tenants, including Blackstone, which bought a majority stake in Office Group last year

–          The stylish building is one of Manhattan’s best-known skyscrapers and has lent its name to the surrounding Flatiron District.  But its wedge layout also gives rise to challenges for tenants, including an unusually small footprint, ….

–          Class A office in the area carry asking rents of $77/sf/yr

–          Much of the growth in the flexible office sector has been propelled by WeWork…

JPMorgan and Citi shares slip on fears over higher US rates – Pg. 10

–          …concerns that the Federal Reserve’s interest rate rises will squeeze profit margins as the industry is forced to pay more for deposits

–          …WellsFargo, whose revenues and profits declined as it grapples with compliance problems

–          Wells, which is struggling to shake off the impact of a series of scandals, dropped as much as 4.3%

Rising debt leaves Ems at epicenter of worries as conditions tighten – Pg. 13

–          The amount of debt in the world increased by almost $25tn n the year to the end of March and by more than $8tn in the first quarter of 2018 alone….

–          Global debts also grew in relation to GDP, to more than 318%, the first such increase since the third quarter of 2016…

–          The size and the pace of change raise fresh concerns over the dangers posed to a global financial system already struggling to deal with rising US interest rates, a stronger dollar and widening risk premiums for borrowers, alongside the worry that world growth is slowing

–          For emerging markets, the dangers may be particularly acute.  The ultra-loose monetary policies pursued by the US Federal Reserve and others in the decade since the global financial crisis have pumped money into emerging assets on a gigantic scale

–          …world’s real debt problem is in mature economies and that emerging economies are much better prepared than previously to deal with their relatively small debt loads.  EM government debt, particularly, seems manageable at the equivalent of 48% of GDP on average, compared with 110% in mature markets

–          …many EMs have improved their public finances and found other means of funding than relying on international lenders

Answer: (1) Hiding money (Prof Note: While I do very little counseling and what I do is for the cost of my meal(s) I always recommend both partners be actively involved and understand where all the money goes.); (2) Hiding debt (Prof Note: I have heard several horror stories of older couples where the man passed and the woman was left with debt for which she was unaware.  Thomas Jefferson did this to his daughter Martha!  Some founding “father”!); (3) Overspending (Prof Note: I know I keep saying it but a sunset is free.  Retail therapy is dangerous.); (4) Underspending (Prof Note: There needs to be a balance.  When I was younger I worried about not spending enough.  Now, it is sort of like eating, I am comfortable not eating the full amount on my plate.  I am comfortable not spending the money and/or declining an expensive restaurant due to cost.  Personal note, I am generally not a fan of expensive restaurants.  Why make others wealthy.  Come to the cottage, we will throw some first-of-season corn on the grill with local crab cakes and have a feast.  The fire pit is ready and I know just when to hope for the green flash); (5) Financial abuse