Tag: Prof Note

28 June 2018

 Question: What are the 16 most important assets that will increase your net worth?

 Millennial moment – Pg. 7

–          …the strongest growth in America’s millennial population between 2010 and 2015 was not in coastal cities such as New York and LA, but in smaller ones in the south and west

–          The double-digit increase in 10 large metro areas, from Colorado Springs and Denver to San Antonio and Austin, contrasts with Mid-western cities such as Chicago and St. Louis, whose millennial populations rose by less than 1%

–          This millennial migration is largely being driven by affordability (Prof Note: I absolutely believe location and happiness are highly correlated!)

–          Denver’s population has jumped by 100,000 to 704,000 since 2010….

–          Denver’s residential property prices are 50% above their pre-crisis peak, dividing the city into those who bought and have watched their assets appreciate and those wondering if they will ever get on the housing ladder

–          Millennials represent America’s most diverse group: 54% are non-white….

 China’s bear market woes run deeper than trade war with Trump – Pg. 19

–          Blame for the sell-off of China’s stock market has been levelled at the Sino-US trade war but Beijing’s problems have been evident for some time and run much deeper

–          China’s key stock market index, the Shanghai Composite, has now tumbled into bear market territory – a downswing of 20% – for the first time in more than two years, falling another 1.1% yesterday

–          The last major sell-off at the start of 2016 was driven by a clutch of bad economic indicators.  This time….mounting trade war with the US and failing overseas projects, to tighter credit and a pullback from institutional investors….

–          Banks have been forced to recognize many off balance sheet assets.  This has led to a tightening of liquidity in shadow lending channeled through asset management companies

 Answer: (1) Owning your primary residence (Prof Note: Provided the loan product is CPM and it amortizes over time and the equity is consumed through financial devices, e.g. HELOC); (2) Education (Prof Note: I worry that education is no longer a value.  Education comes in many forms and as I age, the more I respect Trades); (3) Vacation homes (Prof Note: Help me Rhonda!  NO!!!!  Unless this is really a rental unit.); (4) Retirement savings; (5) College savings (Prof Note: I believe more care must be placed in majors, i.e. pick the major with a reasonable ROI unless your family is wealthy); (6) Rental real estate; (7) Health; (8) Expertise; (9) Investments; (10) Household items (Prof Note: The article was referencing considering longevity, maintenance and operational costs); (11) Private lending (Prof Note: Do not agree.  Underwriting is not a simple task); (12) Collectibles (Prof Note: Buy smart.  Hess trucks, nice but no value; Buddy L Trains…Amen brother!); (13) Permanent life insurance; (14) Vehicle; (15) Boat (Prof Note: I do not even know how to respond to this!); (16) Private jet (Prof Note: WHAT???  I have looked into NetJet for trips to Nevis.  Note, after doing the research I continue to find myself in the coach section of American Airlines)

27 June 2018

 Question: According to US News & World Report, what are 9 habits that can get you out of a deep debt hole?

 GE takes stride towards break-up by spinning off two of largest units – Pg. 1

–          …divest GE’s healthcare division and its stake in oil services company Baker Hughes reverses decades of acquisitions….

–          The latest divisions being spun off accounted for 30% of the group’s revenue and 25% of its industrial segment profit last year.  Shares in GE, which had fallen nearly 50% since Mr Flannery took over, rose 8% to $13.78 in midday trading after the plan was unveiled yesterday

–          GE will now confine its business to three divisions: equipment for the electricity industry, renewable energy, and aero engines and other aircraft parts

–          GE is likely to cut its dividend after it completes the spin-off of the healthcare unit within 18 months….the dividend was cut last year for only the second time since 1938

 Berlin pencils in 4% minimum wage rise – Pg. 4

–          Germany is set to raise the minimum wage by 4% to 9.19 (euro) an hour next year, ….

–          The introduction of a minimum wage was one of the central demands of Germany’s Social Democrats in their previous coalition government…it finally took effect in January 2015….

–          The minimum wage commission, which brings together employers, trade union officials and academics, said there was no evidence so far that the reform had hurt the economy

 Minimum wage laws still fall short for those on the bottom – Pg. 9

–          Wage inequality fell in Germany in 2015 more than in any other country in the EU.  The minimum wage has narrowed geographical pay inequality between rich areas such as Bavaria and poor ones such as Mecklenburg-Vorpommern

–          …studies found there was no damage to people’s employment prospects

–          More importantly, low pay is not the only problem for people at the bottom of the economic scale.  Higher hourly wages do not help with unpredictable shifts or fluctuating incomes

 Gulf’s influence grows in flagship emerging market stocks index – Pg. 19

–          Saudi Arabia’s entry last week to the MSCI Emerging Markets equity index – used to underpin about $1.5tn of assets globally – has reinforced the rising importance of the Gulf region

–          ….the Gulf could conceivably account for about 7% of the index by 2020, more than index stalwarts South Africa, Brazil and Russia and behind only China, South Korea, Taiwan and India

–          The impact of this will be magnified further by the fact that foreign ownership of Gulf stock markets is very low; …it accounts for just 1.9% in Saudi Arabia versus 35 – 65% in other big emerging markets

–          Saudi Arabia is the biggest new entrant to the MSCI EM equity index since Malaysia was readmitted in 2000

–          Qatar and the UAE were both admitted in 2014 and are likely to have combined weight of 1.4% after the ascent of Saudi Arabia, alongside Argentina, which will reappear next year after a 10-year absence

–          Kuwait is next in the queue…expecting it to join in 2020

 Answer: (1) Learn how to shift your spending habits (Prof Note: Rarely do I get a drink anymore at restaurants.  $3 for a coke when a 1 litre is 99 cents…no thank you!); (2) Set up an automatic savings account (Prof Note: Forget the auto “anything”…do it manually.  Pay yourself first!); (3) Have an emergency fund (Prof Note: ONLY for familial health issues.  You should have a standard side hustle!); (4) Don’t automatically use an unexpected windfall to pay off your debt (Prof Note: Absolutely true BUT if you have no discipline you may want to reconsider); (5) Pay off smaller debts first (Prof Note: NOOOOO!!!  Pay off the high-interest debts first!); (6) Pay your debts on time (Prof Note: Absolutely!!!); (7) Use cash as much as possible (Prof Note: NOOOOO…then you loose points on credit cards!  Learn credit card discipline and be responsible!  ORRRRRR…as soon as you make a credit card purchase go to the smart phone and transfer from checking to the credit card); (8) Measure your debt (Prof Note: One cannot eliminate what one cannot quantify!); (9) Dine in (Prof Note: There is always room at my table for anyone on the list-serve.  On Nevis, the main is served at 1:00pm promptly!); (10) Continually monitor your budget (Prof Note: Yes, this is 10 but the question had “9”…I noticed this as well and double checked.  As for budget, stay true to your budget.)

26 June 2018

 Question: According to MSN: Money, what are 8 steps to quit living paycheck to paycheck?

 The US census counts on having all the data – Pg. 8

–       …constitutional requirement to count “the whole number of free persons” every 10 years, achieved since 1790 by a census.  Who, though, should count as a “free person”?

–       In March, the US government reintroduced a question about citizenship status, not asked since 1950, to the 2020 census. 

–       In 1999 the Supreme Court described the census as the “linchpin of the federal statistical system”

–       But courts have upheld that apportionment be done by total rather than citizen population.  The 14^th Amendment makes no distinction between citizen and non-citizen: representation shall be based on “counting the whole number of persons in each state”

 Amex wins legal battel over merchants – Pg. 12

–       …the US Supreme Court said that it could block them from steering customers to use cheaper credit card payment methods

–       American Express is a two-sided platform, where the company deals with merchants on one side and consumers on the other.  The ruling could require antitrust enforcers to prove that increased prices on one side of a market were not outweighed by benefits on the other side

 Answer: (1) Know where your money goes (Prof Note: I literally have rebuilt my own Quicken in MSExcel.  I track every expense, categorize, and reconcile (credit card and bank statements).  I realize Quicken has many fans but I highly recommend building your own system, capturing every receipt image, etc.); (2) Make saving painless (Prof Note: NOOOO…saving, in my opinion, should be painful.  What I mean is that it should not be automatic, it should be physical, i.e. at the start of the month physically transfer $X to savings.); (3) Live on less than you earn (Prof Note: While the list-serve has been around for 11 years and I will readily admit my blessings occurred about that time, prior I drove 10+ year old cars, rarely went out to eat, stayed in cheap hotels, etc.  Now I love having guests to the house (I am a horrible griller), etc which is most fun and much cheaper); (4) Get comfortable saying “no” to the kids; (5) Cut your housing costs (Prof Note: My personal residences are small and my investment properties actually have the tenants living in nicer digs than me….MUCH nicer.  However, fixed operating costs are omnipresent in my mind and I am always attempting to reduce them); (6) Drive a used car (Prof Note: I do not agree!  Purchase cars through your LLC and depreciate them…remember….you better be doing the hustle!); (7) Learn to cook (Prof Note: I am not much of a cook though I can make a thick burger and purchase high-quality meat.  It is about the company); (8) Forge an independent spirit (Prof Note: Learn to enjoy things that do not cost $$$.  If you try and email/call me at sunset it is unlikely I will respond until after the sun has dipped below the horizon.  We only get so many sunsets in our lives and I am going to enjoy as many as possible!  If you have not seen it, check out the Green Flash!)

25 June 2018

Question: According to money.cnn.com what are four financial goals you need to meet by age 40?

Beijing eases capital reserve rules to soften impact of US trade war – Pg. 1

–          China is cutting the amount of reserves the country’s banks are required to keep on deposit at the central bank, freeing up more than $110bn to help cushion a slowing economy and the impact of a potential trade war with the US

–          …cuts are scheduled to take effect on July 5

–          This month, Donald Trump, US president, announced his administration would impose punitive tariffs on $34bn worth of Chinese industrial exports in retaliation for alleged intellectual property theft.  The first round of tariffs is scheduled to take effect on July 6, with a second round hitting another $16bn worth of Chinese exports

–          The US administration is also taking further steps to escalate a trade war with plants to restrict Chinese investment in US companies in sectors ranging from aerospace to robotics and railways

US set to use emergency act against Beijing – Pg. 2

–          The Trump administration has decided to restrict Chinese investment in US companies and start-ups in sectors from aerospace to robotics as it prepares to deploy its latest weapon in the escalating trade war with Beijing

–          …Chinese foreign direct investment in the US plunged more than 90% to just $1.8bn in the first half of 2018 compared with the same period last year.  In 2016 Chinese companies made a record $46bn in foreign direct investment in the US

Road opens up for Saudi women as driving ban is lifted – Pg. 3

–          Women drivers in Saudi Arabia took to the roads for the first time yesterday as a decades-long ban was lifted

–          The plan also aims to spur growth in the private sector and create jobs for young Saudis

KKR faces ire over Toys R Us workers – Pg. 14

–          The retailer’s 30,000 employees face joblessness, many without the severance benefits they expected, after the creditors who are now in control decided to liquidate the business in the wake of disappointing Christmas trading.  Toys R Us employees last week made motional pleas to the investment committee at the California public employees pension fund Calpers, the largest pension fund in the US

–          (Prof Note: This is an interesting conundrum!  CALPERS has a fiduciary duty to its investors which, ignoring social benefits, benefits from paying Toys R Us employees less.  I dare say it, “Do the hustle!”)

Answer: (1) Have a fully loaded emergency fund (Prof Note: NO!!!!  This implies that in emergency you burn down principal.  Yes, absolutely in the case of familial health crisis, etc.  However NOT for job losses.  Do The Hustle!  Have a side business, even if waiting tables at Cheesecake Factory, so that familial wealth is not decreased.  Side Hustles!!!); (2) Have three times your salary saved for retirement (Prof Note: This is a BS number!  Where did it come from?  Have investments that provide passive income sourcing which can replace income at retirement/illness.  Cash can be gone, assets/businesses providing income are true “gold”; (3) Have no debt other than your mortgage and vehicle payment (Prof Note: This could NOT be MORE WRONG!!!  Mature leverage but disciplined leverage!  If starting at zero (0) one of the only ways to build wealth is the proper and mature use of leverage.  Build a real estate portfolio with mature leverage that naturally amortizes over one’s working life.); (4) Have a will (Prof Note: This is so simplistic it sickens me!  Yes, it is accurate.  However, one needs to consider how assets are owned.  Assets in a trust transfer outside of a Will.  How does one own the assets?  Yes, a will is necessary BUT as important are powers of attorney (medical and financial), living wills, home inventory, property use of insurance, etc.  Stating “Have a will” is over simplifying a very complex and necessary requirement)