Tag: Prof Note

16 June 2018

Question: According to MSN, what is the most expensive hotel in Maryland?

Ex-Trump campaign chief Manafort jailed for alleged witness tampering – Pg. 1

• The judge noted that her earlier instruction not to commit crimes while on bail was “printed in bold, all caps” (Prof Note: There is much to be said for a quiet, anonymous life)

Central banks correctly go their separate ways – Pg. 8

• The Fed raised rates and signaled future increases, as expected; the ECB gave details of its impending exit from quantitative easing, while emphasizing that monetary policy would remain loose; the BoJ did nothing
• Of the three, the BoJ had the easiest task, though not for pleasant reasons. Inflation in Japan continues heavily to undershoot its target; shoing that the tightening in the labour market is a long way from feeding through adequately into pricing power
• The Fed, having clearly signaled a quarter-point rise in rates, duly delivered
• ….Jay Powell….was wise to try to dispel notions that he would take a more hawkish approach than Janet Yellen, his predecessor
• The Fed needs to be alert to the possibility that its tightening will cause significant financial disruption, notably in emerging economies. But the wildest card is the possibility of an escalation of trade conflict among the big economies, driven by Donald Trump, the US president
• …the most difficult decision was that the ECB, which faced the delicate task of preparing financial markets for its exit from quantitative easing
• It seems quite likely that equilibrium long-term interest rates have fallen. Moreover, this already very old recovery could run out of steam, or be subject to adverse shocks, at any time.  Still, consumers, investors and businesses should take some comfort that the central banks of the world’s biggest market economies have roughly the right analysis of where they are and how they might react in a downturn

Law firm’s near $200,000 offer kicks off US pay war – Pg. 10

• US law firms have launched an expensive bidding war for young legal talent after New York-based Millbank Tweed Hadley & McCloy raised the salary it was offering first-year lawyers to $190,000, forcing their competitors to follow suit
• …raised salaries for those just below partner level to $330,000, took effect this month
• (Prof Note: Students are always surprised when I state that attorneys rates are negotiable. You can and should negotiate their fees.  Also, track their time and negotiate the bills when they are received.  I often use two law firms on my bigger issues and have each check the other’s invoices.  REFUSE to pay for the $25 copy!  REFUSE to pay for the 2 minute phone call confirming the meeting.  Note the firm most likely rounded the 2 minute call to 6 minutes and then billed you.)

Halcyon days recede as ECB and Fed step back – Pg. 13

• The withdrawal from fixed income was broad based as investors adapted to a world in which two key central banks were providing less support. European bond funds were particularly hit, losing $2.4bn, the biggest outflow in over a year.  Emerging market bond funds suffered their eighth straight week of outflows, the longest negative streak since 2014
• Pressure on emerging markets has been exacerbated by investors shifting cash from EM into the US, where rates are becoming more attractive. The returns on short-term 12-month Treasury bills – essentially the equivalent of cash – have climbed to a 10-year high of 2.3% thanks to the Fed’s tightening and a big increase in US government borrowing following tax reform

Answer: Four Seasons, Baltimore

8 June 2018

Question: According to MSN:Lifestyle, what are 11 signs someone is lying to you?

Turkish lira up 2% after central bank raises rates to keep inflation in check – Pg. 1

• The lira rallied sharply after the central bank raised its benchmark interest rate by 125bps to 17.75%. The currency gained 2% against the dollar after the increase
• Investors have been clamouring for higher rates to help curb annual consumer inflation of 12.15% and to stem the currency’s slide
• The lira went into freefall last month as investors worried about inflationary government spending pledges ahead of the pools…
• The central bank raised its late liquidity rate by 300bp after an emergency meeting on May 23, a move that investors warned had come too late

Power – Pg. 7

• In Laos, in Brazil, in central Africa and most of all in China, ultra high-voltage cable technology that allows power to be commercially transported over vast distances with lower costs and increased load in justifying the construction of massive power projects
• UHV allowed china to binge on dam building in its mountainous hinterland, then transport the power thousands of killometres to its wealthy, industrial east coast
• It is no coincidence that this would resolve the problem of “trapped” power resulting from some of China’s mega construction projects in countries like Laos that lack a big enough domestic market
• Some western observers see a geopolitical strategy on part with China’s Belt and Road Initiative, a grand design that seeks to boost Chinese-led infrastructure investment in more than 80 countries
• The first stage, set to run until 2020, involves investment in domestic grid assets within other countries. The second phase would see the kitting together of some of those grids and that generation capacity
• The ambition is huge, envisaging linking up more than 100 countries. But china has considerable organizational, financial and technological firepower
• The state-owned power companies that are hitting the acquisition trail overseas rank as global heavyweights. State Grid is ranked as the world’s second-largest company after Walmart in the 2017 Fortune 500 list

Watch the Fed’s balance sheet, not interest rates – Pg. 9

• …Fed’s balance sheet unwinding is quietly contributing to the current turmoil in emerging markets
• …worries that President Donald Trump’s subsequent tax cuts have caused the US deficit to widen unexpectedly, sparking higher-than-projected issuance of US debt. Indeed, some $2.34tn of Treasuries will be sold in the next two years
• Global investors will need dollars to buy those bonds. However, the rub is that the Fed’s unwinding is sucking dollars out of the system, currently at a pace of $20bn a month, which is slated to rise to $50bn next or (or a cumulative $1tn of liquidity by December 2019).  That creates a dollar liquidity squeeze…

Answer: (1) They change their head position quickly; (2) Their breathing changes; (3) They stand very still; (4) They repeat words or phrases; (5) They provide too much information; (6) They touch or cover their mouth; (7) They instinctively cover vulnerable body parts; (8) They shuffle their feet; (9) It becomes difficult for them to speak; (10) They stare at you without blinking much; (11) They tend to point a lot

2 June 2018

Question: According to MSN, what are the 50 most common regrets people have in their 50s?

Global markets rally as US jobs rise calms volatile trading week – Pg. 1

• Global markets rallied yesterday as a robust increase in US employment helped calm a week of volatile trading triggered by renewed fear of a transatlantic trade war and political instability in Europe
• The US economy reached its lowest unemployment rate in 18 years….

Renminbi resilience lets central bank loosen grip – Pg. 11

• With emerging markets currencies in turmoil, China’s renminbi has been a bastion of strength
• Despite the People’s Bank of China’s loosening of the renminbi’s peg to the dollar, the currency tracks the greenback’s movements more closely than other emerging market currencies
• Trade-weighted strength explains why the People’s Bank of China has maintained a hands-off approach this year
• The first pressure is China’s deteriorating current account, where a $28bn deficit in the first quarter was the first since 2001. A current account deficit indicates that trade is creating net outflows of foreign exchange
• While a full-year deficit is unlikely, the OECD forecasts a surplus of 0.9% of GDP this year, which would be the smallest since 1995
• Second, the yield gap between renminbi and dollar assets has narrowed substantially this year, as subtle easing moves by the PBoC have contrasted with Fed policy tightening.
• While China capital controls had historically made cross-border carry trades – in which investors seek to profit from interest-rate differentials – difficult, this yield gap had shown high correlation with the renminbi’s exchange rate against the dollar, …
• Lower interest rates in renminbi relative to other currencies tend to make China’s currency less attractive, as capital flows to where returns are highest
• With China’s capital markets more open to foreign investment, such correlation should only increase

Answer: (1) Ending relationships with people you loved; (2) Not being adventurous enough; (3) Wasting time hating your body; (4) Trying to live up to your parents’ expectations; (5) Not eating healthier (Prof Note: After securing your financial future, you want to enjoy it!  I remember disembarking to Antarctica and an older woman was sobbing as the crew would not allow her on the zodiac as she was too infirmed.  She had saved all her life only to not be able to realize her dream.  She literally could see the continent!); (6) Taking life too seriously; (7) Not traveling more (Prof Note: Traveling opens one mind and ones heart!  There are good/great people everywhere!  I remember an evening spent in Cairo with the mother of a former student.  She was a professor of Islamic culture in Egypt.  I wish everyone could spend an evening with her.  While I always respected Islam, I saw the wisdom and beauty through her eyes and those of her family); (8) Holding onto grudges (Prof Note: Respected peers disagree with me but I feel, in many cases, we are far to forgiving.  Somethings, especially acts as an adult with knowledge, should not be forgotten and/or forgiven); (9) Not standing up for yourself; (10) Worrying about other people’s opinions (Prof Note: Life is too short…live the dream!); (11) Prioritizing practicality over fun; (12) Not attending to your health; (13) Quitting school; (14) Not accomplishing more; (15) Working too much (Prof Note: Ask yourself, if revenue were hit, would the company/employer fight to keep me?  If the answer is “no”, think hard about your commitment); (16) Not telling people you love them (Prof Note: I need to express my high opinion of peers, friends, and colleagues more often.  I admire people that do this more and it is so meaningful to hear!); (17) Ignoring your instincts (Prof Note: Always go with your gut, how often is it actually wrong?); (18) Being an inattentive partner; (19) Not taking vacations (Prof Note: Create memories and vacations are memories!  Trust me, if you pass (and I hope you do not) your job will get done!); (20) Getting divorced; (21) Letting friendships fizzle out (Prof Note: I am working harder and harder to maintain the wonderful gaggle of friends…life is too short!); (22) Missing out on the little moments; (23) Not saving more (Prof Note: I ask people ALL the time that are successful in retirements if they saved too much.  I have never heard the answer, “yes”); (24) Not trying to land that dream job (Prof Note: You miss 100.0% of the opportunities not sought); (25) Being unkind (Prof Note: I am working harder and harder on kindness and basically doing the right thing.)  (26) Not doing more for others (Prof Note: Acts of kindness are rewarded handsomely); (27) Not seeing someone before they died  (Prof Note: Julian J pushed me to see the Great Bill Hudnut more as he was waning.  Julian was right and some of the best memories I have with Bill are during his past few months.  I loved Bill’s sense of humour and the fact that well into his eighties, he loved the ladies! J); (28) Not appreciating your youth; (29) Not being more romantic; (30) Muting your real personality (Prof Note: One of my expressions about wealth; the absence of wealth requires one to be the person they must be, the existence of wealth allows one to be the person they want to be!); (31) Not spending more time with your kids; (32) Missing out on investment opportunities; (33) Not admitting your feelings for someone (Prof Note: I love all of you!!!  Love the comments!  Love the bandy of ideas!  Love when you share your successes!!!); (34) Being ungrateful; (35) Not asking that person out; (36) Setting aside your passions (Prof Note: If you are passionate, why are you doing it?); (37) Not being more present; (38) Not appreciating your body (Prof Note: Yes, I truly am “HOT”!); (39) Spending too much time worrying; (40) Being inattentive to your kids; (41) Not getting to know people better (Prof Note: True wealth is relationships.  Just two months ago Mike A and Laurie were on Nevis with evenings spent on the patio, under the stars, conversing.  Those are the best of times!); (42) Letting the passion die; (43) Not standing up for other people (Prof Note: Never had this problem, even when it harms me personally; however, it is about doing the right thing!); (44) Spending too little time with your parents; (45) Acting your age; (46) Forcing your opinions on your children; (47) Not being more spontaneous; (48) Not apologizing more; (49) Ignoring your personal happiness; (50) Not leaving a legacy (Prof Note: While a legacy is different for different people, I am blessed with the legacy my grandfather left me on Nevis!)

31 May 2018

Question: According to MSN:Money, what are 5 critical moves to make before your 40s are over?

OECD bullish on global growth but warns of looming risks – Pg. 2

• The global economy is still set to strengthen this year, but risks are looming and growth is increasingly reliant on support form governments
• It trmmmed its previous forecast for global growth in 2018, from 3.9% to 3.8%, to reflect the soft patch in the Eurozone and Japan in particular, but is still expected growth to tick up to 3.9% in 2019
• …cut unemployment across the OECD to its lowest level since 1980, igniting wage growth and leading to nascent labour shortages in Germany, Japan, the US and elsewhere
• Other risks are more immediate. The EECD acknowledged that the disappointing first quarter was not only a matter of one-off strikes or extreme winter weather.  It said fears of disruption to trade could already have led companies to postpone investments, while higher oil prices could have filtered through to cramp consumer spending

Company investment data signal rate rises – Pg. 4

• Strengthening investment by businesses helped sustain steady overall economic growth in the first quarter, countering a weak showing by American consumers and leaving the US Federal Reserve on track for further increases in interest rates
• The figures contributed to overall GDP growth of 2.2% in the opening quarter of the year, marginally weaker than the 2.3% previously reported for the period
• The GDP numbers revealed further weakness in household spending, with consumers increasing outlays at an annual 1% pace, far short of the 4% growth seen at the end of last year

Surging dollar poses profit challenge for US blue-chips – Pg. 19

• The dollar has gained more than 7% against the euro since the single currency peaked at $1.25 in early February. As the political crisis in Italy has deepened this week the euro fell below $1.15 – its lowest level since July 2017
• “A rising US dollar translates into a negative currency headwind for so many of the companies in the S&P 500”
• A surge in US corporate profit growth in the wake of tax cuts, estimated at about 25% year on year, has failed to drive the S&P 500 back to its record peak set in late January
• The S&P 500 US Revenue Exposure index, which measures the performance of companies in the index with higher than average revenue exposure to the US, is down for the year, whereas an index that measures companies with a higher than average revenue exposure outside the US is up almost 3%
• The dollar’s ascent helps to explain why the shares of small companies, which tend to generate most of their revenue at home, have outperformed the S&P 500
• The domestic focus also insulates small-caps from the trade tensions that have emerged this year and makes them a bigger beneficiary of cuts in the corporate tax rate and a stronger economy

Answer: (1) Save to avoid a retirement emergency (Prof Note: Get rich slowly.  If an unexpected expense results disallowing saving, “Do the hustle!”); (2) Prioritize retirement over college (Prof Note: I do not have children BUT I believe your children will be better served if the parents are financially stable in retirement.  Remember children are better able to shoulder the debt given the future years of work.  Also, the payment of college could occur upon your death.); (3) Prepare for the worst (Prof Note: I am always stress-testing my portfolio.  I know exactly how many years I can go prior to eating into principal.); (4) Invest, even if you think you can’t (Prof Note: It is always possible to pull the belt tighter!); (5) Think – and talk – about end of life (Prof Note: Holy Cow…YES!!!; Everyone needs an estate plan which includes Wills, PoAs, Living Will(s), etc.  The more information provided to heirs, the less pain they will suffer at your passing.)