Tag: Prof Note

18 May 2019

 

Question: According to MSN: Money, what are ten (10) things retirees should never keep in their wallets?

 

Global economy – Pg. 5

–          The fact that US growth held firm even after past rounds of tariffs sent tremors through financial markets emboldened the president to take a tougher line in the talks with China

–          …unless a deal is reached soon, the US economy will bear the brunt of the new and higher tariffs, which will act as an extra tax on a wide gamut of products, form construction materials to farm equipment and electronics

–          …estimate that if a 25% tariffs is extended to all of China’s exports to the US, it could deliver a 0.5% knock to the level of American GDP next year

–          The blow to China would be greater if all of its exports to the US are taxed at a 25% level, in part.  Whereas the US exported $120bn of goods to China last year, China is far more reliant on the US, shopping $540bn of goods to the US.  The hit in 2020 to Chinese GDP, which has already sown some weakness in recent months, would be 1.3% under this scenario

 

Global fund houses gear up to tap China’s rare growth story – Pg. 11

–          Assets under management in China should grow to $9.3bn by 2023, from about $5.3tn now…

–          That would make it the world’s second largest investment market, after the US

–          Late in 2017 China allowed foreign companies to take a 51% stake in the joint ventures they operate – a threshold that will rise to full ownership in 2021.  These JVs, which allow investment companies to sell mutual funds in the country, are often run in conjunction with a state-owned bank or firm.  The other option is to set up a wholly foreign-owned enterprise, which is limited to unlisted investment products

 

Answer: (1) Wads of cash; (2) Social Security Card; (3) Password Cheat Sheet; (4) Spare keys; (5) Blank Checks; (6) Passport; (7) Multiple credit cards (Prof Note: Guilty!); (8) Birth Certificate; (9) A stack of receipts (Prof Note: Guilty!); (10) Medicare Card

17 May 2019

 

Question: According to MSN: Money, what are the mean/median net worth of U.S. families based on the age of the head of household (35 or younger), 35-44, 45-54, 55-64, 65-74, 75+?

 

Global banks handed 1bn (euro) in fines for rigging foreign exchange rates – Pg. 1

–          Barclays, Citigroup, Royal Bank of Scotland, JPMorgan and Japan’s MUFG have been fine more than 1bn (euro) by the EU’s competition watchdog for rigging the multitrillion-dollar foreign exchange market after the last financial crash

–          …most of the traders knew each other personally….(Prof Note: When I was in energy trading, personal relationships were key!  If there was a mispricing in the market, “word” went out quickly and the shark frenzy was quick)

–          The market rigging activity took place between 2007 and 2013 and involved 11 currencies, including the euro, pound and dollar.  The information shared by traders “enabled them to make informed market decisions on whether to sell or buy the currencies they had in their portfolios and when.  Occasionally, these information exchanges also allowed the traders to identify opportunities for co-ordination”…

 

Macron buoyed by fall in joblessness to 10-year low – Pg. 2

–          Unemployment in France has fallen to a 10-year low in a boost to President…

–          Joblessness in the eurozone’s second-largest economy fell 0.1% in the first quarter of this year to 8.7%, its lowest since 2009,…

–          Year-on-year growth has outpaced that of Germany and Italy almost continuously for two years

 

US drug pricing is in need of an overhaul – Pg. 8

–          …the most frequently administered treatments now cost 1.8X more in the US than in other countries – and is growing (Prof Note: I recently asked a doctor for a prescription and he provided but said, “it is expensive.”  Then he asked if I had an ability to get it filled in another country.  I said, “Yes”.  The pills are significantly less in the Caribbean!)

–          Drugmakers are just part of the problem.  Regulations on Medicare, the government health insurance for the elderly, incentivize doctors to prescribe expensive products by paying them a percentage of drugs’ costs.  These rules also prohibit Medicare from bargaining with drugmakers

–          …companies known as pharmacy benefit managers act as middlemen between drugmakers and insurers.  PBMs negotiate rebates, discounts form the list prices set by drugmakers.  In theory, this means lower prices for customers.  However, PBMs are accused of suing rebates to bolster their own profits while drugmakers push up list prices to compensate.  A lack of competition in the PBM market – dominated by just three companies – worsens the issues

–          One solution put forward last year by the administration is to link the prices of drugs administered under Medicare to those paid abroad.  Another option is wider reform of Medicare regulation.  Given its vast purchasing power, it could negotiate with drugmakers, as is the case in the British health system.

 

China’s Treasuries sell-off stokes US concerns of retaliation for trade tariffs – Pg. 19

–          China sold the most Treasuries in more than two years in March, magnifying concerns that it could weaponise its positon as the US government’s largest foreign creditor in the trade dispute between the two countries

–          China is the largest foreign holder of Treasuries, owning a total of $1.12tn, meaning any increase in yields it could engineer would also mean losses on its own portfolio

 

Answer: 35 or younger: $76,200, $11,100; 35-44: ($288,700, $59,800); 45-54: ($727,500, $24,200); 55-64: ($1.17m, $187,300); 65-74: ($1.07m (not a typo, it went down), $224,100); 75+: ($1.07m, $264,800)

16 May 2019

 

Question: According to MSN: Money, what is the average net worth required to be considered “wealthy”?

 

Germany enjoys first-quarter rebound – Pg. 2

–          The German economy expanded 0.4% in the first quarter of 2019, ending the slowdown of the second half of last year and dispelling fears of a more prolonged economic malaise

–          The EU’s largest economy narrowly avoided a recession last year, with GDP flat in the final quarter, having contracted in the preceding three months

–          Despite the positive performance, German bond yields fell, reflecting concerns over deepening Sino-US trade tensions and worries about global growth.

–          The recent escalation of the US-China tariffs war looms over German growth for the rest of the year, although the German economy has been spared a hit from new US tariffs

–          Growth was boosted by domestic factors, including strong data for construction and machinery investment as well as healthy private consumption

–          Economists expect the economy to expand 0.8% this year, more slowly than the 1.3% forecast for France and 2.2% for Spain

–          …number of jobs in the Eurozone rose by an annual rate of 1.3%, defying widespread expectations of a slowdown in the rate of growth

 

Brazil student protest against Bolsonaro cuts – Pg. 3

–          At issue are Mr Bolsonaro’s plans to slash spending on federal universities and shift funds from the humanities to areas that he says can “generate immediate return to the taxpayer, such as veterinary, engineering and medicine” (Prof Note: I have often commented that it is possible to get as much borrowed $$$ for a liberal arts degree than a science degree despite there being a large differential in earning capacity, on average, for the student.  I question the underwriting for students loans, i.e. I worry that many students have loans that will keep them in perpetual debt and prevent them from realizing the “American Dream”)

 

Alabama abortion bill sets stage for legal battle – Pg. 3

–          …legislature that would ban most abortions in the state…

–          …aimed at overturning the 1973 Roe v Wade ruling in the Supreme Court that gave women the constitutional right to terminate pregnancies

–          The measure seeks to outlaw abortions at every stage of pregnancy unless the mother faces a “serious health risk”, after an amendment proposing limited exceptions in cases of rape and incest was rejected

–          Alabama has some of the country’s most restrictive abortion laws…

–          Women have to take a scan, receive mandatory counselling and wait 48 hours before the procedure

–          By making abortion a felony offence, doctors who perform the procedure could face up to 99 years in prison.  Women would not be held liable

–          (Prof Note: I have tried to wade into intellectual discussions of abortion laws twice with two highly educated sets of women.  I have found two things to be true: (1) This is a highly emotional issue and (2) On a personal note, it is just best for me to avoid this subject.)

 

Cost of US-China tariffs creep up on households – Pg. 4

–          …estimated the administration’s decision to boost tariffs on $200bn of imports from China would increase the deadweight cost to $6.6bn a month, or $628 per household a year

–          …prices on a basket of household products rose 2.5% in the year to the end of March, more than double the rate of a year ago.  Good and drink prices rose 2%, up from 1.4% increase the previous year

–          Overall inflation remains quiescent, with the core personal spending price index rising just 1.6% on year-on-year in March, et the Fed’s bigger concern in recent months has been low price growth

 

Law firms rife with bullying and sexual harassment, survey finds – Pg. 14

–          Sexist and sexually suggestive comments were the most common form of harassment, while 22% of sexually harassed respondents had been subject to physical approaches

–          Bullying was also reported as a significant problem, …

–          The US, Canada, Australia, South Africa and Nigeria were the worst countries for sexual harassment…

 

Banks resist demand to shed more daylight on forex charges – Pg. 19

–          Some of the biggest banks in the $5tn-a-day currency markets…

–          Trading in currencies does not involve commissions.  Banks make money by slapping a spread on transactions, make it somewhat more expensive for clients to trade with them than for banks to trade with each other

–          Under rules brought in last year by the second Markets in Financial Instruments Directive, banks have to explain mark-ups and costs they impose through those means, with the aim of helping investors pick which banks to deal with

–          …foreign exchange trading has been one of the steadier lines of business in the aftermath of the financial crisis, as other areas like credit and commodities have waxed and waned

 

Answer: $2.27m (Prof Note: This is absurd!  It is NOT net worth that matters.  For instance, assume one inherited a family property that had a market value of $25.0m.  The property had NO debt.  Assuming no other assets, the individual inheriting the property’s net worth is now $25.0m.  Wealthy?  Now assume the property is a family legacy property and the person refused to ever sell it.  The property has annual operating costs of $250,000.  Is the person wealthy?  I argue, “no”.  The individuals just inherited a $250,000/yr invoice.  Wealth is more about passive income than asset valuation!)

15 May 2019

 

Question: According to MSN: Lifestyle what are 18 proven strategies to teach kids to handle bullying?

 

White House pressed Fed to help in trade tussle with China – Pg. 2

–          Mr Trump’s renewed pressure on Fed chair Jay Powell to lower short-term interest rates came amid a period of volatility on world stock markets as hostilities over trade escalate between the US and China

–          Escalating trade hostilities could revive one of the so-called downside risks Fed policymakers have been watching for more than a year, adding to dovish arguments a rate reduction was in order

–          But higher tariffs should temporarily push up inflation, which could alleviate some of the central bank’s worries that price growth was too low

 

IMF stakes reputation on Argentina bailout – Pg. 4

–          Assets have stabilized in recent weeks and the central bank is allowed to use IMF resources to intervene in the peso

–          In September, the IMF said it would extend an additional $7.1bn loan to provide Argentina with more cash upfront in exchange for a harsher austerity programme

–          The deal required Argentina to run a balanced budget by 2019 and to shrink its external deficit.  It succeeded on both counts

–          Inflation is nearly 55% and more than 30% of the population live in poverty, stirring memories of past crises and rescues

–          Many people view the IMF as a comic book villain given its long and chequered history in Argentina.  Since it first sought the fund’s help in 1958, Argentina has signed 22 agreements, most of which have ended badly for both sides

 

Inequality in America offers lessons for Britain – Pg. 9

–          The US holds the unenviable title as the world’s most unequal rich country, at least in terms of income

–          Perhaps the most troubling aspect of inequality in the US is the extent to which the lives of people without four-year college degree have become worse and have diverged from the lives of those who are better educated

–          For those without a college degree, real median wages have fallen for half a century

–          Even as US national income has grown, the gains have all gone to the more educated, while those left behind have lost, not only prosperity but the self-respect, status and meaning that come with good jobs and good marriages

 

How long the debt cycle might end – Pg. 9

–          Those in emerging countries are particularly vulnerable, because much of their borrowing is foreign currencies.  This causes currency mismatches in their balance sheets.  Meanwhile, monetary policy fosters risk-taking, while regulation discourages it – a recipe for instability

–          Start then with inflationary fire.  Much of what is going on right now recalls the early 1970s: an amoral US president (then Richard Nixon) determined to achieve re-election, pressured the Federal Reserve chairman (then Arthur Burns) to deliver an economic boom.  He also launched a trade war, via devaluation and protection.  A decade of global disorder ensued.  This sounds rather familiar, does it not?

–          Some suggest that the Phillips curve – the short-term relationship between unemployment and inflation – is dead, because low unemployment has not raised inflation

 

Answer: (1) Parents: Talk about it; (2) Kids: Walk with friends; (3) Parents: Know the rules; (4) Kids: Ignore the bully; (5) Parents: Communicate; (6) Kids: Use the right body language; (7) Parents: Listen; (8) Kids: Practice handling a bully; (9) Parents: Give your child control; (10) Kids: Keep a distance; (11) Parents: Do not change your mind; (12) Kids: Slow your speed; (13) Parents: Avoid the urge to rescue; (14) Kids: never give a bully anything; (15) Parents: Empower instead of rescue; (16) Kids: Be a positive bystander; (17) Parents: Encourage kids to connect with friends; (18) Parents: Model kindness (Prof Note: I talk with more and more of my mates and many are experiencing bully issues with their children.  We talk about their children, they show me pictures, and I simply do not get it.  My only comment is that I believe bullying is pervasive throughout society at all levels.  Perhaps in school it is emotional but in business it becomes economic.  I see it as a power differential.  I do not have answers, just observations.  One of my favourite expressions, coined by a mate, is, “We bully the bullies!”.  Just remember there is always a light on at Casa de Staiger if ever needed.  (Warning: I have no indoor plumbing at the moment but some day… J))