Tag: Prof Note

14 May 2019

 

Question: According to MSN: Money, what are eight (8) signs that you should leave retirement?

 

Fannie and Freddie privatization in doubt – Pg. 4

–          Congress is likely to resist attempts by US president Donald Trump’s administration to privatize the two companies that guarantee most American mortgages, ….

–          The two companies were bailed out at the height of the financial crisis in 2008 and have since been officially in “conservatorship” – under government control but without their liabilities being listed on the public balance sheet

 

Japan employers struggle to fill jobs – Pg. 4

–          Shortages of drivers, construction workers, shop clerks, chefs and carers have become the number one issue for business across Japan as the population ages and the economy enjoys a sixth year of growth under PM Abe…

–          Mr Abe’s stimulus programme, dubbed “Abenomics”, has seen the BoJ purchase financial assets equal to 100% of Japanese economic output, delivering a weaker yen and a drop in the unemployment rate to 2.5%

–          In trucking, there are three open jobs for every applicant.  Yet the industry also highlights a paradox: for all the intense shortages of blue-collar staff, there is little upward pressure on wages or prices, which the BoJ is counting on it hit its 2% inflation target

–          In Japan, however, hiring only gets harder and no matter how severe the labour shortages there is little appetite among businesses to buy growth with higher wages

 

China’s slowing pains –Pg. 7

–          …6.5% increase in GDP last year was the weakest since 1990 – a process that has dep implications for business, society and policies in the world’s second-largest economy

–          State-owned companies secured 83% of banks loans in 2016, up from 36% in 2010…

–          Private companies account for 90% of exports and Washington’s decision to impose tariffs on Chinese exports has unnerved the country’s equity markets, further eroding private businesses’ ability to raise money

 

Bed Bath & Beyond chief quits under pressure – Pg. 12

–          The group has argued the retailer needs to recruit a new CEO, reverse its weak sales by streamlining the number of products it offers and improving its inventory, and turn around the company’s culture through employee training and new technology

–          It has also called for a cut in the advertising budget and development of a direct sourcing strategy and a private label programme to cut out extra costs form vendors (Prof Note: I have had two arguments in as many months with BB&B managers over coupon policies.  At one point I said, “I am wearing the white hat here!  I am actually fighting for your job.  Do you realize what is happening with your stock price?!”  Then sanity returns and I went to Target for my purchase.)

 

First negative-fee investment fund highlights battle for clients’ money – Pg. 19

–          The structure applies a 34bp fee waiver to the fund’s 29bp management fee

–          This means the fund will have a negative fee of 5bps, meaning customers will receive $5 for every $10,000 they invest

–          The race to the bottom appeared to reach its natural conclusion last year when Fidelity Investments, the $2.4tn US asset manager, offered the first free mutual funds

–          (Prof Note: My motto (bank focused): “Fees are theft, interest is a cost of doing business!”)

 

Answer: (1) You are having trouble making ends meet (Prof Note: That should be a sign to expand side hustles always); (2) You are becoming too sedentary (Prof Note: Envision retirement.  My grandfather spent his time greeting the tourists at Cat Ghaut and reveling in the history of the property and the island.  He was far from sedentary and always doing what he loved, i.e. sharing the beauty of Nevis); (3) You just cannot adjust to your new life (Prof Note: Again, envision retirement); (4) You have lost social connections (Prof Note: So much of working is social.  Some of my best mates I have met through work.  This is what I do not think HR considers in a down-sizing and/or termination.  The social loss to individuals.); (5) You love being in the workplace (Prof Note: think about your position in the workplace…you can remain but on the opposite side of a table, e.g. equity in a deal rather than employee); (6) You are ready to start over in the workplace (Prof Note: Most of my “bosses” are younger than me now.  I enjoy supporting their pursuit to greatness.); (7) You have a great idea for a new business (Prof Note: Perhaps retirement affords one the ability to focus on a business with a sustained, but small, loss for social reasons.  Is profit always the goal?!); (8) It is time to pursue your passion (Prof Note: This should always be the case, provided responsibilities are met)

13 May 2019

 

Question: According to MSN: Money, the top six (6) things Americans are saving for today are what?

 

Finger-pointing begins after Uber IPO mis-step – Pg. 7

–          Its shares closed down nearly 8% from the $45 initial public offering price in one of the worst debuts for a big US listing

–          …raised questions about whether bankers have mispriced some of the most high-profile IPOs in years

–          The benchmark S&P 500 fell 2.2%, its worst week this year, as US-China trade tension flared.  Lyft also sold off

–          But by Friday’s closing bell, the S&P 500 had turned positive while Uber and Lyft sank even further

–          The $45 price was near the bottom end of the indicated range, raising $8bn and delivering a fully diluted valuation of $82bn

–          Investors appear to be skeptical about an unproven industry,…

 

Trump battle with Beijing sees investors ditch US stocks and eye the stable yen – Pg. 8

–          Under the benign scenario, the S&P 500 could quickly rally to a new record of 3,000 points (Prof Note: I am bearish on this scenario but a nod to SM who considers me bearish in general!)

–          Under the more likely “brinkmanship” scenario, with new tariffs but ultimately an accord in the scone half of the year, US stocks would be volatile and dip 5%, yet remain resilient

–          ….worst-case “trade war” scenario, the S&P 500 might tumble as much as 10% – and potentially even tip the global economy into a recession

–          Investors have shown little faith in US stocks

–          The share sales have picked up despite solid data from the US economy, where first-quarter growth came in at an annualized 3.4%

–          As the corporate earnings season draws to a close, companies have beaten earnings estimates by 6.6%, with almost three in every four companies outpacing analysts’ forecasts for net income, …

 

Shut up and get lost: advice for outgoing chief executives – Pg. 12

–          The responsibility of chief executives who are paid employees, rather than company creators, is clearer. “The general [public company] rule should be that once you leave as CEO you really do leave” (Prof Note: Of all people “Comey” taught me this!  Do I believe there is some truth to what Comey says?  Yes.  Do I wish he would just go away?  Yes.  This is my same opinion of the Clinton and Bush families.  This is not a political statement but I want a new chapter in politics.  I do hope they author their books and provide their unique and valuable insight.  However, negative comments only serve to literally exhaust me.  Change from within is hard enough; change from outside is even harder.  Again, just my opinion and no political statements are meant here!)

–          A good handover helps avoid later recriminations.  Financial regulators now insist on a formal transfer of knowledge when senior banks roles change hands.  Yet there is still an emotional side to change at the top (Prof Note: Employees of public companies, regardless of level, are employees.  The line becomes grey when they are also shareholders but an understanding that their position within the institution is that of employee is critical!)

–          New executives can help their predecessors stick to this excellent principal by remembering they are temporary stewards of the companies they head, not flawless immortals.  (Prof Note: My grandfather use to say, when individuals came to Cat Ghaut and asked if it was his, “I am the current caretaker of Cat Ghaut for the next generation.”)

 

Business schools are building boldly for the future – Pg. 13

–          The global competition to construct ever more luxurious facilities at business schools has reached new levels in the past couple of years

–          The level of technological capability expected by the millennial generation of MBA students requires new buidlings… (Prof Note: Technology does NOT solve everything!  This weekend we had to build a Real Estate Waterfall.  Personally, I considered it a Private Equity Waterfall applied to real estate.  The third tier was a catch-up.  Admittedly my tooth is long but it took a fair amount of time to develop the algorithm algebraically to quantify the catch-up.  Then technology, i.e. MS Excel, implemented the algorithm.  Now, in my estimation there were two ways to solve the Catch-Up, i.e. (1) Solver (which required the use of a Macro (technology) or (2) Algorithm (required algorithmic solving of relationship).  We understand both and believe the superior solution was the algorithm that took significantly more time.  I just wonder what would have been taught in academia today?!)

–          (Prof Note: Also, I think it is important to remember, buildings do not create graduates.  I am a two-time alumni of GWU, whose business school facility is wonderful.  However, it has not helped us in the rankings!)

 

The Fed’s proposals face a credibility challenge – Pg. 17

–          Since the 2008 crisis, the US long-run neutral rate – the interest rate that keeps employment and inflation close to the Fed’s target – has drifted lower

–          The closer the neutral rate moves to zero, the more it constrains the Fed’s ability to use rate cuts to generate inflation

–          There are three main ways to incorporate such a make-up component into the Fed’s policymaking process: average inflation targeting, price-level targeting and nominal GDP targeting

–          Wonks focus on the differences among them.  But the key thing to know is that all three seek to influence expectations of what inflation will do

–          Since 2012, the Fed’s target has been 2% inflation as measured by the personal consumption expenditure index.  That indicator, however, has averaged 1.8% over the past 20 years – and just 1.4% since the target was set

–          ….the new frameworks have never been tried or tested anywhere

 

Answer: (1) Retirement (Prof Note: I am having an issue with the word, “saving”.  Personally, I believe individuals need to replace with words like “investing” or “creating”); (2) A home; (3) Vacation; (4) A car; (5) College; (6) Child- and family-related expenses (Prof Note: Consider how many of these are revenue generating.)

11 May 2019

 

Question: According to MSN: Money, “Never mind lattes: Here’s where you’re really wasting money.”  What are these ways?

 

Germany surprises with exports surge – Pg. 2

–          Germany unexpectedly reported a rise in exports in March, adding to recent indications that the eurozone’s largest economy is showing more resilience to global economic challenges than previously forecast

–          Exports rose 1.5% from February and 1.9% from the same month a year earlier…

 

Canada’s record jobs growth in April defies slowdown fears – Pg. 3

–          Canada added a record 106,500 jobs in April, the strongest sign yet that the economy has remained remarkably resilient despite uncertainty over the direction of oil prices and the outlook for the global economy

–          Wage growth held steady, rising 2.3% year-on-year in April, unchanged from March

–          The Canadian economy got off to a rip-roaring start to 2018, with GDP rising at an annualized pace of 1.3% and 2.9% during the first and second quarters, respectively.  But growth began to decelerate in the third quarter and ground to a near halt in the final three months of last year…this contributed in part to the Bank of Canada’s decision to take a dovish stance on further rate rises

 

Can universities pass a tricky admissions test? – Pg. 6

–          …Cambridge university has long been vehemently opposed to anything that smacks of parents “buying” places for their kids, whether through connections or money

–          This may sound bizarre in the US, where the notion of using “legacy” connections is regarded as par for the course.  In the UK, however, Cambridge’s stance is unremarkable

–          Money and class still buy privilege in the UK, albeit in a more subtle way

–          …half of all Oxbridge places go to children at private schools, though only 7% of kids in the UK attend these

–          The perception that some American parents can use legacy links and donations to boost their children’s chances pushes many of them to try to do precisely that, …

–          …system penalizes middle-class kids who lack connections and wealth but are not poor or “diverse” enough to qualify for aid

–          …while Americans from families with university degrees are 6.8 times more likely to attend college than people from families without a degree, this ratio is only slightly better, at 6.3, in England

–          Put crudely: is it right for US universities to accept some rich-but-dim kids as just the “price” for subsidizing poor-but-bright ones?

–          So the next time you get a letter from your old college begging for a donation, ponder these moral quandaries.  There are no easy answers here.  But dealing with difficult philosophical questions is one thing that university is supposed to teach in the first place

 

Turkey accelerates dollar borrowing to prop up lira – Pg. 11

–          Turkey’s central bank has boosted its short-term dollar borrowing to new heights, padding out official reserves after authorities sparked a fresh bout of instability in the lira by ordering a rerun of a critical Istanbul election

–          The Financial times revealed last month that a surge in short-term borrowing by the central bank was helping to obscure the scale of the decline in net foreign currency reserves

 

Answer: (1) New Cars (Prof Note: STOP losing depreciation!  Start a side hustle and purchase the car through the side hustle.  Remember that setting up a business just to house personal expenses is illegal.  But get smart about capturing the depreciation.); (2) Premium gasoline (Prof Note: Car care is important.  I leave this to the experts to determine); (3) Rental car insurance (Prof Note: Oh no…from experience, when on holiday, purchase the FULL insurance.  Holiday time is so precious that if an issue occurs, you want to hand them the keys and take another car with no hassle); (4) Name-brand prescriptions (Prof Note: I leave this to the experts…do not cheat your health); (5) Paper towels (Prof Note: I get their point.  Value decision…); (6) Lottery tickets (Prof Note: If a dollar a day buys hope, I question the wisdom in denial.  Note that I do not purchase lottery tickets but for when there are pools.  I fear the pool winning and me being left out!); (7) Unnecessary laundry products (Prof Note: These are as great a mystery to me as may of the Millennial Apps.  I remember one trip to Target.  I needed Johnson’s Baby shampoo to clean my train’s wheels.  I was in the shampoo section.  I had scoured all the shelves along the aisle.  I ran through the alphabet both horizontally and vertically.  There was no Johnson Baby shampoo.  It had to be there!  In defeat I asked the woman also in the aisle (not a Target employee, another customer like me).  She said, “You do not do the shopping do you?”  I said, “No but I am intelligent.  I have cross referenced, by alphabetical order the entire section for “Johnsons” and “Baby”, confirmed this is the shampoo aisle, and the location of ‘Johnsons Baby Shampoo’ remains a mystery as great as how the Great Pyramids were constructed.”  She smiled and said, “There is a baby section.  It is located there.  Let me take you!”  I was appreciative but completely dumbfounded.); (8) Gym memberships you do not use; (9) Sale items (Prof Note: You are NOT saving 50%, you are spending 100% more than you would have had you not seen the sale!); (10) Prepared food (Prof Note: Guilty!)

10 May 2019

 

Question: According to MSN: Money, what are sixteen money wasters which prevent so many American’s for saving for retirement?

 

Barbados creditors fume at ‘absurd’ $27m advisory fees for boutique firm – Pg. 1

–          A little-known UK advisory firm stands to make about $27m from the restruturing of Barbados’s $7bn of debts – ….

–          Barbados’s debt came to around 160% of GDP last year, one of the highest levels in the world

–          Few Caribbean debt restructures have paid out fees in the tens of millions to financial advisers in recent years.  For example, Citigroup earned $3m restructuring Jamaica’s $9bn of debts in 2013…

 

Zuckerberg’s power must be checked, says Facebook co-founder – Pg. 14

–          One of Facebook’s co-founders has called for the social network to be broken up by regulators, arguing that Mark Zuckerberg’s “unchecked power” has created a monopoly and given him “unilateral control over speech”

–          Advertisers have not been deterred from using the platform: the group posted a 26% rise in first-quarter revenues last month, largely from advertising, and shares have risen more than 40% in the year to day, …

 

Wall Street’s safe bet on trust banks turns risky – Pg. 14

–          Their core business of global custody is coming under pressure as customers seek lower fees for services and higher yields on deposits, and the more diversified JPMorgan Chase gains share

–          Customers are struggling to deal with the rise of low-fee passive investments strategies.  Money managers pay the trusts a tiny fraction of a percentage point on the assets moved or held, but as the managers’ margins are squeezed, they have pressed the trusts for ever lower fees

–          The end of the Federal Reserve’s rate-raising cycle poses problems for the trust bansk.  Yields on loans and bonds stop increasing while deposit rates, which tend to lag, continue to rise.  The effect is pronounced at the trust banks, as they have few, if any sticky retail deposits.

–          The main strategy of the trusts in the face of the pressure on revenue has been to take out costs while offering more services to clients (Prof Note: Banks are notorious for adding costs to customers in the form of fees.)

 

Norway breaks from pack with rate rise plan – Pg. 19

–          Norway’s central bank, having held its key interest rate at 1%, indicated yesterday it would tighten its monetary policy as soon as next month

–          In contrast, Sweden’s Riksbank sounded a cautious tone earlier this week, pushing the Swedish krona to its lowest level against the euro for nearly a decade.  The krona lost some 8% against the dollar and more than 5% against the euro this year.

 

Answer: (1) Tattoos (Prof Note: My rule, if I can see it, I can ask about it.  I do believe there needs to be protection similar to hand gun purchases, i.e. 24-hour rule/7-day rule.  I am also amazed at the cost when I ask about people’s ink.  However, I do respect freedom of expression.  My motto: think before you ink!); (2) Vacations (Prof Note: It is imperative to be mindful of cost.  I have seen so many at Four Seasons Nevis appear so stressed.  I have heard the stories of angry guests.  I attribute it to the cost and the stress it causes.); (3) College (Prof Note: I worry the value of education no longer exists.  I question the need for all the administrators.  I question the “expertise” of professors lecturing from textbooks written by others.  I think there is much value in learning a Trade. College is not a panacea and it has a high cost that can require payment for decades.); (4) Restaurants (Prof Note: $3.00 for a drink.  No thank you!  I will have water!); (5) Opportunities Lost (Prof Note: Employer match on 401(k), etc.); (6) Transportation (Prof Note: Location makes a huge difference.  On Nevis, a car is all you need.  In DC, I feel compelled to drive a “nice” car.  But, do you really need that “nice” car?!); (7) Credit cards (Prof Note: used correctly they are a valuable financial tool.  Used incorrectly and one find’s themselves paying 18.0%+ in interest); (8) Lottery (Prof Note: I get the probability.  But the ticket also provides hope.  Hope is good.  Just do not be excessive and make lottery tickets your retirement “investing”); (9) Clothing (Prof Note: I still remembering asking a woman in one of my Wealth Management classes the cost of her jeans.  She said, “$200”.  I pulled up The Gap on line and found a pair for $20.  I’m just say’n…); (10) Shoes (Prof Note: OMG, a student two years ago in one of my finance classes wore a $700 pair of sneakers.  Now, they were nice and flashy but $700?!); (11) Tchotchkes and stuff (Prof Note: When I travel I try and purchase one nice “Tchotchkes” from the trip.  A memory of the destination.  However, I work at no clutter.  It is a balance.); (12) Failing to look ahead (Prof Note: Always, always, look at retirement and tomorrow.  Always stress-test the family budget for job loss, illness, etc.  We do these stress-tests in businesses, do them in the home as well.); (13) No backup plan (Prof Note: If you are from a wealth family and your backup plan is to call Aunt Ida, no issue…wish I had an Aunt Ida.  If you do not have an Aunt Ida, be prepared.); (14) Holidays (Prof Note: Holidays bring happiness, just fight the debt they may also bring!); (15) Toys (Prof Note: Ask yourself if you are purchasing the toys for the child or for yourself?!); (16) Haircuts (Prof Note: A close mate’s lady friend just spent $400 on a haircut.  That is half the ticket cost to Nevis!  I just checked online.  The Flowbee is still available and a viable solution for the home haircut.  Bring back the Flowbee!)