The Market. President Trump could be impeached. Even though Beijing withdrew its extradition bill, the bill that caused chaos in Hong Kong, protests are still occurring. The next step would be to declare a national emergency and send troops… which investors speculate could trigger a global stock market selloff. Value stocks are starting to underperform, lagging in return compared to fundamentally weaker stocks, is value dead? Where are the rich putting their money? (See the picture below) Index funds make the market more efficient. Quarter 4 estimates (corporate earnings and economic data) are not looking positive. The Consumer Confidence Index decreased in September (Current: 125.1, Last: 134.2). The global economy works best when goods, services, people and ideas flow freely across administrative boundaries. A bubble is viewed as the asset or market that is expensive relative to its potential growth and income and the marginal buyer in the asset class or market appears to have little interest in valuation. News and increasing uncertainty about trade tariffs decrease investment and activity. Advances in AI and robotics will continue to disrupt the labor market and the amount of skilled and unskilled jobs available. Four output and living standards to rise over time, either people need to work more hours or people need to be more productive while working.
The future of work. Automation technologies promise to deliver major productivity benefits that are too substantial to ignore. Automation is expected to displace: office support, food service, transportation and logistics, and customer service roles. But the economy will create jobs in: healthcare, science, technology, engineering, math (STEM), and jobs that require personal connection and interaction. Those with a high school degree or less are four times more likely to hold automatable roles than those with bachelor’s degrees. High-growth hubs and megacities are where you’ll see the most employment. In the US, 60% of job growth by 2030 could be concentrated in 25 cities. Young workers, workers over 50, and Hispanics and African Americans are the workforces that are most likely to be displaced. 40% of Americans are in occupational categories that could shrink by 2030. With the jobs displaced and phased out, new jobs will be created, more than making up for those lost.
Energy Outlook 2019. Key takeaways from this study (the study’s estimates are for 2018-2050): The Organization for Economic Cooperation and Development (OECD) is an economic organization that has 34 members (all developed countries), founded to boost world trade and economic progress. GDP estimates for 2018-2050 for the OECD countries is 1.5% compared to 3.8% for non-OECD countries. The [estimated] fastest-growing countries (non-OECD) for the period of 2018-2050 will be: India, Africa, China, and the Middle East). Japan and Russia are the slowest-growing economies (both have declining populations and aging workforces). China is estimated to not grow as fast (grew 10% annually from 2000-2010). Energy consumption will grow by nearly 70% for non-OECD countries. The industrial sector (refining, mining, manufacturing, agriculture, and construction) will account for the largest share of energy consumption. Liquid fuels will continue to be the predominant transportation fuel and an important industrial feedstock. Renewable energy will become the leading source of primary energy consumption by 2050 (although renewable energy is the world’s fastest-growing form of energy, fossil fuels will continue to help meet energy demand). Global natural gas consumption will increase by more than 40%.
Where will the next crisis come from? Crises tend to have a large element of unpredictability. Periods with a higher number of crises/shocks coincide with higher levels of debt and with it higher deficits. Leaving the precious metal-pegged currency systems has encouraged budget deficits, rising debts, huge credit creation, loose monetary policy, and financial deregulation (In a gold standard world, mining new gold was the only stable way of increasing the money supply). Extremely high global asset valuation and low economic growth relative to the past could cause an asset price correction. The central banks have made yields very low causing other asset prices to rise.
Investing in the future. What is the future going to look like? What will be popular and profitable? What will consumers be buying and using? What will be essential and what will be disrupted? Where are the trends leading to? What are the future trends, consumer preferences, and behavior? Here are our thoughts: companies that contribute to a more sustainable economy like electric vehicles (the world is going green and not by choice, by necessity), biotechnology companies working in the agriculture space (agriculture will be disrupted by irregular weather patterns. What can solve that?), solar companies and other renewable power companies (the new sources powering the world), waste management and water purification companies, ESG ETFs, data storage and data center companies, telecommunication companies, US opportunity zones (for tax purposes), investing in developing and emerging markets like India, Nigeria, Vietnam, Mexico, Russia, Brazil, etc., cybersecurity companies, AI companies, liquified natural gas, and cannabis. These investment types are based on intuition and experience/knowledge of the world we live in and how the world will be in the future.
Introduction to Bakkt, Bitcoins' new futures market. Bakkt is bitcoins first US compliant futures market, offering an investment vehicle for institutions and US investors to safely purchase and hold bitcoin. This exchange is run by ICE (Intercontinental Exchange), who also operates the NYSE. This exchange opened to the public earlier this week, Monday, September 23rd, with first days volume being disappointing, around 200k USD. Although volume was substantially higher later in the week, reaching around 700k USD, this still fails in comparison to even a lesser traded futures market, such as the lean hogs commodity, with volume around 2m$. This market does bolster a few different attributes to the current capital markets, being that it is open 7 days a week, and is only closed for 2 hours every day to finalize closings. In my opinion, a 24/7 market has quite a lot of drawdowns’ and isn’t nearly as good of an idea as it sounds. Operating constantly leads to a lack of active trading hours, and increased potential for manipulation. Shortly after opening, bitcoin's price fell sharply by around 19%, from 10500$ to 8500$. It seems that the hype that has been circulating for the past year, regarding Bakkt’s launch and constant delays, is all but over.
Global population changes and predictions. By the year 2030, the world’s population will grow by 1.2 billion people, with 97% of that growth occurring in developing countries. Over the same time, cities will expand to hold a record 60% of the world’s population. This data has large implications for the economies of the world as population growth or decline directly impacts many aspects of the economy including per capita output, per capita income, and the standard of living. For example, Russia is currently facing an annualized population decline rate of 6% and is expected to lose over 9 million people by 2030. This decline is one of the contributing factors to Russia’s ongoing finical crisis. On the other hand developed countries with steady population growth like The United States are expected to see correlated economic growth. The bulk of population growth will occur in China and India which are expected to grow by 67.7 million and 224.3 million people, respectively. This growth will continue to fuel the recent economic growth as long as the countries can successfully allocate resources quickly enough to provide for food, housing, and jobs to account for this unprecedented population growth.
By 2030 the median age will increase to 33.2 years which is generally good news because the ideal median population should be around 35 years, so the bulk of the working population is working in productive, high paying jobs that contribute to growth and provide for the retirement of the previous generation. Japan has one of the worst future outlooks with an expected 5% population decrease and a median age of 51.6 years. After decades of improving life expectancy and falling birth rates, Japan now had a rapidly aging and shrinking population. In 2016, 86% of employers struggled to fill open jobs while most filled positions are worked by people who are over 50 years old. Without young people entering the workforce, the government and companies are struggling to continue to provide pensions and retirement care to retirees. This has contributed to Japan’s shrinking economy as fewer people means fewer goods and services are produced and in turn, fewer goods and services are purchased. One of the paths Japan is taking to combat this issue is a focus on the robotics industry, which the current Prime Minister hopes to quadruple. Japan is working to use robots to help with everything from increasing productivity, to taking care of the elderly, to robot wolves that chase away wolves as they approach city limits. So, if you make it to Japan in the next few years don’t be shocked to see a country with people and robots working hand in hand to usher in a new era of Japanese economic growth.
The Alchanati Campbell and Associates Team
The Market. Fed cut another 25 basis points. The newest projections estimate that Social Security will be insolvent in 2034 and Medicare in 2026. 20% of Americans are illiterate. Lacking knowledge on a topic makes it difficult to read and learn about. Coal and nuclear energy are being displaced by natural gas, wind, hydropower, and solar energy (shown in the graph below). Chronic absence has a huge impact on a student’s education and the four school conditions for learning include physical and emotional health and safety, sense of belonging and support, academic challenge and engagement, and social and emotional competence. Most people have 100 10 minute blocks of living time each day. You have to think about everything you spend your time doing in the context of its worth in blocks. A human isn’t simply a perfect survival creature—it’s also just the right element of a perfect survival tribe. More than half (53%) of U.S. CFOs believe that the U.S. will be in recession by the third quarter of 2020 and 67% believe that a recession will have begun by the end of 2020.
The value of financial advice. Does professional advice contribute to investor value? Vanguard did a study to test advisor value in their Personal Advisor Service to see if professional advice increased a customer’s portfolio value, financial value, and emotional value. Portfolio value comes from building a well-diversified portfolio that generates better after-tax risk-adjusted returns net of all fees, that matches with the client’s goals and risk tolerance. Financial value comes from the achievement of the client’s benchmarks or goals like education funding, retirement funding, and growth of wealth. Emotional value comes from the advisor-client relationship and the trust and confidence involved. From their study, after clients were advised, three distinct changes happened: risk-levels were adjusted, high cash reserves were invested in fixed income securities, and home bias was eliminated. Professional financial advice helped clients make more and have a higher probability of meeting their retirement goals.
"The Art of Worldly Wisdom" by Baltasar Gracian. It is the fool's misfortune to fail in obtaining the position, the employment, the neighborhood, and the circle of friends that suit him. Silence is the holy of holies of worldly wisdom. Knowledge and courage are the elements of greatness. The wise man would rather see men needing him than thanking him. More is to be got from dependence than from courtesy. Keep the imagination under control. He cannot make himself understood who does not himself easily understand. All fools come to grief from want of thought. To be occupied in what does not concern you is worse than doing nothing.
Insolvency. Insolvency is the state of being unable to pay the money owed. Cash flow insolvency involves a lack of liquidity to pay debts as they fall due and balance sheet insolvency involves having more liabilities than assets. Insolvency is a concern for sovereign entities. When governments become insolvent, they are in default. Their debt becomes refinanced by further borrowing or by issuing more currency which results in higher inflation. Most people think that governments cannot become insolvent simply because they can issue(print) more of their own currency and continue to pay the interest on their debts. When currency is printed, it has no value until it enters the economy. When it enters the economy, it adds to the sovereign debt. A country becomes insolvent when more than 25% of tax receipts are required to service existing debt. The US has a fiscal gap (the present value of all its spending including servicing its official debt less all its future taxes) of $202 trillion.
Great market commentary: https://www.peakprosperity.com/america-the-insolvent/
The repo rate. A repurchase agreement (similar to a collateralized loan like corporate bonds) is a form of short-term borrowing (inexpensive financing for security holders), mainly in government securities. It is the sale of securities for cash with a commitment to repurchase them at a specified price at a future date. The repo market is a key US borrowing market that recently saw a massive surge. The US has three overnight Treasury repo rates: Secured Overnight Financing Rate (a broad measure of the cost of borrowing cash overnight by Treasury securities), Broad General Collateral Rate (a measure of overnight Treasury general collateral repos), and Tri-Party General Collateral Rate (a measure of rates on overnight, specific-counterparty tri-party general collateral repos secured by Treasury securities). All of these rates rose around 79% on Monday. These rates serve as benchmarks for market participants to use in financial contracts. With higher repo rates, cash leaving the funding space and more cash being added to the repo market, Treasury’s cash balance will increase and the number of bank reserves in the system will deplete. The fear in the surge of the repo rate and the reason why the Fed had to add billions into that market is because of the threat of borrowing costs rising for consumers and corporations.
Free trade. Trade used to be a zero-sum game. Mercantilism was a 16th-century belief where a country’s best interest was to maintain a trade surplus. But when trade is free, it allows nations to prosper and grow without restrictions or barriers. Free trade refers to a situation where a government does not attempt to influence trade through quotas or duties that its citizens can buy from another country or what they can produce and sell to another country. International trade allows a country to specialize in the manufacturing of products that they can produce most efficiently and then export and allows a country to import products that can be produced more efficiently in other countries. The world market can only support a limited number of firms in some industries. Countries that are open to trade have higher growth rates than countries that close their economies to trade. Countries should specialize in the production of goods for which they have an absolute advantage and then trade these goods for the goods produced by other countries. Free trade, on paper, should be a positive-sum game. But you need to factor in politics, the fight for power, currency manipulation, the constant changes in trade policy, the increase in transportation costs, global warming and irregular weather patterns, corruption and civil war in emerging markets, and labor laws and regulations.
Oil. Oil has been a hot topic over this last week. With it, we have gotten a lot of events, massive volatility, and a few exaggerations. From the media, it seems that there was a massive drone attack on Saudi Arabian oil fields, specifically Aramco, perpetrated by Iran. This attack was reported by Saudi Arabia to have wiped out 50% of the facilities processing power, which is the largest producer and distributor of crude oil in the world. It was then reported that Trump could go on the offensive and declare war with Iran in retaliation. This sent crude prices skyrocketing upwards of 15% on Monday. In reality, it seems that although there was a drone attack carried out against Aramco, and 50% of production was cut off, in less than a day 50% was back up and running, and there was no definitive proof regarding who carried out the attack. This leaves a deficit of 25% of total production capacity, which Saudi Arabia states will be back online by the end of September. More so, the infrastructure which was in place was outdated, and the new infrastructure which will be implemented should increase processing capacity overall. Oil prices have since fallen, but still holding above the previous levels. To the other point, among common misconceptions, Trump is firmly against declaring war, which played a role in why Bolton was removed from the Whitehouse.
How the Fed is feeling. The labor market remains strong, economic activity has been rising at a moderate rate, job gains have been strong, unemployment has remained low, household spending is strong, but, business fixed investment and exports have weakened. Below are the economic projects from the Federal Reserve board members. The Feds cut rates again this week by 25 basis points. In order for rate cuts to stimulate the economy and avoid a downturn, they need to work through one of two channels: spurring credit growth or easing financial conditions. Here is a report done by Meb Faber on how to prepare and protect yourself for the next downturn (Note that this paper was written in 2017).
The Alchanati Campbell and Associates Team
The Market. More than a billion tons of essential and nutritious food goes to waste each year. In today’s economy, it can be cheaper for farmers to leave perfectly good food in the fields than to sell it. The number of people with no health insurance has been increasing. Oil companies are starting to invest in clean energy due to shareholder pressure, new technology, and the up-and-coming consumer preference from the new generations. Health authorities are urging people to stop vaping and using e-cigs until they can investigate the 5 deaths caused by a mysterious lung illness. In 2018, only about 70% of the high school students enrolled college, but less than half will graduate with a BA. What is the most effective way to increase the graduation rate? By lowering the costs of colleges or by giving schools more money to fund their students. The four tools of discipline: delaying gratification, accepting responsibility, dedication to reality, and balancing everything in your life. 800,000 people die by suicide every year, meaning one person dies every 40 seconds. Coal is being phased out of the US. Natural gas consumption is rising. Trump wants the US’s interest rates down to “ZERO OR LESS”. Natural gas production is increasing even when natural gas prices are declining (the new alternative to coal).
Sustainable finance. Sustainable investing is the practice of investing in companies or funds that aim to achieve market-rate financial returns while pursuing positive social, environmental, and governance impact. 85% of investors are interested in sustainable investing (mostly millennials). Investors want products that match their interests and they want more product choices. They care about plastic reduction, climate change, community development, multicultural diversity, and gender diversity.
Worries in finance. Equity is way too expensive, earnings are declining and becoming weaker, multiples are 16x their 12-month earnings, and US margin trading is near its peak level. Consumers are still buying and the top-line (revenue) is still growing, but profit margins are dwindling because operation expenses such as labor is becoming more expensive. Nobody knows what is going to happen. We can either go into a recession because key economic indicators say so or because the talks of recession start increasing and the overall fear of investors brings down the market… OR the US can sidestep the recession through strategic quantitative easing, monetary policy, and continued market manipulation.
BREXIT event study. Did the BREXIT announcement have a significant effect on the stock markets around the world? An event study is an empirical analysis performed on securities or markets that examines the effect of a significant event on that security or market. On June 24, 2016, the UK voted in favor of leaving the EU. According to the MCSI Global Market Index, global markets dropped -4.762% on that Friday, decreased another -2.19% on the following Monday the 27th, and rebounded 1.72% on Tuesday the 28th. But some countries were more affected than others. Below is an event study analyzing France’s stock market to the global market on the Friday, Monday, and Tuesday. You take the regression of the previous 100 days of stock market returns of the MCSI Global Market Index and France’s CAC 40 and see if there is a significance (A t-Stat greater than 2) on the Friday, Monday, and Tuesday. According to the table, a 1% increase or decrease in the global stock index will lead to a 1.29% increase or decrease in the France stock market. On Friday, there was a significant return of -4.06% on France’s stock market. We can now say that the announcement of BREXIT significantly impacted France’s market- and it could have been due to France’s close trade relationship with the UK and how BREXIT could hurt that relationship.
The shadow economy. Known as the underground economy or the black market, shadow economies are the economic transactions that are deemed illegal like untaxed labor, untaxed sale of goods, and the smuggling of goods into other countries without paying duties at the border. In 2013, the American underground economy represented approximately $2 trillion. The mean value of the shadow economy across all nations was 31.9% of GDP in 2018. The nations with the largest shadow economies are Zimbabwe (60.6% of GDP), Bolivia (62.3% of GDP), and Georgia (64.9% of GDP). Countries with relatively low tax rates, fewer laws and regulations, and a well-established rule of law tend to have smaller shadow economies.Black markets are considered unethical, illegal, and considerably dangerous, but there are also some pros: resources not being used in the official economy can be used in the shadow economy to increase overall supply, and governments try to encourage firms to move out of the shadow economy by improving public institutions and funding public services. Organized crime, corruption, and illegal employment can be fought through stricter controls and enforcement.
“I always pass on good advice. It is the only thing to do with it. It is never any use to oneself,” (Oscar Wilde). Go deep on things, become an expert. Find what things you enjoy doing. Aim to read a lot. Don’t make the mistake of judging your success based on your current peer group. Learn to think for yourself. Don’t fear fear. Be playful. Speak your mind. Do not limit yourself. If she/he’s interested in you, they will go after you. Be careful with who you disclose your feelings to. Don’t lie to yourself. Smile your way through life.
Back to $1 trillion dollars. Following Apple’s annual September product reveal, the company’s market cap jumped back up to $1.01 trillion. This year Apple doubled down on its plan to branch out to several new multi-billion dollar markets by leveraging its massive base of dedicated product users. Over the few years, Apple has acquired some of the biggest actors, directors, and producers in Hollywood to launch Apple TV+ and now the subscription is set to launch on November 1st. To break into a massive market dominated by Netflix, Amazon Video, and HULU, Apple has set the subscription price at an extremely competitive $5 a month and has included the service free for a year for anyone who buys a new Apple hardware. Apple is using a strategy known as “penetration pricing”, which is when a firm enters a market by offering a product or service well below the market price with the goal of attracting a new customer base and later raising prices to a competitive level. Apple has also entered the mobile gaming market with Apple Arcade and announced 100 new games will be released this year. Several new products were introduced starting with the new iPad Pro which starts at $329 and was touted as “two times faster than the bestselling PC”. The new Apple Watch Series 5 features a new screen and power management system that allows it to stay on all of the time. Lastly, Apple revealed three new iPhones that followed its previous product lineup. The iPhone 11 ($699), 11 Pro ($999), and 11 Pro Max ($1099) are all set to release this month. The main improvements are increased battery life and an improved neural engine camera system. The iPhone 11 has a wide camera and an ultra-wide camera on the back, and the pro models have an additional telephoto camera on the back. These additional cameras combined with the new neural engine creates one of the most powerful cameras of any smartphone, with each picture you take, the camera actually takes 8 images and selects the best pixels from each image to create a single beautiful image. The new iPhones feature the fastest CPU and GPU in any smartphone and a new neural engine with machine learning accelerators that allow for over 1 trillion operations a second. Overall, Apple released new products and services that are likely to sell well and for the first time in years, lowered the cost of many of their new products. The only thing missing was the highly anticipated Apple glasses which are rumored to realize next year.
Great read on sunscreen. https://www.health.harvard.edu/staying-healthy/the-science-of-sunscreen
The Alchanati Campbell and Associates Team
The Market. Australia’s economy has slowed sharply as households struggling with record debt and weak wage growth cut back on spending. The US initiated tariffs on $110 billion in Chinese imports on Sunday. A decision is a matter of judgment. Professionals often make decisions that deviate significantly from those of their peers, from their own prior decisions, and from rules that they themselves claim to follow. Negative yielding debt is now at an estimated $17 trillion. Extreme heat is the deadliest consequence of our excess consumption of fossil fuels. The World Health Organization predicts heat stress linked to the climate crisis will cause 38,000 extra deaths a year worldwide between 2030 and 2050. The cost of manufacturing solar systems have been decreasing for the past 7 years and the cost of manufacturing wind turbines and natural gas generators increased slightly. The Arctic is warming twice as fast as the rest of the world. Hong Kong’s troubles have significantly reduced by the city’s chief executive withdrawing the extradition bill. Bond market data is pricing in a 47% chance of a recession in the next 12-months and Ray Dalio stated a 25% in 2020.
Lifetime finance advice. The central problem of life-cycle finance is the spreading of income from the economically productive part of an individual's life over the person's whole life. No investment is riskless if the "run" is long enough and no one knows how long they will live. A person’s life has three financial stages: 1) growing up and getting educated, 2) working, 3) retirement. We all start off with tons of potential and we begin accumulating our human capital (the present value of future labor income). The amount of education one receives is highly correlated with the present value of earning power. Our total wealth is made up of two parts: our human capital and our financial capital. The risks to our retirement are as follows. The risk of living too long is called longevity risk. To insure against longevity risk, one can purchase annuity products that pay yearly income as long as one lives. People today are living longer and could face much higher health-care costs. One way to reduce wage earnings risk, the risk of losing one’s income, is to save more. The Social Security system and many Defined-Benefit plans are at risk so investors must increasingly rely on their own savings for retirement spending. Investors need to make asset allocation decisions and life insurance decisions jointly. The optimal asset allocation depends on the risk-return characteristics of their labor income and the flexibility of their labor income. Younger investors may invest more of their financial assets in risky assets than older investors because the young have more flexibility in their working lives. Conservative investors should invest relatively more in risk-free assets and buy more life insurance. In the event of death, life insurance can be a perfect hedge for human capital. The number one reason for individual investors to save and invest is to fund spending in retirement. A typical investor has two goals in retirement- ensure a comfortable lifestyle and leave some money behind. Individuals risk a stable and healthy retirement due to financial market risk, longevity risk, and the risk of not saving enough. The first step of a well-balanced retirement plan is to locate a suitable global mix of risky and risk-free assets.
Dorian. With Hurricane Dorian making landfall on the Eastern coast of the United States this week, the impact of Hurricane Dorian is incalculable at this moment. 2017 was the costliest year for the U.S. economy in terms of natural disasters, with 16 extreme events costing over $300 billion. The St. Louis Fed put out an informative article detailing the costs. There are direct costs, expensive losses -- things like houses, cars, jewelry, and barbeques. These are easy to calculate the cost of. There are also direct costs like the loss of historical monuments, which are impossible to quantify. Indirect costs are more of the lingering effects of a disaster. Local businesses are destroyed, and depending on the specifics, may never return to that area. That puts people out of jobs and wrecks the unemployment and income of the area. Luckily, most people are insured against disasters like hurricanes, tornadoes, and wildfires, so much of the cost falls on insurance companies. However, in 2018, only half of the $160 million losses in 2018 was insured, so these disasters are even more devastating for the uninsured. The less affluent people are the ones not insured and are the ones that need the insurance the most. They signify no hope of being able to rebuild their home by their own, and quite possibly represent the most tragic of disaster repercussions. Something interesting to keep in mind is that, according to most scientists studying climate/weather, global warming is increasing the frequency of disasters. In turn, global warming is advanced by businesses that are disregarding the environmental impact of their operations in exchange for lower costs and a higher profit margin. Then, when disaster strikes, these companies undoubtedly feel the impact, whether that be through damaged buildings, taxes for national emergency relief, and loss of revenue. While the two sums (cost of lowering environmental impact and disaster relief costs) are not equal, it's interesting to note that they may be paying either way.
USD strength. Amidst global slowdown fears, a potential impending recession, and political instability, the dollar is still holding near its 2-year local high. The DXY, which is considered the US dollar strength index matches the USD against a basket of foreign currencies, to obtain a trade-weighted average value. Dollar strength means a few things: decreased exports, increased imports, increased US capital flows, and decreased tourism. We have decreased exports, as US products are more expensive in foreign currencies, while foreign products are cheaper in regards to the USD. Usually, a strong USD is directly related to the current belief in the future of the economy being strong. To me, there is something awry, as there is quite a bit of fear currently in the US economy. Maybe people can’t find another instrument to move into to cover an impending recession and are willing to bet the USD will drop the least, in regard to other currencies.
Social Security. A study conducted by the Transamerica Center for Retirement Studies stated that 80% of millennials are worried about social security and don’t think they will be able to count on the system that they will have paid into for their entire working life. Yet, studies on the longevity of the system vary. The Center for Economic and Policy Research found that when millennials retire they will actually be able to receive 10% more benefits than current recipients. This report is in stark contrast to what the Social Security Administration reported just this year when it found that the Social Security Trust Fund (that has $2.8 trillion in reserves) will run out of reserves by 2035. This discrepancy is due to the fact that the first report accounts for the fund’s reserves growing faster than inflation. So why is everyone so worried about Social Security? Well, the Center for Retirement Research found that the amount of income that social security will replace is going to drop by 4% which means that beneficiaries will either have to cut back on expenses or find another way to replace that income. In addition, the AARP expects Social Security to only cover roughly half of the basic living expenses. So be sure to start saving your money now! You may not have another choice.
Management practices. In the past, we have learned that managers cannot be trusted to do their jobs of maximizing shareholder value, but the manager’s values must still align with the shareholders. And, that there should be strict monitoring and supervision to restrict opportunistic behavior. But these practices are outdated and ineffective. Bad management theories are destroying good management practices. Business schools and academics are creating management theory into a science of sorts. They are teaching students how to be a good manager based off of a scientific model. Ethics and morals have been diminished due to the strict objectives and goals placed on managers and executives. Goals such as: making shareholders happy and wealthy, profitability, and constant growth and improvement. Sometimes these goals cause managers to be unethical to achieve the goals. If we wish to reinstitute ethical or moral concerns in the practice of management, we have to first reinstitute them in our mainstream theory; the theory taught in schools.
The Alchanati Campbell and Associates Team
WHAT'S UP FRIDAY? is a weekly newsletter that will give you a summary of "What's up?" on Wall Street, in the US and around the World written by The Alchanati Campbell and Associates Team. What makes us unique is we focus on long-term knowledge; knowledge that will still be useful to you 10 years from now.