Climate change, economy, environment, interest rates, retirement, risk management, SRI

Climate Change impacting Economic Growth

In the past decade the global economy has struggled to produce sustained economic growth. While the financial crisis of 2007-2009 and the Great Recession left a lasting impact on companies and decision-makers, the structural changes to the economy since then have been substantial.

Companies have adapted by changing the employment structure of how they operate. Many companies, to cut costs, have changed many jobs from w2 positions to contractor or out sourced positions. This has allowed large companies to pay less in terms of benefits to their workers; benefits such as health insurance, disability insurance, life insurance and retirement savings.

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economy, income, interest rates, retirement, risk management

Negative Yielding Bonds and Risk

Bonds are traditionally used within investment portfolios to reduce equity risk and generate income through the yields they carry. For example, a 10 year bond with a face value of $10,000 with a 5% yield generates $500 in income. Most recently the US 10 year yield was 2%.

However, over the past few years central banks in Europe and Japan have experimented with Quantitative Easing and driven rates below zero%. In late June 2019, the amount of negative yielding bonds reached over $12 trillion. Yields in Europe continue to fall as the ECB in June indicated its plans to lower the discount rate further in upcoming meetings. A slow-down in the European economy and low inflation has left businesses and economists frustrated. (1)

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Climate change, economy, environment, interest rates, retirement, risk management

Rising global temperatures will hurt global GDP

A study released by the science journal Nature makes the connection between the rise of global temperatures and the negative impact this has on GDP around the world. In the study, titled “Global non-linear effect of temperature on economic production”, researchers found that “fundamental productive elements of modern economies, such as workers and crops, exhibit highly non-linear responses to local temperature even in wealthy countries.” Meaning as temperatures rise, the effect is much greater and accelerates in ways that are potentially disastrous. (1)

One of the lead authors, Marshall Burke of Stanford’s Department of Earth System Science, calls their study “the first evidence that economic activity in all regions is coupled to the global climate.”

The study continues, “If future adaptation mimics past adaptation, unmitigated warming is expected to reshape the global economy by reducing average global incomes roughly 23% by 2100 and widening global income inequality.”

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Climate change, economy, environment, ESG, new economy, risk management, Socially Responsible Investing, SRI

David Hume, “State of Nature” and Climate Change

When you examine the behavior of corporations today you begin to wonder… Is there a moral philosophical underpinning to their behavior? What determines right and wrong? And in an age of anthropogenic climate change what is the responsibility of business to the larger society?

I decided to revisit the philosophy of David Hume and see if I could scrape together some clues to better understand what we are experiencing. Hume was an English philosopher in the 18th century. Along with John Locke, Hume wrote several treatises that became the foundation of philosophical thought in England, but also importantly, for the United States. Hume’s insights can be found in the Declaration of Independence, the Articles of Confederation and the Constitution. As a result, his thinking played a crucial role in the development of business and industry, and the policies that supported their development.

To understand how government developed and the role it played in regulating behavior, Hume and others described an original condition (prior to government) he called the “State of Nature”.

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economy, entrepreneurship, new economy, risk management

A Guidebook for the Anthropocene Era

I have written before the current age has been called the Anthropogenic Era, the human era, because mankind is reshaping the geology and environment of the world. The economic system is adjusting to these changes taking place. The economic system set up 100 years ago does not behave or react the same way because the environment is different in which it operates.

The internet is revolutionizing the economy.

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income, interest rates, retirement, risk management

Closing the Retirement Savings Gap

A new report from World Economic Forum shows that retirees could outlive their savings by a decade or more due to higher life expectancy. “Women should prepare to bear the brunt of such shortfalls, going without retirement savings for at least two years longer than their male counterparts.” (3)

“The size of the gap is such that it requires action,’ says report co-author Han Yik. (1)

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Climate change, economy, environment, health, retirement, risk management

Global future growth… and Climate Change

A recent Bloomberg article titled “The Global Growth Hotspots of the Future Are Here” discussed an HSBC report which advises that investors need to focus on the growth of cities in the Emerging Markets. (1)

“While wealthier countries are more urbanized today, the proportion of urban to rural dwellers in emerging markets is expected to climb to 63 percent in 2050 from 50 percent now, according to the study, which draws on research by McKinsey and the United Nations.

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economy, income, interest rates, retirement, risk management

“Data Dependent” Fed Changes Course and Markets React

In the Fall of 2018, equity markets sold off.

What was the cause?

Widespread view among economists was an expectation of slowing economic growth in 2019 and a Federal Reserve led by Chairman Jay Powell that was expected to continue to raise rates three more times in 2019.

As anxiety and stress built up in November and December, markets dropped. Between October 3 and October 29 the SP500 fell 9.7%. Between October 29 and December 7 the market bounced around rising 6.5% only to give it back and to fall .3%. However, in the weeks before Christmas, December 7 to December 24 the market fell another 10.7%. Showing the rapidness of the decline, on Christmas Eve the SP500 fell 2.6%.

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health, retirement, risk management

The Benefits to a Healthy Diet: Quality of Life, Financial Security and Legacy

Its no secret that human longevity has been growing due medical advances over the past 30 years. Life expectancy in 1960 was 66 for men and 73 for women; in 2010 the average expectancy was 80 for men and 84 for women. (1)

However, in addition to longevity, one of the issues people have struggled with is a decreased quality of life in a person’s later years. Chronic diseases play a major role in limiting peoples experience and inflicting pain on the elderly and their families… cancer, strokes, dementia, respiratory, Parkinson’s, Alzheimer’s. 

These issues not only reduce a persons enjoyment of life but affect their financial health as well. The expenses associated with medical care and long-term care are substantial. But baby-boomers are not sitting still…

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economy, income, interest rates, retirement, risk management

Market Risks and the Wall of Worry

 

“Current Bull Market Continues To Climb A ‘Wall of Worry’” (1)

 

The “wall of worry” is one of the phrases frequently used to illustrate the resistance or fear of investors to invest in a stock market that had earlier gone down.  Since the Great Recession of 2008 and the financial crisis many investors have worried about the possibility of another financial crisis.

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