OUTSIDE THE BOX



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A long-awaited stock-market rotation back to value stocks might benefit oil and gas companies in the short-term, but long-term there are concerns about the sustainability of the energy industry as it now exists. The sector’s woes are such that at the end of August 2020, energy stocks accounted for just 2.6% of the S&P 500 (SPX) , down from more than 16% in 2008. 

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The systemic risk surrounding energy companies due to climate change underscores the difference in approach between active managers and their index-fund counterparts and large retirement funds, as well as the tools active managers can use to make a persuasive case for meaningful change. While active fund managers increasingly are avoiding the energy sector and its risk of permanent capital impairment, many passive-fund investors recognize that as universal owners of the market and, by default, the economy, they have a stake in encouraging a successful energy-sector transition to renewables.

Eschewing the entire industry is short-sighted and misguided. While some investors have divested from fossil fuels, many continue to hold these investments in the hope of driving change through engagement. Active managers, drawn by seemingly low valuations, are engaging alongside them, with the combined weight of their collective voices leading to better reporting and some shift in strategy towards redirecting capital expenditure to renewables. The challenge will be if the change being supported by engagement will be enough to avoid fossil fuel stocks becoming “value traps.”

Read: This is the hottest social issue that U.S. companies are discussing

Active managers have distinct advantages when it comes to proxy voting and engagement, the most obvious being that active managers have a far smaller number of securities to cover than a passive manager. Further, through their research processes, active managers can incorporate

“I agree it was crass,” Culture Secretary Oliver Dowden tweeted on Monday, adding that his staff were not involved in the advertisement, which was part of a “partner campaign encouraging people from all walks of life to think about a career in cyber security.”

Reactions to the advertisement dovetailed with broader criticism that officials have not found ways to communicate effectively with workers facing tenuous employment during the pandemic. Fatboy Slim, a popular British DJ and music producer, said that the government was “throwing the arts under a bus.”

The anger came after beta version of a quiz developed by the British government to help people prepare for career changes became the subject of gallows humor among arts workers last week. The Department of Education quiz asked 50 questions to help respondents decide what careers might best suit them.

But those who took the quiz were often perturbed by the suggestions. This reporter took the test last week and was advised to consider a new career in boxing or as a soccer referee. On Twitter, other users shared images of recommendations that they become lock keepers or airline pilots.

The ballet advertisement, published on the website of training firm QA, appeared to suggest that a ballet dancer named Fatima could soon have a job in cybersecurity, although she did not yet know it.

It was part of a campaign dubbed “Rethink. Reskill. Reboot” — part of CyberFirst, a program launched in 2019 by Britain’s National Cyber Security Centre that encourages young people to get training for careers related to technology.

But for many in the British creative and arts industries, it was interpreted as a further sign that the government did not support them amid venue closures and dwindling opportunities.

Others retweeted the image with a hashtag for “Save

KEY POINTS

  • Every $1,000 increase in home price pushes 150,000 buyers away: Report 
  • Rental prices have dropped by 0.1% since last month: Report
  • Homebuying is currently led by people with jobs and equity

Rising demand for homes, unprecedented levels of mortgage rates and low supply have pushed home prices out of reach for prospective homebuyers, which could make America a ‘renter nation,’ Grant Cardone, a real estate investor, told Yahoo.

“Homeownership is still dead in this country because the only people that are buying homes right now are people that have equity, great credit, and a job,” Cardone said.

For every $1,000 increase in home price, 150,000 buyers are priced out of a possible home purchase, according to a recent report by the National Association of Home Builders (NAHB).

The fall season is known to be good for real estate as home prices fall during this time. Realtor.com, however, suggests that median home prices rose to $350,000 in the week ending Oct. 9, almost matching summer highs. This was 12.9% higher than the previous week.

On the other hand, the rental market is looking more desirable and economic with prices dropping. Data from rental website Zumper suggests that the median rent price for a one-bedroom apartment slid 0.1% from last month.

Cardone said a secure job is a way to secure a home loan. Americans would need a better credit score now than they did before COVID-19 to get a home loan, he told Yahoo.

As the pandemic progressed from early February, the American public, especially renters, have higher rates of unemployment, fewer savings to be used for a down payment, and lower credit scores, Elizabeth Renter, an analyst at Nerdwallet, told Yahoo.

Even though the public is struggling with finances, banks have increased their requirements to give out loans,

(Bloomberg) — If Democrats do “sweep” the November elections and increase capital gains taxes, it would be unlikely to cause more than a temporary slide in the U.S. stock market, according to JPMorgan Chase & Co.

Strategists and prediction markets are increasingly pricing in a “Blue Wave” where Democrat Joe Biden wins the presidency and his party takes control of the Senate, adding to their hold on the House. That might allow for an increase in some tax rates — including capital gains.

If a higher rate become effective Jan. 1, 2022, there would probably be some downward pressure in equity markets in the fourth quarter of 2021, according to JPMorgan strategists led by Nikolaos Panigirtzoglou. But once the new rate was in place, stocks would likely resume their upward trajectory, as they did in the first halves of 1987 and 2013 following increases on some capital gains.



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“Longer term, we see little impact from a prospective capital gains tax rate increase on risk taking and investors’ attitude toward equities as an asset class, given the current low yield and high equity risk-premium environment,” the strategists wrote in a note dated Friday.

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One of the major attractions of equities right now is the relatively high return investors can enjoy, with bonds and cash globally offering historically low yields. Real yields are negative for about $31 trillion of bonds, a separate group of JPMorgan strategists estimated recently. With Biden’s lead over President Donald Trump increasing in recent weeks, Wall Street has been turning its focus to the implications of a potential Democratic sweep that could allow the party to more easily usher in big policy changes.

JPMorgan estimates there could be tax-related equity selling of about $200 billion around a prospective increase in the capital gains

By Padraic Halpin

DUBLIN, Oct 9 (Reuters)Ireland’s budget deficit is set to hit 6.1% of gross domestic product this year, Finance Minister Paschal Donohoe said on Friday, a narrower than forecast shortfall likely to give him room for more generous measures in Tuesday’s budget.

The government will look to support those hit hardest by COVID-19 restrictions in the budget for 2021, helped by state tax revenues having held up much better than expected and Ireland’s big export sector limiting the economic damage.

The finance ministry estimated early in the pandemic that a big fall in tax receipts and a huge increase in spending could lead to a deficit of 23 to 30 billion euros or between 7.4% to 10% of GDP.

Donohoe said the deficit would reach 21 billion euros, provided current COVID-19 restrictions were not tightened. A no-policy-change estimated deficit of 14 billion euros or 4% of GDP for 2021 will be updated next week when the government announces its budget stimulus measures.

“I want to emphasise that these figures are subject to an unprecedented degree of uncertainty with potential further change within 2020 and clearly the potential for significant change in 2021,” Donohoe told a news conference.

Next week’s budget figures will include a scenario outlining the impact of tougher restrictions to contain the novel coronavirus, he said. The government rejected a recommendation by its health chiefs to enter a second national lockdown on Monday.

In updated forecasts on Friday, Donohoe’s department expects to collect 18% more income tax than when they revised them down sharply in April, keeping the year-on-year decline in the overall tax take to 4% versus the 16% initially feared.

Bucking the trend in most tax categories, corporate receipts are forecast to jump by 14% year-on-year to hit a record 12.4