4 Ways To Prevail Over Automation: Asset Allocation Daily

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Includes: UL
by: SA For FAs

Summary

Tipswatch: Across most short-term maturities, U.S. Treasuries offer better yields, ultimate safety and freedom from state income taxes.

Ironman at Political Calculations: China, as part of its trade war strategy, is not taking delivery of orders for U.S. soybeans, which are ending up in Iran of all places.

Thought For The Day: Unilever’s HR chief suggests that obtaining and keeping a job is becoming increasingly difficult; we propose four ways to fight this harsh trend.

CDs vs. Treasuries

“Bankers…have failed the test to keep up with the yields on U.S. Treasurys, which offer ultimate safety and are not subject to state income taxes. Best-in-the-nation CD rates are consistently below the Treasury issue of the comparable term. The few exceptions tend to be for 5-year CDs, which banks in recent years had stuck with extremely low yields. Now the trend appears toward encouraging customers to take longer terms - the banks will then win if yields keep rising.” (Tipswatch)

Floating-Rate Loans

“Although their interest rate related benefits are what drive investors' flows into and out of the asset class, floating-rate loans can help diversify a portfolio at any time - and this benefit can be overlooked. Most of the return in floating-rate loans comes from their exposure to credit risk…, while the Bloomberg Barclays U.S. Aggregate Bond Index gets most of its return from duration risk…” (Columbia Threadneedle Investments)

Soybeans (U.S.-China-Iran)

“…but there was another country ranking up near the top of the list that shocked us: Iran. In August 2018, over $140 million worth of soybeans ended up in Iran, a country just recently targeted for new economic sanctions by the U.S. in May 2018. It's a bigger number than the total value of all U.S. exports to Iran in either 2016 or 2017. So what gives?” (Ironman at Political Calculations)

Bonds Still Hedge Stocks

“Beyond its impact on yield, the stock-bond correlation has an even larger significance. If bonds are a less reliable hedge, investors looking to mitigate portfolio risk need to maintain a much larger cash balance or find another hedge. Nonetheless, monetary conditions are still easy, and concerns over growth exist. This suggest bonds can still perform one key function: a hedge.” (Russ Koesterich)

Labor Market

“An individual’s ability to earn a livelihood is changing and, in most cases, reducing. The impact of automation is redrawing the shape of all organizations. The World Economic Forum’s Future of Jobs 2018 report suggests the human share of labour hours will drop from 71% to 58% by 2025. Machines and algorithms will increase their contribution to specific job tasks by an average of 57%. Nearly 50% of companies expect that automation will lead to a reduction of the full-time workforce by 2022. The consumer goods industry is feeling the impact of this faster and more heavily than most other industries and Unilever is no exception. ” (Leena Nair, Chief Human Resources Officer, Unilever, on World Economic Forum)

Thought For The Day

One of America’s greatest strengths, and an exceptional one historically and internationally, is its people’s optimism. Maybe it stems from the deeply rooted attitude of gratitude that is reflected in the Thanksgiving holiday a month and a half away. When that day comes, Americans would do well to express thankfulness for their jobs. As those still employed by the financial industry understood in the years following the global financial crisis, their job itself was the bonus, once bonuses took a hiatus.

Despite the fact that the U.S. labor market is currently strong, with many jobs going unfilled for lack of the proper qualifications, we are nevertheless bombarded with daily lamentations about automation, wage stagnation and other dour economic phenomena, usually originating from practitioners of the dismal science, i.e., economics. But the lugubrious warning from Leena Nair (linked immediately above) bears attention because it comes from the person in charge of hiring for one of the world’s largest corporations, Unilever (UL), and it suggests that obtaining and keeping a job is becoming increasingly difficult. The article perhaps registered with me because I was just last evening conversing over dinner with a hard-working fellow and extremely bright and capable young professional who recounted his difficulty in getting started in his professional career six years ago. (He’s soaring now, however.)

As noted, the job market has strengthened currently but economic conditions change and it will again be stressed. So what are we to do? Common sense suggests the following:

1) Develop, maintain and bolster your human capital; 2) do so in an area you feel naturally attracted, for greater success and satisfaction; 3) maintain a cash reserve fund so that you have staying power in the event of job loss and can pursue your next opportunity with a settled mind rather than a sense of panic; 4) don’t wait until Thanksgiving to say thank you – the positive attitude will be reflected in your work and will help you maintain that upbeat optimism that gets you through your work day and career years.

So don’t let the naysayers – even if, especially if, they’re HR directors – get you down. Statistics are statistics, but you live your life individually, not statistically. As my dinner companion evinced last night, hard work and a positive attitude (and financial preparedness) will get you very far.

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