~*Revealing and Getting Rid of Scams | Creating Honest Sustainable Wealth | Offering Happiness, Safety and Legitimacy*~

Wednesday, 30 April 2008

Americans unloading precious belongings to make ends meet

NEW YORK - THE for-sale listings on the online hub Craigslist come with plaintive notices, like the one from the teenager in Georgia who said her mother lost her job and pleaded, 'Please buy anything you can to help out.'

Or the seller in Milwaukee who wrote in one post of needing to pay bills - and put a diamond engagement ring up for bids to do it.

Struggling with mounting debt and rising prices, faced with the toughest economic times since the early 1990s, Americans are selling prized possessions online and at flea markets at alarming rates.

To meet higher gas, food and prescription drug bills, they are selling off grandmother's dishes and their own belongings. Some of the household purging has been extremely painful - families forced to part with heirlooms.

'This is not about downsizing. It's about needing gas money,' said Ms Nancy Baughman, founder of eBizAuctions, an online auction service she runs out of her garage in Raleigh, North Carolina. One former affluent customer is now unemployed and had to unload Hermes leather jackets and Versace jeans and silk shirts.

At Craigslist, which has become a kind of online flea market for the world, the number of for-sale listings has soared 70 per cent since last July. In March, the number of listings more than doubled to almost 15 million from the year-ago period.

Craigslist CEO Jeff Buckmaster acknowledged the increasing popularity of selling all sort of items on the Web, but said the rate of growth is 'moving above the usual trend line.' He said he was amazed at the desperate tone in some ads.

In Daleville, Alabama, Ms Ellona Bateman-Lee has turned to eBay and flea markets to empty her three-bedroom mobile home of DVDs, VCRs, stereos and televisions.

She said she needs the cash to help pay for soaring food and utility bills and mounting health care expenses since her husband, Bob, suffered an electric shock on the job as a dump truck driver in 2006 and is now disabled.

Among her most painful sales: her grandmother's teakettle. She sold it for US$6 (S$8.20) on eBay.

'My grandmother raised me, so it hurt,' she said. 'We've had bouts here and there, but we always got by. This time it's different.'

Economists say it is difficult to compare the selling trend with other tough times because the Internet, only in wide use since the mid-1990s, has made it much easier to unload goods than, say, at pawn shops.

People selling belongings at bargain prices But clearly, cash-strapped people are selling their belongings at bargain prices, with a flood of listings for secondhand cars, clothing and furniture hitting the market in recent months, particularly since January.

Earlier this decade, people tapped their inflated home equity and credit cards to fuel a buying binge. Now, slumping home values and a credit crisis have sapped sources of cash.
Meanwhile, soaring gas and food prices haven't kept pace with meager wage growth.

Gas prices have already hit US$4 per gallon - high by US standards - in some places, and that could become more widespread this summer. The weakening job market is another big worry.
Ms Christine Hadley, a 53-year-old registered nurse from Reading, Pennsylvania, says she used to be 'a clotheshorse,' splurging on pricey Dooney & Bourke handbags. But her live-in boyfriend left last year, and she has had trouble finding a job.

Piles of unpaid bills forced her to sell more than 80 items, including the handbags, which went for more than US$1,000 on a site called Now, except for some artwork and threadbare furniture, her house is looking sparse.

'I need the money for essentials - to pay my bills and to eat,' Ms Hadley said.

At, which helps novices sell things online, for-sale listings rose 66 per cent from February to March, much faster than the 25 per cent to 30 per cent average monthly pace since the company was formed in September, CEO Maureen Ellenberger said.

Economic stress She said she was surprised to see that most of her clients desperately needed to sell items to raise cash.

For, a classifieds and business directory site, for-sale listings for January through March rose 10 per cent from the previous year.

'We can definitely detect economic stress on the part of the consumer,' said Mr John Raven, the site's chief operating officer.

On Craigslist, Mr Buckmaster said, three of the four fastest-growing for-sale categories are tied to gas - recreational vehicles like campers and trailers, cars and trucks, and boats.
Mr Raven noted more and more listings for furniture, particularly in areas around Miami and Las Vegas and other regions hardest hit by the housing crisis.

Ms Baughman, who runs eBizAuctions, said that over the past four months she's been working with mostly desperate sellers instead of mainly casual ones. Most are middle-class customers who can't pay their bills and now want to be paid up front for the items instead of waiting until they are sold, she said.

The trend may be hurting secondhand stores too. Donations to the Salvation Army were down 20 per cent in the January-to-March period.

Mr George Hood, the charity's national community relations and development secretary, said that was probably partly because people were selling their belongings instead.

And secondhand buyers want better deals now as well, driving prices down. Secondhand merchandise online is going for 25 to 35 per cent below what it commanded a year ago, estimated Mr Brian Riley, senior analyst at research firm The TowerGroup.

'It won't hit the saturation point until the (economy) hits the bottom and right now, we don't know when that is,' he said.

In Alabama, Ms Bateman-Lee said that she only received US$30 for her TV and US$45 for her DVD player at a local flea market. She doesn't have too much left to sell, but she's going back to 'sort through more things.'

Her US$30 water bill is due this week. -- AP

Tuesday, 29 April 2008


Courtesy of CNA forummer: ian_ow

DOW and SG indexes at major turning points.

My view:

S&P and DOW will not have a sustain break above 1400 and 13,000 respectively.

STI has no strength pushing past the 3200 and could possibly sell down from here if a strong resistance forms.

For the optimists - The recent global economic problems have only started and the calls for a sustained rally or a bull run is ridiculous.

Some important headlines:

April 28 (Bloomberg) -- Former World Bank President James Wolfensohn said he's ``pessimistic'' on the outlook for financial markets and predicted losses from the global credit turmoil may climb to $1 trillion.

NEW YORK (Reuters) - Warren Buffett, the world's richest person, said on Monday the U.S. economy is in a recession that will be more severe than most people expect.

"This is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think," Buffett said. "This will not be short and shallow.

"I think consumers are feeling gas and food prices," he added, "and not feeling they've got a lot of money for other things."

"NTUC chief says retrenchments in 2008 could be higher than last year"

"Act fast or face deep recession: Tony Tan"
(I have read the clarifications before posting this and the thing to note is that : "However, in light of the current fluid and uncertain times, the probability of the pessimistic scenario, while not the highest, has risen to a level that warrants serious consideration by GIC."

Major Institutional players might sell to cash out from the recent rally and might even short if the markets do not break up and sustain above the mentioned points.

For the STI. there is reduced volume and market is up but losers outnumber gainers for now, a sign the recent rally is running out of steam and the gains in the STI are currently concentrated on a few stocks.

Just some of the component stocks' performance today, please exercise caution.

Kep Corp 10.760 -0.900 -7.7%
SPC 7.000 -0.740 -9.6%
CoscoCorp 3.360 -0.140 -4.0%
STX PO 3.520 -0.120 -3.3%
Venture 11.080 -0.320 -2.8%

* A partial paste out of my analysis below

To the bulls and optimism, or is it?

In recent times, stock markets have declined 20% from their cyclical highs and this is one of the factors that indicate a bear trend.


52 week range (2745.96 - 3906.16)

HIGH @ 3875.77 on Oct 11th 2007
LOW @ 2792.75 on Mar 17th 2008

Last Close @ 3124.87 on Apr 18th 2008

Support1 @ 3000.18 on Mar 25th 2008
Support2 @ 2792.75 on Mar 17th 2008

Resistance1 @ 3046.54 on April 1st 2008
Resistance2 @ 3344.53 on Jan 9th 2008

Will history repeat itself?

These are the figures I've pulled out from charts for the STI from 1987. When established as the peaks at that time, the movements are as such:

High in Mar 1990 - 1581.10
Low in Sep 1990 - 1098.70
Change : (-30%)

High in Jan 1996 - 2449.20
Low in Aug 1998 - 856.43
Change : (-65%)

High in Dec 1999 - 2479.58
Low in Mar 2003 - 1267.81
Change : (-48%)

Average Decline from Highs: (-47.6%)

Historically based:

If this is the current high and STI declines from HIGH @ 3875.77 on Oct 11th 2007, we could see a few possible scenarios:

Optimistically (-30%): 2713.03

Average (-47.6%): 2030.90

Pessimistically (-65%): 1356.51

*Applying the above calculations, my predicted low of 2713.03 on an optimistic view, differs slightly, but coincides with our current trend low of 2793.75 on Mar 17th 2008. The STI might look at testing the 2793.75 low and if broken, we could probably see the 2500 levels.


Total Current Writedowns - approximately US$290 Billion
Estimated writedowns - US$900B to 1 Trillion
Only approximately 30% done.

These are historical figures from 3 major banks listed on the DJIA:

High @ $53.87 in Oct 2006
Low @ $38.56 in April 2008
Market Cap:
@ High: US$239.29 Billion
@ Low: US$171.29 Billion
Percentage writedown: -28.41%
Amount of writedown: -US$68 Billion

High @ $58.39 in Aug 2000
High @ $25.11 in April 2008
Market Cap:
@ High: US$303.99 Billion
@ Low: US$130.73 Billion
Percentage Writedown: -56.99%
Amount Writedown: -US$173.26 Billion

High @ $58.12 in Mar 2000
Low @ $45.76 in April 2008
Market Cap:
@ High: US$197.65 Billion
@ Low: US$155.62 Billion
Percentage Writedown: -21.26%
Amount Writedown: -US$42.03 Billion

Average writedowns on banks' market cap from all time highs are approximately 35.55%.

*It is very important to note that at the highs for price/market cap of these banks, the prices/market caps have taken into account a very optimistic view of the future and further upside, HOWEVER, the current situation is not only gloomy but is looking at deteriorating further as shown by, just to name a few, :

- declining housing prices and home sales which has yet to show any signs of abating
- drastic reduction in consumer and producer sentiments
- sharp increases in unemployment and people on unemployment benefits (we have all seen recent reports of increasing retrenchments for companies all over the world with announcements quoting numbers in the thousands)

Thus it is not justified for prices/market caps to go back to their previous high and in fact if we had mitigated the situational difference and the price/market cap differences, there is definately more downside to come.

Government Intervention

Rebate checks:

In both 2001 and 2003, the government gave out tax rebates similar to the recently proposed one, albeit smaller in proportion. According to various studies done on previous handouts, it was found that the marginal propensity to spend the rebates is about 25% and this coincides with a recent survey sponsered by UBS which polled 1,000 Americans asking how they'd use the money if the fiscal stimulus package was signed into law - 43% of respondents said they would use the money to pay down debt, 26% would put in into savings, and 24% would spend it. With the above findings, should the people respond the same way with the rebate check they're about to receive, only US$37 Billion (25% of the US$148 Billion) would be spent - resulting in a paltry increase to GDP growth of about 0.25%, or maybe not.

Current CPI numbers for March 2008 at 0.3% (4% YOY) and 0.2% core (2.4% YOY) would have outrightly negated the supposed 0.25% increase in GDP growth and there is still an additional 2.15% of core YOY inflation to be accounted for from GDP growth (or the lack thereof) for this year (with oil hitting above $115, other commodities hitting all time highs along with decreasing fed rates currently at 2.25%, an inflation beast is hiding in the woods, growing rapidly, yet to be acknowledged).


The US still remains a key export destination for Singapore accounting for 10-20% of export share. One recent example of US companies feeling the heat is Motorola. Hurt by its handset business and in a cost cutting initiative, Motorola said it will stop manufacturing in Singapore by the end of 2008 and will lay-off 700 workers. This is a stark awakening for some who are convinced that the world will decouple from the slowdown/recession in the US due to growth in Asia (China has already revised its growth rate down a little and so has Singapore). Should US GDP growth continue to be revised downwards with soaring inflation rates, 2008 could very well see the US economy at little/zero growth or quite possibly, negative growth. Singapore has taken the right path by trying to attract more investments in the energy sector and most recently a project worth billions of dollars in a petrochemical complex in Singapore, Bukom Island. Temasek has also ventured into the oil and gas sector through its new subsidary Orchard Energy and their plans might tell us, other than for the sake of diversifying, which sectors they might have growing confidence in. These moves would help to offset the declines in the other industries and sectors but not by much I feel. With ailing consumer sentiments around the world, especially in the US, I do not see a sharp reverse or a V shape recovery from the current downtrend, in fact, I believe we're only in the midst of the problem and this brief rally might very well be coming to and end.

Caution: Stock markets have recently reversed their losses but this could be a relief rally in a bear trap
Some questions to note:

Do we expect to see stock markets going back to their Oct 2007 highs anytime soon and if not, where do we see it?

Do we think the current downtrend is actually reversing when global economies have only started showing signs of a slowdown?

Even if the credit crisis is resolved, how much would that change consumers' sentiments amid a slowing economy, uncomfortably high inflation rates and a deflated housing bubble (which will probably not see a sharp recovery anytime soon)?

I do not rule out a turnaround of the stock markets and the global economy from here but at least from my point of view, I would say that it is highly unlikely. This might be a good time to sell into market strength and look into the many other investment opportunities available at this point of time or in time to come. The end of this global economic crisis (not just credit) is nowhere in sight and any signs of a recovery might take at least 12 to 18months from here.

Best Regards,

Ian Ow

*This is not the complete research i've done but i will try to post up the rest when i have time. Check back for updates.

Buffett says recession may be worse than feared

NEW YORK (Reuters) - Warren Buffett, the world's richest person, said on Monday the U.S. economy is in a recession that will be more severe than most people expect.

Buffett made his comments on CNBC television after his Berkshire Hathaway Inc (NYSE:BRK-A - News; NYSE:BRK-B - News) agreed to invest $6.5 billion in the takeover of chewing gum maker Wm Wrigley Jr Co (NYSE:WWY - News) by Mars Inc in a $23 billion transaction.

"This is not a field of specialty for me, but my general feeling is that the recession will be longer and deeper than most people think," Buffett said. "This will not be short and shallow.

"I think consumers are feeling gas and food prices," he added, "and not feeling they've got a lot of money for other things."

He was not immediately available for further comment. Known for his frugality, the 77-year-old Buffett has lived in the same 10-room Omaha, Nebraska, house for a half-century, despite being worth an estimated $62 billion.

On Wednesday, the U.S. Commerce Department is expected to say how fast the economy grew in the first quarter. Economists on average have projected that gross domestic product grew at an annualized 0.2 percent rate in the quarter.

Two quarters of declining GDP is a traditional indicator of recession. That last happened in 2001. Economists expect the U.S. Federal Reserve on Wednesday to cut a key lending rate for a seventh time beginning last September.

Berkshire is a $197 billion conglomerate best known for its insurance holdings, such as auto insurer Geico Corp, but it owns more than 70 businesses.

Many of those businesses are tied to the housing market, including Acme Brick Co, insulation maker Johns Manville, and the real estate brokerage HomeServices of America Inc.

Others depend on consumers to spend more on discretionary items, such as Ben Bridge Jeweler and Borsheims Fine Jewelry.

"In the retail businesses ... if anything, they've gotten a little worse," Buffett said. "Of course, things connected with housing, whether it's in brick or whether it's in carpet, those businesses have shown no uptick at all. Jewelry had a bad Christmas ... and it stayed that way."

Buffett sees no respite from the housing slump.

"I think this is going to be fairly long and fairly deep, but who knows," he said.

In March, Forbes magazine pegged Buffett's net worth at $62 billion, ahead of Mexican tycoon Carlos Slim's $60 billion and Microsoft Corp (NasdaqGS:MSFT - News) Chairman Bill Gates's $58 billion. Gates is a friend of Buffett and a Berkshire director.

(Editing by John Wallace)

Sunday, 27 April 2008


The people, who are calling depression and a prolonged bear market, do not belong in the same class of investors as the great Warren Buffett.

Looking at the latest annual report of Berkshire Hathaway, page 16, I find the following:

“The second category of contracts involves various put options we have sold on four stock indices (S&P 500 plus three foreign indices). These puts had original terms of either 15 or 20 years and were struck at the market. We have received premiums of $4.5b, and we recorded a liability at
year end of $4.6b. The puts in these contracts are exercisable

Buy ! only at their expiration dates, which occur between 2019 and 2027, and Berkshire will then
need to make a payment only if the index in question is quoted at a level below that existing on
the day that the put was written. Again, I believe these contracts, in aggregate, will be profitable.”

Do you think Buffett would be wrong? Do you think there would be a decoupling between US and other markets?

If you had been advising clients to short the markets, I suggest you eat humble pie and tell
them you made a mistake. Otherwise, you will be eating humble pie all be yourself – NO CLIENTS!

Last Friday, an important index made a very important move. Two moving-averages are
about to cross. This is as important as the yield adjusted 13-26 week cross for Gold at
$625 - just before it went on to >$1000. The Dow Jones Transportation Index 50-day SMA hit 4751.66 and the 200-day SMA hit 4773.55. At the present 5100, it only takes 3 days for the MAs to cross. 50 days ago, this index was 4500 while 200 days ago, it was 4800. The reverse cross-over was last September.

wai chee

Saturday, 26 April 2008

Greater wealth tied to lower stroke risk

NEW YORK - FOR people aged 50 and 64 years, being wealthy seems to protect them against having a stroke, according to new research. After age 65, however, wealth appears to make little difference in stroke risk.

'We confirmed that lower wealth, education and income are associated with increased stroke up to age 65, and wealth is the strongest predictor of stroke among the factors we looked at,' Dr Mauricio Avendano, who was involved in the research, noted in a written statement.

'After age 65, the association of education, income and wealth with stroke are very weak, and wealth did not clearly predict stroke,' said Dr Avendano, of Erasmus Medical Center, Rotterdam, The Netherlands.

Each year about 780,000 Americans suffer strokes; about 27 per cent of strokes occur before age 65, according to the American Heart Association.

Dr Avendano and co-investigator M. Maria Glymour assessed the effect of income (i.e., annual earnings), wealth (total of all assets minus liabilities) and education on stroke risk in 19,445 Americans in the ongoing University of Michigan Health and Retirement Study (HRS), which surveys Americans age 50 and older every two years.

All of them were stroke-free when they entered the study in 1992, 1993 or 1998. During an average of 8.5 years, 1,542 people in the study had a stroke.

Dr Avendano and Dr Glymour report in the American Heart Association's journal Stroke that the 10 per cent of people with the lowest wealth had three times the stroke risk at age 50 to 64, compared with those with the highest wealth.

'Lack of material resources themselves, and particularly wealth, appear to strongly influence people's chances to have a first stroke,' Dr Avendano said. 'From a public health perspective, this would mean that diminishing the large wealth gap at age 50 to 64 also could help diminish the large disparities in stroke.'

However, as noted, from age 65 on, stroke risk was not significantly different between the two wealth groups for men or women. 'We expected wealth to be a strong predictor of stroke in the elderly,' Dr Avendano said.

Wealth more than income 'comprehensively reflects both lifelong earnings and intergenerational transfers, and increases access to medical care and other material and psychosocial resources,' Dr Avendano added. 'We were surprised to see that it was not associated with stroke beyond age 65.'

The study also found a greater prevalence of common risk factors for stroke, including high blood pressure, smoking, inactivity, overweight, and diabetes, among the 50- to 74-year-olds with lower wealth, income and education. -- REUTERS

Investor's Corner: Margin Can Leverage Your Gains, But It Also May Exacerbate Losses

Vincent Mao

Nitrous oxide ramps up an engine's power by allowing more fuel to be burned. In the stock market, margin works kind of like that.

With margin, you can magnify your returns and buy more stock than you otherwise could.

There are advantages and disadvantages to this. And there are times when you should be on margin as well as times when you shouldn't.

Margin lets you buy stock without putting up all of the required capital. Under current regulations, you put up half of the position's value and borrow the other half from your broker.

This 2-to-1 leverage factor is the main reason why investors use margin. If a trade works in your favor, you'll earn a higher return -- more bang for your buck.

Of course, brokerage firms don't lend you money for free. They charge you interest on a monthly basis depending on the debit balance, or how much you borrowed.

Suppose you buy 100 shares of a $100 stock in a regular cash account. You'll need to have at least $10,000, or the full market value of the position, to cover the trade.

If you're right on your trade and the stock rises to $120, your return will be 20% ($2,000/$10,000).

If you make the trade on margin, putting up $5,000 and borrowing the other half of the money from your broker, your gain will be 40% ($2,000/$5000), or twice that of a cash account .

If the stock surges 50% when you're on margin, your percentage return will be 100%, or double your money. That's the power of margin.

However, margin can be a double-edged sword. When you're wrong on a trade, you'll lose money twice as fast.

From the example above, if the stock drops to $80, an investor with a cash account loses 20% (-$2,000, $10,000). But on margin, that's a 40% hit (-$2,000/$5000).

If shares plunge 50%, you will be wiped out (-$5,000/$5,000).

So, should you use margin? In "How to Make Money in Stocks," IBD chairman and founder William J. O'Neil wrote that it's much safer for new investors to buy stocks on a cash basis only.

Investors may consider using margin once they've racked up a few years of market experience. As always, they should trade using a set of sound buy and sell rules.

The best time to be on margin is within the first two years of a new bull market.

When the overall market is acting right and leaders are breaking out of proper bases, that's when the market tends to produce its best opportunities.

You don't have to be fully margined and leave yourself exposed all of the time. Use margin wisely.

It really depends on the current market environment, your risk tolerance and your experience.

The time to get off margin is when a market correction comes on the horizon.

You should sell shares and raise as much cash as possible when distribution days start piling up, or leading stocks start showing topping signals.

Remember: When you're on margin, your stocks fall twice as hard and you'll get hurt twice as bad.

Why the worst may be over

The credit crunch may be behind us and earnings have been better than expected. That could lead to happier times if the Fed starts focusing on inflation.

By Paul R. La Monica, editor at large

NEW YORK ( -- What a wild week.

Oil hit another record high but has since pulled back. The dollar has finally started to show some signs of life. And for the most part, corporate earnings were - as Larry David would say - pretty pretty good.

Boeing (BA, Fortune 500) blew away earnings estimates. Ford (F, Fortune 500) posted a surprise profit. And even though investors Friday appear to be disappointed by the forecast from Microsoft (MSFT, Fortune 500) for the current quarter, the company issued a healthy outlook for its next fiscal year.

The worst of the credit crunch may finally be behind us. There have been no more major bombshells from financial institutions, a sign that the Fed's six rate cuts since last September and massive injections of liquidity into the banking system may be working.

TalkBack: Are you feeling more confident about the markets and economy?

In fact, Merrill Lynch (MER, Fortune 500) indicated yesterday that it would pay its dividend this quarter, relieving investors who were anticipating a cut.

For the first time in a while, there seems to be cause for optimism about the markets. The Dow is trading at its highest level since Jan. 10.

The bond market is acting as if it's not as worried about a recession anymore either.

Bonds have fallen in recent weeks, sending the yield on the benchmark 10-year U.S. Treasury to about 3.86%, up from a year-to-date low of 3.28% in January. Bond prices and yields move in opposite directions and lower yields are usually associated as a sign of economic weakness.

And for consumers, even though it's still a painful time because of rising food and gas prices, help is on the way as well. The first of the government's tax rebate checks will be hitting mailboxes on Monday.

Of course, it still is a rough economic environment. The surging price of food threatens to disrupt not just U.S. consumer spending patterns but the overall global economy.

Will Ben save the day?

That's where the Federal Reserve will hopefully step in. The Fed's policy-setting committee holds a two-day meeting next week and will announce its next step regarding interest rates on Wednesday.

As my Fortune colleague Colin Barr pointed out earlier this week, the Fed has a great chance to show the markets that it is serious about keeping inflation in check by holding its key federal funds rate steady.

Many fear that more rate cuts could lead to a further weakening of the dollar, which in turn, could fuel more speculation in the commodities markets and drive food and gas prices even higher.

"The Fed's intention to pause...may be part of an international effort to stabilize the falling value of the dollar in light of the deteriorating state of world food prices. Indeed, the falling value of the dollar has been an integral component of soaring commodity prices," wrote Ashraf Laidi, chief currency strategist with CMC Markets U.S. in a report Friday morning.

I doubt the Fed will be so bold to pause just yet though. Fed chairman Ben Bernanke, like his predecessor Alan Greenspan, likes to telegraph the central bank's moves well in advance and not surprise the markets. And according to the latest federal funds futures price on the Chicago Board of Trade, investors are pricing in an 80% chance of a quarter-point cut.

So my money is on that scenario playing out, which would put the federal funds rate at 2%. The Fed is also likely to carefully word its statement to reflect concerns about rising commodity prices. Expect the Fed to say something along the lines of "further policy action will be data dependent."

In other words, if the credit crisis isn't over and the housing market plunges even further into an abyss in the coming months, the central bank could lower rates again. But if the dollar stays weak and food and oil prices keep surging, the Fed might actually start raising rates later in the year.

"For American consumers, a lower federal funds rate could do more harm than good," wrote Jack Ablin, chief investment officer of Harris Private Bank in a report Thursday.

So as strange as this may sound, higher interest rates, or at the very least, not more cuts, might be exactly what this market and economy needs. Hopefully, the Fed will send a strong signal to investors Wednesday that it is getting ready to sit tight.

Nobel Winner Stiglitz: US Facing Long Recession

The U.S. economy is already in recession -- and may echo the 1930s, Nobel Laureate Joseph Stiglitz said Friday.

"The big question is: how will the government respond?" said Stiglitz, in an interview with CNBC. Stiglitz, a Columbia University professor and 2001 winner of the Nobel prize, detailed his bleak outlook for the American economy.

"This is going to be one of the worst economic downturns since the Great Depression," said Stiglitz.

He explained that main cause of the current situation is historically unique -- and thus is befuddling those charged with creating solutions.

Other downturns were primarily caused by excesses in inventories or inflation; but this slowdown is due to the condition of "badly impaired" banks and financial entities, which are unwilling and/or unable to lend capital -- stymieing the very borrowers who usually drive the country back to vitality, Stiglitz said. And the Federal Reserve may have used up its ammunition -- and the faith investors and planners have put in it.

"[The Fed] will be between a rock and hard place. And we're not over-worrying about credit. But [simultaneously], we need to start worrying about the real sector," he said.

And if inflation wasn't the prime recession cause, it's still a menace. The professor points to the two-pronged danger of high oil prices joined by climbing food prices, harming businesses and scaring consumers.

"Oil is particularly bad," as it means that more U.S. dollars "will be going abroad," he said.

The housing downturn is an even worse economic factor than casual observers realized, Stiglitz said. He explained that during the real estate boom, Americans were able to withdraw billions of dollars from their home equity.

"[But] with housing prices coming down, it's going to be difficult to do that anymore," he said -- drying up a spending source. And within that problem, still another complication: people typically spent the money they drew off their home equity on consumption, rather than investment -- garnering no return on the spending.

"The savings rate as we go into the recession is zero. Which means [savings] will go up, " he said -- decreasing consumer spending and weakening retail further.

What about the government stimulus package?

"The Bush Administration's response is too little, too late -- and very badly designed," he declared. The amount ostensibly being infused into the economy by tax rebate checks will be a "drop in the bucket" compared to the money being held back and siphoned out by the factors he mentioned.

"If you really wanted to stimulate the economy, increase unemployment insurance," he suggested.

"The president is telling people to go out and get jobs -- and there are no jobs for them," he said.

Wednesday, 23 April 2008

In a Recession, Being Great at Your Job Is Job One

by David Bach

In early April, the Bureau of Labor Statistics reported that 80,000 jobs were lost in March -- and almost a quarter of a million since the beginning of the year. Many analysts are predicting that net job losses are likely to continue at least through August.

This news may be causing you to feel fearful for your own job, particularly if you work for a large corporation. That's understandable. But now isn't the time to panic. Instead, take action to avoid becoming a statistic.

The Good, the Bad, and the Great

So when the workforce reduction ax swings in your company, who will it hit? Bad employees? Sure, if any are still around. Good employees? Yes, those too.

Good employees are the single biggest problem a boss faces. When you talk to truly successful business owners or managers, they'll tell you it's not the bad employees who concern them -- they'll ultimately quit or get fired. It's the ones who do what it takes to be OK, but never enough to be great. So if you're merely good, you may be vulnerable. So be great.

The skeptics out there will argue that when jobs are cut, it doesn't really matter who you are -- that no one's safe. Trust me, those skeptics will be the ones who lose their jobs first. Let them be skeptical, and wish them well. You need your own game plan.

How do you get one? I suggest you start by asking yourself the following six questions. If you can answer each with a "yes," you're on the right track to job security:

1. Would you hire you?

I've asked this question hundreds of times in my seminars, and it almost always gets a big laugh. Why? Because people always laugh at truths -- particularly uncomfortable ones. And people seem to think the idea of hiring themselves is really funny.

But in all seriousness, if you can't answer a resounding yes to this question, you've got some work to do. Read on for how you can turn this around.

2. Are you focused?

Many things drive bosses crazy. I know because I run my own company, and because I spend a lot of time with other entrepreneurs. At the heart of what drives bosses crazy is employees who don't focus on doing their job well. Worse, many simply don't do their job at all.

A 2007 survey by found that over 63 percent of respondents admitted to wasting an average of 1.7 hours out of a typical 8.5-hour day -- and it's costing companies billions of dollars.

The leading time-wasting activities are personal Internet use, socializing with coworkers, and conducting personal business. Many people -- and you know some at your job -- spend their day pretending to work. Others buckle down and actually work. They don't spend time doing personal chores, chit-chatting, instant-messaging, going to lunch, making dinner plans, and so on. They work. If you're not this type, now's the time to change.

3. Do you have a positive, can-do attitude?

Nothing takes more air out of an organization than employee negativity. People who whine, complain, or are just plain indifferent are disliked by bosses and create a lousy work environment as they drag others down with them.

Recessions are a great time for what I call "pity parties," where coworkers join together to gripe and whine. These people also get fired first in a recession -- if the boss is smart.

Great employees treat everyone in the organization -- bosses, peers, and subordinates -- like valued customers. They're about what they can do for the company, not what they can get from it. They're pleasant to be around, and their positive energy gives life to an organization.

If being positive doesn't come easy to you, get some coaching to help; it's a skill that can be taught. Read up on it, or even consider taking a course. Motivational-movement icon Dale Carnegie believed that maintaining a positive attitude can actually unlock your true potential.

4. Are you indispensable?

Do you have skills or experiences that other employees don't have? Computer skills? Foreign-language skills? Can you do a lot of different jobs in the organization, or are you limited?

Companies are littered with employees who only know the inside of their company. Do you know about the industry at large? About competitors and the big picture? How many industry websites or trade journals have you read recently? Do you know what the keynote speaker said at the last industry trade show?

Become the go-to person for your boss and organization. Mark Jaffe, president of retained search firm Wyatt & Jaffe, suggests that you "do something no one else can, no one else wants to do, and do it well." In sports, certain athletes can be counted on to deliver in a pinch, thanks to their remarkable skills and know-how. When the game is on the line, the ball will be given to the guy or gal who can make the play.

So become an expert. What skills could you learn today that would make you a valuable asset at work? Take classes. Join organizations that can help you learn more about the industry you're in. Read more. Get involved.

5. Are you visible?

Do you show up for work on time -- or better yet, early? When your boss comes in at 9 a.m., are you already there getting a head start on the workday?

Your achievements need to be visible as you are. Discuss with your boss how best you can keep him or her updated on the work you're doing. This may mean a daily or weekly summary that highlights your achievements, not your to-do list. Don't hesitate to toot your own horn a little. Take pride in your accomplishments.

And for those of you who have the luxury of telecommuting, working from home is a nice perk, but don't let your boss and coworkers forget who you are. Stay on the radar by showing up on a regular basis -- especially on days when your boss is in the office. If you telecommute full time, be sure to touch base daily, not only by email but by phone, too.

Finally, make sure you aren't visible in a negative way. I recently hired a woman who had been referred by friends. She interviewed multiple times for the job and truly impressed me through the rounds of interviews. Then she showed up late to work her first week -- three days in a row. On the first day I reminded her that the team starts before 9 a.m. On the second day I warned her. On the third day I fired her. If you're visible in a similarly negative way, someone's working on a plan to get you out the door.

6. Are you a leader?

Leaders don't wait to be told what to do. They look to expand their role in ways that benefit the company, not just themselves. They take on responsibilities that no one else wants, and do them well.

To paraphrase renowned training company Franklin Covey, no organization has ever become great without leaders who can connect the efforts of their teams to the critical objectives of the organization; tap the full potential of each individual on their teams; align systems and clarify purposes; and inspire trust.

Great employees are great leaders. If you're not a natural-born leader, you can learn leadership skills. Again, read up on it or take a training class.

How to Sleep Well at Night

Even as you achieve greatness in your job, if the thought of layoffs still keeps you awake at night, build yourself a cushion. Spend less. Save more. Be conservative. Update that résumé (on your own time, of course), and network.

Being prepared should ease the burden of worry. Recessions are a back-to-basics time, because the basics in life and work... genuinely work.

5 Keys to Increasing Your Pay

by Eileen P. Gunn

t could be that managers and workers have a different take on what it means to be a top performer, and so they disagree on who should get the corporate spoils.

Most workers think that if they know what their job is and do it well, hitting all their goals on time and within budget, then they're doing a good job and deserve to have raises and bonuses heaped upon them. That would be true in a pure meritocracy. But in the real world, the politics of compensation are not that simple. Here are five keys to increasing your salary and benefits:

1. The boss's priorities rule

From the boss's perch, the biggest raises and plumpest perks go to the people he values the most and doesn't want to lose. These are the people who help him to get things done, meet his goals, and generally look good. In short, your performance and the raise it garners are less about you and all about him.

This is why leadership expert Rebecca Shambaugh, author of It's Not the Glass Ceiling, It's the Sticky Floor, says that your campaign for a bigger raise starts with finding out what your boss values. Talk to him about it both formally and informally. And talk to people who know the important things happening at your company and your boss's role in them.

"Executives value people who fit in well with them and with the team, who understand the culture and can help them get the results they want," she says. "So find out what's on the top of your boss's mind, and drive your work and your team's work around those things rather than the other things on your agenda that are lower priority for him."

2. You are as good as you say you are

Once you've got your priorities straight, make sure your boss, and anyone else who matters, knows about the great work you're doing for the company. And don't wait for those annual performance reviews to let them know. It's the informal interaction that the boss takes in all year long that creates an impression of who you are and how you fit into his work.

So shoot him e-mails to ask advice or let him know about progress you're making on the work he most values. When you get an e-mail from someone else noting your success or thanking you for help on this work, forward it on.

Be able to speak up at meetings in an informed way about the projects closest to the boss's heart. And when you run into your boss in the elevator or at the water cooler and he asks how it's going, skip the polite, generic small talk. Instead, opt for an upbeat sentence or two that relates how excited you are about work coming up or just completed on one of those coveted projects.

Leadership gurus like Shambaugh call this socializing your agenda. In layman's terms, you're tooting your own horn and laying the groundwork for the formal sit-down discussion about your performance and the salary and bonus it should carry.

3. Know what you want

Compensation is more than just salary. So when it comes time for that sit-down, know what you want and have the data to support it. Know what others in your field receive in terms of pay and other perks, and what the salary range is for your job at your company. Then think about what is important to you. Do you most want a raise, a better bonus, more stock, or something else?

"Talk to others in your organization who know your boss and ask for feedback on your pitch to him," Shambaugh says. "Find out what his points of resistance are going to be so you're prepared to respond to them."

4. Have a plan B

If the raise you want simply isn't going to happen, don't go away empty-handed, Shambaugh says. In its stead, "ask for more training, a trip to an important conference, or Friday mornings off—whatever has value for you."

And suggest a plan for discussing it again in a few months. "No doesn't always mean no. It can mean not right now," she explains. So zero in on why the boss is handing you that "No." If it's not in the budget, let him know what you would like your salary to be when he sets a new budget. If he wants to see you hit a certain milestone before bumping up your pay, then agree to a plan and time frame for getting there.

5. Know when to walk away

Fourteen percent of people who are thinking of leaving their company this year say the desire for better pay is the reason, according to a survey from human resources consulting firm Blessing White. That's twice the number of people who say they are staying because they expect a good raise or bonus.

Sticking by a company through a short financial squeeze or a few rounds of salary freezes doesn't make you a pushover if other aspects of the job work for you.

But the time can come where you just need more money. Or it can become clear that the boss is never going to see you and your value to the team the way you want him to. When that happens, it's not only OK to seek greener pastures; it's the savvy thing to do. Even within the same company, starting over with a new boss gives you a clean slate for establishing who you are and negotiating what you're worth.

Copyrighted, U.S.News & World Report, L.P. All rights reserved.

Indications of recession

April 22 (Bloomberg) -- Falling shipments at United Parcel Service Inc. and FedEx Corp., which together deliver 80 percent of packages in the U.S., show the economy is in a recession and unlikely to rebound this year.

UPS, whose domestic volume has outperformed the gross domestic product for almost a century until last year, said April 8 that deliveries dropped in the first quarter. UPS also said earnings for the three months through March will miss its previous projection by as much as 7.4 percent, just the third time the Atlanta-based company has made a new forecast that was below an earlier one.

FedEx's U.S. shipments dropped 2 percent last quarter, and the company said last month it would have ``limited earnings growth'' this year because of the slowing economy. Both companies are also struggling with soaring jet-fuel, gasoline and diesel costs after crude oil surged 80 percent in the past year.

``This is what a recession feels like,'' said Steven Marco, who manages $800 million including UPS shares at Marco Investment Management LLC in Atlanta. ``The trucks are not as full as they used to be.''

UPS's profit excluding one-time items may drop 12 percent to $902.9 million for the first-quarter, according to the average estimate of six analysts surveyed by Bloomberg. The company is scheduled to report earnings tomorrow. Chief Executive Officer Scott Davis declined to comment because of the ``quiet period,'' spokesman Norman Black said.

`Risks Have Increased'

UPS Chief Financial Officer Kurt Kuehn said at a March 12 investor presentation that 2008 will be ``challenging'' because of the cooling economy and that the ``downside risks have increased'' for volumes.

FedEx's profit for the fourth quarter ending May 31 may drop 14 percent to $525.1 million, according to the average of five estimates in a Bloomberg survey. Chief Financial Officer Alan Graf said last month that lower demand for express shipments in the U.S. will continue into fiscal 2009.

UPS, General Electric Co. and Union Pacific Corp. are among the bellwether companies economist Chris Rupkey considers when making forecasts. Union Pacific's automotive volume fell 13 percent and lumber is down 27 percent for the first 14 weeks of this year. Two weeks ago, GE said 2008 earnings will miss its previous forecast.

``All three have seen a slowdown in their businesses, and this could presage a sharper downturn in the economy than we are anticipating,'' said Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``It was likely a very weak first quarter based on UPS and FedEx shipments.''

`Coincident Indicators'

UPS and FedEx's customers include Ford Motor Co., Dell Inc., and Inc., as well as banks and law firms. That gives them exposure to almost all industries, making them ``coincident indicators'' of economic health, says Rajeev Dhawan, director of the economic forecasting center at Georgia State University in Atlanta.

Drops in U.S. shipments, coupled with job losses and tighter bank lending standards, signal that the economy probably entered a recession in November or December, and may have a period of no growth for 9 or 10 months, Dhawan said.

The volume decreases for the two shippers confirms ``the outlook that we are projecting for the rest of 2008 as being very bleak,'' said Satish Jindel, president of SJ Consulting Group Inc. in Sewickley, Pennsylvania, whose clients have included UPS and FedEx.

Rethinking Needs

Fuel is partly to blame for earnings erosion at UPS and FedEx, since they typically have a two-month lag in recovering expenses through surcharges. Both companies plan to boost their surcharges for air shipments to 25 percent next month, from 20 percent, which FedEx's Graf said is causing some customers to ``rethink'' their shipping needs.

Shipping now makes up 5 percent to 10 percent of most manufacturers' costs, up from 3 percent to 5 percent a couple years ago, said Norbert Ore, chairman of the Institute for Supply Management's manufacturing survey committee.

``It takes the overall cost up and that leads to scrutinizing those expenses,'' Ore said.

More companies are looking for ways to reduce shipping costs, by choosing less-expensive options such as ground delivery, Ore said.

Sending a 2-pound package from the Empire State Building in New York to the Sears Tower in Chicago can cost as much as $82.50 for UPS's Next Day Air Early A.M. service that guarantees delivery by 8 a.m., according to UPS's Web site.

That same package can be delivered within two days by the U.S. Postal Service for $6.20.

Circuit City's Response

Circuit City Stores Inc., the second-largest U.S. electronics retailer behind Best Buy Co., has lowered its shipping expenses by encouraging customers to order items on line and pick them up at one of its 1,500 stores, spokesman Bill Cimino said.

More than half of Circuit City's $1.35 billion in sales through its Web site last year were picked up at stores instead of being shipped to customers, he said.

Circuit City also offers free shipping on Internet orders of $24 or more, using UPS. To keep costs down, it takes as many as 10 days for orders to arrive.

``If it's the free service, there is a longer window'' for delivery, Cimino said.

UPS fell 62 cents to $71.90 at 4:01 p.m. in New York Stock Exchange composite trading. The stock has gained 1.7 percent this year. FedEx declined $1.88, or 2 percent, to $93.57. Those shares have advanced 4.9 percent this year.

Housing slump could exceed drop of Great Depression: economist

NEW HAVEN (Connecticut) - AN INFLUENTIAL economist who long predicted the housing market bubble cautioned on Tuesday that the slump in the US housing market could cause prices to fall more than they did in the Great Depression and bailouts will be needed so millions don't lose their homes.

Yale University economist Robert Shiller, pioneer of the widely watched Standard & Poor's/Case-Shiller home price index, said there's a good chance housing prices will fall further than the 30 per cent drop in the historic depression of the 1930s.

Home prices nationwide already have dropped 15 per cent since their peak in 2006, he said.
'I think there is a scenario that they could be down substantially more,' Mr Shiller said during a speech at the New Haven Lawn Club.

Mr Shiller's Standard & Poor's/Case-Shiller home price index is considered a strong measure of home prices because it examines price changes of the same property over time, instead of calculating a median price of homes sold during the month.

Mr Shiller, who admitted he has a reputation for being bearish, said real estate cycles typically take years to correct.

Home prices rose about 85 percent from 1997 to 2006 adjusted for inflation, the biggest national housing boom in US history, Mr Shiller said.

'Basically we're in uncharted territory,' Mr Shiller said. 'It seems we have developed a speculative culture about housing that never existed on a national basis before.'

Many people became convinced that housing prices would increase 10 per cent annually, a notion Mr Shiller called crazy.

Mr Shiller, who said it's difficult to forecast prices, endorsed legislation proposed by Democratic Sen. Chris Dodd and Rep. Barney Frank that would allow the Federal Housing Administration to back as much as US$300 billion (S$405 billion) in mortgages for struggling homeowners.

Servicers would have to agree to take a loss on the existing loans, while borrowers would have to show they could afford to make new payments on their refinanced mortgages.

On Tuesday, the National Association of Realtors said that sales of existing homes fell in March while the median home price declined to US$200,700, a decline of 7.7 per cent from the median price a year ago.

Sales of existing single-family homes and condominiums dropped by 2 per cent in March to a seasonally adjusted annual rate of 4.93 million units.

Many analysts said they do not expect a rebound for a number of months, given the problems weighing on housing from a severe glut of unsold homes to tighter credit standards for prospective buyers and a rising tide of mortgage foreclosures. -- AP

Monday, 21 April 2008

GIC says global recession, crisis likely

SINGAPORE - A SINGAPORE state investment fund that bought multi-billion dollar stakes in beleaguered banks Citigroup and UBS said a global financial crisis and recession was increasingly likely but that its investments in western banks were long-term in nature.

'The financial contagion has now spread beyond US shores, increasing the likelihood of a global financial crisis and recession,' Government of Singapore Investment Corp deputy chairman Tony Tan told a staff meeting on Monday.

'We could be facing a recession which is longer, deeper and wider than any recession we have encountered in the last 30 years.'

'We regard our investments in UBS and Citigroup as long term investments which will give us good returns when markets stabilise and economic conditions return to more normal levels,' he said.

GIC is the larger of Singapore's two sovereign wealth funds and bought 11 billion Swiss francs (S$15 billion) worth of mandatory convertible notes in UBS last December. In January, GIC invested US$6.88 billion (S$9.4 billion) in Citigroup in a capital raising by the US bank.

'We regard our investments in UBS and Citigroup as longterm investments which will give us good returns when marketsstabilise and economic conditions return to more normallevels,' he said.

GIC previously said it has not yet decided whether to participate in UBS's subsequent 15 billion franc rights issue. Dr Tan said that GIC had entered the market turmoil well prepared after it had taken a more conservative stance in its investment portfolio by selling stocks in the third quarter and holding more cash.

'We are now entering a period of extreme uncertainty in the world economy and the global financial markets. As banks continue to de-leverage, cutting down on their lending activities and causing contraction in credit supply, the prospects for the US economy and even the world economy are fraught with considerable downside risks,' he said.

GIC says it manages 'well above US$100 billion'. But analysts say the fund's assets could be larger than US$300 billion, making it one of the world's biggest sovereign wealth funds.

Morgan Stanley said in February that GIC was the world's third-largest sovereign wealth fund with US$330 billion in assets under management, behind the Abu Dhabi Investment Authority with US$875 billion and Norway's Government Pension Fund with US$380 billion.

Temasek Holdings, Singapore's other fund, has to date invested US$5 billion in Merrill Lynch. -- REUTERS

Where to put your money now

Even some great investing minds are confused. But don't run scared. We found a few intriguing opportunities including steel, Microsoft - and cattle futures.

By Jon Birger, senior writer

(Fortune Magazine) -- How treacherous are the financial markets these days? So treacherous that you can get blind-sided even if you're one the world's great investors, even if years ago you anticipated the credit crisis now roiling Wall Street - even if you're George Soros.

After posting big gains in 2007, Soros's $17 billion Quantum Endowment hedge fund has been flat in 2008. The profits Soros earned shorting the dollar have been wiped out by big positions in free-falling Chinese and Indian stocks. Yet Soros seems unperturbed. "We are in a period of acute financial wealth destruction," the 77-year-old superstar speculator tells Fortune. "If you can preserve your capital in a period of wealth destruction, you're doing pretty well."

Soros isn't the only investor struggling for answers. Fortune interviewed a dozen or so leading money managers and market gurus about where to invest now, and the only thing they agreed on is how unpredictable the financial markets have become. "The avoidance of risk and the search for safety is more intense now than I've ever seen in my career," says Bob Doll, chief investment officer for equities at Wall Street money manager BlackRock (BLK).

Everyone has his own take on what's safe and what's risky, of course. Soros thinks U.S. stocks and bonds are risky. In his view, the United Staes is either near or in a recession, unemployment (now 5%) will continue to rise, and the housing crisis will only deepen as more homeowners get slammed with rate resets on their interest-only mortgages.

He's also worried that the Federal Reserve's aggressive rate cutting has laid the groundwork for an inflation spike. Soros summarizes his investment strategy for 2008 this way in his new book, The New Paradigm for Financial Markets (available in e-book form at now, in print in May): "Short U.S. and European stocks, U.S. ten-year government bonds, and the U.S. dollar; go long Chinese, Indian, and Gulf-state stocks and non-U.S. currencies." He likes the short-term outlook for oil and commodities too.

Credit bubble alarm

Soros began sounding the alarm about a credit bubble years ago, and what's interesting about his macro view - and what's telling about the challenge of investing successfully these days - is that a slightly different interpretation of the credit bubble's impact could be used to construct a radically different investment strategy.

After all, the same easy credit that fueled the U.S. real estate boom helped energize the rally in commodities and emerging markets. As the financial markets de-lever - in other words, as banks trim exposure to exotic investments and cut lending to consumers, hedge funds, and corporations - the risk of a commodities or emerging markets collapse intensifies.

"Name any growth story from the last five to seven years, anywhere around the world, and I will tell you it's directly or indirectly tied to the credit bubble," says Merrill Lynch (MER, Fortune 500) chief investment strategist Richard Bernstein, who thinks U.S. stocks are now a better value than those of developing nations.

Another wildcard is the cost of crude. Bears think the bursting of the credit bubble will starve speculators of leverage they've used to help bid up oil prices. Also, a recession in the U.S. will further dampen fuel demand. According to MasterCard SpendingPulse, drivers bought 7% less gasoline during the week ending April 4 than during the same period last year. If that trend continues, a return to $65 a barrel (the price a year ago) seems possible.

Leave oil in the ground

Or oil could reverse course and shoot up to $165, which seems no more or less likely. To some extent, basic market mechanics have broken down. Typically, high prices in the futures market serve to stimulate new production. Over time, that brings down prices. But according to James Burkhard, director of oil market analysis at Cambridge Energy Research Associates, a shortage in oilfield personnel coupled with the rising cost of rigs and other equipment has reduced oil companies' willingness to invest in expanding production or developing new fields.

On top of that, there's little incentive for state-owned oil companies to boost output. "If Saudi Arabia pumps more oil, it tends to depress prices, and it generates a bunch of cash that they need to invest," says John Brynjolfsson, a commodities fund manager at Pimco. The Saudis might accept lower prices if they could get good returns on their investments, he adds, but in today's low-rate environment, that's tough. In other words, they can get a better return leaving the oil in the ground.

With the markets giving off so many mixed signals, it's more important than ever to stick to sound investing principles. Diversify. Use dollar-cost averaging - move money into new investments gradually rather than in one lump sum. Seek out mutual funds with low expenses. And pay extra-close attention to valuations and balance sheets when picking stocks. Being wrong about a company with little debt and a low price/earnings ratio will usually be less harmful to your portfolio than being wrong about one with a 40 P/E and a 50% debt-to-equity ratio.

Also, don't follow the crowd. For instance, do you want to bet on corn prices doubling or tripling again? Or would it be smarter to invest in agricultural commodities that often track corn but that so far have been shut out of the agricultural boom?

Finally, listen to investors who have demonstrated a consistent knack for putting up good returns in almost any market environment. Soros is obviously one. Warren Buffett is another.

A contrarian approach

A less appreciated luminary is CGM Funds' Ken Heebner. Heebner's exploits since 2000 have been well chronicled in these pages. His CGM Focus (CGMFX) returned 80% last year and boasts the best one-, three-, and five-year annualized returns (58%, 33%, and 38%) of any diversified U.S. stock fund. His CGM Realty (CGMRX) fund hits the same trifecta for the real estate fund category, boasting one-, three-, and five-year annualized returns of 27%, 30%, and 39%.

How does Heebner do it? By pairing a contrarian streak- one grounded in deep research - with a willingness to go all in (or all out) when he feels most confident about his ideas. Heebner made a bundle short-selling tech and telecom stocks in 2000. In 2001 he built a huge position in homebuilders, only to unload every single share just before real estate cooled. In 2005 and 2006, Heebner plowed his homebuilder profits into oil and copper stocks, and last year he juiced his returns with well-timed short sales of bond insurer Ambac and mortgage lenders Countrywide and Indymac.


Following the principles outlined above led us to three disparate areas. The first is Heebner's latest big bet: steel. Three steelmakers- Arcelormittal (MT), Nucor (NUE, Fortune 500) and United States Steel (X, Fortune 500) - accounted for 16% of CGM Focus's assets as of Jan 1.

For Heebner, steel is essentially a proxy for infrastructure - a bet that developing nations like China, India, Brazil, and Saudi Arabia will continue to build new hospitals, roads, bridges, and power plants. "We've never had a global steel shortage before, but all the ingredients for one are present today," he says. Heebner thinks heightened demand could eventually push steel prices up to $2,000 a ton from $800 today.

Value plays

One of the enduring traits of bear markets is that good stocks inevitably get thrown out with the bad. Two such stocks are Annaly (NLY) and Microsoft (MSFT, Fortune 500).

Annaly was a pick in our 2008 Investors Guide. A real estate investment trust that pays out the bulk of its earnings in dividends, Annaly has a business model that sounds terrifying, which is probably why its stock remains unloved. Annaly is essentially a hedge fund that buys mortgage-backed securities with borrowed money.

Yet Annaly is no Bear Stearns. It doesn't take any credit risk - it buys only mortgages guaranteed by Fannie Mae or Freddie Mac - and the steepening of the yield curve (short-term rates have fallen while long-term mortgage rates have climbed) has been fantastic for Annaly's bottom line. The company just announced a 40% dividend increase - the current yield is 12% - and analysts expect Annaly's earnings to climb 95% this year. Still, the stock trades at a mere 13 times the past 12 months' earnings.

The case for Microsoft is equally straightforward- regardless of whether its unsolicited bid to acquire Yahoo proves successful. Microsoft's 16 P/E is at a near-record low. Earnings rose 92% last quarte r- helped along by strong demand for the Windows Vista operating system and the Xbox game player - and are expected to be up 25% for the fiscal year ending in June. On top of that, Microsoft has a sterling balance sheet, with no debt and $23 billion in cash to fund acquisitions, share buybacks, or dividend increases. "For years software companies were derided for having such conservative balance sheets," says Microsoft fan Manny Weintraub, a former Neuberger Berman managing director who runs his own firm, Integre Advisors. "Now they look pretty smart."

Cattle futures

Turning to a different kind of stock, an offbeat play to consider is cattle futures. Despite rising global food demand, the price of cattle has actually fallen this year thanks to turmoil in the livestock business. "There comes a point where corn prices are so high that you can't afford to keep feeding your animals," explains Judith Ganes Chase, a consultant and agricultural commodities analyst.

Walloped by rising feed costs - corn has soared from $2 to $6 a bushel in two years- ranchers and cattle feeders have essentially flooded the market with beef. Just to stay afloat, they've been forced to sell younger and younger animals to slaughterhouses. Geoff Blanning, head of commodities investing at London-based money management firm Schroders, thinks this is about to change. "Meat prices will be the next to rise," he says. According to the latest USDA cattle report, the 2007 calf crop of 37.4 million head was the smallest since 1951. Couple that shrinking supply with rising beef exports - projected to be up 20% in 2008 - and you've got all the makings for a big rally. The easiest way to invest in cattle futures is via an exchange-traded fund available on the London Stock Exchange: ETFS Live Cattle, which tracks the Dow Jones-AIG Live Cattle Sub Index.

Earnings Growth

by Thomas Kostigen

Making money, not inheriting it, creates more financial security

Most wealthy people earn their money, and because they earned it they feel more secure about keeping it. That's what a new survey reveals about wealth and values.

PNC Wealth Management conducted the survey of people with more than $500,000 of investable assets. The Wealth and Values Survey showed that 69% of "wealthy" Americans accumulated most of their money through work, business ownership or investments; 6% percent received money through inheritance; and 25% gained wealth through a combination of inheritance and earnings.

"An overwhelming number of affluent Americans earned their wealth and are more likely to feel secure during challenging economic times compared to peers who inherited their money," according to PNC.

These findings mirror most other studies of the wealthy and how they got rich. Indeed, take a look at the Forbes list of the world's richest people and you won't find many at the top spots who inherited their riches. This value set speaks volumes about making money, as well as about the prospects of losing it.

A couple of things separate the earners from the inheritors: First, earners were in control of making their money, and therefore feel more confident about preserving it or making even more. Second, earners likely took large risks to achieve wealth. As we all know, as risk increases, so does return. Accordingly, earners are likely more comfortable with the concept of risk.

Keep What You Make

Earners are more likely to be concerned about an economic recession, and more confident they can manage through a downturn. When asked about a recession, 36% of earners said it was a concern, yet 77% agreed with the statement "I feel I have a lot of control over my financial future."

Meanwhile, 27% of heirs expressed concern about recession, but 67% expressed confidence about control of their financial futures, PNC found.

Driving the point of risk tolerance home, the report says earners also have a higher risk tolerance than heirs: 39% of earners rate themselves as moderate to risky investors compared with 21% of heirs.

"There is a strong correlation between those who earned their wealth, their willingness to take risks and confidence that they can recover from a major negative financial event," says Thomas Melcher, executive vice president and managing director of Hawthorn, PNC Wealth Management's division that services ultra-wealthy clients.

"Those who inherited their wealth often view themselves as stewards for future generations," he adds. "As a result, they tend to be more conservative in their approach to investing."

Other Survey Findings Include:

Happiness is relative: Three-quarters of earners agree with the statement: "My financial success lets me feel less stress and worry," versus 50% of heirs. Meanwhile, 51% of earners agree with the statement: "As I have accumulated more money in my life I have become happier," compared to 33% of heirs.

More is not necessarily merrier: Heirs are more than twice as likely to say "Having a lot of money brings about more problems than it solves."

As luck would have it: More people who have earned their wealth (37%) agree with the statement: "The money I have made so far has come from being in the right place at the right time" compared with 25% of heirs.

Passing it on: Far more of earners agree with the statement: "Every generation should be responsible for creating its own wealth." And more earners believe that "It is more important for children to learn the value of money through hard work."

Which also seems to be a good lesson for adults.

Copyrighted, MarketWatch. All rights reserved. Republication or redistribution of MarketWatch content is expressly prohibited without the prior written consent of MarketWatch. MarketWatch shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Friday, 18 April 2008

US business leader warns of 'double dip' recession

The head of a US business executives group warned Thursday that the world's largest economy could endure a "double dip" recession if efforts by the authorities fail to spur growth.
"If, after the economic stimulus package takes effect and we get into (20)09, and the ... lower interest rates do not kick in, there is a probability of (a) double-dip recession," said Harold McGraw, chairman of Business Roundtable, which represents chief executive officers of leading US companies.

"That could have serious effects on the other developed countries," said McGraw, who is also head of publishing giant McGraw-Hill.

US economic growth has slowed dramatically in recent months and a growing number of economists fear the world's largest economy will experience a recession during the first half of 2008 amid a housing slump and related credit crunch.

There is also growing nervousness that the economy might slip back into recession again after a brief recovery in a W-shaped "double dip recession".

McGraw, who was in Tokyo for a one-day business summit with fellow business leaders from the Group of Eight (G8) richest nations, warned that the credit crunch would continue until the end of this year.

"I think it will take the rest of this year to unwind but I think it US President George W. Bush in February signed a two-year, 168-billion-dollar economic stimulus package to try to boost an ailing American economy.

The Fed has slashed borrowing costs by a cumulative 300 basis points since September last year to ease a credit crunch and boost the economy, and is widely expected to further cut rates this month.

Thursday, 17 April 2008

Trading Without Emotion

By TradingMarkets Research

Peter Forth is president of 4th Systems Inc. and creator of the StockReflex stock market replay simulator ( Part video game, part learning tool, StockReflex helps you refine your technical analysis skills and amass trading experience without financial risk.

According to Cal Berkley University research, more than eight out of ten people who trade the stock market on a regular basis lose money. However, the people who do make money at trading tend to do so consistently and repetitively. What do these successful traders have that the others don't? A key factor is their ability to make their decisions to buy and sell without being influenced by extremes of fear and greed. Indeed, inappropriate emotional influence on trading decisions is one of the key reasons that most traders fail to make a profit.


There's a martial-arts maxim that you should never get into the ring until you have mastered the basic forms. If you do, your fear of getting hurt makes it almost impossible for you to objectively evaluate the situation and respond to it appropriately. So how does mastery of the basics stop you from being fearful? Most fear stems from being confronted with an unfamiliar situation and being unsure what the correct response is. By practicing and rehearsing situations, scenarios, and responses beforehand you can recognize them when you confront them in real life. Ideally you will have already tried solving the problem using several different tactics while in the safe zone of your training and should now have no hesitation in choosing the most appropriate and effective response.

This same principle applies to trading. How many times have you seen a stock you own spiral downward and thought, "Look how far it's dropped! I'd better get out now before it falls further and I lose all my money." Or if a stock you were considering purchasing goes up before you bought it said to yourself, "I'd better jump in now or I'll miss the boat completely!" With enough practice and experience under your belt you would be less likely to be scared into making the wrong decisions.


The flip side to fear is greed. Wall Street's Gordon Gecko may have preached "greed is good", but this is not necessarily true in stock trading. For example, greed can cause you to stay in a stock too long and watch the profits that you had acquired evaporate. It can cause you to misallocate your capital by putting too much money in a stock that has performed well for you in the past instead of properly diversifying your portfolio. And perhaps even more seriously, as Bears Stern's employees recently found out, it can encourage you to use too much leverage. Anyone who has tried this can attest that leverage is a double-edged sword. It can produce spectacular gains, but many investors who start out successfully become overly confident and begin to use more and more of it. Once this cycle begins, it's only a matter of time until the inevitable highly leveraged bad bet decimates the gains which have come before it.

Practice, Practice, Practice

Just like you shouldn't practice your basic martial-arts forms in the ring where your mind is more focused on pain avoidance then executing the tactic correctly, a novice shouldn't begin trading with real money and real consequences. Only once you've amassed significant practice in a safe environment where you can conduct your technical and fundamental analysis without being emotionally distracted should you begin to trade with real money. And when you finally start, don't jump straight into the ring with Bruce Lee. Begin tentatively, gradually, slowly increasing your trading exposure over time as you become accustomed to the increasing levels of risk. How do you know you've moved too far, too fast? If you are finding it's becoming harder to sleep at night, either because you are worrying about your trades or you are excited about your gains, then you have moved into the realm where your emotions are going to have too strong an effect. You are going to start making poor, emotionally-clouded decisions and so it is time to scale back.

Real-time Virtual or Fantasy Trading

There are hundreds of online systems that allow you to practice trading against the real markets using virtual money. These systems are useful in that they provide an automated way for you to keep score and track your trading progress without risking real cash, so you can keep your emotions in check. These systems allow you to practice both your fundamental analysis (choosing stocks based on fundamental market trends) and your technical analysis (trading using patterns in a stock's chart to tell you where the best entry and exit points are).

Replaying History

Real-time virtual trading is an incredibly valuable place to begin practicing emotionless trading but it does have one drawback - it has a fairly long feedback loop for your learning curve. That is, you can only learn as fast as the market itself moves, so sometimes you have to wait for weeks or months before you can evaluate if your trade was profitable or not. For traders who use stock charts and technical analysis but want to speed up this learning curve, one alternative is to replay historical data as if it was really happening.

For example, using your favorite charting software you could:

1. Pull up an old chart of a stock that you are not familiar with.

2. Cover up the last half of it and then slowly reveal it one bar at a time.

3. Pretend that you have sizeable position in the stock.

4. Be introspective and monitor your emotions as you reveal each bar.

5. Analyze the market by focusing on the present moment instead of trying to guess what's what up ahead.

6. Continually reevaluate the situation and ask yourself: Should I trail my stop to lock in gains? Should place a limit order to exit with a profit.

Should exit now and take a loss? What is the price action and my indicators telling me now?

7. In this way you can do analysis and make virtual trading decisions, and then tell almost immediately if you made the right calls.

Of course there are also several software packages on the market that automate this process by hiding the "future" part of the chart, asking you to make virtual trades and then tracking your results. Using tools like these you can potentially simulate a whole years worth of trading in minutes.

Black Belt Trading

The market can feel like a combat zone. It's a real challenge to keep your emotions from obscuring your judgment and influencing your moves. However, with the trial and error of practice and the hindsight of experience under your belt, you can eventually learn to approach your trading with the calm, cool deliberation of a skilled master.

Wednesday, 16 April 2008

Lehman Brothers CEO joins other bankers in saying worst of credit crisis over

NEW YORK - LEHMAN Brothers Holdings Chief Executive Richard Fuld joined a growing chorus of investment bank executives in saying on Tuesday that the worst of the credit crisis is behind Wall Street.

Mr Fuld, speaking at the investment bank's annual shareholder meeting, said that credit markets have begun to ease but still believes the environment 'will remain challenging.'

Steep losses tied to mortgage-backed securities has cost the world's biggest banks and brokerage about US$200 billion (S$271 billion) since last year.

Similar comments came last week from two other investment bank CEOs - Goldman Sachs Group's Lloyd Blankfein and Morgan Stanley's John Mack. Both said during shareholder meetings that Wall Street is closer to the end of the crisis, and that it might last a few more quarters.

Lehman Brothers, the nation's fourth-largest investment bank, raised about US$4 billion from a stock sale earlier this month to help boost capital levels.

The securities firm also announced in a regulatory filing on April 9 that it liquidated three funds with assets of about US$1 billion during the first quarter because of 'market disruptions.'

There had been concerns that other investment banks might be having financial problems after Bear Stearns nearly collapsed in March. The Federal Reserve later engineered a bailout for Bear Stearns by helping the company be sold to JPMorgan Chase.

Lehman has avoided major losses compared to its larger rivals.

Investors might get a better glimpse about the state of the credit markets with first-quarter earnings reports expected from JPMorgan on Wednesday, Merrill Lynch on Thursday and Citigroup on Friday.

Shares in Lehman fell 18 cents to US$39.20 on Tuesday, and are down about 40 per cent for the year. -- AP

German boy, 13, corrects Nasa's asteroid figures

BERLIN - A 13-year-old German schoolboy corrected Nasa's estimates on the chances of an asteroid colliding with Earth, a German newspaper reported on Tuesday, after spotting the boffins had miscalculated.

Nico Marquardt used telescopic findings from the Institute of Astrophysics in Potsdam (AIP) to calculate that there was a 1 in 450 chance that the Apophis asteroid will collide with Earth, the Potsdamer Neuerster Nachrichten reported.

Nasa had previously estimated the chances at only 1 in 45,000 but told its sister organisation, the European Space Agency (ESA), that the young whizzkid had got it right.

The schoolboy took into consideration the risk of Apophis running into one or more of the 40,000 satellites orbiting Earth during its path close to the planet on April 13 2029.

Those satellites travel at 3.07km a second, at up to 35,880km above earth - and the Apophis asteroid will pass by earth at a distance of 32,500km.

If the asteroid strikes a satellite in 2029, that will change its trajectory making it hit earth on its next orbit in 2036.

Both Nasa and Nico agree that if the asteroid does collide with earth, it will create a ball of iron and iridium 320m wide and weighing 200 billion tonnes, which will crash into the Atlantic Ocean.

The shockwaves from that would create huge tsunami waves, destroying both coastlines and inland areas, whilst creating a thick cloud of dust that would darken the skies indefinitely.

The 13-year old made his discovery as part of a regional science competition for which he submitted a project entitled: Apophis - The Killer Astroid. - AFP

Tuesday, 15 April 2008

UBS staff spooked in Singapore, but staying put

Simon Mortlock

Staff at UBS in Singapore are sprucing up their CVs as job-cut rumours start to spread. One recruiter, who asked not to be named, says a few UBS bankers have already been in touch to discuss their careers.

“I’ve definitely seen more résumés coming across my desk this month. There are certainly interesting things going on at UBS. People there seem to be spooked,” he adds.

The job-loss jitters follow UBS’s announcement earlier this month of US$19bn of new asset writedowns, and the departure of chairman Marcel Ospel.

But at this stage employees are only talking to recruiters, not walking out to join rival banks. “I haven’t seen any actual hirings of UBS people yet. It’s all rumour and speculation at the moment. They want to keep their options open,” says the recruiter.

Another Singapore-based search consultant, who also preferred to remain anonymous, agrees UBS workers are nervous: “From people I know there, there’s a lot of talk about what’s going on, but that’s to be expected when you’ve just lost your CEO and you’ve just lost a lot of money. They naturally feel uncomfortable.”

Although UBS is one of the top-ranked banks in Asia, other firms do not seem to be targeting its talent. Both headhunters say competitors have not approached them about pre-emptive poaching of UBS staff.

Crisis to affect markets for a decade: JP Morgan

By Richard Barley

LONDON (Reuters) - The financial crisis will affect market structure and pricing for at least a decade and lead to greater regulatory powers for central banks in areas at the centre of the turmoil, analysts at JP Morgan said.

"Market participants and regulators will focus intensely on controlling the risks that were at the core of the crisis," analysts led by Jan Loeys and Margaret Cannella wrote in a note on Monday.

These risks include lending standards in mortgages, leverage in the funding of securitized products, and the use of short-term financing for illiquid long-term assets outside of the regulated banking sector.

This will change behavior for market participants "for at least a decade," they wrote, in line with fallout from previous crises.

"We had the NASDAQ, we had LTCM, we had the various forms of emerging-market crises in the '90s, we had the real estate crisis of 20 years ago: In most of these the direct impact on the behavior of the parties involved lasted more than 10 years," Loeys told Reuters in a telephone interview. "It looks like it takes a generation for the memory to fade and for the same mistakes to be made again."

He noted, for instance, that global equity markets remained extremely cheap on all risk measures even five to six years after the end of the dotcom crash.

As a result of these changes in behavior, banks will become "bigger, safer and somewhat less profitable" as they will retain more assets on balance sheet, the analysts wrote.

Securitization will be reduced, and no longer rely on short-term funding structures that assumed liquidity as a given, although it will survive, they said.

Meanwhile, premia for term, liquidity and credit risk will be higher on average over the next cycle, they said.

JP Morgan (NYSE:JPM - News) is regarded as having steered a relatively steady course through the credit crisis, turning a profit last year where others posted huge losses. It took centre stage in March as it announced a deal to buy Bear Stearns (NYSE:BSC - News), averting a collapse that could have set off fresh turmoil in already battered financial markets.


The biggest change as a result of the crisis will be in regulation, Loeys said, with the focus on the off-balance sheet structures that the financial world has created.

"This looks like a recession caused by financial markets, which clearly policy makers are not going to take kindly to ... There will be a lot of follow-up," Loeys said.

"This was a run on the securitized world. The bank regulation and the structure of the supervisory system was created for a banking world of taking deposits and making loans. That world has moved towards capital markets, which were regulated from the point of view of consumer protection, but not from a systemic stability point of view," he said.

"Banks did not have the tools to try to protect the capital market from its own excesses."

As a result, central banks will be forced to take on more power as they are the entities extending support to the markets, Loeys said.

"Central banks' extension of liquidity to broker-dealers and (the) securitized world is permanent, and will be followed by regulatory control," the analysts wrote.

(Reporting by Richard Barley; Editing by Jason Neely)

Sunday, 13 April 2008

A New Index for Financial Well-Being

by Laura Rowley

In the 1880s, British economist Francis Edgeworth proposed creating an instrument called a "hedonimeter" that could measure, physiologically, how much pleasure a person derived from a specific choice. Edgeworth suggested that the hedonimeter would expand utility analysis from theoretical economics to the real world, helping individuals maximize their welfare and societies create better public policy.

The Hedonimeter Reborn

A group of researchers is reviving the notion of the hedonimeter, at least philosophically. They've developed a method to measure, compare, and analyze how people spend and experience their time, across countries and over time. The idea is similar to Edgeworth's -- if we have a quantitative way to measure which activities bring pleasure to most people most of the time, we can make better decisions to enhance our well-being.

"We're really interested in describing people's lives as they experience them, as opposed to theories about their lives, and from that get an overall measure of how people are doing," says David Schkade, professor of management at the Rady School of Management at University of California, San Diego.

The study, co-authored with Nobel Laureate Daniel Kahneman and Alan Krueger of Princeton; Norbert Schwarz of the University of Michigan; and Arthur Stone of Stony Brook University, will be published by the University of Chicago Press later this year.

What's Your U-Index?

What does this have to do with money and happiness? Researchers say people can manipulate 40 percent of their happiness through their day-to-day choices (the other 60 percent is natural disposition and circumstances, such as health and wealth). While many decisions are no-brainers -- going to see a movie is more fun than taking out the garbage -- most of us are faced with tradeoffs in utility that aren't so clear-cut: Live close to work in a smaller house, or commute an hour each way to get a bigger one? Take the higher-paying job with travel away from family, or the lower-paying one close to home? Spend extra time volunteering, or selling stuff on eBay to make extra cash?

To illustrate their approach, researchers asked 4,000 Americans to track how they spent their day, then isolated three random events and interviewed them on their emotions --pleasant or unpleasant, passive or active. They summarized the data in something they call a "U-Index" ("U" for unpleasant).

"We're trying to come up with a meaningful way to talk about well-being that sounds like the poverty rate or the unemployment rate," says Schkade. The approach captures how people feel about their tasks shortly after they perform them, avoiding the brain's tendency to misremember what actually occurred. The higher a person or group scores on the U-Index, the greater the unhappiness.

Driven to Unhappiness

Study participants were happiest when socializing, playing sports and exercising, doing spiritual activities, and relaxing. Watching television ranked in the middle, as did food preparation and volunteering. The most unpleasant tasks included housework, working for pay, household management, receiving medical care, education, and caring for adults.

"One of the worst activities for all the people we survey is commuting. The only thing that ranks below commuting is commuting with your boss." says Schkade.

His advice for someone deciding between a 30-minute commute from a tiny, expensive house, and a 90-minute commute from a McMansion: "Commuters are not masters of life, their schedule is. If you can transfer two hours to something more pleasant, that can make a big structural difference in how good life is. We don't have the causal thing nailed down completely, but certainly our research begs for people to make that tradeoff."

The More the Less Merry

In addition, the study found conflicting trends related to the pursuit of ever-higher income and education. People in households with annual incomes below $30,000 spend almost 50 percent more time in an unpleasant state than do people with incomes above $100,000. On the other hand, a historical comparison found that unhappiness has declined more for men with a high school degree or less than for men with a college degree or higher. (The result corresponds with a recent study that found leisure time has increased more for the less educated than the highly educated.)

I was discussing this with a friend recently, who seems to have found the ultimate sweet spot in his career. He makes a comfortable living, works fewer than 40 hours a week, is highly respected at work, and has a great boss, lots of autonomy, and no employees to supervise. He knows he could land his boss' job at another company and get a whopping raise. But he would have to travel, supervise people, work longer hours, and answer to higher, possibly more demanding powers.

"People who have more income typically have more responsible jobs," says Schkade. "That extra money comes with additional things that are not as pleasant: They can't leave at 5 p.m. when the whistle blows; they might have stress because they have to hire and fire people. That's why changing features like income and education don't seem to have as much of an effect on happiness as we think, because they have tradeoffs. When we think about them, we only think about the good things."

GNP ≠ National Well-Being

Another benefit to the U-Index is getting a more accurate picture of things we tend to idealize -- like parenthood. "Some of the least happy people we see in surveys are mothers with young children," says Schkade. "We think it's because they are working and stretched too thin."

That's not to say the index would make you decide against having children. But you might recognize the near impossibility of combining toddlers with a tortuous commute to work, and make informed decisions about where to work, where to live, or what kind of child care to use -- and thus avoid learning through nightmarish experience.

From a public policy perspective, the backdrop of the U-Index is a recognition that traditional ways of tracking a country's progress -- gross national product or national income measurements -- don't provide a full picture of national well-being. As Robert Kennedy put it in a 1968 speech: "Our gross national product ... measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country. It measures everything, in short, except that which makes life worthwhile."

Goldman Sachs Information, Comments, Opinions and Facts