coping with redundancy

Guy Day

Losing your job can be one of the most stressful events in your life, particularly if you are mid-career and have been with your employer for some time. It’s usually unexpected and its implications are often difficult to comprehend immediately. However, take heart and think positively because redundancy can also provide an excellent opportunity for you to break the mould and change direction towards a more successful career.

It's not just you

The media continues to report the decline in the world economy and the resulting job losses. Seemingly no country, no sector and no profession has been left untouched and around the world thousands of executives have been made redundant this year. Many organisations with revenue in decline have retreated to their core and profitable businesses. Rationalisations, restructurings and redundancies have resulted.

Quite often in this phase of the employment cycle, layoffs can be indiscriminate with regard to ability, length of service and value to the organisation. Back-office teams are often a target because they are non-revenue generating, and in the short term they are a less emotive cost saving.

So, the message must be - it's not just you. It's happening everywhere and you must use this fact as part of the healing process.

Drain away the pain

When you first hear of your redundancy, you may feel a range of emotions, especially anger, but also relief, uncertainty, betrayal, bitterness and sadness. All these are justifiable and normal. You should spend time coming to terms with the decision and getting the emotion out of your system as much as you can. You shouldn’t under any circumstances start to look for another job until you have calmed down and processed the news of your redundancy.

Your anger and bitterness will be evident during the selection process and will deter potential employers. If you cannot shake your loss after four to five weeks, then you may need to seek guidance from professional counsellors to help you through this stage.

Communicate with family and friends

Don’t try to hide your redundancy. It’s crucial that you explain what has happened and that there may be some changes ahead. Also tell your closest friends, although it’s probably best not to make this a general broadcast until you have a plan and can ask for specific help generating leads.

Make a financial plan

One of your immediate issues will be financial. Whether or not you have received severance pay or bonuses, you should undertake a thorough review of your budget for the year ahead. Make sure you have received all your entitlements from the organisation and that your pension payments are in order. Reduce all non-essential expenditure and assume that your new budget will need to last a full year until you are back on your feet again. Undergo the self-review process as well. Once you feel reconciled to what has happened, it’s time to move on and to think about the future.

Exit with dignity

However tempting it may be to express your real feelings during the exit process, try to harness your anger and exit professionally and with dignity. You will need the help of your former colleagues and managers in the coming months for references and contacts.

Explain your termination to potential employers

Discuss your termination and the reasons for it with your employer and your other referees. Regrettably, there is still a stigma attached to being out of work, so potential new employers may think your departure is performance related until you can convince them otherwise.

It’s important therefore that you understand the reasons for your termination so that you can communicate them with confidence to the market and so that your referees - including your former employer - can back you up verbally and in writing. You need to ensure that there is no doubt whatsoever surrounding the reasons for your departure, otherwise your job search could be damaged.

Finally, set yourself a realistic time frame for finding a new role. Be prepared that it could take several months to find the right job – more if you are seeking a specialist or senior position, or if you don’t have the requisite skills or experience. Be persistent and positive during your job search.

Swine flu risk to Singapore recovery: central bank

SINGAPORE (AFP) - - The global swine flu outbreak could set back a recovery for Singapore's recession-hit economy, the central bank said Wednesday.

"Depending on how the global outbreak of the swine influenza develops, there could be repercussions for the domestic economy," the Monetary Authority of Singapore (MAS) said.

"Nonetheless, the domestic economy is not expected to stage a decisive rebound this year," the MAS said in its twice-yearly report.

"Indeed, the path to recovery is uncertain and hinges on external developments including the recent outbreak of swine influenza in Mexico, which has added a new dimension to the risk outlook."

Singapore, an open economy largely dependent on external trade and tourism, has stepped up measures against swine flu, drawing lessons from its fight against the Severe Acute Respiratory Syndrome (SARS) in 2003.

SARS killed 33 people in Singapore that year.

Authorities have deployed thermal scanners at the airport and seaports and stepped up infectious disease control measures at hospitals.

Influential former prime minister Lee Kuan Yew also said any residents returning from Mexico, the epicentre of the current swine flu outbreak, will be quarantined.

As of Wednesday, authorities said 17 people had been referred to two hospitals for precautionary medical assessment and four of them had tested negative for influenza A, the virus type associated with swine flu.

Singapore's economy slipped into a recession last year and is tipped to contract as much as 9.0 percent this year as export demand dries up due to the global downturn.

Don't Believe in Buy and Hold

A. Gary Shilling

Even during rip-roaring bull markets, investors miss a good chunk of the gains. Buy and hold RIP.

The recent 57% collapse in the S&P 500 index to its most recent low on March 9 followed hard upon the 38% decline in the 2000-2002 bear market. And the five-year recovery from that swoon didn't exceed the 2000 peak by much. The Nasdaq index, which nosedived 78% in 2000-2002, recovered only 44% of that decline before falling another 55%. There are only two other global bear markets since 1900 in which stocks fell over 40%.

No wonder that investors' faith in stocks has been shattered, and both institutional and individual investors have been withdrawing. The buy and hold strategy, which was validated by the earlier long, steadily rising market, doesn't work in severe bear markets. Only one of 1,700 diversified U.S. stock funds showed a gain in 2008, and that was a mere 0.4%. The average of these funds dropped 39%, precisely in line with the S&P 500's decline.

The buy and hold devotees say you can't time the market, and if you aren't in all the time, you risk missing much of the gain. A Spanish research firm found that if you removed the 10 best days for the Dow Jones industrial average in the 1900-2008 years, two-thirds of the cumulative gains were lost. But if you missed the 10 worst days, it found, the actual gain on the Dow tripled. These results are in line with our earlier research and reflect the fact that stocks fall a lot faster than they rise.

We eschew the buy and hold strategy because of what's known in classical statistics as the gambler's ruin paradox. The odds may be in your favor in the long run--in this case, your stocks may provide great returns over, say, 10 years. But if you hit a streak of bad luck, your capital may be exhausted before that long run arrives.

Or more likely, a severe bear market will scare you out at the bottom. Many investors bail out then and don't reenter until the next bull market is well advanced. This explains why the returns of mutual fund investors lag well behind the performance of the funds in which they invest. A widespread retreat is what makes a good bottom, as we've noted in many past Insights. All those who can be shaken out are. They've reached the puke point at which they regurgitate their last equities and swear to never ingest any more.

We've never understood the U.S. individual investors' fascination with stocks, almost to the exclusion of all other investment vehicles. Stock backers point to long-run annual gains of about 10% but neglect to note that about half of that came from dividends, which were much bigger parts of the total return in earlier years, although they may be again in the future.

Also, stock indexes are revised over time, dropping weak and fading companies and replacing them with robust and growing firms. So the performance of the Dow or S&P 500 over time is much stronger than the performance of the companies that were in those indexes, say, 30 years ago. This is known as survivor-bias.

Even with this upward bias, stocks way underperformed Treasury bonds in the 1980s and 1990s in what was the longest and strongest stock bull market on record. The superiority of Treasuries has been even more so since then. One reason that few realize this is because they don't know much about bonds, despite the simplicity of Treasury obligations and, so, they ignore them. Furthermore, commissions on stocks are usually much bigger than on Treasuries, so brokers favor them.

Our all-time favorite graph shows the results from investing $100 in a 25-year zero-coupon Treasury bond at its yield high (and price low) in October 1981, and rolling it into another 25-year Treasury annually to maintain that 25-year maturity. On March 31, 2009, that $100 was worth $16,656 with a compound annual return of 20.4%. In contrast, $100 invested in the S&P 500 at its low in July 1982 was worth $1,502 last month for a 10.7% annual return including dividend reinvestment. So Treasuries outperformed stocks by 11.1 times!

Long-time Insight readers know we have been recommending long Treasury bonds since 1981. Back then, we forecast secular and huge declines in inflation and interest rates. So we declared that "we're entering the bond rally of a lifetime." Unfortunately, that rally is over. Our target of 3% yield on 30-year Treasuries, down from 14.7% in 1981, was exceeded at the end of 2008 when the yield fell to 2.6%. Nevertheless, it was a grand finale to "the bond rally of a lifetime." The yield drop from 4.5% at the end of 2007 provided a 37.5% appreciation. Add in the 4.5% interest and the total return was 42% last year.

In the long run, the stock market rises with GDP, after accounting for intermediate trends in profits' share of GDP and P/Es. In the next decade, we foresee much slower growth in GDP than in the 1980s and 1990s and deflation, with profits' share of the pie falling along with declining P/Es. In this secular bear market, stock market average gains will probably be much lower with cyclical bull markets shorter and weaker, while bear markets are more frequent and deeper.

Economy: Don't Look Now, But the Worst Is Over

From The Business Insider:

Paul Kasriel and Asha Bangalore of Northern Trust lay out the case that the economy is turning. For highlights of their report (and the full report) click here.

Importantly, Paul and Asha are NOT saying that the economy has "bottomed." Just that the rate of decline is now decelerating. One of the main causes of this is the tremendous fiscal and monetary stimulus the government is pumping into the system. Paul discussed this in this previous piece, where he noted that it worked in the 1930s (until the government screwed up).

Paul and Asha's assessment that we've past the quarter with the worst decline is consistent with what even bearish economists like Nouriel Roubini believe. Where Nouriel begs to differ is when growth will resume. Paul and Asha's view, which is in line with the consensus, is that the economy will begin growing again in Q4. Nouriel thinks the economy will shrink 2% in Q4 and struggle all through 2010 (I tend to think he's right, but the stimulus is a wildcard).

And then there are John Mauldin, Kyle Bass, and others who think that even if the economy stabilizes, it will just collapse again in 2010 and/or move sideways for years--like Japan's.

Leaving aside the future, here are Kasriel and Bangalore's key points on what has happened in the past three months that suggest the worst is over.

G7 signals worst of world recession may be over

By Gernot Heller and Louise Egan

WASHINGTON - Finance chiefs from the G7 powers said on Friday the global economy may be past the worst phase of a recession although recovery was not yet assured, and they pledged to make sure that big financial firms are sound.

Group of Seven finance ministers and central bankers said after a meeting that economic activity should begin to recover later this year. However, they said the outlook remained weak and there was a risk that the global economy may still worsen.

"We are right to be somewhat encouraged, but we would be wrong to conclude that we are close to emerging from the darkness that descended on the global economy early last fall," U.S. Treasury Secretary Timothy Geithner said in a statement.

It was a less dire assessment than the G7 finance officials delivered at their last gathering in February, when they warned that the severe downturn would persist through most of 2009 and made no mention of promising signs of stability.

"Recent data suggest that the pace of decline in our economies has slowed and some signs of stabilization are emerging," the G7 said in a closing communique.

"We will continue to act, as needed, to restore lending, provide liquidity support, inject capital into financial institutions, protect savings and deposits and address impaired assets. We reaffirm our commitment to take all necessary actions to ensure the soundness of systemically important institutions," the statement said.

Japanese Finance Minister Kaoru Yosano said "signs of stabilization" was "an expression with a question mark."

"But we understand that the G7 statement has indirectly expressed the view that the worst may be possibly over for the world economy," he added.

The G7, which comprises the United States, Britain, Canada, France, Germany, Italy and Japan, met a day before the International Monetary Fund and World Bank begin their twice-yearly meetings. The larger G20 group, which includes emerging economies such as China and India, held a meeting after the G7 but issued no official statement.

Geithner said both groups had the same agenda.

"The agenda will be: What are we doing? Are we doing enough to help attenuate the risks in this recession, lay the foundation for an earlier recovery, lay the foundation for a more balanced, more sustainable recovery?" he said.

FIX THE BANKS

The G7 has been under growing pressure to speed up efforts to rid banks of bad assets that have constrained lending and plunged the global economy into its deepest recession since World War Two.

The International Monetary Fund, which has estimated that losses at financial institutions around the globe could exceed $4 trillion, urged rich nations to prioritize repairing the financial sector because the world economy cannot fully recover unless credit is flowing.

"The IMF is absolutely right when it asks countries to deal with toxic assets because transparency is crucial for recovery," said Mario Draghi, head of the Financial Stability Board, a newly fortified group designed to coordinate global regulatory reform.

But some European officials questioned how the IMF calculated the magnitude of bank losses. The Fund estimated that European banks may need to write down $750 billion in bad assets, while U.S. firms had $550 billion more to go.

"We are looking at it very carefully and we think there are methodological issues we have to clarify with the IMF," European Central Bank President Jean-Claude Trichet told a news conference after the G20 meeting. "I am not criticizing the IMF we have to look at it very carefully."

U.S. regulators have put 19 of the largest U.S. banks through stress tests to assess whether the government will have to pump more money into them. Geithner said the results of the stress tests were not discussed at the G7 meeting.

The Federal Reserve released a paper on Friday outlining the methodology of the tests, and said banks needed to hold substantially more capital than is usually required to weather a potential worsening of the recession.

Canadian Finance Minister Jim Flaherty, who has expressed frustration over the slow pace of progress in fixing the banks, said after the G7 meeting that he was pleased with U.S. and British efforts to implement their bank repair plans.

"We're going in the right direction," he said.

With attention firmly focused on the banking sector, the G7 made no changes to its closely watched statement on currency markets, repeating its February caution that excess volatility and disorderly movements in exchange rates were unwelcome.

How The Recession Can Spice Up Relationships

The economic crisis has a huge upside: an opportunity to improve your relationship.

Layoffs, furloughs and shrinking 401(k)s may not seem like natural aphrodisiacs, but according to experts in relationships and sex, the depressed financial picture is leading some couples--and singles--to better appreciate each other.

"The recession brings with it a re-evaluation of what's important in life," says Manhattan psychoanalyst Amy Joelson.

In Depth: Eight Ways The Recession Can Spice Up Relationships

It's too early for empirical studies evaluating the effect of the recession on the sex lives of Americans, notes Chicago psychiatrist Paul Dobranksy, author of The Secret Psychology of How We Fall In Love. He says it takes years to compile a meaningful picture of how the downturn has changed the intimate lives of Americans. "See me in five years," he says.

But anecdotal information exists. While many of Joelson's patients, for example, have expressed anxiety about spending money on frivolous items, they still feel good about engaging in physical intimacy. "People wrestle with guilt about indulging in all kinds of pleasures, like going shopping or eating at expensive restaurants; that's seen as politically incorrect," she says. "But you don't need a 401(k) to have sex."

Physical intimacy is also a great way to relieve anxiety, tension and stress, points out Wayne, N.J., psychologist and dating coach Victoria Zdrok, author of Anatomy of Pleasure: The Head to Toe Guide to Better Sex. "People are turning to sex to boost their endorphin levels," observes Zdrok. Tightening budgets means more time at home, says Zdrok. "That allows people more one-on-one time and more intimacy," she says, "which leads to more sex."

Because of all the bad news about plunging markets and escalating unemployment, says Zdrok, some couples may be turning off the television and turning to one another. "It's been shown that people who watch more TV have less sex," she notes. "In one Italian study, when television was removed from the bedroom, couples' sex lives improved."

Another upside of the down economy: With many Americans out of work or on furlough, people have more time to exercise.

"Exercise is one of the ways people deal with stress and anxiety," notes New York City relationship counselor Ian Kerner, author of Sex Recharge: A Rejuvenation Plan for Couples and Singles. "Exercise is also a great libido-booster and a great part of sexual health," adds Kerner. "Exercise increases blood flow and predisposes you to sexual arousal."

Layoffs and furloughs can also shake up the daily grind and introduce the concept of novelty, which can spur spontaneous sex. "Whenever you introduce novelty, it stimulates dopamine transmission in the brain," notes Kerner. "I advise couples to use the recession to break out of routines."

Experts agree that tough economic times can motivate couples, as well as singles, to turn to simple pleasures. For singles, that can mean greater use of dating Web sites followed by low-key in-person meetings that can lead to more intimate conversations and deeper relationships.

"To go out there and use the more traditional method of a night on the town--that's too costly," points out Manhattan psychotherapist and advice columnist Jonathan Alpert.

Couples, likewise, can forgo lavish vacations or dinners in upscale restaurants in favor of affordable pastimes that stimulate bonding, like cooking dinner at home, renting a movie, cuddling on the couch or taking a walk in the park and talking. "All of these activities," says Alpert, "encourage an intimacy and a closeness that improves the quality of a couple's sex life."

Dobranksy agrees. "Anybody who loses a job is going to take a hit to his dignity," he says. "That presents a couple with an opportunity to rediscover the non-material values in life, which are certainly the stuff of love and romance."

Meantime, notes psychoanalyst Joelson, couples should stay focused on the value of an active sex life. "Sex is a great expression of intimacy in a relationship," says Joelson. "It's a really optimistic thing, to have sex; there is hope built into the belief that together, you can create something better."

10 Countries in Deep Trouble

Matthew Bandyk

While the collapsing U.S. housing market may be at the root of the global economic recession, the downturn's effects are being felt hardest overseas. Take Iceland, for instance. Its biggest banks failed, its economy may shrink 10 percent this year, its government fell, its central banker was sacked, the country was bailed out with a $2.1 billion IMF loan, and 7,000 people (in a country of 300,000) took to the streets in protest.

Which countries have the greatest chances of being the next stories of failure? U.S.News looked at some countries that are currently facing severe economic disruption that endangers their standards of living, attractiveness to foreign investors, and political stability. First, we examined what Moody's Investors Service and Standard & Poor's had to say about them. These firms rate the risk of sovereign bonds, securities that finance the debt of a country. Many of the countries we identified have poor bond ratings or ratings under review for a downgrade, showing that these governments are perceived as being at greater risk of defaulting on their debt.

Second, we looked at what global markets think about a country's debt, based on data from Markit. The financial information company provides daily pricing on credit-default swaps, contracts between two parties that provide a kind of insurance on corporate and government debt. Analysis was also supplied by credit-rating organization AM Best. It ranks countries into five tiers based on the risk to insurers posed by the countries' economic, political, and financial systems. Using these analyses, here are five countries in deep trouble and five worth keeping an eye on.

Five Countries in Deep Trouble

Mexico. Thousands of would-be tourists from America and elsewhere had to cancel spring break trips to Mexico due to ongoing violence related to the drug trade. Mexico was the second country recently identified by the U.S. Joint Forces Command as possibly poised for a "rapid and sudden" collapse. Mexico's "politicians, police, and judicial infrastructure are all under sustained assault and pressure by criminal gangs and drug cartels," says the report.

The violence and tourism decline could not come at a worse time. Economists predict a 3.3 percent contraction of the Mexican economy this year. The poor economic growth means that the government is getting strapped for funds. In April, it asked the International Monetary Fund for a $47 billion loan. While credit-rating agencies don't expect Mexico's debt to grow riskier soon, and the risk of its sovereign derivatives has not skyrocketed like some other countries on this list, serious problems still remain for the Mexican economy. The country depends on the United States to consume its exports and pay Mexican immigrants who send money back home. If the U.S. recession deepens, Mexicans will feel the pain as much as Americans.

Pakistan. The country has already almost gone bankrupt once in the past six months. In October, only an emergency $10 billion in support from the World Bank, the Asian Development Bank, and others prevented Pakistan from defaulting on its debt. During that crisis, the cost of insurance on Pakistan's debt exploded. Even though the situation has calmed since then, investors are not getting comfortable with Pakistan. It still costs $2.2 million a year to insure $10 million of Pakistan's sovereign bonds.

The economic situation isn't all bad. The Asia Development Bank recently predicted that Pakistan's economy will grow 4 percent in the next fiscal year beginning in July, compared to 2.5 percent growth estimated this year. But the wild card that could change everything is the country's political situation. Pakistan is one of the most unstable countries in the world. On April 13, White House counterterrorism consultant David Kilcullen said that a political collapse in Pakistan could come within months. A 2008 report from the U.S. Joint Forces Command identified Pakistan as a country at risk of a "rapid and sudden collapse," one that would create a devastating security problem for the world. The report says that "the collapse of a state usually comes as a surprise." Anyone banking their money on Pakistan's economic growth might not know what hit them.

Ukraine. While Iceland may have suffered the worst financial collapse of the global recession, Ukraine has also received a dubious honor: It had the priciest sovereign credit-default swaps for the first quarter of the year. It currently costs about $3.9 million to insure $10 million of Ukrainian five-year sovereign bonds. A year ago it cost just under $3,000. S&P rates them CCC--the seventh-best (out of eleven) rating, indicating that Ukraine is vulnerable to nonpayment.

As the government tries to solve the crisis, Ukrainians are getting squeezed. Kiev, one of the oldest capitals in Europe, has had to shut down free clinics, schools, and increase public transportation costs in order to close a deficit. The Institute for Economic Research and Consulting is forecasting a GDP contraction of 12 percent. The Ukrainian stock market has fallen 25 percent so far this year. The Ukrainian currency, the hyrvnia, is also plummeting, falling 35 percent against the dollar in the last six months. The Ukrainian government's efforts to shore up the currency, including setting a floor for which the hryvnia can be traded, have so far been in vain.

Venezuela. Hugo Chavez has inextricably tied the Venezuelan economy to oil, and that didn't look so bad before the financial crisis. Oil profits helped deliver massive economic growth, so much that 4.8 percent growth in 2008 was seen as a disappointment. But with oil prices having plunged due to the global slowdown, the fortunes for Chavez's strategy have changed. Many economists are predicting negative growth for Venezuela this year, such as the 4 percent drop predicted by Morgan Stanley.

From June to September, the cost for an investor to buy insurance against Venezuela's debt almost doubled. Right now, to protect $10 million in Venezuelan sovereign bonds against default, an investor would need to spend $1.8 million each year. S&P gives Venezuela's sovereign bonds a BB rating, meaning Venezuela faces "major ongoing uncertainties" that could lead to "inadequate capacity" to meet its obligations. S&P also has a negative outlook for the bond rating, meaning it could decline in the next six months to two years.

Argentina. The Argentine economy is notorious for its boom and busts. The country last defaulted on its debt in 2002, but enjoyed economic improvements through most of this decade. During that last financial crisis, citizens staged protests known as cacerolazos, which means "banging of pots and pans," but the demonstrations resulted in broken windows and fires. Argentina has not seen that kind of violence stemming from the current financial crisis yet, but foreign investors are worried the economy is back to "bust" mode. CMS Datavision ranks Argentina as having the third most expensive credit derivatives in the world. Right now, Markit composite prices show an annual cost of $3.2 million for an investor to buy protection against $10 million of Argentina's sovereign debt. Moody's rates Argentina's sovereign bonds as B3, meaning a high, speculative credit risk, and S&P as B-, meaning that more bad economic news for Argentina could lead to default. The Organization for Economic Cooperation and Development gives Argentina a seven, its riskiest classification rating.

Five Countries to Keep An Eye On

Latvia. Iceland isn't the only country that's seen massive protests against economic hardship. In January, a 10,000-strong demonstration in Latvia's capital, Riga, turned into a riot. Tremendous economic growth since the end of the Cold War earned Latvia its place as one of the "Baltic Tigers." GDP growth was 11.2 percent in 2006, for instance. But Latvia's Ministry of Finance forecasts a 14.9 percent drop in GDP this year. Latvia is getting a $7.5 billion emergency loan from the IMF, but the organization is sitting on part of the money because of the Latvian government's failures thus far to reform its budget. The past two years have seen the cost of Latvia's credit default swaps increase over one-hundred fold. Moody's rates Latvia's bonds as Baa1, or "moderate" credit risks, and projects that they could become riskier bets in the medium term.

Croatia. The country's beaches on the Adriatic Sea draw so many visitors that tourism is almost 20 percent of the country's GDP. But since the recession is taking a bite out of travelers' pocketbooks, Croatia's economy is getting bitten as well. The government forecasts unemployment could rise as high as 12 percent this year. And a recent poll found that 78 percent of Croatians think the country is going in a bad direction, with unemployment cited as the primary reason. All this bad economic news might be one of the reasons S&P projects a possible rating decline for Croatia's BBB-rated bonds. The BBB rating means that Croatia does not have payment problems yet, but are in a position where their ability to pay for debt could be easily weakened.

Kazakhstan. While the Central Asian nation's GDP has grown in recent years, Kazakhstan has two problems that have created the potential for economic disaster: a reliance on foreign lending and a reliance on oil. Kazakhstan holds 3.2 percent of world's oil reserves. But the soaring oil prices that have boosted Kazakhstan's economy are no more, and investors have pulled money out of Kazakhstan in response. The cost of buying protection against Kazakhstan's debt has skyrocketed about 75 percent during the past year. The cost is back up to a peak reached in October, and it currently costs $875,000 a year to insure $10 million of Kazakhstan's debt. S&P has a negative outlook on Kazakhstan's BBB-rated sovereign bonds, meaning they could get riskier in the next six months to two years.

Vietnam. Unlike many of the other countries on this list, Vietnam has had some good news recently. The Asian Development Bank forecasted Vietnam's economic growth at 4.5 percent for the next year, the highest in Southeast Asia. Yet the country just registered its slowest economic growth in a decade. A survey found that 46 percent of Vietnamese were afraid of unemployment in January, up from 9 percent in September. Both Moody's and S&P have a negative outlook for Vietnam's sovereign bonds. The price of its sovereign derivatives has almost doubled in the past year. Vietnam falls into the riskiest of the five tiers as rated by AM Best. In particular, the firm identifies Vietnam's financial system, plagued by "relatively poor infrastructure and cumbersome bureaucracy," as "very high" risk.

Belarus. Minsk, the capital of Belarus, was mostly destroyed during World War II and much of the city was rebuilt in the form of hulking, utilitarian, Soviet-style buildings. Belarus also retains a heavy Soviet influence in its financial system--all but one of the country's 31 banks is controlled by the state, according to AM Best. Because of Belarus's failure to reform its financial system, the firm gives the country its highest score for financial risk. Even though Belarus scores relatively well for political stability, that economic rating is enough to push it into the riskiest of the report's classifications.

Belarus's problems aren't just speculative. Although its economy is still growing, the IMF expects it will expand 1.4 percent this year, compared to 10 percent last year.The country's government has also been approved for a $2.46 billion IMF loan. But the IMF now forecasts that the country will need a further $10.7 billion in 2009. Still, other experts disagree about just how fragile Belarus's economy is. Its bonds are rated as B1 from Moody's, meaning high credit risk but also at the top of the pack of the high-risk countries.

Long Odds? Three Scenarios for the Economy's Path

by David Wessel

There is no doubt where the economy is now. "By any measure, this downturn represents by far the deepest global recession since the Great Depression," the International Monetary Fund declared Wednesday.

But there's more than the usual uncertainty about where it is going. The key is the U.S. Even though its slice of the world economy is smaller than it once was, it's still huge. The U.S. led the world into the abyss, and it will lead the world economy out of it.

But how fast and when?

The alphabet can help to imagine the possibilities and the path of the economy. There's the letter V: the kind of quick rebound that usually follows a deep recession. Or U: a longer recession and slow recovery. There is L: years of painfully slow growth. And W: a temporary upturn as the economy feels the jolt of fiscal stimulus that quickly wears off. Finally, there's the big D, not the shape but another Great Depression.

With history a guide, consider three starkly different scenarios.

The V

The late Victor Zarnowitz, a student of the business cycle, had a rule: "Deep recessions are almost always followed by steep recoveries." The mild recession of the early 1990s and early 2000s were followed by mild recoveries. But the U.S. economy grew faster than a 6% pace in the four quarters after the deep 1973-75 recession and faster than a 7.75% pace after the even deeper 1980-82 downturn.

"In deep recessions," says Michael Mussa of the Peterson Institute for International Economics, "there is usually a growing sense of gloom as the recession deepens." Then the forces that triggered recession -- say, plunging home prices -- abate. The adrenaline of tax cuts and government spending kicks in. With inventories so lean, the slightest uptick in demand prompts a sharp increase in production, and the natural dynamism of capitalism reasserts itself.

"Experience suggests all of this should work, and I believe it will," Mr. Mussa predicts. Governments have administered huge doses of fiscal and monetary stimulus. Home-building and car-buying are so low they can't fall much further. Many consumers shy away from buying because they're frightened, not broke, and that state of mind can change quickly and liberate pent-up demand.

But the Federal Reserve caused the deep recessions of the 1970s and 1980s when it put its foot on the brake to stop inflation; it ended them when it let up. This time, Fed has its foot to the floor and the economy is still slowing. And so much stock-market and housing wealth has evaporated that a quick turn in consumer spirits seems unlikely. Plus, the repair of the banks remains far from complete, restraining lending.

The odds of the V: 15%.

The Big D

If one asked a roomful of economists two years ago to put odds on a repeat of the Great Depression, nearly all would have said zero. In early March, The Wall Street Journal posed the question to about 50 forecasters -- defining depression as a decline in output per person of more than 10%, four times worse than the decline the IMF anticipates. On average, they put odds at one in seven; several put them above one in four.

"This is a Depression-sized event," says economic historian Barry Eichengreen of the University of California at Berkeley, citing the global decline in industrial production and world trade. The big difference: In 1929, governments dithered, or worse. In 2009, they've rushed to the rescue.

To go from today's deep recession to a depression something would have to go wrong. It could be a financial catastrophe on the scale of last fall's bankruptcy by Lehman Brothers or another panic-inducing event. Or a crash in the dollar, one that forces interest rates up at just the wrong moment. Or it could be political gridlock that stops governments in the U.S. or Europe from spending enough to fix the banks before a big one fails, or keeps them for doing more on the fiscal or monetary fronts as the economy deteriorates.

Or it could be virulent deflation that pulls down prices and incomes, making debts, which don't fall when prices do, a heavier burden. The textbook remedy is easy money and big government deficits. But so much of that has been tried it's easy to question its efficacy or to imagine resistance around the world to doing.

The odds of the big D: 20%.

The L

For a decade after its stock market and real-estate bubble burst in 1990, Japan bumped along at an annual growth of just 0.5%. It was dubbed the Lost Decade, and it could happen here. The recession ends but the economy plods along, growing too slowly to bring down unemployment for years.

As the IMF observed this week, recoveries following recession caused by financial crises are "typically slower." Those following recessions that occur simultaneously across the globe "have typically been weak." Back in the 1990s, as U.S. banks struggled, the Fed talked a lot about "financial headwinds." Those were zephyrs compared to the gale-force winds that the economy confronts today.

If financial markets stabilize but don't improve steadily, or if housing prices continue to drift down, or if confidence remains shaky, the U.S. economy could languish for a time. American consumers, once known for spending in the face of prosperity or adversity, could finally decide to prepare for retirement by saving more, having just learned that neither 401(k) retirement accounts nor home values rise inexorably. And the U.S. can't count on increasing exports, the solution when emerging-market economies run into financial trouble and the reason Japan didn't do even worse in the 1990s. The rest of the world is in no shape to buy.

An unfolding depression could scare Congress to act boldly, but the L is less ominous -- and perhaps more likely as a result. There would be months when the economy appeared to be strengthening so the temptation to wait-and-see would be strong.

Put the odds of the L at 55%. That adds to 90%. So put 10% odds on the U, less pleasant than the euphoric V but far less painful than a Lost Decade. That's the rough consensus of economic forecasters; it means U.S. unemployment grows for another year and a half.

Bottom line: The odds favor a long slog.

Home prices to fall more

BUYERS snapping up homes in recent weeks may be jumping into the market way before it has reached the bottom, says new research.

Real estate consultancy DTZ is tipping a gradual property market recovery only from the middle of next year so people buying now could be spending more than they need to.

The firm bases its view on a new report from its Asia Forecasting unit. This shows how a slump - or recovery - in the stock market is always mirrored in the property market, but only after one or more quarters.

Or to put it more bluntly: the housing market will not recover until at least one quarter or even a year after the stock market recovers.

And as any stock market investor knows, the Straits Times Index is well down on its 2007 peak, even though it has gone up slightly recently.

'The STI reflects people's view of the economy so its recovery will really depend on clear signs of an economic recovery,' said DTZ's senior director, consulting & research, Ms Chua Chor Hoon.

Experts have long noted that a recovery in the stock market typically precedes an economic recovery, with a recovery in the property market after that.

'It's all corelated in one way or another. The stock market is usually the earliest indicator but it's not hard and fast... its timing might be off,' said Daiwa Institute of Research analyst David Lum.

DTZ's study also underlined the high levels of unsold stock held by developers, another drag on prices and an eventual recovery.

DMG & Partners Securities investment analyst Brandon Lee sees the property market bottoming out only in the first half of next year.

Geithner says crisis unprecedented in modern times

Martin Crutsinger, AP Economics Writer

WASHINGTON (AP) -- Treasury Secretary Timothy Geithner said Wednesday the United States bears a substantial share of responsibility for a global economic crisis that could cost the world up to $4 trillion in lost output this year alone.

While the crisis started in the U.S., Geithner said its damage has spread widely with serious challenges facing much of the globe.

"Never before in modern times has so much of the world been simultaneously hit by a confluence of economic and financial turmoil such as we are now living through," Geithner said in remarks to the Economic Club of Washington.

Geithner cited the International Monetary Fund's new economic forecast Wednesday that projected global economic output will fall 1.3 percent this year, the first decline in more than six decades. Compared with a normal global growth rate of 4 percent, the lost output could amount to as much as $3 trillion to $4 trillion, he said.

Still, there are tentative signs the severity of the downturn was beginning to moderate. Some measures of consumer spending and industrial output had started to stabilize and financial conditions had improved "modestly," Geithner said.

It also was encouraging that the U.S. and other countries had responded with unprecedented speed and force to deal with the crisis, but going forward it will be critical for countries not to relent in their efforts to boost economic growth and stabilize their financial systems, he said.

"The actions now in place and in the pipeline offer the strongest basis for confidence that we will begin to lay the foundation for global recovery," Geithner said.

The plan put forward by the Group of 20 major industrial countries and developing nations in London on April 2 offered a solid basis for support, and finance ministers meeting this weekend would be seeking to build on those commitments, he said.

Following his speech, Geithner avoided directly answering a question about the chances the government will be able to recoup the $182 billion in support it has provided to troubled insurance giant American International Group Inc.

Geithner called AIG an "extraordinary challenge," but said that the government-installed managers were working hard to "help improve the odds that the taxpayer is repaid."

Global economy is expected to shrink this year

WASHINGTON (AP) -- The world economy is likely to shrink this year for the first time in six decades.

The International Monetary Fund projected the 1.3 percent drop in a dour forecast released Wednesday. That could leave at least 10 million more people around the world jobless, some private economists said.

"By any measure, this downturn represents by far the deepest global recession since the Great Depression," the IMF said in its latest World Economic Outlook. "All corners of the globe are being affected."

The new forecast of a decline in global economic activity for 2009 is much weaker than the 0.5 percent growth the IMF had estimated in January.

Big factors in the gloomier outlook: It's expected to take longer than previously thought to stabilize world financial markets and get credit flowing freely again to consumers and businesses. Doing so will be necessary to lift the U.S., and the global economy, out of recession.

The report comes in advance of Friday's meetings between the United States and other major economic powers, and weekend sessions of the IMF and World Bank. The talks will seek to flesh out the commitments made at a G-20 leaders summit in London last month, when President Barack Obama and the others pledged to boost financial support for the IMF and other international lending institutions by $1.1 trillion.

The IMF's outlook for the U.S. is bleaker than for the world as a whole: It predicts the U.S. economy will shrink 2.8 percent this year. That would mark the biggest such decline since 1946.

Among the major industrialized nations studied, Japan is expected to suffer the sharpest contraction this year: 6.2 percent. Russia's economy would shrink 6 percent, Germany 5.6 percent and Britain 4.1 percent. Mexico's economic activity would contract 3.7 percent and Canada's 2.5 percent.

Global powerhouse China, meanwhile, is expected to see its growth slow to 6.5 percent this year. India's growth is likely to slow to 4.5 percent.

All told, the lost output could be as high as $4 trillion this year alone, U.S. Treasury Secretary Timothy Geithner estimated.

Besides trillions in lost business, a sinking world economy means fewer trade opportunities and higher unemployment. It raises the odds more people will fall into poverty, go hungry or lose their homes. And while keeping a lid on interest rates and consumer prices, the global recession increases the risk of deflation, which would drag down prices and wages, making it harder for people to make payments on their debt.

The jobless rate in the United States is expected to average 8.9 percent this year and climb to 10.1 percent next year, the IMF said.

In Germany, the jobless rate is expected to average 9 percent this year and 10.8 percent next year. Britain's unemployment rate is projected to rise to 7.4 percent this year and to 9.2 percent next year.

Brian Bethune, economist at IHS Global Insight, estimates that at least 10 million jobs could be lost this year, mostly in the United States and Europe, because of sinking global economic activity.

He and other economists said the 1.3 percent projected decline would be the first in roughly 60 years. In a report issued in mid-March, the IMF predicted global activity would contract this year "for the first time in 60 years," though it didn't offer a precise estimate then.

Next year, the IMF predicts the world economy will grow again -- but just 1.9 percent. It said this would be consistent with its findings that economic recoveries after financial crises "are significantly slower" than ordinary recoveries typically are.

All those factors tend to weigh against prospects "for a speedy turnaround," the IMF said.

In 2010, the IMF predicts the U.S. economy will be flat, neither shrinking nor growing. Germany's and Britain's economies, meanwhile, will shrink less -- by 1 percent and 0.4 percent respectively -- it estimates.

Others countries, such as Japan, Russia, Canada and Mexico are projected to grow again. And China and India should pick up speed.

The financial crisis erupted in the United States in August 2007 and spread around the globe. The crisis entered a tumultuous new phase last fall, shaking confidence in global financial institutions and markets. Total worldwide losses from the financial crisis from 2007 to 2010 could reach nearly $4.1 trillion, the IMF estimated in a separate report Tuesday.

The crisis has led to bank failures, wiped out Lehman Brothers and forced other big institutions, like insurance giant American International Group, to be bailed out by U.S. taxpayers.

And it's triggered radical government interventions -- such as the United States' $700 billion financial bailout program and the Federal Reserve's $1.2 trillion effort to lower interest rates and spur spending.

Actions by the United States and government in other countries have helped ease the crisis in some ways. But markets are still not operating normally.

The 185-nation IMF, headquartered in Washington, is the globe's economic rescue squad, providing emergency loans to countries facing financial troubles. It has urged countries to take bolder actions to bolster banks.

The IMF also has pushed countries to work more closely together. It favors coordinating fiscal stimulus efforts through tax reductions or greater government spending to stimulate the appetites of consumers and businesses. And it warned countries to resist the temptation of enacting protectionist trade measures.

"Fiscal policies had made a gigantic difference," said IMF Chief Economist Olivier Blanchard. Without them, the hit to the global economy would have been much greater and pushed it perilously close to "a depression," he added.

Because the world economy won't be back to normal next year or perhaps even in 2011, Blanchard urged countries to spend money on big public works projects -- something the Obama administration is doing -- to bolster activity.

Bold policy actions could set off a mutually reinforcing "relief rally" in financial markets and a revival in consumer and business confidence, the IMF said in its report. But it remains concerned that these policies won't be enough to break the vicious cycle whereby deteriorating financial institutions feed, in turn, weaker economic conditions.

"The problem is that the longer the downturn continues to deepen, the slimmer the chances that such a strong rebound will occur, as pessimism about the outlook becomes entrenched and balance sheets are damaged further," the IMF said in the report Wednesday.

With the global economy stuck in a recession, the risks of a dangerous bout of deflation -- a prolonged decline in prices that can worsen the economy -- has risen. The IMF cited a "moderate" risk of deflation in the United States and in the 16 countries that use the euro. It saw a "significant likelihood of deeper price deflation" in Japan.

Smart Money Moves for Young Investors

By Ben Levisohn

At a conference on financial literacy on Apr. 20 in Chicago, Federal Reserve Chairman Ben Bernanke said it was time for Americans to learn to manage their money. Ramit Sethi couldn't agree more. The 26-year old personal finance guru has made it his mission to help Americans do just that and he tries to make it as simple as possible. In his new book, I Will Teach You to Be Rich, and on his blog of the same name, Sethi shows twentysomethings how they can automate their financial decision-making and learn how not to overanalyze. This is especially true when it comes to investing. He says money should be automatically diverted to investment accounts, then automatically invested and rebalanced, according to a set calendar. Sethi met with BusinessWeek's Ben Levisohn on Apr. 17 to discuss how fearful investors can get started in this vexing environment.

You're only 26. How did you start investing?

When I was in high school, I applied for a number of scholarships because my parents told me we had to. The first scholarship, for $2,000, was written to me and I invested it in the stock market. This was back in 2000. I lost a lot of money. I still have some of those stocks. One is worth 90% in total. I probably lost 99% of that money. That was a great eye-opener. It made me realize that just because you see a stock on TV that does not mean you should invest in it. Just because you're wearing clothes from Gap (NYSE:GAP - News) doesn't mean it's a good investment. That's when my eyes started to open. But if you ask most people, "hey, what investments do you have," they say, "you mean stocks?" Which causes me to throw my hands up in the air.

So you're not a big believer in buying individual stocks. How should people invest?

I want to reduce choice and encourage people to invest. For most, a target date fund is perfect. That's the 85% solution. It's not perfect, but it's good enough. There's no need for people to rebalance by themselves. The fact that we have 60- to 70-year olds losing 50% of their money speaks volumes that just because you should rebalance your investments, it doesn't mean you will. Just like you should practice safe sex does not mean you will.

But what if investors want a little more control?

If you really want to tweak it, if you're a type-A nerd and you're reading about all different asset allocations, then let me show you how to do this. Here's a recommendation: the Swensen model, by Yale's Chief Investment Officer David Swenson. Take this and tweak it as needed. (The Swensen Model allocates 30% to domestic equities, 15% to developed world international equities, 5% to emerging-market equities, 20% to real estate funds, 15% to government bonds, and 15% to TIPs.)

But we need to build systems around automating rebalancing so people are not depending on more will power. Investing and personal finance -- we've shown that it's not about more will power. It's about creating systems that do this by default for us.

So you wouldn't recommend trying to time the market?

There are people now who pulled their money out. And when the market comes up, they will be some of the last that get in. It drives me crazy. They think this is binary. You either put money in the market or pull it out. That's not how investing works. There are so many gradations and nuances. You can change asset allocation, you can diversify differently, you can change your time horizon. There are a million things you can do. If you try to time the market, then you are a fool. I'm trying to focus on the long term. I really believe in investing for the long term.

Have you changed your outlook because of the bear market?

I was given the opportunity to completely revamp the book in light of the crisis, but the material stands on its merits. What I tell people is that what's in the newspaper today and what President Obama decided to do today has very little to do with your personal finances. Personal finances are personal. You can turn off your TV, close down all the Web sites for the next six weeks, and your finances, if you optimize them, would get much better regardless of what happens.

Young investors have watched their parents lose a good chunk of their retirement savings. What do you say to them to coax them into the market when they may feel like socking away their cash in a mattress?

Although it seems catastrophic, we're in our twenties and thirties and essentially the market is on sale. If I told you one year ago that the market would be 50% off for the same equities you're buying now, what would you have said? The answer, of course, is I would have been ecstatic. Now there's a lot of psychology and uncertainty involved and that's changing things.

How have your investments done in this environment?

I'm roughly indexed, so I was basically in line with the market.

Did you expect these kinds of losses?

I was surprised. The models don't predict this loss typically. We know there are a lot of problems with models. But as a young person, I'm comfortable knowing I can afford that kind of risk. I was consciously invested and am still consciously invested in a risk seeking way. My readers in their twenties and thirties who are invested are interested in the same. They understand this is a long-term play. They understand there are trade-offs. I'm comfortable knowing that not only do I have a long-term perspective, I'm comfortable managing money, earning more, so it can flow back into my infrastructure.

They're Hiring!

by Christopher Tkaczyk and Julianne Pepitone

As many big companies are announcing mass layoffs, these Fortune 100 employers have at least 150 openings as of mid-April.

It's no secret that many big companies are announcing mass layoffs and pay cuts in the recession. With 5.1 million jobs lost nationwide since 2008, and the current unemployment rate at the 25-year high of 8.5%, it's easy to feel down about the battered labor market.

But the job prospects aren't entirely bleak. We looked at the top 100 of this year's Fortune 500 list and found 28 with at least 150 job openings as of mid-April. Some, like Wal-Mart, say they're hiring thousands of people to staff new locations. Others, like Motorola, have hundreds of positions open in a variety of fields: engineering, sales, finance, marketing and project management.

Brush up the résumé and iron the suit. Your next job could be a click away.

1. Wal-Mart Stores

2009 Fortune 500 rank: 2

Headquarters: Bentonville, AR

Number of job openings: Thousands

What they're looking for: To staff new locations, Wal-Mart is hiring store managers, human resource managers, pharmacists, customer service associates and cashiers, among others.

2. Hewlett-Packard

2009 Fortune 500 rank: 9

Headquarters: Palo Alto, CA

Number of job openings: 150*

What they're looking for: HP is hiring in several areas of its businesses, including information technology, human resources, research and development, marketing, finance and administrative.

3. Bank of America Corp.

2009 Fortune 500 rank: 11

Headquarters: Charlotte, NC

Number of job openings: 1,860

What they're looking for: Positions are available in several areas including consumer banking, small business banking, credit cards, home loans, global banking, wealth management, technology, human resources, finance, communications, marketing and administration.

4. State Farm Insurance Cos.

2009 Fortune 500 rank: 31

Headquarters: Bloomington, IL

Number of job openings: 800+

What they're looking for: State Farm Insurance is hiring new insurance agents. There are positions in a variety of areas including claims and underwriting, finance, accounting and legal. The company aims to add 800 to 1000 new agent positions across the country, specifically in the Northeast, Texas and California.

5. WellPoint

2009 Fortune 500 rank: 32

Headquarters: Indianapolis, IN

Number of job openings: 1,225

What they're looking for: WellPoint is hiring health outreach specialists, nurse case managers, accountants, actuaries, claims representatives, customer care representatives, enrollment and billing representatives, account managers, marketing managers, business analysts and sales assistants.

6. Boeing

2009 Fortune 500 rank: 34

Headquarters: Chicago, IL

Number of job openings: 2,400

What they're looking for: Positions are available in various areas such as engineering, finance, communications, contracts, intellectual property, information systems, program and project management, operations, quality, marketing, supplier management and supplier quality, legal, business development and some administrative and support positions.

7. Microsoft

2009 Fortune 500 rank: 35

Headquarters: Redmond, WA

Number of job openings: 630*

What they're looking for: Positions are available in marketing, software development, customer service, information technology, operations, program management, small and medium business sales, software testing, administrative services, operations, user assistance and education, game design, content publishing, marketing communications, legal and finance.

8. MetLife

2009 Fortune 500 rank: 39

Headquarters: New York, NY

Number of job openings: 1,000+

What they're looking for: MetLife is hiring in the areas of information technology, human resources, finance, operations, call center, administration and sales (including individual policies, group, home loans - mortgage and reverse mortgages).

9. United Parcel Service

2009 Fortune 500 rank: 43

Headquarters: Atlanta, GA

Number of job openings: 3,070

What they're looking for: UPS is hiring part-time package handlers, mechanics, warehouse personnel, sales representatives and information technology professionals.

10. Medco Health Solutions

2009 Fortune 500 rank: 45

Headquarters: Franklin Lakes, NJ

Number of job openings: 300+

What they're looking for: There is selective hiring companywide. One division in particular, Liberty Medical, which serves the needs of patients with diabetes, is hiring for a number of customer service positions.

Copyrighted, CNNMoney. All Rights Reserved.

Worst-Case Scenario Survival Guide

by Amanda Gengler, Donna Rosato, and Penelope Wang

A grinding depression. Wild inflation. Endless unemployment ... How to deal with what could go very wrong.

So is this just a really, really bad year? Or the end of capitalism as we know it? These days it's all too easy to imagine almost anything happening to the economy. And to you.

You've probably already run the movie in your mind about the day you get the ax. Maybe you've even wondered if there's a point at which you'd just mail your house keys to the bank.

And then there's your portfolio. The words "great" and "depression" seem to be popping up together a lot more often. Is there something you should be doing? Like selling your stocks and burying cash and gold bars in the backyard?

Time to get a grip — not by ignoring the worst possibilities but by facing them head-on. Here, then, are answers to six ridiculously scary (but certainly not ridiculous) questions posed by today's economy.

Should I Prepare My Portfolio for a New Depression?

First, let's explain our terms. Economists broadly define a depression as a 10% drop in output and consumption. In the Great Depression our gross domestic product fell 25%. There are some frightening parallels between then and now: Banks are weak, and the economy is loaded up with debt. (See the graphic on the left.)

But historian Eric Rauchway of the University of California at Davis points to big differences too. Strange as it sounds, our financial system is vastly better regulated than it was then. Bank deposits are insured, and the Federal Reserve has taken an active role in trying to stem the crisis. Policymakers have in fact been trying to do everything their predecessors didn't — they're spending like mad, saving banks and loosening up money. (No guarantee that this will work, but it beats doing what clearly didn't work before.) Meanwhile, a social safety net adds stability to the economy that wasn't there in 1930.

That doesn't mean we're in the clear. Market crashes can increase the likelihood of a depression, says Harvard economist Robert Barro. Recently he and colleague Jose Ursua examined crashes and depressions in 34 countries. Based on that record, Barro puts the odds that the U.S. will slip into a depression at one in three, and the chances of another Great one at 6%.

Before you get out that shovel, remember that fear of a deep recession or depression has already pushed stocks down. Could they drop even further as the economy deteriorates? You bet. The stock market fell 25% in 1930 — and collapsed another 43% in 1931.

Then again, investors who bought stocks at the start of 1933 — with eight years of the Depression to go — earned an average of 9.4% a year over the next decade. It's hard to predict when the market will rebound, and it may happen well before the economic recovery is obvious. Try to time the turn, and you could miss a good chunk of the comeback gains.

But what if you just want all the risk out of your life now? You can switch to cash and high-quality bonds. Yields on Treasuries are low, but if consumer prices start to fall, as they did in the '30s, the real value of that income will be higher.

How much do you have to save to meet your retirement goals with bonds? Lots. Say you are a 45-year-old earning $100,000 with $250,000 stashed away. According to T. Rowe Price simulations, you'd need to save more than 40% of your annual income. If you can handle more risk than just bonds, Lou Stanasolovich of Legend Financial Advisers also recommends equity funds that can bet short — that is, make investments that rise in value when stocks fall.

What if High Inflation Makes a Comeback?

You've probably heard some scary talk about inflation lately. Sometimes the double-digit inflation of the 1970s is invoked; occasionally it's visions of Weimar Germany and people pushing wheelbarrows full of bills. The case for some future inflation isn't paranoid, but here again, it's tricky to position your investments for doomsday. For one thing, you'll have to decide which apocalypse to bet on.

If we actually get a depression (or a recession that comes close), the immediate to mid-range problem is likely to be deflation, which may be far worse than some inflation. Falling prices and falling wages can put the economy into what economic forecaster Gary Shilling calls a "self-defeating spiral." Consumers become reluctant to buy something today that will be cheaper tomorrow, and debts (like home mortgages) become tougher to pay off, further depressing demand. And some classic investments used to hedge against inflation — such as commodities — could lose you money during a depression/deflation cycle.

People warning of a return to '70s inflation or worse are often hawking gold investments. Gold is relatively easy to buy now (no vaults required), because you can use exchange-traded funds like SPDR Gold Trust. Except for run-ups during brief periods of high inflation or financial panic, however, gold has delivered lousy returns — on an inflation-adjusted basis, it's still trading far below its 1980 peak. "Gold is a purely speculative play, which offers no income and no guarantees," says Marilyn Capelli Dimitroff, a financial adviser in Bloomfield Hills, Mich.

All that said, for long-term investors inflation is a legitimate concern. Washington's spending and the Fed's easy money have Tom Atteberry, co-manager of FPA New Income fund, predicting that inflation will heat up in three to five years.

A diversified fund that invests in commodity-producing companies, such as T. Rowe Price New Era, could give you a hedge against rising prices without the extreme volatility of gold.

Treasury Inflation-Protected Securities, or TIPS, are an even easier call. Their principal is adjusted to keep pace with consumer prices, and they're cheap now because the market is still worried more about deflation. Unlike gold, the only way TIPS won't keep pace with inflation is if the U.S. defaults — and if that happens, you may be better off buying canned food and armor-plated doors.

Is it Ever a Good Idea to "Walk Away" From a Mortgage?

For all too many Americans this isn't even a question — they simply can't come up with their payment this month. But others face a complex tradeoff. Perhaps you can squeak out the monthly payment but have to turn down a better job in another town because your mortgage is too far underwater for you to sell your home. Maybe you're so far away from ever breaking even on the house (see chart above, right) that you just can't stand to keep throwing money at it. "Some people will find walking makes sense," says Dean Baker of the Center for Economic and Policy Research.

We'll leave the ethical implications of not paying a debt up to you. Here are the purely economic costs you'll have to weigh. First, there's your credit score. If you have a good score, it most likely will drop more than 100 points, according to credit scorer FICO, and the mark stays on your report for seven years. You'll be hard-pressed to buy again anytime soon.

And you should remember that potential employers and landlords may see your credit record, although some of the stigma of losing a house may be wearing off now that we're Foreclosure Nation. Compared with foreclosure, a short sale — where the lender lets you sell the house for less than you owe — might make it a bit easier to get a future mortgage. But it is likely to do just as much damage to your numerical credit score, according to FICO.

Then there are taxes. In the past, if a lender forgave a mortgage, you typically had to pay tax on that amount. A new law offers relief from most of those federal taxes. But it's only for a primary residence, and if you borrowed against the house for anything besides home improvement, you'll still owe tax on that part, says Mark Luscombe of tax publisher CCH.

Also, depending on your state's law and your type of mortgage, your lender may be able to go after you for the money. It is uncommon, but as the crisis grinds on, banks may get tougher. Consult an attorney and tax professional before making a decision.

And check the rental market in your area. You may not save as much as you'd think, especially after figuring in taxes and the burden of poor credit.

I Don't Have Much of an Emergency Fund if I Lose My Job. What Do I Do Now?

You need backup cash like never before. It's taking people longer to find work — a middle-aged worker now can expect an average of six months to rebound from a layoff, according to Moody's Economy.com. And if you have a very senior position it could take longer. So ideally you would have a year's worth of expenses saved, says Chicago-area financial planner Donald Duncan.

Whoa. A year? Even if you're halfway there, the recession will (we hope) be over before you can get all that money together. But don't let that paralyze you. You can get further along faster by halting contributions to your 401(k), IRAs, and college savings, and funneling that money into a high-yield savings account. "You can always turn those back on," says Duncan.

You also want to take a hard look at your 401(k) and IRA investment mix. Tapping retirement accounts for living expenses should be your very last resort, but if you have little or no other savings, you should face the possibility that things could come to that if you are laid off.

Before an emergency strikes, figure out what a year's worth of expenses will be. Subtract what you already have saved and what you might get from unemployment, severance, and possibly family. Whatever is left over might have to come from your retirement accounts. Remember, unless you borrow from a working spouse's 401(k), you'll have to pay federal and state taxes and a 10% penalty on anything you take out of a 401(k) or traditional IRA early. (Like we said, last resort.)

Figure out how much you need to protect, and shift it into money markets or bonds. Perhaps the only thing worse than drawing down your retirement fund early is needing to do so and finding out there's no longer enough there.

I'm Sure I'll Get Laid Off. How Do I Fight for My Severance?

First, resist the inevitable urge to slack. This is not the time to back off from a big project — if you can embed yourself in that one last critical task, you may be able to stick around longer. (Ask an AIG trader how this works.) When the hook does come, don't resign yourself to taking whatever they give you, and don't sign anything until you've figured out your strategy.

Start by collecting office scuttlebutt. Find out what other employees got in their packages and what your manager's goals for this layoff are. If he's been ordered to reduce headcount rather than hit cost numbers, for example, you may have a better chance of sweetening the deal.

Haggle as much as possible with your boss, not the HR guy whose job is to gently push people out the door. To be blunt, guilt works better on your manager. "The only way to get more is to negotiate with someone who knows you and is willing to go to bat for you," says Lee E. Miller, an employment lawyer and author of Get More Money on Your Next Job ... in Any Economy.

You will probably have more leverage if you are part of a legally protected group, which includes being over age 40. Be subtle — you aren't threatening a lawsuit, just signaling that you know your rights and you aren't a pushover, says Miller. Start with these five magic words: "I just want what's fair."

Banks, Insurers, and Investment Firms Are All in Trouble. How Safe Are My Assets?

You have money stashed in lots of different accounts, so there's a good chance that a company you do business with will end up in the headlines for its financial woes. But you have some key protections.

Copyrighted, CNNMoney. All Rights Reserved.

Robust profits mask problems in bank sector

WASHINGTON (AFP) - - A string of surprisingly strong earnings reports suggests US banks are emerging from a near-death experience, but some analysts say the troubled sector faces more pain.

Bank of America on Monday joined the parade of financial firms reporting robust results -- a profit of 4.2 billion dollars in the first quarter, beating its performance for all of 2008.

Last week, Citigroup, JPMorgan Chase and Goldman Sachs all topped expectations with strong profits, a hopeful sign for an industry critical to recovery from the severe recession. Wells Fargo said its results would show "record" profits in the January-March quarter.

The apparent renewed health of banking sector comes in part from record-low interest rates from the Federal Reserve, which has cut its base rate to near zero as part of an effort to stimulate lending and growth.

"The banks are benefitting from a jump in mortgage refinancing as well as the fact that with interest rates so low, they are able to borrow cheaply and therefore profit more from lending," said John Wilson at Morgan Keegan.

"It ought to be difficult for a bank not to make money in this environment."

But banks are also setting aside large chunks of cash for bad loans, suggesting they anticipate more mortgages and credit card debt may sour.

Bank of America for example added a hefty 6.4 billion dollars to its loan loss reserve. Citigroup charged off some 4.6 percent of its loans.

Although Citi managed to show a profit of 1.6 billion dollars in the first quarter after losses of more than 18 billion in 2008, some analysts were unimpressed.

Citi's results included "several one-time items which muddied the waters in assessing the franchises underlying performance," said Goldman Sachs analyst Richard Ramsden.

Some analysts say that below the surface, banks are still fragile and may face another round of deep problems ahead, especially if the economy remains weak.

Martin Weiss at Weiss Research called the surge in earnings "bogus," and a result of tricks including an easing of mark-to-market accounting rules.

"Regulators have now agreed to let banks cover up their toxic assets by booking them at fluffy-high values, bearing little resemblance to actual market prices," he said. "Like magic, the bad assets are suddenly worth more."

Leahey said most banks have written off troubled mortgage securities but now face issues with rising defaults on other loans and credit cards.

"Banks are making money in traditional business lines but that could be swamped by a second tidal wave of losses tied to the economy," Leahey added.

Skewing bank results, say analysts, has been payments from bailed-out insurer American International Group (AIG), which shelled out tens of billions of dollars to banks to cover soured investments or so-called credit default swaps.

Goldman Sachs, for example, received nearly 13 billion dollars from AIG before it posted a quarterly profit of 1.8 billion dollars.

"In the case of Goldman, the AIG payments dwarfed the positive earnings," said Bob Eisenbeis, economist at Cumberland Advisors. "That's the reason that people are justifiably skeptical about these earnings."

Eisenbeis said banks "have every incentive to squeeze a lot of positives into this quarter" to end the vicious cycle of falling asset and stock prices that has led to a death spiral for some institutions.

Some skeptics say AIG, which has gotten a US government bailout worth some 180 billion dollars, is being used to "funnel" cash into the banking system.

"Anybody owed money by AIG got bailed out 100 cents on the dollar, and some people don't thing that is fair," Leahey said. "But you cannot not avoid paying 100 cents on the dollar without going to bankruptcy court."

Robert Brusca of FAO Economics said AIG is indeed a funnel but possibly the only way to avert a calamity in the banking sector that would deal a further blow to the economy.

"If you didn't help AIG, then AIG would not be able to pay off the banks, and we would be stuck with a collapsing banking system," he said.

Brusca said it remains unclear how much AIG has helped the bottom line of the banks because earnings reports lack such details.

"We know the banks are very impaired, they have a lot of problems," he said. "And we know they will get worse as long as the housing problems get worse."

Roubini: 'Suckers Rally' to Fade Amid Economy Woes

Well-known economist Nouriel Roubini, one of the few experts to foresee the current global crisis, said Tuesday a recent "suckers rally" in stock markets would fade as the U.S. economy continues to wither and the financial system suffers unexpected shocks.

Hopes the world economy will stage a faster recovery this year have fueled a six-week rise in global markets, with major benchmarks on Wall Street and in Asia up more than 20 percent over just six weeks.

But Roubini, a professor at New York University's business school and former adviser at the U.S Treasury Department, was doubtful and predicted markets would test the lows seen in March.

"For people who say there are green shoots, I seen only yellow weeds frankly," Roubini said at a conference in Hong Kong. "It's not a true recovery. It's just a bear-market rally, it's a suckers rally."

That's because the U.S. economy won't grow again until 2010 after contracting by 2 percent this year, he said. Unemployment will hit 11 percent next year and corporate earnings will come in worse-than-expected, he predicted.

Troubles in the financial sector, meanwhile, are far from over and will be worse than many expect. The results of the government's "stress tests" will show even the biggest 19 American banks don't have enough capital to cope with the huge losses they'll inevitably suffer on souring loans.

"The losses are much more than people are predicting and (the banks) have not reserved enough," Roubini said.

"It looks ugly for every one of those 19 banks, let alone the smaller ones," he added. "So it's going to be ugly for the financial system."

What we will miss about the prophets of doom

By David Marsh

For two years now, we have collectively gorged on tales of tears and deeds of downfall. If the bulls really are back and the economic and financial misery is about to end, here are 16 reasons why we will miss the gloomy times.

1. Role-play will be a lot less pleasurable. We have split the world into two pantomimic parts: the evil (the bankers) and the good (everyone else). In future, sorting out villains and victims will require more imagination.

2. The crisis has favoured inexpensive, socially constructive pastimes such as bird-watching, book-reading and communal needlework. More aggressive activities will soon be on the rise again.

3. The prophets of doom have had a field day. Yet we feel strangely comfortable with the Cassandras. We have enjoyed being told that the light at the end of the tunnel signals an approaching train. Now we will have to get re-acquainted with the optimists – a much more dangerous and unsettling bunch of people.

4. During the recession we profited from empty planes, hotels, restaurants and buses. When recovery comes we will have excess demand again. The good life, when it returns, will be a lot more crowded.

5. Prices have been falling. Is that not what everyone always wanted? Now everything – from apples to yachts – will be going up again. And won’t we now all start suffering from the Great Inflation? What would you rather have: Austerity Britain or Weimar Germany?

6. The central banks have become the people’s friends, with even the European Central Bank cutting interest rates. Not long from now, rates will be rising again. Goodbye to bargain-basement banks, dirt-cheap consumer credit and rock-bottom mortgages.

7. Many high street stores selling goods that no one wanted to buy have closed, prompting art galleries and other edifying enterprises to move in to the vacant sites. Alas, all these shops peddling tawdry knick-knacks will be back with us again.

8. People have started to eat less. Obesity has been on the decline. There has been a boom in home-grown vegetables. Once the economy starts to grow again, the nation’s health will plummet.

9. Dinner party talk of house price rises will return. People will no longer be ashamed of being estate agents. Sons and daughters will again want to go into investment banking rather than eco-farming.

10. We will have to get used to a new, painful jargon. “Quantitative easing” was bad enough. The vocabulary of recovery is still less elegant. Prepare for the central banks selling their enormous holdings of government bonds to drive up interest rates. Practise saying “quantitative firming”.

11. Service blossoms in a downturn. Waiters wait, usherettes usher, doormen open doors. GDP growth = general grumpiness.

12. It is good to have scapegoats. We have been delighted to blame the mess on George W. Bush, the former US president, and Gordon Brown, the UK prime minister. Now President Barack Obama will take all the credit for the upswing. He may become slightly smug. The upshot: anti-Americanism will surge.

13. Energy use will rise again. With a good strong depression under way, we thought we had global warming licked. Not so! We will have to endure a new and mighty role for Opec and the sprouting up everywhere of new nuclear power stations.

14. Reining in the Russians will be more difficult when the oil price starts to push through $100 a barrel. So it will be scowls, not smiles, from President Dmitry Medvedev. And let’s not even think of how the Iranians will start to behave.

15. The bane of the 21st century – current account imbalances – has been coming nicely under control. Now all this will be out of control again. The dollar will plummet. Worse news, the foreign exchange dealers will run out of other currencies to sell it against.

16. China will really start to throw its weight around when its export motor goes back into overdrive. Mandarin will be the new official language of the European Union. Forget the SDR. The central bankers’ new official currency: the renminbi.

Once everything gets back to normal, we will soon begin to discern the green shoots of a new crisis. And it will be a lot worse than the 2007-09 version. Happy times!

The writer is chairman of London & Oxford Capital Markets. He is the author of The Euro: The Politics of the New Global Currency

Australia recession inevitable

MELBOURNE, AUSTRALIA - Prime Minister Kevin Rudd conceded for the first time Monday that Australia was heading for a recession, saying it was inevitable in the current global downturn.

"The worst global economic recession in 75 years means it's inevitable that Australia will be dragged into recession," Rudd told a jobs forum in Adelaide.

The prime minister has previously couched his language carefully when discussing how the downturn will hit Australia, refusing to use the word recession in the face of repeated questioning.

Instead, he had said it would be "virtually impossible" for Australia's economy to record positive growth amid the global financial crisis.

But he spelled out the challenge facing the economy unequivocally Monday, saying seven of Australia's top 10 trading partners were in recession and the country could not avoid the same fate.

"The severity of the global recession has made it impossible for Australia to avoid a further period of negative economic growth," he said.

Australia's last recession was in the early 1990s but the economy posted its first negative growth figures for eight years in the final quarter of 2008, and is expected to do the same in the first three months of 2009.

That would officially tip Australia into recession, usually defined as two consecutive quarters of negative growth.

Rudd said the government was addressing the issue through economic stimulus packages worth more than 50 billion Australian dollars (31 billion US).

"The challenge for government is to cushion the impact of recession on business and jobs, through the actions we take, through economic stimulus strategy," he said.

The stimulus includes one-off cash payments of up to 900 dollars to more than seven million taxpayers, as Rudd's centre-left Labor government's attempts to kickstart spending.

It also includes spending 28.8 billion Australian dollars on schools, housing and roads over four years and tax breaks for small businesses.

Rudd said expansionist stimulus policies were a better way of dealing with the global recession than protectionism.

"If there's one core lesson to learn from the events of the 1930s, it's this - when you are faced with a synchronised global economic recession, don"t make it worse by erecting protectionist barriers against one another, because you take what is already a bad situation and make it much, much worse," he said.

"You shrink the global economy even more. You shrink jobs even more. You shrink those businesses which here depend on exports for their survival."

Rudd also defended the government's decision to guarantee bank deposits and inter-bank loans, saying it ensured Australian banks retained lines of credit in global markets.

"If I look at the comparisons between the stability of our financial system in the months since then against what has occurred in so many economies around the world, this was the right thing to do," he said.

Rudd's comments coincided with the release of official data showing the producer price index - the wholesale prices paid by business - fell for the first time in six years.

The index fell 0.4 percent in the March quarter after rising 1.3 percent in the previous three months, the Australian Bureau of Statistics said, upsetting economist predictions of an 0.6 percent rise.

Analysts said the figures indicated that March quarter inflation data due out Wednesday would show prices were under control, giving the Reserve Bank of Australia room to cut interest rates further.

The central bank has slashed rates from 7.25 percent to a 49-year low of 3.0 percent since last September in a bid to stimulate demand.

U.S. recession seen likely to go through summer

WASHINGTON (Reuters) - A key gauge of future economic activity fell for the third month in a row in March, showing the recession may persist through the summer, a nonprofit research group said on Monday.

The Conference Board's Leading Economic Index declined 0.3 percent last month, steeper than the 0.2 percent analysts polled by Reuters were expecting. It also fell 0.2 percent in February, which was originally reported as a 0.4 percent drop.

"The recession may continue through the summer, but the intensity will ease," said Ken Goldstein, an economist at the Conference Board, in a statement.

The index has not risen in the last nine months. In September and December it was unchanged and it experienced the largest drop during that period in October, when it fell 1 percent.

Real money supply and the yield spread both showed strength in March, but not enough to counterbalance the drag of building permits, stock prices and supplier deliveries.

Over the last six months, the index has fallen 2.5 percent, compared to the smaller 1.4 percent drop for the previous six months.

The Coincident Index, a measure of current conditions, fell for the third month in a row, by 0.4 percent, primarily due to declines in employment and industrial production.

The Lagging Index, which provides a glimpse backward, has been on a downward trend since July 2007, the Conference Board said. Its 0.4 percent decline in March was caused by weakness across all of its components, which include duration of unemployment, inventory levels, and outstanding loans.

"There have been some intermittent signs of improvement in the economy in April, but the leading economic index and most of its components are still pointing down," Goldstein said.

(Reporting by Lisa Lambert; Editing by Neil Stempleman)

Analyst: Bank Hurricane Not Over -- We're in Eye of Storm

With several big banks reporting profits this quarter, pundits are saying the bank crisis is over. The DOW is up nearly 30% from its low, Goldman and other firms are rushing to pay back the TARP, and financial stocks have soared.

Keep dreaming, says Josh Rosner, Managing Director at Graham Fisher, an independent financial-services research firm.

Josh thinks the quarter the banks have just reported may be their best of the year. There's bad news looming just over the horizon, he says--when the loan loss cycle begins in earnest.

The deterioration of construction and development loans, the bread and butter of regional and community banks, will soon spread.

Says Rosner:

* “We’re about to see the loss cycle really start in earnest. I think that’s actually where the bank crisis spreads from the 19 or so of the largest banks into the 8500 banks in our country….”

* “I think that second half story hasn’t been accounted for in provisions heretofore very acceptably. And I think the loss rates are going to be staggering. And I think that’s where we going to realize that the crisis is redoubling upon itself.”

In order to put the banking crisis behind us, Josh says, the government will have to recognize that it can't save every bank. It will then have to draw a line in the sand--helping the strong firms and winding down the weak ones. At best, this process will take another two years.

Why Contrarians Make Money And Trend Chasers Lose Money

Simon Maierhofer

Don't you hate being left out? Going against the grain is usually the unpopular direction to go. Nobody likes to be the oddball out. For the sake of popularity, humans tend to conform to the general trend eventually, especially if the trend continues to persist.

As it turns out, when it comes to investing, being the oddball is much more profitable. Oddballs in the investment community are considered contrarians and contrarian investors have been one of the few to actually book profits over the past year or so.

If you are willing to exchange some of your trend conforming popularity in return for profitability (don't worry, making money will once again increase your popularity score), this article is for you.

Trend chasing - a losing proposition

Most investors - novices and pros alike - rely on news and news- based forecasts to make their buy/sell decisions. News is always good at the top and bad at the bottom. Excessively bullish news will trick you into the market before it falls, excessively bad news will squeeze you out of the market before it bounces.

Here are a few examples to illustrate what I mean: Equity mutual fund cash reserves reached an all-time low of only 3.5% just before the market topped in October 2007. This means that 96.5% of mutual fund managed assets got to participate in the decline that followed.

Broad index funds such as the Dow Jones (NYSEArca: DIA - News), S&P 500 (NYSEArca: SPY - News) and Russell 1000 (NYSEArca: IWB - News) lost over 50% from top to bottom. Most actively managed mutual funds did even worse. Why? Because fund managers based their decisions on positive news.

In the fall of 2008, the Federal Pension Benefit Guaranty Corporation shifted most of its $65 billion in assets from bonds to stocks and real estate. This move came just before the bear's attack intensified.

In 2007, companies belonging to the S&P 500 index spent a record $590 billion repurchasing their own shares. On average, this buy-back decision resulted in a 50% loss. Index components like General Electric (NYSE: GE - News) and JP Morgan (NYSE: JPM - News) did much worse than the broader market.

General Properties (NYSE: GGP - News), one of the largest mall operators in the states, had to file for Chapter 11 bankruptcy protection due to its aggressive and overleveraged expansion at the height of the real estate boom.

Yes, as the example of General Properties and once highflying homebuilders (NYSEArca: XHB - News) shows, trend chasing is actually the root cause for the financial and economic meltdown. The fear of losing out on profits caused even the most prudent investors and business men to throw caution to the wind.

As Ben Stein commented in the New York Times, nearly all of us are part of creating the prevailing trend, which inevitably turns against its creators. Ben noted that 'almost all economic pundits and soothsayers - whether on television, in newspapers, or at brokerage firms - are asked to tell the future. Some of them are stunningly well paid for their efforts, even though they are wrong decade after decade. Yet, we cry out for someone to tell us the future, like children who want to hear the end of the story.'

If you are looking for a crystal ball of what the future holds - as long as it relates to equities and economics - resisting your urges and swimming against the current is your best bet.

Easier said than done

As so often, this is easier said than done. Certain people, perhaps even prior contrarians with a stellar reputation and brilliant mind, may abandon their out of the box views and conform to the general trend tempting you to do the same.

Crispin Odey, a London hedge-fund manager who gained fame and money by shorting U.K. banks, has switched teams and is now cheering for the bulls. After being short for most of 2008, Mr. Odey started to accumulate bank stocks again earlier in 2009. The SPDR KBW Bank ETF (NYSEArca: KBE - News) is the U.S. cousin to U.K. bank stocks.

On a larger scale, even Mr. Roubini, one of the few economists who predicted the real estate meltdown and Mr. Soros, the billionaire investor who came out of retirement to steer his Quantum fund to an 8% gain in 2008, believe that the worst is over. Albeit slow, they expect an economic recovery to begin over the next year or two.

Like sand on the beach

Look around and you'll see that economic forecasts are as abundant as sand on the beach, and they are worth just as much. It is tough to find a precious gem (an accurate forecast) amidst worthless sand.

To further illustrate the folly of news and news based forecasts, consider this: On March 9th, the day the market bottomed, the Wall Street Journal featured an article called 'Dow 5,000 - There's a Case For It.'

True, there might be a case for it eventually (more about that below), but as it turned out, the market decided that March 9th was not the time and place in history.

In fact, just a few days earlier, on March 2nd, the ETF Profit Strategy Newsletter sent out a Trend Change Alert recommending ETFs that benefit from a rising market. Such ETFs included traditional broad market index ETFs, dividend ETFs, sector ETFs like the Financial Select Sector SPDRs (NYSEArca: XLF - News) and leveraged ETFs such as the Ultra Dow Jones ProShares (NYSEArca: DDM - News) and Direxion Large Cap Bull (NYSEArca: BGU - News).

Back to the folly of a news-driven market; Wells Fargo's (NYSE: WFC - News) positive earnings report sent stocks soaring last week while Goldman Sachs' (NYSE: GS - News) earnings surprise this week was greeted with indifference. If news drives the market, why does the market react differently to essentially the same piece of news?

The profit prophet

The ETF Profit Strategy Newsletter has often referred to the inverse effect investor sentiment tends to have on the market's performance. On December 15th for example, it noted the following: 'Optimistic sentiment, which should be more visible above Dow 9,000, will give way to further declines. At this point, the best target for a temporary low is 6,700 for the Dow and 700 for the S&P 500. Extreme pessimistic sentiment may drive the indexes even towards Dow 6,000 and S&P 600.'

The beginning of January, right about when investors started to feel comfortable with the market's future prospects again, proved to be the time to load up on short ETFs such as the UltraShort Dow Jones ProShares (NYSEArca: DXD - News), UltraShort MidCap ProShares (NYSEArca: MZZ - News), Direxion Large Cap Bear (NYSEArca: BGZ - News) and many more.

Economists and market analysts often use projected growth and earnings numbers as foundation for their forecasts. We have found that using projected numbers does not deliver accurate results. 'Projected' implies the possibility and often probability of change. Who wants to hear after the fact, 'sorry, we had to adjust our forecast because things got worse than expected?'

The market's built-in indicators

Most people don't know this, but the stock market has several built in indicators visible to the naked eye. Just like a fever is the body's way to let you know something's wrong, the stock market's internal indicators are telling investors whether its current valuations are 'healthy or sick.'

While it does take some common sense to interpret the market's symptoms, you don't need to be a Doctor or rocket scientist to figure them out.

Dividend yields, P/E ratios and investor sentiment are the market's way of letting us know what's going on. An analysis of the above three indicators reveals that the stock market does not bottom until dividend yields, P/E ratios and investor sentiment reach certain levels, just like your body is telling you that you won't be fine until your temperature calibrates back to about 98.6 degrees.

An in-depth analysis of the above three indicators along with the Dow Jones measured in the only true currency, gold is available in the March issue of the ETF Profit Strategy Newsletter. The results show that contrarians will continue to be the ones raking in profits.

Obama sees economic progress, but "not out of woods yet"

By Ross Colvin

WASHINGTON (Reuters) - President Barack Obama, updating the American people Tuesday, believes there are signs of recovery in the U.S. recession-hit economy but "by no means are we out of the woods just yet."

Shortly before he was to deliver his latest economic speech at Georgetown University, U.S. stocks fell after an unexpected drop in retail sales dampened recent optimism, although bank stocks were boosted by Goldman Sachs posting higher-than-expected first quarter profits.

"I want to update you on the progress we've made, and be honest about the pitfalls that may lie ahead," said Obama's advance text of what the White House billed as a major speech.

"But from where we stand, for the very first time, we are beginning to see glimmers of hope," Obama said, repeating a phrase he has used often in recent days.

Obama outlined the many steps his administration has taken since he was sworn in on January 20, inheriting the worst economic crisis in decades from his predecessor George W. Bush.

Obama said his $787 billion economic recovery package, steps to recapitalize banks, unfreeze credit markets, stabilize the housing market and shore up the ailing U.S. auto industry were all necessary pieces of the "recovery puzzle."

"And taken together, these actions are starting to generate signs of economic progress," he said.

Earlier Tuesday, White House economic adviser Christina Romer said the U.S. economy was "still sick" and she forecast continued job losses and a falling gross domestic product for several more months.

The U.S. economy lost 663,000 jobs last month, pushing the unemployment rate to a 25-year high of 8.5 percent. The economy shrank at an annual rate of 6.3 percent in the last quarter of 2008, the steepest decline since the first quarter of 1982.

There was more gloomy economic news Tuesday, with new data showing that U.S. retail sales fell 1.1 percent after two months of increases. Producer prices also fell unexpectedly.

The data tamped down cautious optimism among some investors, fueled by positive housing and consumer spending figures, that the 16-month-old economic downturn was close to its bottom.

Obama said 2009 would continue to be a difficult year, warning that Americans would see more job losses, more house home foreclosures "and more pain before it ends."

"There is no doubt that times are still tough. By no means are we out of the woods yet," he said.

(Additional reporting by Andy Sullivan, Lucia Mutikani and Emily Kaiser, Editing by Alan Elsner)

No new banking crisis

TOKYO - US Treasury Secretary Timothy Geithner does not see a second wave of banking collapses and the government is ready to support capital-raising when needed, a Japanese newspaper said on Sunday.

In an interview with the Asahi Shimbun newspaper, Mr Geithner was quoted as saying US authorities were making sure there was steady funding and that banks were able to meet commitments.

'So in some ways what we're saying is we're going to backstop the amount of capital-raising that's necessary,' he was quoted as saying in an English text of the interview.

'And again, a lot of that will come from the market, ultimately. But where it doesn't we'll make sure we provide it.' In an attempt to assess banks' capital needs, the US government is testing how they would fare under more adverse economic conditions than are expected. The results are due at the end of April.

Once the 'stress tests' are finalised and the capital needs are determined, banks will have six months to raise capital in the private market or could take an infusion of government funds.

Mr Geithner was also quoted as saying the Group of Seven of rich nations and the Group of 20, which also includes emerging economies such as China and India, were 'very complementary forums'.

Mr Geithner will host both a G-7 finance ministers meeting and a G-20 ministerial session on April 24 in Washington.

He told the Asahi that China had played a role in stabilising the global financial crisis, and added that Beijing was committed to a more flexible currency regime over time.

'China's exchange rate appreciated quite substantially in real terms,' he was quoted as saying.

'China's accumulation of foreign reserves has slowed and they are putting in place economic policies that will encourage domestic demand and growth.' -- THOMSON REUTERS

BKForex Advisor - Experimentation

Commencement speeches are rarely inspiring or thoughtful, but when I was senior in high school one of my teachers whose name I long ago forgot said something that has stayed with me for life.

"Success," he said, "is fleeting. But failure... Failure is what we live for." We looked utterly befuddled but he went on. "Think about success. It is certainly nice, but once we achieve it, we inevitably take it for granted and after savoring it for a few hours or a few days we move on. Failure on the other hand is what drives us. Failing is what forces us to strive. Failure is the key to all progress."

That 's why I am such a firm believer in experimentation. Experimentation is basically failure that leads to progress. Unhampered by the stigma of failure children are the purest experimenters of all. Watch a toddler for a while trying to learn how to walk. Does he quit just because he falls over, once, twice or two hundred times? Of course not.

That 's why I am such a firm believer in experimentation. Experimentation is basically failure that leads to progress. Unhampered by the stigma of failure children are the purest experimenters of all. Watch a toddler for a while trying to learn how to walk. Does he quit just because he falls over, once, twice or two hundred times? Of course not.

On the other hand, if children acted like traders, the human race would never walk. Traders hate to fail. That' s why they hold on to losing trades, revenge trade with abandon and ultimately quit out of sheer frustration. However, experimentation allows traders to fail safely. It gives the trader the opportunity to try new setups, tinker with ideas and generally be free to engage the market without the stigma of loss.

Don't get me wrong you will lose money when you experiment, but as long as you set aside a small but meaningful amount of capital (the loss must hurt enough to make you care, but not enough endanger your net worth) you can experiment all you want.

I am often asked why not just demo trade, or simply run some backtest simulations? Those of you who know me well, know that I despise backtests. They are worse than nothing because they give you false hope. If I had a dollar for every brilliant system that backetested beautifully only to fail in real time, I would be richer than George Soros.

No matter how many elegant statistical tricks you play backtests are simply dogmatic structures overlayed on historical data. One of my first jobs in the business was to oversee the execution of hundreds of algorithmic programs during the overnight shift. After 12 months, not one out of the hundreds programs that I monitored (all of them designed by the most robust of backtests) - ever made money.

As to demos, they always remind me of the simulators I saw at the New York auto show last week, Nice but utterly useless for real driving. Why? Because just as in a sim you never actually feel the fear of coming within inches of the racetrack wall, or experience the overwhelming smell and noise of high performance race car, so too on demo you never actually feel the pressure of holding money on the line while price flirts within a pip of your profit target or stop.

How will your ideas perform in real life? You will only know if you experiment in real markets with real money. Experimentation lets you know very quickly If your idea are worthy or dumb. More importantly the process of experimentation often challenges your basic assumption behind your setup. Failure is feedback and experimentation allows to study that feedback and become a better trader.

Bank Profits Mask Peril Still Lurking

By Binyamin Appelbaum
Washington Post Staff Writer

Citigroup announced a surprisingly strong first-quarter profit yesterday, the latest bank to report a sharp improvement from the disastrous final months of 2008.

The earnings bloom, however, is probably a false spring, according to bank executives and financial analysts. Banks rise and fall with the economy. As prosperity recedes, more people and companies are defaulting on loans. The nation and its banks still face grave challenges, they said.

"We don't see the light at the end of the tunnel," Edward "Ned" Kelly, Citigroup's chief financial officer, said in an interview, referring to the state of the economy. His company, the most troubled of the large banks, reported that defaults increased during the first quarter on nearly every kind of consumer loan.

J.P. Morgan Chase also announced strong earnings this week. The company's chief executive, Jamie Dimon, also did not see in those results evidence of recovery.

Asked about loan losses in a call with analysts, he said: "Eventually they will peak, but they've been going up consistently. We've shown you here that they're going to go up even more. They're going to continue going up in all the home lending areas, mortgage and home equity and credit cards."

Large banks have profited despite their problems because of accounting maneuvers and earnings from investment banking.

The banking industry's bleak tone contrasts with recent expressions of cautious optimism by President Obama and Federal Reserve Chairman Ben S. Bernanke. The president said last week that he saw "glimmers of hope across the economy," such as signs that spending on homes and consumer goods might stop falling.

Bank executives are more downbeat, according to some analysts, because banks are suffering more during this recession than other sectors as a whole. This is unusual. It is a well-established industry rule of thumb, for example, that the proportion of credit card loans in default roughly equals that of Americans without jobs. But the collapse of the housing bubble has destroyed vast amounts of wealth, pushing people to default on other kinds of loans, including credit cards.

The nation's unemployment rate stands at 8.5 percent, but Citigroup, for example, reported a 10.2 percent loss rate on domestic credit card loans in the first quarter.

The struggles of financial firms also reflect the limited success of the government's massive efforts to help banks, including the Treasury Department's investment of almost $200 billion in more than 500 banks and the Federal Reserve's extension of more than $1 trillion in emergency loans through various programs.

The government programs were intended to help banks increase lending, at least above the levels without government aid. But the volume of loans made by the largest banks -- which received most of the federal aid -- has continued to decline, in part because losses continue to rise on the loans banks do make. Also economic woes have diminished demand for loans, particularly among businesses.

Despite these problems, Citigroup said yesterday it earned $1.6 billion in the first quarter, compared with a loss of $5.11 billion in the first quarter last year. The company paid out all its profits and then some to preferred shareholders, leaving a net quarterly loss of 18 cents per share. The overall profit still surprised financial analysts, who expected the company to lose money.

The largest banks have reported huge profits from the trading of financial instruments such as corporate bonds. Citigroup, for example, made $2.8 billion in investment banking and lost $1.2 billion in consumer banking.

In part, the companies relied on accounting rules.

Citigroup recorded revenue of $2.5 billion from a decline in the value of its own bonds. A 2007 change in accounting rules allowed the company to gain from its investors' loss because the company conceivably could buy back the debt at the lower value, paying less than it originally expected.

Earlier this year, accounting rule-makers also loosened the rules that determine when a company must recognize a decline in an asset's value as a permanent loss. Citigroup said that change added about another $600 million to its bottom line.

Goldman Sachs last reported earnings through the end of November. This week it reported a profit for the first three months of 2009, then separately reported a large loss during the orphaned month of December. The company switched its reporting periods as a consequence of its decision to become a bank.

Wells Fargo took the unusual step of announcing a large first-quarter profit two weeks before it plans to publish an earnings report, leaving investors and financial analysts uncertain how the company achieved the results.

Financial analysts say every major bank would have sustained large losses, and some might have collapsed, if the government had not made emergency investments in them last fall. The government has invested $45 billion in Citigroup and guaranteed to limit the losses on a portfolio of more than $300 billion in troubled loans. J.P. Morgan and Wells Fargo each received $25 billion in capital. Goldman Sachs accepted $10 billion.

Analysts also caution that the combination of unusual investment banking profits and accounting benefits make it unlikely that banks can sustain profits at this level.

"I think we knew all along that the first quarter might not be indicative," said Nancy Bush, a financial analyst with NAB Research. She noted that investment banks benefited from demand for services that built up during the fall, when the capital markets largely were shuttered. Competition on Wall Street also was diminished by the collapse of Bear Stearns and the bankruptcy of Lehman Brothers, leaving more pie for the surviving firms.

Bush said she expected increasingly clear differences among banks, with the strongest showing greater profitability while the weakest hobbled along with government help.

Worst of downturn over?

NASHVILLE (Tenn) - TOP US officials on Saturday offered reassurances that the worst of the economic downturn is likely over, helped by unprecedented efforts to keep credit flowing, though the recovery will be slow.

Two Federal Reserve policy-makers, Vice Chairman Donald Kohn and New York Fed chief William Dudley, both pointed to signs that measures taken by the US central bank are indeed working to help revive the economy.

And Paul Volcker, a senior economic adviser to the Obama administration and a former Fed chairman himself, said the rate of the economy's decline is set to slow.

Mr Volcker, who like the other officials spoke at a conference of policy-makers and academics at Vanderbilt University, said, however, that the economy faces a 'long slog' toward recovery.

Fed officials often stress that there is a lag before the economy responds to measures taken to support growth, such as interest rate cuts, and that those lag times can vary.

Since the financial crisis erupted in 2007 the Fed has slashed its benchmark lending rate from a peak of 5.25 per cent, reaching the current range of zero to 0.25 per cent in December 2008.

The Fed has also created an alphabet-soup of programs to support credit markets and revive lending in different segments, especially home mortgages.

While the central bank's emergency measures have caused the Fed's balance sheet to balloon to over US$2 trillion (S$3 trillion), Mr Kohn and Mr Dudley dismissed worries that the measures could lead to inflation down the road, saying they have plenty tools to drain excess cash from the system when necessary. -- REUTERS

Sorry for the lack of posts this week! Just back from holiday!

Let me share some photos of my holiday with all my readers who have been supportive all these while... :)

Is This a Bear Market 'Head Fake' or the Real Deal?

Katy Marquardt

Is this rally for real? Investors are basking in the fourth rally of the current bear market--and this one has yielded the biggest gain for stocks since the markets began to tank in 2007, according to Citi global equity strategists.

In a note to clients today, the analysts looked at a number of factors--including the duration and intensity of the previous market rallies, 'head fakes' in previous bear markets (during the '00-'02 bear market, there were four rallies before the real recovery), as well as factors such as policy response, market sentiment, and earnings data.

Their assessment:

The rally exhibits less of the hallmarks of a head fake. However, we need to be further through the earnings downturn and need to see more good news from the real economy and credit markets before we can suggest this is the real deal...we don’t believe we are through the period of economic downturn. Our economists’ forecasts are for GDP to contract for the rest of the year in most regions. But, their forecasts suggest we could be past the most intense period of the recession. While the economic situation may be less bad, but it is not obviously better.

So essentially, Citi's telling us that we shouldn't get too excited. Yet.

7 Killer Insurance Mistakes You're Probably Making

Why you should take out more insurance, not less
By Kimberly Palmer

For most people, talking about life insurance sounds almost as fun as eating rotten fish. And while ignoring it can compound a family tragedy by turning it into a financial nightmare, more and more people are doing just that. A recent survey by the nonprofit LIFE Foundation found that one in four Americans would consider canceling their life insurance policy in order to save money during the recession.

Before making that kind of drastic decision, consider these seven insurance mistakes you're probably making—and you might decide to buy more insurance, not less.

Thinking you have enough. In a recent survey of middle-income Americans, Allstate found that while respondents agreed everyone should have some level of life insurance, most believed that it should primarily cover bills and funeral expenses. Only two in ten said life insurance should replace the income of the person who died, in order to continue to support any children and other dependent family members. The idea of having a policy that paid out seven to ten times one's salary—an amount that could easily make sense for someone with young children—sounded like an attempt to sell a needlessly large policy to the respondents.

In fact, one in three adults have no life insurance at all, says Steven Weisbart, chief economist for the Insurance Information Institute. Of the remaining people, many of them have only the insurance that comes from their workplace policies, which is usually not enough for people who want to support dependents after their death.

Not talking about it at all. "It's a topic that nobody really wants to think about," says Matt Easley, vice president for Allstate Financial, partly because thinking about death is so uncomfortable.

But while life insurance isn't required the way auto insurance is, Weisbart says it is "morally required," because "if you have dependents, you owe it to them to protect them from the loss of your capacity to earn an income."

Relying on old rules of thumb. Traditionally, people relied on a standard "seven times income" rule to calculate how much insurance they need. But that's not a useful measure, says Easley, because people's situations are so different. A single person with no dependents will probably need much less insurance than someone with five young children, for example. Instead, Easley recommends sitting down and thinking about "the things you want to protect." How much would it cost to support your children in the way you want? To pay for their college, or pay off the mortgage?

Michael Bonevento, a senior financial adviser at Ameriprise Financial, also recommends making a "human life value" calculation, which looks at the economic loss that would come from a breadwinner passing away. For example, if he earns $100,000 per year and has 20 years left until retirement, then the value is $2 million. (Taxes then get subtracted out along with the amount the breadwinner consumes himself, and other benefits such as health insurance are added. Finally, the present value of that number is calculated.) The human life value is usually a higher number than what people come up with after considering what they'd like to be able to pay for if they were to die. Bonevento recommends purchasing insurance for somewhere in between those two amounts.

Ignoring your non-monetary income. Many people, when adding up how much of their income they would need to replace, forget about the benefits that come with their job, such as health insurance and retirement account payments. "I have a job, and my employer pays my health insurance costs, but if I died, and that subsidy disappears, my wife would have to get health insurance without it, so it would cost more," he says. Life insurance, then, should pay enough money to cover the new health insurance bill.

Forgetting the long-term. People often lose track of how long the life insurance payout should support their children and other dependents after they die, says Easley. "If you have a child who's ten, in 15 years, they'll be out on their own," he explains, so in that case, term coverage that will provide support for those 15 years likely makes the most sense.

Thinking that it's too expensive. Many people mistakenly think life insurance is prohibitively expensive, says Bonvento, but it's possible to find a policy that fits your needs—and your budget. Term insurance, which provides temporary insurance over a specific time period, is more affordable than permanent insurance, which lasts a lifetime. In addition to managing financial risk, people sometimes use permanent insurance as an investment tool, as well.

But those on a tight budget tend to choose term insurance. One of Bonvento's clients, a married man with one child and another on the way, decided he needed to take out $1.5 million worth of term life insurance. His monthly payment, pending an assessment of his health, will cost between $102 and $219 per month.

Forgetting to update it. While major life events, such as the birth of a child, marriage, or divorce, usually mean it's time to update your insurance policy, many people forget to do so. Even Sept. 11, which affected many of Bonevento's clients, did not serve as the motivator he thought it would. Then, he says, "when tragedy strikes, they face financial problems on top of everything else."

The Interview That'll Bag a Job

by Sarah E. Needleman

In recent weeks, recruiters for Consolidated Container Co. have seen job candidates arrive up to an hour early for interviews. Other candidates have alluded to financial hardships while in the hot seat, and one person even distributed bound copies of documents describing projects he completed for past employers.

These sorts of tactics aren't exactly winners.

In today's ultracompetitive job market, even getting an interview is a feat. Yet recruiters and hiring managers say many unemployed candidates blow the opportunity by appearing desperate or bitter about their situations — often without realizing it.

"People are becoming a lot more aggressive," says Julie Loubaton, director of recruiting and talent management for Atlanta-based Consolidated Container. "They often wind up hurting themselves."

At an interview, you want to stand out for the right reasons. To do so, you'll need to leave your baggage and anxiety at the door. For starters, wait until 10 minutes before your scheduled interview time to announce yourself. Arriving any sooner "shows that you're not respectful of the time the hiring manager put aside for you," says Ms. Loubaton, adding that a candidate who arrived an hour early made workers uncomfortable. "Companies really don't want someone camped out in their lobby."

Signal confidence by offering a firm handshake, adds Wendy Alfus Rothman, president of Wenroth Consulting Inc., an executive coaching firm in New York. Focus your attention on the interviewer. Avoid looking around the room, tapping your fingers, or other nervous movements.

No matter how you're feeling, keep your personal woes out of the interview process, asserts Ms. Alfus Rothman. Instead, always exude an upbeat attitude. For example, if you were laid off, instead of lamenting the situation, you might say the experience prompted you to reassess your skills, and that's what led you here. "You want to demonstrate resilience in the face of unpredictable obstacles," she says.

Meanwhile, show you've done your homework on the company by explaining how your background and track record relates to its current needs, adds Deborah Markus, founder of Columbus Advisors LLC, an executive-search firm in New York. This is particularly important if the firm is in a different industry than the one you worked in before. To stand out, you'll need to look up more than just basics on company leadership and core businesses. You'll also need to find out — and understand — how recent changes in the marketplace have affected the firm, its competitors and industry overall. Read recent company press releases, annual reports, media coverage and industry blogs, and consult with trusted members of your network. "Companies that may have been performing well just a few months ago might be in survival mode now," says Ms. Markus. "You want to understand how [they're] positioned today."

Also, be sure to show you're a strong fit for the particular position you're seeking, adds Kathy Marsico, senior vice president of human resources at PDI Inc., a Saddle River, N.J., provider of sales and marketing services for pharmaceutical companies. Offer examples of past accomplishments — not just responsibilities you've held — and describe how they're relevant to the opportunity. "You must differentiate yourself like never before," she says. "You need to customize yourself and make yourself memorable."

Sherry R. Brickman, a partner at executive-search firm Martin Partners LLC, says a candidate recently impressed her with this sort of preparation. "He knew the company's product line and what markets it was already in," she says of the man, who was interviewing for an executive post at a midsize industrial manufacturer. "He clearly and effectively explained how he could cut costs, increase sales and expand market share based on what he'd done in his current job." The candidate was hired.

Be careful not to go too far, though, in your quest to stand out. For example, it may be tempting to offer to work temporarily for free or to take a lesser salary than what a job pays. But experts say such bold moves often backfire on candidates. "Employers want value," says Lee Miller, author of Get More Money on Your Next Job ... In Any Economy. "They don't want cheap."

Your best bet is to wait until you're extended a job offer before talking pay. "In a recession, employers are going to be very price sensitive," says Mr. Miller. "The salary you ask for may impact their decision to move forward." Come prepared having researched the average pay range for a position in case you're pressured to name your price, he adds. You might say, for example, that money isn't a primary concern for you and that you're just looking for something fair, suggests Mr. Miller. You can try turning the tables by asking interviewers what the company has budgeted for the position.

In some cases, you may be looking just for a job to get you through so you might consider a less-than-perfect fit. But if you aren't really excited about an opportunity, keep it to yourself, warns David Gaspin, director of human resources at 5W Public Relations in New York. "I've had times where people come in and it's clear that if they really had their preference, they'd be doing something different," he says. "You don't want to put that out on the table. Nobody wants to hire someone who's going to run for the door when times get better."

After an interview, take caution with your follow-up. If you're in the running for multiple jobs at once, make sure to address thank-yous to the right people, career experts advise. Also look closely for spelling and grammatical errors. In a competitive job market, employers have the luxury of choice, and even a minor faux pas can hurt your chances.

If all has gone well, don't stalk the interviewer. Wait at least a week before checking on your candidacy, adds Jose Tamez, managing partner at Austin-Michael LP, an executive-search firm in Golden, Colo. Call recruiters only at their office, even if their business card lists a home or cell number. Leave a message if you get voicemail. These days, recruiters typically have caller ID and can tell if you've tried reaching them multiple times without leaving a voicemail. "There's a fine line between enthusiasm and overenthusiasm," he says.

Is This Rally for Real?

by Mick Weinstein

The S&P 500's rapid 26 percent rise since its March 9 low has investors wondering if stocks have put in a meaningful bottom. Has the time come to put new money to work in equities, or is this a mere bear market rally that will unwind shortly as indexes plumb new lows? Both cases rely on speculation regarding the macroeconomic picture, as traditionally the stock market has served as a leading indicator of broader economic recovery -- an indicator, that is, which one can only really observe in retrospect. Ben Bernanke, for one, sees "green shoots" of recovery sprouting up.

Here's one helpful starting place on the matter: a comparison chart of 4 Bad Bear Markets that DShort updates daily. Or in another (more humorous) framework, are we in Stage 13 or Stage 15 of this investor psychology chart? Econobloggers weigh in on both sides:

The 'This Rally's Got Legs' Camp

• Portfolio manager J.D. Steinhilber says this move should have staying power. Steinhilber cites "the sheer magnitude of the bear market declines in broad stock indexes (60%!) over the past 18 months" and believes "[t]he immensity of the government's stimulus efforts, both fiscal and monetary, which now total a mind-boggling $4 trillion, appear to be taking hold in the economy and markets." Steinhilber finds foreign stocks to be particularly attractive here.

• Doug Kass made a bold and timely market bottom call in March ("perhaps even a generational low") and remains bullish, but now names some "nontraditional headwinds" to be wary of.

• Both Scott Grannis and Bill Luby see a bullish sign in volatility falling back significantly of late. And Grannis notes that industrial metal prices have bounced: "Maybe it's the return of the speculators, but even if it is, it reflects a return of animal spirits and suggests that monetary policy is easy enough for people to start releveraging."

• Hedge fund manager Dennis Gartman also uses industrial metals as a leading indicator, and as Market Folly notes, Gartman uses the Baltic Dry Index and the Transports as signs we're exiting recession. In response to these all moving upward recently, Gartman "wants to be long copper and Alcoa, and short the Yen," as the Japanese are big importers of commodities.

• Octagon Capital technical analyst Leon Tuey sees extreme pessimism in the current CBOE put/call ratio and that, pushed along with massive new liquidity from the Fed, are signs "we are not witnessing a bear market rally, but a bull market, the magnitude and duration of which will surprise everyone."

• Jeff Miller of NewArc Investments sees a lot of skepticism about any positive economic signs. But Miller uses a remarkable sportsman's model to suggest we really may be moving upwards.

The 'Sucker Rally, Don't Buy It' Camp

• Tim Iacono has his eye on unemployment data: "Conventional wisdom over the last fifty years or so is that, during recessions, stocks make a bottom at around the same time that monthly job losses peak... If past is precedent and if the recent January decline in nonfarm payrolls of 741,000 turns out to be the peak for this cycle, then it is reasonable to believe that the March low in equity markets could be a lasting bottom. However, if either of those are untrue -- that this downturn will be different than previous recessions or that job losses have not yet reached their peak -- then we are more likely to see new lows sometime later this year. In my view, that is the most likely scenario."

• Tyler Durden believes quant funds drove up the market in March, in a "distortion rally" that lacked broad-based support: "Risk managers allocating capital to quants are prolonging and exacerbating the long-term bear markets in equities, creating an atmosphere of distrust and making markets unreliable tools of price discovery and playgrounds for rampant, Atlantic City-like speculation. In the words of both a NYSE chairman and a famous credit index trader, 'This will all end in tears.'"

• Peter Cooper says "the absurdness of this sucker's rally ought to be obvious to all... Unemployment is still rising, house prices are still falling, and the fundamentals of bank balance sheets are still deteriorating."

• Likewise, Henry Blodget finds the "'suckers' rally' argument far more persuasive than the 'new bull market' one...About the best we can say is that, after 15+ years of overvaluation, stocks are finally priced to produce average returns over the next decade (9%-10% a year or so)."

• Investor Sajal has a nice roundup of how various market gurus (Marc Faber, George Soros, Jim Rogers, and more) see things here. Most believe that we're in for further downside, and that this rally is not to be trusted.

• Finally, James Picerno says the trend may now be our friend, but still: "Even if the recession has bottomed out, that's a long way from saying that a return to growth is imminent. It's likely that the economy will tread water for several quarters at the least once the economy stops contracting. And while the stock market appears inexpensive, or at least fairly priced, it's still too early to expect that profits are set to rebound any time soon."
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10 Secrets of Millionaires' Money Management

Kimberly Palmer

It turns out millionaires are just like us--but they have a lot more money. When asked about their secrets to success, they don't cite anything magical or rare, but rather the steady application of wise investing strategies, hard work, and, believe it or not, a degree of frugality. Here are 10 secrets of millionaires' money management:

Start early to avoid financial pitfalls. Adrian Cartwood, 49, author of the blog How to Make 7 Million in 7 Years, made his fortune by living frugally while he built his technology-related business. People often get into trouble, he says, by racking up personal debt early on, which acts as a big drag on their earnings. "Learn how to live within your means and how to delay gratification; these are the habits that you need to maintain on the way up, so you can keep your millions when you get there," he says.

Believe that you can do it. Before investing in real estate and becoming a millionaire, Alan Corey, author of A Million Bucks by 30, read as many biographies and autobiographies of millionaires as he could find. He says he was searching for a common characteristic that could help him in his own quest. "What I found was they all had an incredible self-belief that they would be financially successful," he says. Corey says that embracing that level of self-confidence helped him get to the top.

Articulate your vision for success. Jen Smith, author of the Millionaire Mommy Next Door blog, says that the saying, "I want to be rich," is too vague. Instead, she recommends imagining what your ideal life as a millionaire will look like. Smith offers this example: "I want to have $2,000,000 invested so that I can live off of the interest. Then I will quit my job so that I can volunteer, travel, learn to play tennis and watercolor, and enjoy picnics at the beach with my family."

Smith's vision involved becoming financially-free before becoming a parent. She cut out images from magazines of beautiful places she wanted to visit and people doing fun things and put them near her desk to help her keep that vision in mind.

Insure against life's risks. Bankruptcy is often caused by divorce, a death in the family, or a disability that renders someone unable to work. Conversely, protecting against those risks through insurance protects wealth. In The Quiet Millionaire, financial planner Brett Wilder writes that many people either fail to get adequate insurance or pay too much for it because they don't understand it.

Work hard--and you'll get lucky. In his new book, Think Like a Champion, Donald Trump attributes his success to his hard work, which to outsiders often appears to be luck. But Trump says luck only comes from working hard. "If your work pays off, which it most likely will, people might say you're just lucky. Maybe so, because you're lucky enough to have the brains to work hard!" he says. That same concept, of course, was advocated by Benjamin Franklin in the 18th century. He said, "The harder I work, the luckier I get."

Practice smart budgeting. Smith recommends tracking how much you spend each month, something she does religiously. Every month, she downloads her transactions into a spreadsheet to keep her spending on track. Smith also says that, as prosaic as it sounds, maintaining a good credit score is essential to becoming and staying a millionaire. "A good credit score can save you thousands of dollars over the course of your lifetime," she says.

Do what you love. Sure, a career in finance might come with a hefty annual salary, but you probably won't excel at something you don't enjoy. That's why Corey recommends going into the field that you find yourself reading about in your spare time. He asks, "Do you read fashion magazines? Get a job in fashion. Do you read gossip blogs? Get a job in celebrity-based enterprises. Do you read Car & Driver? ESPN.com? Yahoo Pets Forum?" Even if the field doesn't seem lucrative, there are ways to make it to the top--something that's more likely to happen if you love it.

Decide how much money you really want. For many people, $1 million won't be enough. "For most Gen-X and Gen-Yers, retiring with a couple million when they are 65 won't be anywhere near enough to maintain even an average lifestyle, because that little pup called inflation is constantly nipping at your heels as you try to run towards building your own retirement nest-egg," says Cartwood. A more reasonable goal might be $3 million-- an amount that Cartwood considers the minimum to be a "bare bones millionaire" these days. Consider your ideal lifestyle and what you would like to be able to fund. A mortgage of a certain size? Exotic vacations? College tuition for your children? Having a concrete goal in mind makes it easier to get there, says Cartwood.

Invest against the grain. Corey recommends making investment decisions based on the exact opposite of what everyone else is doing. Right now, for example, stocks are relatively cheap because so many people have sold off shares, which means anyone buying can get them at a discount to their values from a year ago. Corey's rule of thumb doesn't just apply to stocks. "Buy a foreclosed house, fill it up with roommates, and you can get a pretty good passive income," he suggests.

Live below your means. Even Eminem, a celebrity and millionaire, scales back his purchases out of concern for frugality. In February, London's Independent newspaper reported that as Eminem considered buying a $15,000 watch he liked, he started worrying that he should save his money instead. Eminem reportedly said, "I don't want to run out of money; I want my daughter to be able to go to college." And so far, at least, Eminem hasn't fallen victim to the financial challenges so many other stars, from Aretha Franklin to Annie Leibovitz, have faced.

On the same note, Smith says that even though she's a millionaire, no one would know it--and that's the point. She recommends saving at least 10 to 25 percent of your income. She also suggests avoiding buying "status" items, such as fancy sports cars or mansions. After all, bling doesn't make a millionaire--and in fact, too much of it can prevent you from ever becoming one.

BOAO (China) - CHINA is still in the mode of struggling against the impact of the global economic crisis despite recent signs that its economy is star

China's premier says stimulus working, Chinese economy is better than expected

William Foreman, Associated Press Writer

BOAO, China (AP) -- Chinese Premier Wen Jiabao said Saturday the country's stimulus package is working and the economy is "better than expected," but he cautioned that complete recovery will take much more time because the global financial crisis continues to spread.

Wen, also China's top economic official, pledged to pull the country out of its slump by expanding domestic demand, building major infrastructure projects, finding jobs for college students and improving the social safety net.

Wen spoke at the Boao Forum, an annual gathering of government and business leaders on the tropical southern island province of Hainan. The theme of this year's conference, which organizers said drew 800 executives, was "Asia: Managing Beyond the Crisis."

The premier, the country's No. 3 ranking leader, said he was confident China could overcome the crisis but warned that global economic recovery will be a "long and torturous process."

"We should not lose sight of the fact that the international financial crisis is still spreading, the basic trend of world economic recession is not reversed," he said, adding that problems in the world's financial system were still unsolved.

But Wen said China was in relatively good shape because the country has sufficient capital, a solid banking industry, rich labor resources that will help it overcome the crisis.

The country's industrial output has gradually stabilized and there is "sufficient liquidity in the banking industry," he said. Investment growth is gaining speed, and consumption is growing "fairly fast," he said.

Wen's comments came just days after China announced its economy expanded at its slowest pace -- 6.1 percent -- in at least a decade in the first quarter.

But Wen said the sluggish growth figure was paired with numbers that show the economy is bouncing back from the slump. Industrial output, consumer spending and investment in factories were on the rise, he said.

"China's package plan is already paying off and positive changes have taken place in the economy," Wen said. "The situation is better than expected."

Some economists said the possible rebound was a sign that the government's 4 trillion yuan ($586 billion) in stimulus spending was beginning to kick in. But others are skeptical that a recovery has begun and say that sustained growth is impossible until consumer demand in the United States and other Western markets rebounds.

In recent months, Wen has taken aim at U.S. financial policy and Western financial institutions.

At January's World Economic Forum in Davos, Switzerland, he said the financial crisis was partly caused by a "blind pursuit of profit" and "an unsustainable model" of low savings and high consumption. He also accused banks of "a lack of self-discipline" and said regulators failed to keep up with new financial instruments.

Last month, Wen publicly appealed to Washington to avoid any response to the crisis that might weaken the dollar and the value of Beijing's estimated $1 trillion in Treasuries and other U.S. government debt.

China has recently begun calling for a new global currency to replace the dominant dollar. This has been seen as a growing Chinese assertiveness on revamping the world economy. It also further signals that China is uneasy about its vast holdings of U.S. government bonds.

On Saturday, Wen wasn't overtly critical of America. However, late in his speech, he repeated his belief that the world needed "a more diversified monetary system." He also urged business leaders to be responsible and "properly manage risks."

Organizers said this year's Boao forum attracted more than 800 people, including former U.S. President George W. Bush, Pakistani President Asif Ali Zardari and Finnish Prime Minister Matti Vanhanen.

Wen ended his speech by urging leaders to be confident and hopeful.

"Confidence is more important than currency or gold," he said. "Today, I want to say that hope is also important. It's like a beacon."

China not clear of crisis still

BOAO (China) - CHINA is still in the mode of struggling against the impact of the global economic crisis despite recent signs that its economy is starting to recover, central bank governor Zhou Xiaochuan said on Saturday.

China needs to continue to adjust its macroeconomic policy in line with the changing situation, Mr Zhou told a session of the Boao Forum for Asia, being held in the Chinese island province of Hainan.

Asked whether he was worried about excessive liquidity in the wake of a surge in lending in the first quarter, Mr Zhou said: 'It's hard to predict the consequences of various policies. The main aim of the expansive fiscal policy and fairly loose monetary policy is to prevent a sharp economic fall. If we do that, then we win.'

He was speaking two days after China said its economy grew 6.1 per cent in the first quarter from a year earlier. While that marked a slowdown in year-on-year terms from the 6.8 per cent pace in the fourth quarter of 2008, analysts said it represented a rebound in sequential growth. -- THOMSON REUTERS

Stiglitz: US banking rescue bound to fail

THE Obama administration's plan to fix the US banking system is destined to fail because the programmes have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.

'All the ingredients they have so far are weak, and there are several missing ingredients,' Professor Stiglitz said. The people who designed the plans are 'either in the pocket of the banks or they're incompetent'.

The Troubled Asset Relief Program, or TARP, isn't large enough to recapitalise the banking system, and the administration hasn't been direct in addressing that shortfall, he said. Prof Stiglitz said there are conflicts of interest at the White House because some of Mr Obama's advisers have close ties to Wall Street.

'We don't have enough money, they don't want to go back to Congress, and they don't want to do it in an open way and they don't want to get control' of the banks, a set of constraints that will guarantee failure, Prof Stiglitz said.

The return to taxpayers from the TARP is as low as 25 cents on the US dollar, he said. 'The bank restructuring has been an absolute mess.'

Rather than continually buying small stakes in banks, weaker banks should be put through a receivership where the shareholders of the banks are wiped out and the bondholders become the shareholders, using taxpayer money to keep the institutions functioning, he said.

Prof Stiglitz, 66, won the Nobel in 2001 for showing that markets are inefficient when all parties in a transaction don't have equal access to critical information, which is most of the time. The Public-Private Investment Program, PPIP, designed to buy bad assets from banks, 'is a really bad programme', Prof Stiglitz said. It won't accomplish the administration's goal of establishing a price for illiquid assets clogging banks' balance sheets, and instead will enrich investors while sticking taxpayers with huge losses. 'You're really bailing out the shareholders and the bondholders,' he said. 'Some of the people likely to be involved in this, like Pimco, are big bondholders,' he said, referring to Pacific Investment Management Co, a bond investment firm in Newport Beach, California. -- Bloomberg

Volcker: Recovery Is a Long Slog

NASHVILLE, Tenn (Reuters) -- Paul Volcker, senior economic adviser to President Barack Obama, said Saturday that the U.S. economic recovery will be a "long slog" but that the rate of decline "is going to slow."

The United States may not be in a Great Depression but it is "in a great recession for sure," following the economy's unprecedented tumble in late 2008, Volcker said at a financial markets conference at Vanderbilt University in Nashville, Tennessee.

Volcker, a former chairman of the U.S. Federal Reserve, did not give a time-frame on his expectations for when the United States will pull out of the recession that started in December 2007.

Most economists believe the economy hit its lowest point in the fourth quarter of 2008, when gross domestic product shrank at an annual rate of 6.3 percent, or in the just-ended first quarter.

"None of us has seen a decline in economic activity at the rate of speed seen late last year," Volcker said.

For now, troubles in the financial system continue to plague the economy, and vice versa.

"The lack of a good strong recovery works against a strong financial system," he said. The financial system "is not quite comatose, but it's on life support."

Volcker said a review the Federal Reserve's role, something traditionally regarded as taboo, now seems inevitable given the fallout from the long-running financial crisis.

"For better or worse, we are at a point where the Federal Reserve Act is going to be reviewed," said Volcker.

The wide range of proposals, from giving the Fed much more supervisory authority to stripping it of part of its current authorities, "are just an indication of how wide open that question is going to be."

The Fed, whose basic mandate is to support the U.S. economy without stoking inflation, has come under sharp scrutiny - along with other government institutions - since the credit crisis erupted in summer 2007.

Issues range from what the Fed's role would be in a revamped financial regulatory system, to criticism about a lack of disclosure about the central bank's vast new credit programs.

Volcker warned against a rush by Congress to act too hastily on financial reforms and an overhaul of the financial system.

"The temptation is to act quickly, but we have to act comprehensively," he said.

The financial meltdown and associated economic crisis grew out of serious and prolonged imbalances in the international economy that created "extremes" in financial markets, he said.

As time progressed, those problems were "supercharged" by compensation practices geared toward excessive risk-taking that ultimately brought markets to their knees.

Volcker said it was important for regulatory reforms to minimize the risk of firms being treated as "too big to fail" because of their sheer size or perceived systemic risk.

"I don't want to get to the point where some hedge funds or equity funds are getting very large and then getting into trouble to the point they need government protection."

Financial Security: Crucial to Life Satisfaction

by Laura Rowley

When it comes to money and happiness, a feeling of financial security is just as important as income, at least for women. That's the finding of a new study by Talya Miron-Shatz, a research scholar at Princeton University's Center for Health and Well-Being.

Miron-Shatz recruited nearly 1,000 women of various ages and incomes to participate in two studies. Researchers asked a series of questions about major life topics, including relationships, work, finances, and overall well-being. Participants in the second study were asked to think and write about "the future" in an open-ended way.

Not surprisingly, women with higher incomes -- those in the 75th percentile and above -- reported more life satisfaction than those in the bottom 25th percentile. But feeling financially secure had the same effect: "When you trade off income for [secure] feelings, it raises life satisfaction to the same degree that a rise in income does," Miron-Shatz says.

Financial Concerns Ding Happiness

When asked about the future, 40 percent of respondents mentioned financial concerns -- retirement, college tuition, making ends meet, etc. These participants reported lower life satisfaction than women who did not raise such concerns.

But remarkably, the study found that the sense of security someone enjoys -- or the sense of foreboding she feels -- has nothing to do with earnings, the complexity of finances, or even being in the red. Household income, homeownership status, age, and credit card debt did not predict whether or not a participant would include financial matters in her image of the future. The study was published in the February 25 issue of ‘Judgment and Decision Making'.

"I think the whole notion of security is becoming more prominent," says Miron-Shatz. "Something is happening in America that hasn't happened since the Great Depression -- the notion that whatever it is I have may be insufficient, or is dwindling rather than increasing, and that is leading to a huge amount of anxiety."

It Hurts to Lose What You Had

Clearly that anxiety can be just as potent for men. Miron-Shatz tells the story of a psychologist colleague whose patient was hospitalized with suicidal thoughts after losing half of his net worth -- although he remained quite wealthy after the loss.

"He was not suicidal because he couldn't go to the grocery store," Miron-Shatz notes. "It's that we are all accustomed to our way of life -- whether it's a motor home or a McMansion -- and you don't want it taken away from you. The prospect of losing that can be psychologically damaging. People value security as much as they value their actual assets."

Miron-Shatz works with Princeton's Daniel Kahneman, a psychologist who won the Nobel Prize in economics for his research in behavioral finance and hedonic psychology. Kahneman and several other researchers created the Day Reconstruction Method (DRM), a tool to measure people's daily quality of life by asking them to record their activities from the previous day in short diary form, as well as their feelings about the events.

What's Making You Happy?

Miron-Shatz was intrigued by the layer of thought and emotion not captured by the DRM. "You may be looking forward to a good friend's visit, and she's not coming until next week," she explains. "You're happy about it; but when you measure activities, you can't capture that this is what's making you happy, and not what you're doing. I wanted to develop a study to capture this layer of thoughts throughout the day."

Among those with money anxieties, 45 percent worried about finances in a generic way. More than a third focused on their financial well-being in retirement; as one respondent wrote, "I think about where I will spend my retirement years and will I have enough health and money to live a decent life." Some 13 percent worried about job security and salaries; 11 percent were concerned about buying or renovating a home; and 10 percent mentioned supporting children and college tuition.

Participants "were worried about very realistic, down-to-earth things, not dreams of grandeur and trips to the Bahamas," notes Miron-Shatz. Just 2 percent mentioned the cost of healthcare or health insurance (and only one respondent referred to the economic status of the country).

Feeling More Secure

So how can people who fret about money feel more secure?

1. If the problem is real -- too much debt or lack of savings -- psychologists recommend "task-oriented coping." Start by brainstorming a menu of strategies to achieve financial goals. Time-management expert and author Doug Sundheim has clients create a long list of everything they're interested in having, putting them in categories such as work, family, health, etc.

Next, clients circle the goals they find most exciting, and write the words, "I could...." at the top of a page. Then they brainstorm 10 to 20 ways to pursue the objective, and begin testing different methods to achieve it. "One of the biggest reasons people never get out of the starting block is they're afraid to experiment with ways to achieve their goals," Sundheim says.

2. For people such as the suicidal wealthy man, lack of money itself is not the problem, so psychologists recommend "emotion-focused coping." The idea is to communicate one's feelings, with the goal of changing perspective on the stressful issue. Seeking social support helps. In her book 'The How of Happiness', psychologist Sonja Lyubomirsky reports on a study that tracked down men and women whose spouses had died suddenly a year earlier.

"Perhaps not surprisingly, they found that the sudden death of spouses was related to an abrupt decline in their physical health," she writes. "However, those widows and widowers who had confided to others close to them had fewer health problems and were less likely to ruminate about their situation."

3. Try "avoidance coping," which is something I turn to when reading stories about the potential impact of New Jersey's budget woes on my property taxes -- or other financial issues that are largely out of my personal control. Simply put, create a diversion: I take the dog for a walk, tackle a household chore, see what friends on Facebook are up to, or call one of my sisters. Research has found that volunteering is a surefire mood-booster, and for money-worriers, spending a morning at a food pantry might provide useful perspective.

4. Manage your aspirations. Money worries can come from falling short of some arbitrary ideal. If you think your children will not do well in life unless they graduate from Harvard, and paying that kind of tuition is impossible, it's time to reframe your reality. And don't compare yourself to people who can afford Harvard; there are many conduits to misery in life, but this one is a bullet-train.

Finally, don't ruminate on losses. "Focusing on the past is the worst thing to do -- you really have to move on," says Miron-Shatz. Her own family experience is a case in point; in the 1940s her mother's family fled Tunisia, which was occupied by the Nazis during World War II, leaving their hard-earned wealth behind. "She married my dad, went to nursing school, and lives in a small apartment," says Miron-Shatz. "She never looked back. That's the best thing to do -- although it's not easy."

Breaking News: US could recover much sooner than expected

You've heard all the gloom and doom about this recession. Now here's some good news: the economic recovery could happen much sooner—and be much stronger—than anyone thought possible.

Suddenly, a small but growing group of private-sector economists is disputing the idea that the recession will drag on for months and that the rebound will be as weak as those following the the 1991 and 2001 downturns.

“Too many people’s idea of recession have been formed by the last two recessions,” says Robert Brusca of Fact & Opinion-based Economics, referring to the 1991 and 2001 periods, which were both short and shallow. "I think that's mistaken.”

“People have been talking about an L-shaped recession,” adds Miichael Mussa, senior fellow at the Peterson Institute for International Economics. “The record shows you come back sharply from deep recessions” like the current one.

These economists and others see a V-shaped pattern, similar to that of the recession-recovery periods of the 1970s and 1980s. And they say there is ample evidence to support it.

Among the reasons for the new optimism: a significant easing of the credit crunch, improvement in consumer spending—including better auto sales—a potential bottom in housing, a less-grim jobs picture and expectations that the government's massive stimulus spending could start boosting economic growth almost immediately.

Though the decline in first-quarter growth will be along the lines of the six-plus percent plunge of the fourth quarter of 2008, some economists now expect a flat or slightly negative showing in the second quarter, followed by the beginning of sustained growth in the third quarter. (That’s three months sooner than what many were forecasting several months ago.)

Optimists acknowledge that existing headwinds and unforeseen events can quickly derail momentum, which may help explain why a majority of opinions--including that of the the Federal Reserve--still fall into the wait-and-see camp.

“The velocity of downturn is lessening," says John J Castellani, chief economist and president of the Business Roundtable, who is more cautious than hopeful at this point. “In the initial part of the recovery, people will be very cautious about this being a double dip.”

Nevertheless, those forecasting a strong recovery point first and foremost to the waning effects of the Lehman Brothers collapse last fall, which roughly coincides with the worst of the credit crunch, and triggered a massive chain reaction in payroll and production cuts.

“The initial adjustment tends to be too big, then there’s some reversal of that,” says Ram Bhagavatula, managing director at the hedge fund, Combinatorics Capital.

That dynamic will lead to swifter and stronger recovery in both the economy and employment that many economists are forecasting.

Mussa, a former White House and International Monetary Fund economist, says that GDP will be a cumulative 6-8 percent higher six quarter than the bottom, depending on whether the recovery starts in the early or late summer.

Brusca is expecting a minimum of 4.5 percent GDP growth over the first four quarters of the recovery

All About The Economy

Both performances compare favorably with the post-WWII average, and while they may be less than the recoveries of the 70s and 80s they are significantly more than those of the past two recessions

In the 70s cycle, GDP shrank two consecutive years then posted GDP growth averaging 5 percent in 1976-1977; in the case of the 80s, the economy contracted 1.9 percent—more than economists expect for full year 2009—then grew 4.5 percent in the first year of recovery.

By contrast, the 2001 recession was so brief and shallow, GDP didn’t register a contraction for the whole year. Growth in the 2002-2003 period, however, averaged just 2 percent. Similarly, in 1991, the economy shrank 0.2 percent, followed by 3-percent growth in 1992 and 1993.

Economists also cite several reasons for better labor market conditions this time. They expect job losses as well as the unemployment rate to peak close to the time growth bottoms out, as was the case in the 80s and 90s, and thus not resemble the jobless recoveries of the two most recent recessions.

Though the recession of 2001 ended in November of that year, 12 months later the economy had added just 200,000 jobs. Moreover, the jobless rate kept rising through June of 2003.

By contrast, payroll losses bottomed out one month after the recession of 1982 ended in November. Payrolls were 3 million higher a year later.

No one is expecting such robust job growth this time, but economists say the relatively strong showing in productivity during this recession points to lean payrolls, which will have to be fattened up--in some cases, quickly--as the economy improves.

"When you have high peaks in jobless claims, you have sharp declines in claims," says Brusca.

More broadly, economists also point to a number of economic factors that bode well, despite lingering concerns about he credit crunch.

“Cyclical forces trump secular forces,” says Brusca, referring to the massive de-leveraging by both consumers and business. “This is especially true when authorities have stepped in to stabilize it,” after a shocking event like Lehman.

“We have massive monetary and fiscal stimulus in the pipeline,” says Macroeconomic Advisers President Chris Vavares.

Macroeconomic Advisers, whose economist forecast for 2010 is more optimistic than that of the White House, estimates the government fiscal stimulus package will add 2 percent to GDP in the second quarter, one reason why the firm expects the economy to shrink by only 0.5 percent during the period. The consensus is for a 2.0-percent decline.

Then there are a handful of cyclical elements on the verge of being positives.

Consumer spending is growing again, while inventories are being wound down. Housing and autos, in particular, says economists, hint at both pent-up demand and a production rebound.

“Housing will be an important element of the upturn right from the start,” says Mussa, who notes housing starts have been “beaten down” so much that supply will have to be added simply to accommodate demographic demand from new households.

The auto sector, which posted a surprise increase in sales in March, also has the potential to be a driving force.

“We all focus on what lousy shape they are in and not on that they have been cutting production,” says Varvares. “When you look at how quickly motor vehicles sales fell off the table last year--that big decline had a lot to due with the lack of financing [not demand / bleu].”

Varvares says automakers are starting to feel better about the credit environment and will offer better financing deals.

Macroeconomic Advisers' analysis makes a strong case for the role of housing and autos.

The two sectors erased a combined 2.5-3.0 percent from first quarter GDP, says Varvares. Autos, however will add 0.7 percent to GDP in the second quarter. Housing is expected to add 0.5 to 1.0 percent to GDP in 2010.

So, if the optimists are right, it's a case of gloom and boom.

"People were very gloomy in late '74 and '75,," says Mussa. "They were gloomy in 1982."

© 2009 CNBC.com

PM Lee says Singapore to revise down 2009 GDP outlook

SINGAPORE: Prime Minister Lee Hsien Loong believes Singapore's growth forecast for this year will have to be revised downwards.

Although the current estimate is between minus 2 and minus 5 per cent, Mr Lee does not expect the contraction to hit double digits.

One bright spot - unemployment numbers are better than he feared.

Visiting retrenched workers undergoing retraining on Thursday, Prime Minister Lee said it is still unclear whether the global recession will continue for the next few years.

Exports from Singapore were down one-third in January and hardly climbed in the last two months.

But there is a silver lining.

Mr Lee said: "We had expected a very big wave of retrenchment and unemployment, particularly after Chinese New Year this year. But so far I think the number of retrenchments and unemployment numbers had been better than we had feared. And I think the efforts which we put in must have had something to do with this."

The efforts include the Jobs Credit scheme and Skills Upgrading & Resilience Programme or SPUR - which helps retrenched workers retrain at places such as the Employment and Employability Institute (e2i) - to get new jobs.

For a four-week period starting end-January, retrenchment numbers averaged 800 to 900 workers a week in the unionised sector. But they are now down to about 200 to 300 weekly.

Mr Lim Swee Say, NTUC Secretary-General and Minister in the Prime Minister's Office, said: "We must be prepared that there could be a second wave of retrenchment coming on board. There is a big difference between retrenchment and unemployment. If we are not able to help the retrenched workers gain re-employment, then obviously every retrenched worker will add to the pool of unemployed workers."

The e2i will be ramping up efforts to retrain the retrenched for new jobs in the months ahead. Current experience shows that only about 20 per cent of the retrenched are assessed to be job-ready. The other 80 per cent either requires skill conversion or a lot more basic training.

Over 10,000 people lost their jobs in the first quarter of this year. But there are still job vacancies available in the market.

At e2i, for example, employers are looking to fill over 18,000 jobs in various sectors. And workers who undergo training have a much better chance of securing those jobs.

More than 4,000 people found new jobs after taking up retraining courses in the first quarter of this year.

- CNA/ir

Why retail investors are starving themselves to death

Why retail investors are starving themselves to death
Clif Droke

Since the market bottomed and the new cyclical recovery bull market began, retail investors have gone on a collective buyer’s strike. Call it a “hunger strike” if you will. The retail crowd is effectively starving itself by missing out on some remarkable recoveries in recent weeks and will most likely continue to miss out on these opportunity until they simply can’t take it anymore. In other words, a classic repetition of the idealized market cycle is setting up perfectly.

So why exactly are retail investors starving themselves to death by refusing to participate in this most profitable of turnarounds? Answer: Because of the most powerful of all human emotions, namely fear. The lingering fear and pessimism from last year’s abnormal market plunge put most investors in a state of catalepsy that persists even now. They are too frightened to take their capital out of zero-yielding “safe haven” investments and put that capital back to work where it is being most rewarded right now, namely equities. When will these retail traders finally work up the nerve to re-enter the market? Answer: At the top.

With the passage of each week the market is giving us more and more signs that a real recovery is afoot, not just for equity market for prices but for key industries and economic segments as well. For instance, several weeks ago I mentioned in this commentary that a leading indicator of industrial commodities demand, the copper price along with the price action of Freeport Copper & Gold (FCX), were pointing to increased demand from overseas. This in turn harbingers a recovery in the global economy, which bodes well for the U.S. economic recovery. Freeport’s stock price broke out of that 4-month lateral consolidation base as anticipated and has rallied nearly $15/share since the beginning of March.

How the crisis happened - A good article in my opinion

(Money Magazine) -- For many people, the most shocking aspect of the financial crisis is that something of this scale could happen at all. Wasn't it just a couple of years ago that the rise of globalization - and the growing sophistication of financial markets - offered the promise of perpetually low inflation, cheap money, and fat returns?

But for British historian Niall Ferguson, what's remarkable is that anyone could have thought this at all. In his latest book, "The Ascent of Money," the Harvard history and business professor traces the evolution of the world's financial systems from the earliest known coins in 600 B.C. to the collateralized debt obligations that brought down Wall Street.

Though the development of finance gave rise to civilizations and empires, he argues, the evolution of financial institutions has never been, and can never be, smooth. "Financial crises happen, and they happen very often," he says. "So to talk as if this could have been avoided is to misunderstand history."

So what does history teach us about this crisis - and how we'll come out of it? Ferguson shared his thoughts with Money senior editor Paul Lim.

What was the root of this crisis? Was it the housing meltdown, a lack of regulation, too much cheap money?

The origins lie in globalization itself. You couldn't really imagine the credit bubble or the housing bubble of 2001 to 2007 taking place without the great flow of cheap capital from Asia to the U.S., which financed U.S. deficit spending. This was also a story of innovation. Financial history is an evolutionary story. And we saw a great flourishing of new financial species in the conditions made possible by globalization.

How do you see the financial markets evolving from this point on?

When Planet Finance reached the size it had reached in 2007, when the derivatives market was vastly larger than the output of the planet, it was clear that we were on the verge of a natural selection clear-out. The species that flourished in this recent era of leverage - when you could wager 50 to 1 if you were a bank - will look a little like a dinosaur after the meteors hit the earth.

So the era of massive financial conglomerates is coming to an end?

Absolutely. While we will prevent the great dinosaurs like Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) from dying, they are never going to be able to operate the way they did.

How come so few foresaw this crisis?

Plenty of intelligent observers did. But market actors failed to heed the warnings. Part of the problem was that incentives for executives and investors discouraged them from taking heed.

Also, a crisis of this magnitude is so rare that it's beyond most people's experience. Only somebody who studies financial history could say, as I was trying to say, "Look, something as big as the liquidity crisis of 1914 or as big as the banking crisis of 1931 is imminent." Most people have a career memory of 25 years at most. If you want to understand how globalization worked - and failed - in the past, you need to go back not 20 years but 100 years.

Isn't the government attempting to go back nearly 100 years now, trying to jump-start the economy through spending as it did in the Great Depression?

The economy of the 1930s, when the New Deal began, was basically a closed economy. The protectionist barriers were so high that the U.S. could increase government expenditures and have the demand ring just around the domestic world. We're not in that situation now. You just can't stop people spending an increment of their income on Chinese imports. So I don't think the stimulus is going to yield anything like the kind of addition to employment or GDP that the government is assuming.

Still, doesn't something need to be done?

Yes, but you can't have the U.S. run a $2 trillion deficit and expect foreign investors to finance it in the midst of a massive contraction of trade. Let's assume the federal deficit grows to 14% or 15% of GDP. That's a number we haven't seen since World War II.

This is why I prefer more radical solutions to reduce private-sector debt. You need to stabilize the real estate market. As long as property prices are falling at an annual rate of 19%, you can't stabilize bank balance sheets. The assets they're linked to keep becoming worth less.

Isn't Obama's housing plan aimed at reducing private debt?

It doesn't go far enough. The plan is to use $75 billion to incentivize lenders to reduce monthly payments. There will also be an opportunity for Fannie Mae and Freddie Mac-backed mortgages to be refinanced. To be effective, a large-scale restructuring of household indebtedness would need to be mandatory.

So lenders should be forced to renegotiate?

I'd be trying to think about how to effectively convert mortgages nationwide into 20- or 30-year debt at, say, 3%.

Has anything like that been done before?

Yes. It was a frequent occurrence in the 19th century. Governments that were paying 6% on bonds would say, "Look, circumstances have changed. From now on you get 3%." What's different today is that these are private debts, not public debts, and that entails a lot more complexity.

Wouldn't a cram-down like that make credit markets more volatile?

We don't really have a great many options here. If we stay the present course, you're going to see the tailspin continue.

Is a depression still possible?

It is. The Great Depression was initially a U.S. financial crisis. But what made it a depression was its global contagion, and then the breakdown of trade and the retreat into protectionism. All of that can happen. All of that is in fact happening with terrifying speed. Countries have started to use protectionist language, whether it's "Buy American" or "British jobs for British workers."

Do investors need to change the way they think?

Paradoxically, this American crisis makes the U.S. seem like a more attractive place to invest - including for foreigners. America's "safe haven" tag is an important one.

Rising Mortgage Delinquencies Signal No Bottom Yet

More U.S. consumers are falling behind on their mortgages, an indication that the housing market has yet to hit bottom, a top credit bureau executive told Reuters.

Dann Adams, president of U.S. Information Systems for Equifax, reported that 7 percent of homeowners with mortgages were at least 30 days late on their loans in February, an increase of more than 50 percent from a year earlier.

He also said 39.8 percent of subprime borrowers were at least 30 days behind on their home mortgage loans, up 23.7 percent from last year.

"I'm trying to find optimism in these numbers, but I'm pretty hard pressed to do that," Adams said, despite a recent burst of relatively positive news that has fueled hope that the U.S. housing market has turned a corner.

Late last month the Commerce Department reported that sales of newly built U.S. single-family homes rose to a 337,000 annual pace in February, the highest in 10 months.

Such news has boosted homebuilder shares, which are up about 45 percent since March 6, according to the Dow Jones U.S. Home Construction Index.

But Adams said the continued increase in mortgage delinquencies revealed in his data foreshadows more foreclosures, short sales and home price declines as homeowners default and banks then repossess the homes to sell them at deep discounts.

The Equifax data also reveals the impact of the rise in unemployment, which is at its highest rate since 1983.

Employers cut 663,000 jobs in March, sending the national unemployment rate to 8.5 percent, the Labor Department said Friday.

The rising jobless rate manifests itself in consumers' increasing reliance on credit cards even as lenders try to restrict access to credit, Adams said.

Banks closed 8 million credit card accounts in February, reducing the number of open cards to 400 million from a July 2008 peak of 483 million, according to Equifax data.

Credit limits fell as well, to $3.27 trillion in February from a July 2008 peak of $3.59 trillion.

"Limits are falling because lenders are trying to minimize their losses," Adams said.

The data shows that lenders have good reason to be wary.

Bank card delinquency is at its highest level in the past five years. Some 4.5 percent of total balances on bank-issued credit cards were at 60 days past due in February, a 32.7 percent increase from a year earlier.

"Their credit card is their lifeline," he said.

Recovery hopes begin to blossom

By Chris Isidore, CNNMoney.com senior writer

A growing number of economists say they see signs that the battered U.S. economy could start to recover as soon as this summer.

NEW YORK (CNNMoney.com) -- Unemployment at a 25-year high. Housing prices continuing to fall. Corporate titans such as General Motors on the brink of bankruptcy. There's no lack of bad economic news.

And yet, amid the gloom, there are a growing number of economists that see a recovery on the horizon -- perhaps even a strong rebound.

They say that a number of indicators appear to have bottomed out in recent months. Job losses may have peaked in January. Home sales are starting to pick up. Stocks are enjoying a strong rally.

And because the economy has experienced such a steep decline in the current downturn, some economists are hopeful the recovery ahead will be much stronger than the anemic gains that came about after the end of the previous two recessions.

Lakshman Achuthan, managing director of Economic Cycle Research Institute, said the economy could be as close to four months away from a recovery.

He says his firms' readings on long-term and short-term economic indicators give him significantly more hope that the economy is closer to a turnaround than he had thought even a month ago. Among the more than dozen different things his firm looks at are home prices, the jobs picture and stock prices.

"These readings don't really turn unless something is happening," he said.

To be sure, many economists still think that the recession won't end until much later this year, if not 2010. But Mark Zandi, chief economist of Moody's Economy.com, also believes that a recovery could be closer than most people think. However, he said an end to the recession will largely depend on improvement in the labor markets.

"We're starting to see some pent up demand for goods. But first things first, we need to see job losses moderate," he said.

Zandi said just a slowing rate of job losses should help make people more confident about their own job outlook, as will a continuation of the recent gains for stocks.

Those two factors, plus a sign that home price declines have ended will help to turn around consumer confidence, Zandi said. That should help spur more spending.

Zandi said the problem with confidence today is that when things aren't going well, many people can't picture things getting better, just as they have trouble imagining declining prices of homes and stocks during a boom period.

"Confidence is a very fickle thing. It can go from abject pessimism that pervades now to a more balanced view of the world rather quickly," he said.

Robert Brusca of FAO Economics, also believes there will be a fairly sharp recovery, mainly because this recession was so much worse than the ones in 1991 and 2001.

A slow, jobless recovery took place after those recessions, which were both fairly mild by historical standards. But the economy has often bounced back sharply following more severe recessions.

Brusca points out that, prior to the 1991 and 2001 downturns, the nation's gross domestic product has gained about 7%, on average, during the first year of a recovery.

For this reason, he is predicting strong growth in at least one of the year's final two quarters as well as a quicker return to health for the labor market.

"You've lost 5 million jobs. It shouldn't be hard to put 2.5 million jobs back on rather quickly after you hit bottom," he said.

Joseph Carson, chief economist at AllianceBernstein, said the economy is already showing early indications of turning around. In addition to improving home sales and positive signs from the stock and bond markets, retail sales in February and March were stronger than expected.

And all of this has happened before the nearly $800 billion stimulus package that was enacted earlier this has had much of an effect. Because of this, Carson said the stimulus plan could create stronger than expected growth -- and much sooner than consensus forecasts.

"Stimulus has a much better chance of working if trends are already turning up than if it needs to halt a decline," he said.

Soros: "Danger of Collapse Has Passed," But Stock Rally Not Sustainable

“The real danger of collapse has passed,” says legendary financier George Soros. But the “fallout of the collapse” of the banking system “will linger."

In the wake of Lehman Brothers’ bankruptcy on Sept. 15, 2000, authorities were forced to put the financial system remains on “artificial life support, which is where it is now,” says Soros, the chairman of Soros Fund Management and author of several books, including most recently The Crash of 2008 and What It Means.

As a result, the billionaire speculator says the stock market’s recent rally is doomed to fail. “Now we will face reality,” he says, referring to a belief policymakers “did not succeed in recapitalizing the banks to point where they can lend freely." Unfortunately, “talk of zombie banks – that’s where we are now,” Soros says. “Instead of providing the lifeblood of credit, [banks] are effectively drawing it to themselves.”

That, in turn, will keep the economy from producing anything more than a fleeting bounce for the foreseeable future, says Soros

A doctor’s personal experience as a houseman in a public hospital

The writer just completed his bond with MOH and is celebrating his new found “freedom”. He wishes to remain anonymous.

I thanked Ms Yvonne Chew for her letter on the plight of junior doctors. (read letter here) As a house officer, I had the “honor” of serving in the respiratory unit of one of the biggest public hospitals in Singapore. Local medical graduates will know which hospital I am referring to. It was an experience I will never forget.

A typical day begins with daily ward rounds at 8am. The house officers usually arrive half a hour earlier to prepare the case notes, familiarize themselves with the new cases and to trace results from the previous night.

I am not sure about the workload now, but during my time, the average number of patients under the care of one house officer ranged from twenty to forty.

The ward round which is often intimidating, seldom ends before 11am and sometimes stretches pass 12 noon if the cases are complicated. Then begins a day’s mundane work of drawing blood, doing ECGs (there were no phlebotomists or ECG technicans in those days), typing discharge summaries, arranging for urgent CT scans, talking to patient’s family etc.

If one is lucky to have lunch, it usually means a quick bite at the caferia provided the nurses are kind enough not to interrupt you during the precious few minutes when the new admissions will start to come in at the same time.

The house officers are responsible for clerking, examining the admitted patients, ordering and taking the relevant tests and to present the cases to their MOs or Registrars during the evening round which can sometimes last till 7pm or later.

We had six to eight night calls a month which start at around 6pm and end at 8am the next day after which you are still expected to work till 1pm before you can knock off if there is enough manpower.

I still remembered the Head of Department telling us during the orientation that “post-call” is privilege, not a right. Very often we don’t get to leave early after a hectic night deprived of sleep or if we do, in the late afternoons around 3 to 4pm.

You have to experience it for yourself to know how it feels like to be without sleep for 36 to 48 hours. Your mind gets switched off, your eyelids go drooping all the time and you get irritated very easily. The body craves for sleep and yet you have to force it to be up and running. There was once I dozed off at the bedside of a patient while talking to him!

The long working hours, mental fatigue and emotional distress are not helped by superiors who are not quite empathetic to the problems encountered by doctors fresh out of medical school.

A fellow house officer who broke down crying after being scolded right in front of a patient’s family by a consultant was told straight in her face to “cut the pretence” and stop being a “crybaby”! (I was just besides her) She took two weeks of “emergency leave” a week later and was transferred to another department upon her return.

A Singaporean medical graduate from Australia quitted only after one week in the ward. On her first night call, she was so overwhelmed that she locked herself in the call room and switched off her hospital handphone. She was expectedly haul up the very next day to face the music dished out by the Head of Department who obviously didn’t take kindly to her ”AWOL” . The last I heard of her is that she is now working in a hospital in Melbourne and has settled down there.

The above examples are real life stories and not an exaggeration of some of the challenges or “tortures” encountered by junior doctors in Singapore’s public hospitals.

Why didn’t we bring up our grievances to the attention of the senior doctors then? There is a “macho” culture pervading the local medical fraternity that because medicine is a noble profession, all doctors are expected to put up with sacrifices and hardships which the job entails even at the expense of their own personal well-being.

More than often, the consultants will brush aside the complaints of the juniors with a dose of their own anecdotes:

“In those days when I was a houseman, I worked longer hours than you with half your pay and I have never complained even once!”

“You should be thankful to be serving your housemanship in Singapore instead of Kuala Lumpur or Kuching!”

“Nowadays the load is so light compared to the past and you guys (and girls) still whine so much!”

That’s why consultants working in public hospitals are the creme la crop as they have demonstrated their mettle in surviving and emerging from the system unscathed.

Please do not get me wrong. I am not writing to lash out at anybody. I still have utmost respect and admiration for the consultants whom I have worked with. They are the most dedicated, hardworking and knowledgable clinicians I have encountered and I am indeed honored to be given the opportunity to learn from them.

The long hours and poor working conditions faced by junior doctors are perpetual problems in public hospitals. As long there is a ready supply of “cheap labor” to keep the system running, there is little incentive to improve the welfare of the junior staff as it will lead invariably to higher operating costs.

Under free market conditions, very few local doctors will want to work in public hospitals unless they are training to be specialists which explains why almost all will leave for the public sector upon completion of their bonds. At least 10 of my classmates have broken their bonds during their final years of service.

Recruiting foreign doctors and increasing the number of medical students are only temporalizing measures which will create a bigger problem in the future if the crux of the issue remains inadequately addressed.

While the public sector remains chronically short of doctors, the private sector will be flooded with general practitioners and specialists which will depress the overall wages of doctors.

MOH should do more to keep doctors within the public healthcare system by offering them better working conditions and renumerations which are comparable to that in the private sector.

Keeping more local doctors in the hospitals and polyclinics will obviate the need to recruit more foreign doctors who will have difficulties communicating with elderly patients and understanding our unique Singapore culture.

Stocks May See ‘Correction’ of 10%, Marc Faber Says

By Chen Shiyin and Susan Li

April 7 (Bloomberg) -- Marc Faber, the investor who recommended buying U.S. stocks before the steepest rally in more than 70 years, said the Standard & Poor’s 500 Index may drop as much as 10 percent before resuming gains.

The measure may decline to about 750 and rebound after July, Faber, 63, said in a Bloomberg Television interview in Singapore. Global stock markets are unlikely to fall below their October and November lows, he said.

“We need some kind of correction, maybe around 5 to 10 percent, and after that we can maybe rally more into July,” said Faber, the publisher of the Gloom, Boom & Doom report. “The economic news, while it won’t be good, the rate of getting worse will slow down.”

The S&P has rallied 25 percent from a 12-year low since March 9, when Faber advised investors to buy U.S. stocks, saying government actions will boost shares. Asian equities are among the best bets for global investors because they are attractively valued and will benefit the most from a global economic rebound.

Faber told investors to abandon U.S. stocks a week before 1987’s so-called Black Monday crash and said in August 2007 that U.S. shares were entering a bear market. The S&P 500 peaked two months later before retreating as much as 57 percent.

Commodities, Banks

Faber said he bought some commodity producers in November and is now less “interested” in these companies after some stocks more than doubled. He is also buying some bank stocks and predicted that Citigroup Inc. shares could “easily rebound” to around $5 from $2.72 currently.

“The rebound potential for some of these banks and financial institutions is quite high,” Faber said.

George Soros, the billionaire hedge-fund manager who made money last year while most peers suffered losses, is less optimistic, saying the banking system is “seriously underwater” with banks on “life support.”

The four-week rally in U.S. stocks isn’t the start of a bull market because the economy is still contracting and there’s a risk the U.S. falls into a depression, Soros also said in a Bloomberg Television interview yesterday.

Citigroup lowered its rating on U.S. equities to “underweight” from “neutral,” saying the rally is set to end and the market’s valuations are less attractive, strategists led by London-based Robert Buckland said in a report yesterday.

S&P 500 futures expiring in June were unchanged at 830.40 at 12:35 p.m. in Singapore.

‘Better Value’

In Asia, stocks offer “much better value” than U.S. shares, and investors should seize the opportunity to buy the region’s equities on “every setback,” Faber said. Japanese stocks also “look interesting,” he added.

“If you buy Asian equities in the next three months, over the next five to 10 years, for sure you will make money,” he said. “Asian exporting countries will benefit the most from an expansion when it happens.”

Faber is less favorable on bonds, saying they are entering a “long-term bear market” that can last for the next 15 years to 20 years.

Investors should also diversify into the currencies of Canada, Australia and Singapore because in the U.S. dollar “may weaken somewhat,” he added. The dollar has strengthened against all of the so-called Group of 10 currencies except the yen in the last 12 months, according to data tracked by Bloomberg.

Faber still advises investors to buy gold even though the precious metal is going to be “dead money” in the next three to six months. He plans to buy more gold if prices drop to between $750 and $800 an ounce, he added. Prices retreated yesterday to $872.8, the lowest in more than two months.

World Bank: China's recovery could start this year

By JOE McDONALD, AP Business Writer Joe Mcdonald, Ap Business Writer

BEIJING – China is likely to emerge from its economic slump later this year, helping the rest of Asia stabilize and possibly rebound, the World Bank said Tuesday.

"A ray of hope may be emerging with signs of China's economy bottoming out by mid-2009," the bank said in a statement. "A recovery in China — fueled largely by the country's huge economic stimulus package — is likely to begin this year and take full hold in 2010, potentially contributing to the region's stabilization, and perhaps recovery."

China's economy — the world's third-largest — should expand by 6.5 percent this year, though exports should shrink as Western markets continue to contract, the bank said in a report on Asian economies.

That's slower than its 9 percent growth last year, but still the strongest of any major economy in the world. Many Asian economies are already contracting and expected to shrink in 2009.

Beijing is trying to reduce reliance on trade with a 4 trillion yuan ($586 billion) plan to pump money into the economy through higher public works spending in hopes of boosting domestic consumption.

The Washington-based World Bank said pressure for Chinese prices to rise is still low, leaving room for the government to cut interest rates or take other steps to fuel growth.

China's growth has plunged as global demand for its goods weakened, with exports falling 25.7 percent in February from a year earlier. Private sector analysts are forecasting growth as low as 5 percent this year, down from 2007's 13 percent — though still the fastest of any major country. The government's official target is 8 percent.

China is a key customer for other Asian nations that supply raw materials and components for manufacturing and other industries, making its economic health a factor in their ability to emerge from the regional slump.

A government-authorized business group reported last week that manufacturing expanded slightly in March following a months-long decline.

The central bank said last week that data pointed toward a recovery, though it gave no details or a time frame.

The World Bank cautioned that Chinese industry will have large unused capacity, possibly leading to weaker investment, slower job growth and downward pressure on prices, which can cut into company profits and investment.

"China cannot escape the external weakness," the bank said. Government spending alone could not offset weaknesses elsewhere, it said.

___

Grads flexible about pay

FRESH graduate Wang Wei Xiang will jump at a job that pays $2,000 a month, even though it is $500 less than the average starting pay.
The 26-year-old, who has a degree in business management from Singapore Management University (SMU), is even willing to be an intern for $700 a month.

His overriding concern is that the job gives him experience in human resource and organisational development.

Mr Wang's flexible stance on pay is typical of the 800 new graduates who attended a job fair yesterday. Over 6,000 jobs were on offer from 28 organisations at the fair organised by Young NTUC, the youth arm of the National Trades Union Congress.

Participants included the Agency for Science, Technology and Research (A*Star), integrated resorts Marina Bay Sands and Resorts World at Sentosa, and pre-school operator NTUC First Campus.

About 12,000 are expected to graduate from the local universities this year, said NTUC assistant secretary-general Josephine Teo.

But at least 1,000 of them may find themselves without a job even after six months, should their employment rate hit the 87 per cent level of the 2003 Sars period, said an NTUC statement yesterday.

Hence, Mrs Teo, adviser to Young NTUC, urged graduates at the fair to promptly launch their career even if they cannot find their 'dream' job. Whatever the job, it will give them new skills, she said.

She also highlighted the large number of jobs on offer at the fair, saying it shows there are still many opportunities despite the downturn.

Mrs Teo's advice struck a chord with SMU marketing graduate Desiree Koh, 24. 'I'll accept a starting pay of about $2,000. I'm still young,' she said.

Not more than $500k

By Joyce Teo, Property Correspondent

THE tightening property market and demand for smaller homes have created a dilemma for the HDB's design, build and sell scheme (DBSS) - price flats over $500,000 and buyers could stay away.
That price point has been cited as the 'resistance level' for home seekers with less cash to spend but a wealth of options in a buyer's market.

Experts said DBSS homes - public flats designed, built and sold by private developers - are sandwiched in a fast- narrowing price gap between private condominiums and HDB flats.

To move units, these condo-style homes will have to be priced at about $500,000 or less - under an equivalent- sized flat in a private condo - but that may erode any profits for the developers.

'These are the same people who will buy your resale HDB flat,' said Knight Frank director Nicholas Mak.

PropNex chief executive Mohamed Ismail agreed: 'The resistance level of HDB buyers is around the $500,000 level. If they are going to be priced above $450 per sq ft (psf), they may face resistance.

'Buyers may head for the private market where they can get better value for $500 psf to just below $600 psf.'

Mass-market condos that offer full facilities, such as Rosewood Suites in Woodlands and Caspian in Jurong, have units in that price range. Developers have lowered their prices of some mass-market projects by 20 to 25 per cent while HDB resale prices are also falling, though at a slower pace.

Two DBSS projects are expected to be released for sale this month. The first is a 1,203-unit project in Toa Payoh with three-, four- and five-room flats.

And Parc Lumiere in Simei will have 360 units - 120 four-room and 240 five- room flats. A Hoi Hup-led consortium won the tender for the Toa Payoh site at about $160 psf per plot ratio last August, while Sim Lian won the Simei site at $137 psf last June.

'It's not a Ponzi scheme'

WASHINGTON - DISGRACED financier Allen Stanford cried, threatened and denied any wrongdoing in his first interview, to be broadcast late on Monday, since being accused of masterminding a US$9.2 billion (S$13.8 billion) fraud.

'I would die and go to hell if it's a Ponzi scheme,' the wealthy cricket mogul told ABC News, according to excerpts released by the network.

'Baloney. Baloney.... It's not a Ponzi scheme. If it was a Ponzi scheme, why are they finding billions and billions of dollars all over the place?'

The Texas billionaire's assets, along with those of his various financial groups, are frozen pending the outcome of a civil lawsuit in which he is accused of running 'a massive Ponzi scheme,' a pyramid scheme in which new investors' money is stolen to pay profits to existing clients.

Securities officials accuse Stanford of lying to investors about the safety and real returns of US$8 billion in 'certificates of deposits' and US$1.2 billion in mutual funds.

In February, the Securities and Exchange Commission (SEC) accused Stanford of perpetrating 'a fraud of shocking magnitude that has spread its tentacles throughout the world,' by luring investors with 'improbable and unsubstantiated' returns.

Stanford said he is forming a legal team to fight an indictment by a federal grand jury he expects to come in the next two weeks.

A senior official told ABC the case was 'moving rapidly,' although a Justice Department spokesperson declined to comment.

The network said Stanford was 'near tears' throughout the interview and cried at times as he explained how the SEC's action had robbed him of his title as 405th wealthiest person in the world by Forbes magazine.

'I'm the maverick rich Texan where they can put the moose head on the wall. And that's the only reason they went after me,' Stanford said. 'I'm fighting for my survival and for my integrity.'

Several governments have seized Stanford banks and frozen their assets with concern mounting that the global reach of his banking operations could complicate the return of an estimated US$50 billion in assets belonging to an estimated 50,000 clients in 140 countries. -- AFP

Stocks and Housing: Are They Putting in a Bottom?

by Ben Stein

As I write this, at the beginning of the second quarter of 2009, there are two contrary trends I am observing.

One is that the stock market and the housing market may be putting in a bottom. The stock market has put in a fierce four-week rally, but we have seen many false bottoms since this astounding stock market crash began in the fall of 2007. We do not yet know if we are facing another false bottom or a genuine rally.

Likewise, home sales are rebounding, albeit from a very low level. In some areas, prices are stabilizing, although, again, from extremely diminished metrics. Are we hitting a housing bottom? Maybe, but I would not look for a major housing rally for some years to come. Housing busts tend to hit bottom, then scuttle along the seabed for a few years before truly rebounding. When we do see a rebound, there is no telling how strong it will be. (I am mindful of the tale of my parents' house, a real beauty on a lovely street in suburban Silver Spring, Maryland. It cost my parents roughly $40,000 to build it in 1953. Twenty years later they sold it for about $77,000. Adjusted for inflation, they lost money. The same thing could happen again. There is no iron law that says real estate will always outpace inflation.)

The Contrary Trend

The contrary trend is that the economy generally seems to still be extremely weak. Unemployment, at 8.5 percent, is high by postwar standards. It would be surprising if it did not continue to rise. Almost all manufacturing and extractive industries are weak. While oil and gas have rallied sharply lately, commodities are generally anemic. Travel is moribund -- partly because of a misguided Treasury campaign against business travel. It is hard to find any private sector segments besides health care that are really strong. (The government is very strong at the federal level, homeopathic at state and local levels.)

The international picture is bleak indeed, with trade falling as fast as it ever has since records were kept. This augurs poorly for exports, to put it mildly.

So we may be sinking deeper into recession or depression, or we may be reviving little by little, if the stock and housing markets and durables are clues. In this situation, what do we do? More precisely, what do investors do?

A Simple Strategy

In the many books I wrote with my pal Phil DeMuth, we laid out a simple strategy: the so-called couch potato's portfolio. (We did not invent the title.) This entails buying the widest possible mix of U.S. equities for half of your portfolio and U.S. Treasury bonds for the other half.

This would have given the investor excellent protection in the 2007-2009 crash. While the stock part would have fallen by at least half, the treasuries area would have risen by roughly 10 per cent, giving us a loss of about 20 per cent. This is still painful, but it's a lot better than having everything in the stock market. If the market is indeed reviving, this portfolio will do well. If we have still more to fall, this portfolio's bonds will protect us somewhat. I wish I could say I have enough confidence in the markets to suggest having more stock and fewer bonds, but the market is still the plaything of speculators and short sellers, and we do not know what they will make the market do.

Also, we have to live in a more modest manner than we have been living. Low overhead is less of an option now and more of a necessity.

We might also want to diverge from our standard portfolio to put about 10 per cent into gold, the funds taken equally from stocks and bonds. I normally dislike the yellow metal as an investment because of its extreme volatility and long-term poor price performance. But if we have inflation as the result of the immensely aggressive actions of the Fed, gold may be a haven. But bear in mind that, adjusted for inflation, gold is still barely half of what it was in 1979.

The main idea is that, for most of us, labor is our primary means of livelihood. We are our primary investment and our primary capital. We must find work we enjoy, stay at it a long time, and be willing to guard our heath so that we will be able to keep working for as long as possible.

The economic future has become extremely cloudy, albeit with hints of sun. The government is doing what it can -- this is sometimes helpful, sometimes not. Your primary reliance, however, must be on yourself.
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Frugality Forged in Today's Recession Has Potential to Outlast It

by Kelly Evans

provided by
The Wall Street Journal

With their jobs less secure, their houses worth less and their stock-market portfolios shrunken, Americans are saving more now. But will they still be thrifty when the recession ends?

No one will know for sure for years, but there's good reason to believe Americans will be saving more in the next decade than they did in the last one. "It's hard to believe we're ever going back to the easy credit and free spending of the last 10 years," said economist Richard Berner of Morgan Stanley. He predicts consumer spending will grow at an inflation-adjusted 2% to 2.5% annual rate over the next several years, compared with 3.5% in the decade ended in 2007.

That means trouble for retailers, restaurants and luxury-goods makers that rely on U.S. consumers. But it could also restore some balance to a world economy that has relied -- too much, many economists say -- on Americans' debt-fueled spending and emerging markets' willingness to save and lend.

David Bailey, 45 years old, who lives in Boise, Idaho, with his wife and three young children, is like many who enjoyed several prosperous years as a small-business owner until the housing market -- and then the broader economy -- collapsed, leaving him saddled with debt but no income. His company, Bailey Engineering, which turns raw land into subdivision plots, hasn't generated any income in months. He has cut his staff of 16 to a handful. Faced with a massive loss in his real-estate investments, he has sold a vacation home he built himself a decade ago and is selling another property to its current renters. He has sold his SUV to eliminate its $800 monthly payment and replaced it with a used minivan he bought with cash.

"I just want to get totally debt-free," he said. "I've completely changed in that regard. At this point I just want to make enough money to enjoy myself and my family -- I'm not trying to get rich anymore," he said.

A U.S. Spending Monitor survey by Discover, the credit-card company, to be released Wednesday, suggests Mr. Bailey isn't alone. About 35% of consumers surveyed in March said they expect to reduce their debt levels over the next six months, and a third said they have already done so -- even though their outlook on the economy has improved. One in three said they would put the money freed up by lower loan payments into savings. After doubling their outstanding debt between 2000 and 2007 to $13.8 trillion, U.S. households last year reduced their total debt outstanding for the first time since World War II, according to the Federal Reserve.

But will it last? A survey by AlixPartners, a business-advisory firm, found Americans plan to save 14% of their total earnings once the recession ends. Fred Crawford, the group's chief executive, said even if that number is "inflated by the emotions of the day," companies must "understand and plan for what could be a 'new normal.' " Two-thirds of those surveyed said they plan to buy less in the future, while more than half plan to buy less-expensive things.

Surveys can be lousy predictors, of course. "If you ask people how much they're going to save next month or next year you always get optimistic answers," said Ravi Dhar, director of Yale's Center for Customer Insights. "The same way smokers always say 'next year I'm going to stop.'"

But the severity of this downturn, the nearly $13 trillion loss of wealth since the recession began and the shaken confidence in the capitalist system is prompting a more powerful move toward frugality than usual. "It's the contagion effect," Mr. Dhar says, the same reaction that makes people travel less after a plane crash, or those who lived through the Great Depression conserve tin foil for decades. "The longer this lasts, the more it will have an impact on people's long-term behavior," he said. On top of that, getting credit is likely to be tougher for some consumers in the next decade than it was during the subprime-lending boom of just a few years ago.

Adding to the pressure on Americans to save more in the future is the shrinking size of their retirement nest eggs -- and the realization that they can't count on constantly climbing home prices and an ever-rising stock market to finance their retirement. Americans lost a fifth of the value of their 401(k) retirement accounts -- some $603 billion -- last year, according to the Employee Benefit Research Institute in Washington.

Some companies are already repositioning themselves for a more frugal consumer. "The current economic conditions have created a fundamental shift in shopping behavior," Kathryn Tesija, Target Corp.'s executive vice president of merchandising, said in a recent conference call with investors. "We are allocating more shelf space to nondiscretionary categories" like food, health care and baby products, she said, and drawing attention to the store's low prices. "Guests won't come to us for everyday necessities if those necessities aren't priced right."

American consumers are traditionally resilient, and may yet return to their old ways. But the borrowing boom of the early 2000s ended badly, and the searing memories may shape consumer attitudes for years.

Five Things to Buy Before the Economy Improves

by Daniel Indiviglio

Sadly, someday this recession is going to end.

After 17 months of steep decline, both the president's Council of Economic Advisors and the Federal Reserve now believe the economy will begin to recover sometime in 2009.

Great news, to be sure. But it's also a warning to consumers: The deals you're seeing on everything from houses and cars to televisions and furniture won't last forever. Luckily, for a host of goods and services, the sale of the century (literally) is still on.

The reason is simple: no buyers. Personal savings in 2008 were nearly six times greater than in 2005, amounting to $191 billion or 1.8% of the nation's disposable income. In 2009, annualized savings for January and February exceeded $450 billion, or more than 4% of disposable income.

For those feeling bold enough to bargain shop, opportunities abound. Some deals, like housing and automobiles, might be obvious, but others, like diamonds, might not be.

Big Ticket Items

At the top of the list: housing. This may be the best time in a generation to buy a home. According to the S&P/Case-Shiller U.S. National Home Price Index, fourth-quarter 2008 prices were down 25% from the four quarter of 2006. The stimulus bill Congress passed in February includes an $8,000 credit for first-time home buyers. According to bankrate.com, average interest rates are beginning to dip below 5% for a 30-year, fixed-rate mortgage.

More good news for consumers: Automakers had a miserable 2008. Auto demand is down by approximately 33% since October and dealers have excess inventory backing up and bills coming due. It's a good time to buy.

Incentives from manufacturers have "probably never been as strong as they are today," says John McEleney, a multi-franchise auto dealer and chairman of the National Auto Dealers Association. If you've got good credit, you can expect 0% financing and cash rebates as high as $6,000.

Another deal? Diamonds. Anyone in the market for a something sparkly will find prices down 14%, on average, since their highs in mid-2008, according to Ken Gassman of the Jewelry Research Institute. Gassman says more expensive diamonds have seen even greater drops. A pristine 4-carat diamond that went for $70,000 per carat is now selling for $51,700 per carat--a 26% discount.

Consumer Goods

Each year it seems like TVs get cheaper and cheaper, but this year those decreases are starting to make larger flat-panel TVs far more affordable. The radio/television category in February's Consumer Price Index was down 9% from a year ago as more manufacturers get into the flat-panel business, driving prices down.

Same thing for furniture. The Consumer Price Index shows prices fell 2.4% since August, but even bigger bargains are out there. With fewer people buying houses, fewer shoppers are filling them. Jim Sluzewski, a spokesman for Macy's says demand has noticeably decreased over the past year. Retailers have excess inventory, leading to lower prices and better deals for consumers.

Women's fashion is also an interesting story. Right now there is no dominant fashion trend in women's apparel, according to Jeffrey Klinefelter, senior research analyst on the Piper Jaffray consumer team.

Women have been taking greater advantage of lower-cost clothing retailers like Forever 21 and Target, not feeling the need to spend more on expensive outfits. This allows the lower-cost chains to reduce their prices through production cost savings and requires the higher-cost chains and designers to cut prices on their excess inventory in response to lower demand.

So if you're ready to spend a little, now's the time. Bargains are out there--for as long as the downturn holds.

Things to Buy Before the Economy Improves

The deals you're seeing on everything from houses and cars to televisions and furniture won't last forever. As the economy improves in coming months, they'll evaporate. Luckily, for a host of goods and services, the sale of the century (literally) is still on. A look at 10 things you may want to buy while they buying's good.

1. A Car

With the auto industry suffering, manufacturers are offering huge incentives on their swelling inventories of new cars. Buyers with good credit can get 0% financing on most types of cars and some cash rebates can be upward of $6,000. Don't rule out a used car either: The February 2009 Consumer Price Index shows a 10% decrease in used car prices from a year ago.

2. A Vacation

Need a break? Now's the time to take one. According to Expedia.com research, average hotel prices in many desirable destinations have plummeted. For example, hotel prices in Las Vegas are down 34% from a year ago. Average Caribbean cruise prices have fallen 8% compared with the first quarter of 2008. Several travel agents also bragged about booking week-long Alaskan summer cruises for as low as $1,000 per person, including airfare and taxes.

3. High-Dividend Stocks

The S&P 500 is down 40% from a year ago and could fall further, but for those willing to brave the market and wait, deals abound. Inflation could make it an even better time to buy. Washington's bailouts and ballooning budgets may make stocks with a history of high dividends a good option--they take advantage of today's low stock prices and implicitly protect investors from future inflation through regular dividend payments.

4. A Laptop

Paul Ryder, vice president of consumer electronics for Amazon.com, says laptop prices have dropped thanks to the interest in netbooks. Although the Consumer Price Index does not break out laptop computers from others, it seems to broadly support this claim, with personal computer prices falling 13% in February from a year earlier.

5. A Television

Each year it seems as though TVs get cheaper and cheaper, but this year those decreases are starting to make larger flat-panel TVs far more affordable. The radio/television category in February's Consumer Price Index was down 9% from a year ago as more manufacturers get into the flat-panel business, driving prices down.

Billionaire Clusters

by Duncan Greenberg

Want to become a billionaire? Up your chances by dropping out of college, working at Goldman Sachs or joining Skull & Bones.

Are billionaires born or made? What are the common attributes among the uber-wealthy? Are there any true secrets of the self-made?

We get these questions a lot, and decided it was time to go beyond the broad answers of smarts, ambition and luck by sorting through our database of wealthy individuals in search of bona fide trends. We analyzed everything from the billionaires' parents' professions to where they went to school, their track records in the early stages of their careers and other experiences that may have put them on the path to extreme wealth.

Our admittedly unscientific study of the 657 self-made billionaires we counted in February for our list of the World's Billionaires yielded some interesting results.

First, a significant percentage of billionaires had parents with a high aptitude for math. The ability to crunch numbers is crucial to becoming a billionaire, and mathematical prowess is hereditary. Some of the most common professions among the parents of American billionaires (for whom we could find the information) were engineer, accountant and small-business owner.

Consistent with the rest of the population, more American billionaires were born in the fall than in any other season. However, relatively few billionaires were born in December, traditionally the month with the eighth highest birth rate. This anomaly holds true among billionaires in the U.S. and abroad.

More than 20% of the 292 of the self-made American billionaires on the most recent list of the World's Billionaires have either never started or never completed college. This is especially true of those destined for careers as technology entrepreneurs: Bill Gates, Steve Jobs, Michael Dell, Larry Ellison, and Theodore Waitt.

Billionaires who derive their fortunes from finance make up one of the most highly educated sub-groups: More than 55% of them have graduate degrees. Nearly 90% of those with M.B.A.s obtained their master's degree from one of three Ivy League schools: Harvard, Columbia or U. Penn's Wharton School of Business.

Goldman Sachs has attracted a large share of hungry minds that went on to garner 10-figure fortunes. At least 11 current and recent billionaire financiers worked at Goldman early in their careers, including Edward Lampert, Daniel Och, Tom Steyer and Richard Perry.

Several billionaires suffered a bitter professional setback early in their careers that heightened their fear of failure. Pharmaceutical tycoon R.J. Kirk's first venture was a flop--an experience he regrets but appreciates. "Failure early on is a necessary condition for success, though not a sufficient one," he told Forbes in 2007.

According to a statement read by Phil Falcone during a congressional hearing in November, his botched buyout of a company in Newark in the early 1990s taught him "several valuable lessons that have had a profound impact upon my success as a hedge fund manager."

Several current and former billionaires rounded out their Yale careers as members of Skull and Bones, the secret society portrayed with enigmatic relish by Hollywood in movies like The Skulls and W. Among those who were inducted: investor Edward Lampert, Blackstone co-founder Steven Schwarzman, and FedEx founder Frederick Smith.

Parents Had Math-Related Careers

The ability to crunch numbers is normally a key to becoming a billionaire. Often, mathematical prowess is hereditary. Some of the most common professions among the parents of American billionaires for whom we could find that information were engineer, accountant and small-business owner.

September Birthdays

Of the 380 self-made American tycoons who have appeared on the Forbes list of the World's Billionaires in the past three years, 42 were born in September--more than in any other month. Maybe that's because September is the month the Forbes list of the 400 richest Americans is published.

Tech Titans Who Dropped Out of College

Forget everything your guidance counselor told you: You don't have to go to college to be successful. More than 20% of the self-made American moguls on the most recent list of the World's Billionaires never finished college. Many of them made their fortunes in tech. Among them: Bill Gates, Steve Jobs, Michael Dell, Larry Ellison, (Oracle) and Theodore Waitt (Gateway).

Skull and Bones

Several current and former billionaires rounded out their Yale careers as members of Skull and Bones, the secret society portrayed with enigmatic relish by Hollywood in movies like The Skulls and W. Among those who were inducted: investor Edward Lampert, Blackstone co-founder Steven Schwarzman and FedEx founder Frederick Smith.

Goldman Sachs

A stint at investment bank Goldman Sachs is a prime credential for becoming a finance billionaire. Of the 68 self-made American billionaires that derive their fortunes from finance, at least eight cut their teeth in Goldman's investment banking, trading, or asset management divisions. The company's crown jewel: its "risk arbitrage" unit, which launched the careers of billionaires Edward Lampert and Daniel Och, as well as former billionaires Tom Steyer and Richard Perry.

Copyrighted, Forbes.com. All rights reserved.

Tips on Keeping Your Money in Cash Accounts

by Sarah Max

Suddenly, cash is king again. With more and more Americans worried about their job security, the personal savings rate has climbed to 3.6%, up from next to nothing two years ago. Investors, meanwhile, have parked billions of dollars on the sidelines while they wait for better days. But with interest rates on savings near record lows, it pays to be savvy about where you stockpile your rainy-day funds. Here's what you should keep in mind.

1. Don't keep all your cash in the same place. There are four ways to use cash, and an ideal account for each. Grocery money goes in checking. Your emergency fund - cash you'll need if you lose a job - must be in a bank account that's 100% safe but needn't be so convenient; if you get a good yield, don't worry if it takes a day or two to transfer the money. Money for a specific purpose, like a wedding, can get a higher yield if locked in a certificate of deposit set to mature when you need it. Your investment portfolio's cash might belong in a money-market fund, but not always (see No. 3).

2. It's safe to shop around. Uncle Sam has your back. For your emergency and special-purpose money, there's no need to settle for low rates at your local bank. You can trust your money to any account insured by the Federal Deposit Insurance Corp., which guarantees up to $250,000 in deposits per depositor per bank (individual, joint, IRA, and trust accounts are insured separately). You can go to Bankrate.com to check the financial health of any bank. Plenty of top-rated online banks now offer 2% yields.

3. Money-market mutual funds aren't a no-brainer anymore. These funds are not FDIC-insured. (Banks' money-market deposit accounts typically are - just be sure the bank says so.) Money-market funds almost never lose a penny, but the crisis has changed the rules: After one fund lost principal last fall, the feds had to step in with a temporary rescue plan. Meanwhile, yields on many funds are now under 2%. If you'll keep part of your portfolio in cash for a while, an insured bank account may be the better deal. But money funds can still be useful. They may be the safest option in a 401(k) plan, and can be convenient when linked to a brokerage account. (Some brokers now offer FDIC-insured accounts too.) Just stick with the big, solid firms. And if a fund promises an unusually high yield, it's probably courting too much risk to be considered cash, says Peter Crane of Crane Data, which tracks the industry.

4. A 2% yield is better than it looks. Low interest rates are bad news if you live off your investment income. But if you are just worried about your savings keeping ahead of rising prices, a 2% yield isn't bad at all with inflation running close to zero, notes Greg McBride of Bankrate.com.

5. You might be better off with "almost cash." There's a whole spectrum of risk between money markets and the typical bond fund. So if the market has you spooked and you want to trim your portfolio's risk, consider some higher-yielding options, advises Evelyn MacIntyre, a Bloomfield Hills, Mich., financial planner. High-quality short-term bond funds may lose money - they fell 4% in 2008 - but they yield over 4%. Stable-value funds also hold bonds but add some insurance on top. They are available only within 401(k) plans and some other tax-advantaged accounts.
Copyrighted, CNNMoney. All Rights Reserved.

Meredith Whitney: Bank Profitability Is an Illusion

From The Business Insider, April 6, 2009:

In an interview with Steve Forbes, red hot bank analyst Meredith Whitney runs down her standard litany of thoughts and concerns about the economy, including cut credit card lines and the need to strengthen tiny banks, rather than the big ones.

One new things she discusses is the question of bank profitability in Q1. This has been a controversial question -- some investors obviously believe that the industry has turned the corner, as bank shares have been bid up significantly. Others think it's all a matter of defining profit, or perhaps nefariously, some accounting tricks courtesty of AIG.

Here are Meredith's feelings:

Now, in January and February, it seemed, at least to an outsider, that even regardless of what the books said, the banks seemed to be doing very well on a cash-operating basis, the rollover alone. You were paying fees. You are paying fees. You were paying 10,000 points above LIBOR. Do we have a disconnect here? Where on a cash basis, the banks are doing well; where in a statutory, regulatory basis, they're still not out of the woods?

Well, on a cash basis and on a trading basis, they're doing, facilitating transactions. January and February, it's all relative, right?

[05:45] Shun Bank Stocks

Right.

Relatively good months. On an accrual basis, that's where you get into problem areas. Because your loan is only as good as it pays you back. And so, the loans are paying back less. As I said, one of the two main assumptions that goes into valuing any of your loans, accrual-based loans, is home price appreciation, but also unemployment.

A lot of the banks were carrying seven-and-a-half to eight percent unemployment. We're already over 8%. So, there are going to be big true-ups this quarter. Some parts of the business are OK. And what's interesting, for a Goldman Sachs, 70% of the capital markets competition has gone away, or dramatically pulled in their horns.

So, it's a smaller pie. But you're getting more of a market. And the government actually is churning a lot of fees for Wall Street. So, there's trading activity there. I don't know how sustainable it is because bank revenues, cash-based revenues on the non-accrual-based loans, should correlate to some multiple of the GDP and global GDP. And as we know, the global GDP is coming down.

Banking Sector Debt Problems Are Far From Resolved: Mayo

Many of the recent fixes in the financial sector are merely "window dressing" and problems still persist in the sector, says Michael Mayo, a former Deutsche Bank analyst who now works for CLSA's Calyon Securities.

Mayo, who is widely respected for his timely calls in the sector, remains negative on the sector and is starting coverage at Calyon with "sell" or "underperform" ratings on 11 traditional U.S. bank stocks. His earnings forecasts for the sector also are below the average estimates of other Wall Street analysts.

Mayo's comments follow a run-up in banking stocks such as Citigroup (NYSE: c) and JP Morgan (NYSE: jpm). His comments are putting pressure on banking stocks in trading on Monday.

Mayo expects loan losses to continue escalate to a level that exceeds the Great Depression, he said in a research note entitled the "Seven Deadly Sins of Banking."

"While certain mortgage problems are farther along, other areas are likely to accelerate, reflecting a rolling recession by asset class," Mayo says, in the research note. "New government actions might not help as much as expected, especially given that loans have been marked down to only 98 cents on the dollar, on average."

Mayo expects the recession to persist and to put further pressure on commercial real estate loans.

Loan losses could accelerate from 2 percent to 3.5 percent by year-end 2010 given ongoing problems in mortgage and an acceleration of troubles in cards, consumer credit, construction, commercial real estate and industrial, he predicts.

He is particularly worried about $7 trillion in bank loans covering mortgage, consumer and commercial real estate that the public private partnership doesn't begin to fix.

According to Mayo, the changes in mark-to-market accounting rules "changes the optics," but doesn't change the underlying fundamentals of the banking business.

Although Mayo expects upcoming earnings reports from the banks to be better than in the fourth quarter, there will still be problems with the asset quality. He expects this quarter to mark a transition from the financial crisis, which was characterized by billions of dollars in writedowns, to an economic crisis, which will be marked by loan losses.

Global economic crisis 'far from over': PutinGlobal economic crisis 'far from over': Putin

MOSCOW (AFP) - - The global economic crisis is "far from over," Russian Prime Minister Vladimir Putin warned on Monday.

"The global economic crisis has still not ended -- it is far from over," Putin said in an address to the State Duma, broadcast live on state television.

"The situation in the global economy is unclear and faces many threats. We cannot solve all the problems in one go," he said.

Obama & Co Have Got It All Wrong: Analyst

From early March lows, the U.S. market has roar back — in fact, in terms of the greenback, the dollar has had the best four week back-to-back series of gains since 1933.

Yet it's a given that first-quarter economic data and earnings will be disappointing. So are investors setting themselves up for a nasty fall? Will this rally come to an abrupt screeching halt?

David Roche, global strategist at Independent Strategy Ltd., thinks the rally will peter out once investors realize that economy is not recovering as the market had anticipated. He gives two reasons.

"First of all, because the credit machine is still broken, and credit will still contract. Therefore the consumer and investment are simply going to be out of the game, insofar as they need credit to grow. The second thing is even if they had credit to grow, you have the consumer, and indeed businesses too, deleveraging. So in other words, it is the demand side for credit which is now causing the deleveraging," Roche tells CNBC.

So what of the policy initiatives that Obama, the Treasury and the Federal Reserve is throwing at the economy?

"They're just all wrong. Basically 90 percent of what the U.S. government has done ... has been to try and add leverage to the government balance sheet in order to sustain an unsustainable level of leverage in household balance sheets, so that the consumer will go on consuming exactly as he did in the past," Roche said.

Roche adds that this approach will simply not work, as the deleveraging process is now being driven by a returns to thrift and hard work. In a sense, the U.S. government is rowing the boat the wrong way, while telling the world it would like to help set up a stable financial system.

"In fact everything it (U.S.) is doing is to make the system more unstable, and using increased amount of leverage to do so, to recreate an American Dream which turned out to be a bit of a credit-driven nightmare," Roche said.

A better approach would be to let asset prices fall to the right level. That way, the remaining wealth in society, which is always a vast majority of wealth, will find cheap assets to buy. Additionally, in an economic downturn, although jobs are lost, a significant number of the people will keep their jobs. Earnings will actually grow in real value because of deflation. That's how economies recover.

"What does not make the economy recover is trying to maintain yesterday's dream by borrowing a lot of money on the Fed balance sheet to do so. That simply will not work, Roche concludes.

Higher jobless rate likely

By Lee Hui Chieh

UNEMPLOYMENT and retrenchment rates in the first three months of this year are likely to be higher than in the last three months of last year, Manpower Minister Gan Kim Yong said on Sunday.
Speaking to reporters ahead of the release of the first quarter's figures this month, he said the economy was not yet out of the woods. He also noted that more retrenchment notices went out in the first quarter than in the previous one.

In the final quarter of last year, unemployment was 3.7 per cent for Singaporeans, up slightly from the 3.3 per cent from the third quarter.

If laid-off foreigners are included, the number of people retrenched in the final quarter of last year would be 7,500, three times more than the quarter before.

Earlier estimates for the number of people laid off in the first three months of this year have been put at more than 10,000.

With the downturn expected to last a few more quarters, Mr Gan said stemming unemployment and retrenchments and helping workers cope with the downturn were top on his list of priorities now.

He said: 'What's more important now is to focus on managing the downturn; managing costs so we can save more jobs.'

He wants more employers and workers on board the Skills Programme for Upgrading and Resilience, which gives employers higher training subsidies so they will retrain rather than retrench workers.

The four-month-old programme, which has enrolled more than 43,000 workers from over 700 companies so far, has been successful in staving off some retrenchments by helping companies save costs. He said some of them may have decided to defer making the decision.

Beyond the immediate crisis, the minister - newly promoted to his post just last week from an acting capacity - also plans to improve workplace safety and to encourage employers to hire more older workers and women.

Construction faces crunch

CONSTRUCTION firms that rely heavily on private-sector projects face tough times ahead as more property developers delay building works.
Even public spending recently earmarked for infrastructure work may not be enough to tide contractors over the slump in demand, as 60 per cent of such spending is for specialised civil engineering works which a typical contractor cannot take on.

The Government recently pledged $18 billion to $20 billion for public infrastructure works this year, and another $15 billion to $17 billion each for next year and 2011.

Of the amount, 40 per cent is for building works such as schools, hospitals and museums, said the Building and Construction Authority (BCA).

The other 60 per cent will go to civil engineering contracts such as extending the Downtown MRT Line and the widening of the expressways.

Industry experts told The Straits Times that contractors which build private residential condominiums will feel the full brunt of the global recession - likely to be after next year, when existing projects are completed.

While the private sector contributed an estimated $20 billion in construction demand last year, this is expected to plunge to between $5 billion and $9 billion this year.

Revenue from private residential projects, in particular, is expected to drop from $6.5 billion last year to just $1.7 billion to $2.3 billion this year, said BCA.

Contractors say this figure could be worse come 2010 and beyond, and it looks like the public pie will not be big enough for everyone.

Mr Lim Yew Soon, managing director of a unit of local builder Evan Lim & Co, noted that civil engineering projects are very specialised, which 'only very few' experienced contractors can carry out.

Short-term still positive but gains will be harder

By R SIVANITHY
Published April 5, 2009

SINGAPORE - Two weeks ago this column recommended traders stick to the main indices because of the likelihood they would be window-dressed, while last week's column argued that there would be a short-term boost to equity markets from improved liquidity, momentum and probably economic data but that this will not last for long.

The first part of those predictions have come to pass - in three weeks since touching 1,456 on March 9, the Straits Times Index has risen exactly 25 per cent.

The second is of course, has yet to materialise but we have little doubt that it will because the present approach to solving the global crisis is via 'quantitative easing' whose aim, as one expert observer dryly remarked, is 'to re-energise economic activity so that society can in effect borrow itself out of debt' .

This, it has to be said, must be counterintuitive to even the most dense of bulls.

Leaving aside for a moment the absurdity of this logic, it should also be equally obvious that a Ponzi-like scheme which calls for the printing of trillions upon trillions of dollars to try and provide the necessary re-energisation is surely not a foundation for a proper recovery because it will inevitably lead to even bigger problems down the road.

Still, if enough politicians, central bankers and brokers - all of whom failed to detect the impending collapse of the banking system ahead of time and should actually be held culpable but are not - claim that their efforts are working, then an oversold market, desperate for even the smallest glimmer of hope, can be expected to react in the way it has over the past few weeks.

Throw the G20 summit into the mix where the leaders made all the right soothing, public relations noises while indulging in the expected back-slapping, then we have the perfect trigger for massive short-covering as well.

Did the G20 really accomplish anything other than promises? Maybe a little, but certainly not as much as the market's reaction would have everyone believe. As Straits Times' Jonathan Eyal pointed out over the weekend, much of the money that was promised had already been pledged before so there was little incremental improvement, while key issues were not addressed, such as how exactly are banks' toxic assets to be written off.

As for what the weeks ahead hold in store for equities, our take is pretty much the same as last week with slight modification - there is enough liquidity and momentum built up to provide some support, but upside from here is going to be much more difficult because as noted earlier, the STI has shot up 25 per cent in three weeks, a nice round figure that would give chart watchers the perfect excuse to recommend taking some money out of the market. In addition, the speed of the rise has come without any sign of improvement in the underlying economy.

This point was made by DMG & Partners in its 2Q Strategy report: 'Singapore's economic outlook is anything but rosy...the economic figures look ugly in the first quarter but we expect a further slide in the second. We forecast the economy to contract by 7.2 per cent in 2009..'

On the stock market, DMG said it is too premature to buy aggressively. 'Judging from previous crises, equity markets will likely see a recovery in 3Q09, a quarter following the worst GDP reading and six months preceding the first quarter of positive growth'. Its fair value for the STI is 1,814, though it thinks a fall to 1,380 is still possible.

Finally, for the bulls who place their faith in 'experts' like investment bankers, brokers and regulators who all contributed to the economic crisis, here's something to ponder - according to World Bank estimates, the global economic crisis will cause an additional 22 children to die per hour, throughout all of 2009.

And that's the best-case scenario. The World Bank says it's possible the toll will be twice that: an additional 400,000 child deaths, or an extra child dying every 79 seconds.

'In London, Washington and Paris, people talk of bonuses or no bonuses,' Robert Zoellick, the World Bank president, said this week. 'In parts of Africa, South Asia and Latin America, the struggle is for food or no food.'

Short-term positive, but disaster looms for the longer-term

By R SIVANITHY
Published March 29, 2009

SINGAPORE - Last week's column raised the likelihood of a play on the major indices because of probable quarter-ending window-dressing. To be honest, the play that did materialise has caught us and many others by surprise, virtually erasing all of the Straits Times Index's loss for the quarter.

Moreover, as a result of the heightened liquidity and momentum that have built up and because there are still two more trading days for index fixing before the quarter actually ends, our guess is that the STI should remain firm for the near-term but will come under some pressure afterward.

In this regard, traders may wish to note that the index started the year at 1,746, almost exactly at the 1,745.66 that it ended on Friday so if any propping up does occur it will likely ensure this level is not breached.

This much is relatively easy to figure out. It's beyond the next week that things get a bit more hazy. There seems to be a feeling in some circles that the bottom has been reached and it's probably sunny skies ahead - Fed officials on Friday for example, spoke of the economic data picking up possibly by mid-year while some analysts have been quoted as referring to 'inflection points' implying that markets have turned.

Our take on all this is the same as it's been for months now - if you print enough money and pump enough cash into zombie banks, car companies, insurance giants and a hugely leveraged consumer-driven economy, even the worst of blood-sucking undeads should twitch into some semblance of life. But it will not result in a lasting, durable recovery; in fact, it is very possible that the subsequent fallout will be worse than before.

This is what is happening now in the US - thanks to an estimated US$3 trillion that the Federal Reserve and Treasury are injecting into America's economy, people are starting to think that the worst is over and Wall Street, whose run over the past fortnight was also probably aided by window-dressing, has tried the get the bullish bandwagon running again.

The truth of the matter is that although the bandwagon might trundle along for a while yet - possibly even a few more months - it cannot sustain because of the flimsiness of the underlying economic recovery that is being engineered.

Rather than rely on Fed officialdom and investment bankers, both who have a vested interest in claiming a recovery is imminent, our preference is for independent observers who operate beyond the sphere of Wall St and politics.

One outpsoken critic of the latest US bank bailout plan is Princeton academic Paul Krugman, 2008's Nobel prize winner for economics, who has openly said the plan will not work and when it fails, Congress will probably not approve any more money for the Obama administration which would be calamitous.

In his March 26 New York Times commentary titled 'The Market Mystique', Prof Krugman correctly points out that the government is in effect bribing the private sector to buy toxic assets with its proposed public-private partnership and also correctly criticises the 'quick-fix' mentality behind the entire rescue effort that is trying to get banks back to where they were a few years ago.

'As you can guess, I don't share that vision. I don't think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good,' said Prof Krugman.

Interestingly, Citigroup's FX Technicals said basically the same thing in its March 26 market commentary: 'We honestly still think that people do not get the seriousness of this 'economic deleveraging' taking place.. this is not a deleverage of the past 5-6 years but of 25-30 years worth of excess'.

The unit goes on to say that the US and entire global economy has been operating like a massive hedge fund for the past three decades, supplementing stagnant real incomes with cheap credit and asset market appreciation to maintain a lifestyle and illusory wealth creation that would otherwise not have been possible.

The worry is this - that state of the world is clearly unsustainable going forward yet everyone (led by Wall St-backed US officialdom) is doing their best to engineer a quick return to that state as possible. It will result in a short-term uptick in the numbers and the market will respond, but when - not if - the next collapse comes, it's difficult to see how an even bigger rescue can be mounted.

Recession "worse than we thought", says UK finance minister

LONDON: Britain's recession is worse than the government expected, and the country is unlikely to return to economic growth until the end of the year, finance minister Alistair Darling said in an interview Sunday.

Speaking to The Sunday Times, chancellor of the exchequer Darling said he would be forced to revise his economic forecasts lower when he presents Britain's annual budget on April 22.

"It's worse than we thought," he told the weekly newspaper, adding that though figures on how the economy did in the first three months of the year were not yet available, "we think they will be bad, because if you look around the world there's nothing that tells you otherwise."

He refused to specify how much he thought the economy would shrink in 2009.

"I thought we would see growth in the second part of the year," he said.

"I think it will be the back end, turn of the year time, before we start seeing growth here."

Darling said that while last week's agreement by the G20 grouping of countries would help revive the global economy, "we have to be realistic about this."

"You cannot, you must not, build up false hope."

Asked by the Sunday Times whether the worst was over for Britain's economy, Darling replied: "I think there is some way to go yet. A lot really depends on how much other countries do."

Britain's economy has been hammered by the international financial crisis and resulting global downturn, with unemployment soaring to a 12-year high as the country endures its first recession in 18 years.

- AFP/yb

Bank Negara raids Walton International Property offices

Written by Joe Chin
Friday, 06 March 2009 17:09

KUALA LUMPUR: Bank Negara Malaysia raided Walton International Property Group (M) Sdn Bhd's offices in Kuala Lumpur, Kota Kinabalu and Kuching on March 5 under the Exchange Control Act (ECA) 1953.

The central bank said on March 6 the raids were carried out simultaneously following complaints received from members of the public.

"Relevant documents of the company were seized for purpose of the investigation," it said in a statement.

Bank Negara also advised the public to be cautious of this type of land banking schemes promoted by the company.

"Any elements of deposit-taking activities and public offerings such as 'interest schemes' or investment in real estates schemes (better known as 'real estate investment trusts' - REITs) should be referred to the appropriate authorities such as Bank Negara Malaysia, Suruhanjaya Syarikat Malaysia and Suruhanjaya Sekuriti," it added.

It also advised the public to use lawful remittance channels when making payment or sending money overseas.

Recession driving Singapore motorists to be more fuel efficient

SINGAPORE : Singapore drivers are taking more steps to make their cars more fuel efficient.

And according to a recent consumer survey by Shell, the economic crisis might be to blame for that.

Two years ago, one out of every four drivers was conscious of how fuel efficient their car was.

Now, Singapore drivers are three times more likely to be aware of fuel efficiency.

They pay an average of S$200 for about 130 litres of fuel each month, and they said saving money is what drives them to make their car more fuel efficient.

Industry experts said practising simple fuel efficiency tips can potentially save drivers an average of S$48 a month. These tips include servicing your car engine regularly, making sure your tyres are at the right pressure, and avoiding excess weight in your car.

Other tips include taking the roof rack off your car, checking the car’s air filters, using the correct type of fuel for your vehicle, checking the seal on your fuel cap, planning your trips, keeping calm and keeping hydrated for better focus and concentration.

"These fuel tips basically help them change their driving habits. And many of the consumers said they want to but they don’t know how to," said Henry Chu, general manager of Sales & Operations with Shell Eastern Petroleum.

The study also showed that more Singaporeans have taken such steps to make their cars more fuel efficient — from 59 per cent in 2007 to 77 per cent in 2009.

They are also more willing to change their driving habits to save more fuel. Some 83 per cent of them said they would do so — higher than the global average of 78 per cent.

The survey polled motorists in six countries including Singapore, Hong Kong, Malaysia, Philippines, Netherlands and Germany. — CNA /ls

6 reasons I'm calling a bottom and a new bull

Forget Roubini: I'm the new Dr. Boom, ahead of Dr. Doom (again!)

By Paul B. Farrell, MarketWatch

ARROYO GRANDE, Calif. (MarketWatch) -- OK, so you're one of millions of investors impatiently waiting on the sidelines, sitting with $2.5 trillion cash under your mattress, waiting for the right moment, that signal screaming: "Bottom's in, start buying!" Yes, it'll go down again, but the bottom's in, thanks to a great March, possibly the third best month since 1950, so it's time to jump back in and buy, buy, buy!

You heard me, I'm calling the bottom, beating Dr. Doom to the punch again (yes, again). Last time we were predicting the recession. This time we're calling the market bottom and a new bull.

Dr. Doom? Of course I'm referring to you-know-who, Nouriel Roubini, the notorious "party-boy economist," as Portfolio magazine calls him, the ubiquitous New York University professor with his well-oiled PR hype machine (and bon vivant lifestyle) that's made him the "go-to" media darling with endless economic predictions.
Portfolio pinpoints Roubini's claim to fame in his February 2008 blog, "The Rising Risk of Systemic Financial Meltdown: The 12 Steps," where he announced the recession actually started in December 2007. We also covered it as a 12-act Shakespearean tragedy.

But today Roubini's got a huge problem, one that'll hurt his fans, investors and credibility.

Last December, Newsweek reported Roubini was predicting "the recession will last until the end of 2009," about nine more months. He also boasted that "eventually, when we get out of this crisis, I'll be the first one to call the recovery ... Then maybe I'll be called Dr. Boom." He made the same boast in Portfolio.

Roubini is a great showman. A century ago he would have outdone P.T. Barnum with his incredible boast, a prediction rivaling historic ones made by other well-known New Yorkers: Babe Ruth's famous home run in the 1932 World Series after pointing his bat into the center field bleachers and Joe Namath's prediction of an upset win over the heavily favored Colts in the 1969 Super Bowl.

Warning: Here are 6 reasons why Roubini can never fulfill his promise ... why he may go down in history, as Portfolio suggests, as the designated "one-hit wonder" ... but worse, any investor waiting for a Roubini "call" is playing Russian roulette, a loser's game ... you will miss the market's real turning point:

1. The stock market turns before the economy bottoms
Regardless of what Dr. Doom or any economist boasts, the stock market has a mind of its own, it's a leading indicator. Stocks historically kick into action earlier than the economy recovers, often six months ahead of the economy's bottom. Witness March.
So while economists' predictions pinpointing a recession may appear earlier than bear market predictions by the notoriously optimistic Wall Street pundits, the cycles work the other way in a recovery: A stock market bottom and new bull may occur six months before the economists call the ending of a recession and an economic recovery. So Dr. Doom's "call" will naturally come months after the stock market in fact turns.

2. Stocks make big money fast then go to sleep
Back in January, Wall Street Journal columnist Jason Zweig reported on some fascinating research: "History shows that the vast majority of the time, the stock market does next to nothing. Then, when no one expects it, the market delivers a giant gain or loss -- and promptly lapses back into its usual stupor."
And the numbers back it up: "Javier Estrada, a finance professor at IESE Business School in Barcelona, Spain, has studied the daily returns of the Dow Jones Industrial Average back to 1900." He "found that if you took away the 10 best days, two-thirds of the cumulative gains produced by the Dow over the past 109 years would disappear. Conversely, had you sidestepped the market's 10 worst days, you would have tripled the actual return of the Dow."

3. No one can predict the next big move
Unfortunately, markets are notoriously unpredictable, ruled by mobs of irrational investors who are all bad guessers, No one can predict in advance when those "10 worst" or "10 best" days will actually occur. Not on Main Street. Certainly not on Wall Street.
Why? In his classic, "Stocks for the Long Run," Wharton economics Prof. Jeremy Siegel studied all the big market moves between 1801 and 2001. Two centuries of data. Siegel concluded that 75% of the time there was no rational explanation for big moves up in stock prices or big moves down. Lesson: Market timing is a loser's game.

4. Famous media-darling pundits inevitably flameout
A month ago Newsweek's science columnist and former Wall Street Journal legend Sharon Begley wrote a fascinating piece, "Why Pundits Get Things Wrong." Her opening: "Pointing out how often pundits' predictions are not only wrong but egregiously wrong -- a 36,000 Dow! euphoric Iraqis welcoming American soldiers with flowers! -- is like shooting fish in a barrel, except in this case the fish refuse to die. No matter how often they miss the mark, pundits just won't shut up."
Think of all the media darlings you know as Begley reviews the data: And "the fact that being chronically, 180-degrees wrong does not disqualify pundits is in large part the media's fault: cable news, talk radio and the blogosphere need all the punditry they can rustle up, track records be damned."

The data comes from Philip Tetlock, a research psychologist at Stanford University: "Tetlock's ongoing study of 82,361 predictions by 284 pundits" concludes that their accuracy has nothing to do with credentials such as a doctorate in economics or political science, or on "policy experience, access to classified information, or being a realist or neocon, liberal or conservative."

What matters? "The best predictor, in a backward sort of way, was fame: the more feted by the media, the worse a pundit's accuracy. ... The media's preferred pundits are forceful, confident and decisive, not tentative and balanced. ... Bold, decisive assertions make better sound bites; bombast, swagger and certainty make for better TV."

They can be totally wrong, so long as they're assertive and entertaining. "The marketplace of ideas does not punish poor punditry. Few of us even remember who got what wrong. We are instead impressed by credentials, affiliation, fame and even looks -- traits that have no bearing on a pundit's accuracy."

5. Even the best economists make huge errors
Go back a decade to that classic article in BusinessWeek, "What Do You Call an Economist With a Prediction? Wrong." Four years later in "So I Was Off by a Trillion," BusinessWeek punctuated the message, reporting on Michael Boskin's classic error. Boskin, a Stanford economist and former chairman of the Council of Economic Advisers under Bush 41, "circulated a startling paper to fellow economists. In it, he argued that the future tax payments on withdrawals from tax-deferred retirement accounts ... were being drastically undercounted. That meant federal budget revenues could potentially be in for a huge, unforeseen windfall ... of almost $12 trillion."

That also meant a political boost for Bush 43: "Larger than the sum of the 75-year actuarial deficits in Social Security and Medicare plus the national debt." Later, however, Boskin checked his numbers and "concluded that he had made a serious mistake: A key term had been left out ... possibly wiping out most of the estimated $12 trillion in savings."

No surprise: Political ideologies often motivate "objective" economists.

6. Will the real Dr. Doom please stand up?

Roubini actually shares the Dr. Doom title with many others, including Hong Kong economist Marc Faber who publishes the "Gloom Boom Doom Report;" legendary Salomon Bros. strategist Henry Kaufman; and Houston billionaire Richard Rainwater, whom Fortune mentioned as Dr. Doom.

In addition, in one of our columns last summer, we reported on many others whose predictions of a coming recession predated Roubini's claim, though not called "Dr. Doom." They include: Pete Peterson, a Blackstone Group founder; Pimco's Bill Gross; Harvard financial historian Niall Ferguson; Warren Buffett; former SEC chairman Arthur Levitt; Jeremy Grantham whose GMO firm manages $100 billion; "Black Swan" author Nassim Nicholas Taleb; and long-time Forbes columnist, economist Gary Shilling.

Noteworthy, way back in 2004 Shilling specifically warned: "Subprime loans are probably the greatest financial problem facing the nation in the years ahead." And later in June 2007 Shilling said: "Just as the U.S. housing bubble is bursting, speculation elsewhere will come to a violent end, if history is any guide. Some astute pioneers, including Richard Bookstaber, who designed various derivative-laden strategies over the years, now fear that financial derivatives and hedge funds -- focal points of today's huge leverage -- will trigger financial meltdown." Then in a November 2007 column, "17 Reasons America needs a recession," Gross predicted a bailout of "Rooseveltian proportions" ahead.

Yes, we were warned. In fact, seems everyone knew. But our denial was too powerful, hidden under our new culture of infectious greed.

The examples go on and on ... strongly suggesting that the "Roubini Hype Machine" may well be the "one-hit wonder" Portfolio calls him. He was not ahead of the competition with his December 2007 recession call. So if you're one of America's 95 million investors waiting for Roubini to call a bottom before getting back in the market, you'll miss the real turning point.

One final, crucial warning: This next bull will be short. First, it will suck money out of the mattresses of investors who are sitting on cash. Then Wall Street will recreate the insanity of the '90's dot-coms and the recent subprime-credit mania.
But underneath it all, Wall Street's bulls will be setting the stage for yet another catastrophic bubble and meltdown. So please be careful when "Dr. Doom's PR Hype Machine" proclaims that Roubini's finally morphed into "Dr. Boom" later this year. It'll be too late.

Survey shows Singaporeans least optimistic about future

My comments: Singaporeans may just be faking pessimism? It's like when you tell others you haven't studied for your exams when you have finish like 3 rounds of revision.

SINGAPORE: Affluent Singaporeans are the most pessimistic in Asia when it comes to their future, according to a survey by life insurer AXA.

Eight Asian economies — China, Hong Kong, India, Indonesia, Malaysia, the Philippines, Thailand and Singapore — took part in the survey which was conducted between January and February.

The Philippines was ranked as the most upbeat, with a score of 84 on a scale of 100, followed by India’s 83.8 and China’s 66.9.

The survey polled 2,700 mass affluent residents between the ages of 25 and 50 on their views about life over the next five years. The study covered four aspects of life — career, retirement, family and health.

The 300 Singaporeans polled generally had the lowest scores in all four categories.

Angela Lau, head, Branding & Communications, AXA Life Insurance Singapore, said: "They’re not so confident about their health and career, and how they are going to cope with the challenges in life. For the career perspective, they are actually very concerned about job security.

"One in four is worried about whether they will have a job in the next year or so and in the next five years. That’s probably one of the reasons why they are not so optimistic about life at this juncture."

Ironically, Singaporeans also turned out to be the least affected by the economic turmoil, across the markets surveyed.

On how much they were impacted by the current economic crisis, Singaporeans rated six on a scale of one to ten — the lowest figure compared to their Asian counterparts.

The survey also showed that more than half of those polled planned to have children, and three in ten planned to have two or more children.


— CNA/so

Unrelenting jobless rise imperils US recovery

WASHINGTON (AFP) - - Amid an unrelenting pace of job losses, the US economy faces a race against the clock as it struggles to recover from its worst slump since the Great Depression.

Another hellish month for the US labor market pushed the unemployment rate to a new 25-year high of 8.5 percent with 663,000 jobs axed in March, official data showed Friday.

While some indicators point to stabilizing or modest growth, the key labor market continues to shed jobs massively, potentially derailing any recovery.

Analysts say a recovery will have to take root quickly to steady employment and avert a further slide in an economic abyss.

"The new optimists who have recently been comforted by a smattering of better economic reports were given a dose of reality this morning by the US jobs report, which reminded everybody that an economic recovery is still, at least, a few quarters away," said economist Krishen Rangasamy at CIBC World Markets.

"There are no indications that the US labor market is about to turn for the better over the coming months. Initial jobless claims remain consistently above 600,000, and continuing claims are now closing in on the six million mark. The jobless rate is set to hit 10 percent before the year is out."

The monthly Labor Department snapshot, seen as one of the best indicators of economic momentum, showed widespread losses across most sectors of the economy as the jobless rate rose from 8.1 percent in February.

Some point to the fact that new hiring typically lags other factors in the economic cycle, meaning that the staggering level of job losses are not as bad they appear on the surface.

"We can't find green shoots of recovery in this report -- though it would not be the first place we'd expect to see them," said IHS Global Insight economist Nigel Gault. "The jobs market will follow rather than lead."

Douglas Porter, economist at BMO Capital Markets, agreed that employment will be among the last major indicator to turn the corner.

"First, sales must revive, and then be sustained, then business will try to squeeze more out of remaining employees, then add hours to the workweek, and only then add to payrolls," he said.

"So, even as jobs spiral lower, another broad array of indicators this week suggested that the howling recession winds may be easing a touch."

Porter pointed to improved US auto sales, consumer confidence, and factory data that moved higher "albeit from desperately weak levels."

"Perhaps more important is the sense that aggressive global policy actions are finally gaining traction," Porter said.

The Group of 20 summit, he said "managed to produce some real meat, particularly the hefty increase in IMF resources, which should help contain the economic damage in the developing world."

Since the recession began in December 2007, a staggering 5.1 million jobs have been lost, with 3.3 million in the past five months, the Labor Department said.

Ethan Harris, economist at Barclays capital, said the economy is getting a boost from massive stimulus programs from the US government and central banks, and similar efforts in other countries, but that this may not be enough if joblessness keeps rising.

"With parts of the economy improving but jobs still collapsing, a natural question is whether jobs are merely lagging the rest of the economy," Harris said.

"Households have seen a boost to their after-tax incomes from much lower tax payments and increased transfer payments ... However, the fiscal stimulus will be overwhelmed if the job market does not begin to stabilize in the coming months."

Peter Kretzmer, senior economist at Bank of America said the fact that job losses appear to have peaked in January is a positive sign.

"The losses continue to be severe but we do see, and I think the market sees, some apparent peaking in the rate of decline, and that stabilization is providing a little bit of cheer to the market," he said.

"We've moved to a different phase of the business cycle," he said, with consumer spending steadying but companies still cutting investment and inventories.

This suggests "several more months of severe declines before things start to improve," Kretzmer said.

The real unemployment is 15% not 8.5%!!

By Catherine Holahan
MSN Money
An 8.5% unemployment rate is unmistakably bad. It's the highest rate since 1983 -- a year that saw double-digit unemployment, nearly 30 commercial bank failures and more than 15% of Americans living below the poverty line.

But the real national unemployment rate is far worse than the U.S. Department of Labor's March figure, announced today, shows. That's because the official rate doesn't include the 3.7 million-plus people who are reluctantly working only part time because of the poor labor market. And it doesn't include the workers who have given up scouring want ads for seemingly nonexistent jobs.

When those folks are added to the numbers, the unemployment rate rises to 15.6%. In March 2008, that number was 9.3%. The Bureau of Labor Statistics began tracking this alternative measure (.pdf file) in 1995.

"The situation out there is very grim," says Heather Boushey, a senior economist at the Center for American Progress, a left-leaning think tank. "We have seen the mounting of job losses faster than any point since World War II. I have never seen anything escalate this bad."

Even the Department of Labor's expanded unemployment measure doesn't fully capture how difficult the job market is for American workers. It doesn't include self-employed workers whose incomes have shriveled. It doesn't look at former full-time staff employees who have accepted short-term contracts, without benefits, and at a fraction of their former salaries. And it doesn't count the many would-be workers who are going back to school, taking on more debt, in hopes that an advanced degree will improve their chances of landing a job.

Here's another way to look at the unemployment figures: More than 5 million people have lost their jobs since the start of the recession in December 2007. And more than 13 million people are unemployed. That's the highest number the U.S. has seen since it began tracking unemployment after World War II. For every job out there, more than four people are competing for it, says Boushey.

Mitch Feldman has seen the results of such intense competition firsthand. As president of New York executive placement firm A.E. Feldman Associates, he has watched lawyers accept paralegal jobs after failing to find any companies that are hiring. He has seen Ivy League-educated financial professionals accept lower-paid contract work after searching in vain for banking jobs.

"When some of the big investment banking firms had layoffs a year ago, those people were looking for permanent jobs," but now they're taking six-month and yearlong contracts, says Feldman. "And they're competing with other contractors who were on contract before. More supply, less demand, and the prices go down."

Some unemployed workers have become so frustrated by the difficulty of landing a job that they're exiting the labor market altogether. Prior recessions saw a spike in the number of women choosing to be stay-at-home moms rather than continue to compete for work. This recession has seen a large spike in the number of laid-off men opting to become stay-at-home dads -- or at least stay at home.

Once people stop looking for work, they're no longer entitled to unemployment benefits.

Unemployment to worsen?
The employment situation on the horizon looks even worse. Typically, unemployment peaks six months to a year after the economy starts to recover, says Rebecca Blank, an economist with the Brookings Institution, a Washington, D.C., public policy think tank. Boushey believes the unemployment rate could reach double digits by the end of the year.

So, even if the recent stock market rally is a harbinger of economic recovery, that doesn't mean that unemployment rates will fall soon. Nor is an economic recovery a guarantee that unemployment will drop below 4%, as it did during the boom in 2000.

The way some economists see it, the U.S. has entered a downward spiral that could result in higher unemployment for the foreseeable future.

Right now, unemployment has helped fuel consumer cutbacks that have, in turn, pinched businesses' revenues. That has forced them to cut jobs in an effort to stem profit losses, continuing the cycle. Eventually, the hope is that government spending will employ more people and give businesses more revenue, leading to more spending and more hiring -- reversing the cycle.

But it might not happen that way. Spooked consumers, still reeling from an attack on all their assets, may simply not spend like they once did -- regardless of how much money the government pushes into the economy. Instead, they might save money in preparation for the tax increases they assume are inevitable or put it in safe assets like long-term Treasury bonds.

Businesses might also curb their spending. Instead of responding to sales increases with hiring, they could invest in relatively cheaper technology to replace eliminated positions.

Economists don't have to go back very far to find an example of a recovery that didn't push unemployment back to its prior lows. The lowest unemployment fell after the 2001 recession was 4.4% in December 2006 (it hit that number again in March 2007). That was significantly lower than the 6.5% high in 2003. But it wasn't close to the sub-4% rates seen in 2000.

That sort of recovery was what economists call a jobless recovery. "We weren't really growing wages and income for people in the bottom half of the economic distribution," says Alan Berube, an economist with the Brookings Institution.

Five strategies to rescue your retirement

By Janice Revell, Money Magazine senior writer

Will I ever be able to retire now? That's a question you're likely asking yourself these days. After a year in which your 401(k) has been hammered by the biggest stock losses since the Great Depression, your home equity has been whacked by the collapse of the real estate market and the specter of being laid off looms larger every day, no one can blame you for being skeptical.

In fact, more than two-thirds of the respondents in a recent poll CNNMoney.com poll said they'll have to postpone their retirement as a result of the current financial crisis; more than a third worried that they'll be chained to their desks for life.

Now for the good news: You've got more weapons at your disposal to win the battle against a hostile economy than you may imagine. Read on for specific strategies to help you position your portfolio for a rebound, take advantage of other financial assets in your arsenal and make the most of the time you have left in the work force.

Sure, the task would be a lot easier if you had 25 years or more before quitting time. But while the challenges are great, so are the opportunities for a comeback.

Need convincing - and inspiration? Check out these profiles of people who lived through similar crises in the past - portfolios down by half in market crashes and recession-fueled layoffs - took smart action and ended up in better financial shape than they were before.

One thing's for sure, though: The task before you won't get any easier if you delay. Here's how to get started on your retirement rescue mission.

1. Know where you stand

Assuming that you will not be able to retire when and how you planned is vastly different from knowing it for a fact. If you haven't taken count of how much money you have and how much you'll need to retire comfortably, you may be in the dire straits that you fear - or you could be in far better shape. Either way, to figure out a plan for where to go from here, you first need to know where you are right now.

Assess the Damage. This is no time to be squeamish. Dig up your latest 401(k) statement, along with the most recent statements from your bank and brokerage accounts, and add up what you've got. The extent of your losses may depress you - a typical 401(k) invested 60% to 70% in stocks and the rest in bonds is likely to be down 20% to 30%, and a more stock-heavy portfolio will have even steeper drops. But knowing the current value of your portfolio will help you determine how much you have to save going forward.

You'll also need to make an educated assumption about how much you will earn on those investments in the future. Coming out of past long-term slumps (the carnage is not just over the past year; this is, in fact, one of the worst 10-year periods on record), stocks have returned no less than 7.2% annually over the following decade and as much as 15.6%, according to the Leuthold Group.

In estimating future returns, err on the conservative side. "If you've got at least a 10-year time horizon and a balanced portfolio, a 7% rate of return is reasonable," says Chris Cordaro, a financial adviser in Morristown, N.J. While that may not sound like much, remember that you won't have to count on your investments alone to fund a comfortable retirement.

Tally other sources of income. Social Security will likely make up at least 20% of your retirement income. The longer you wait to collect (you're eligible at 62), the more money you'll get. Every year you delay up to age 70 adds about 8% to your payout. If you're retiring this year and you qualify for the maximum benefit, that would mean the difference between about $21,000 a year (in today's dollars) at 62 and $38,000 if you wait until 70.

You may have a pension to fall back on as well. Despite widespread reports of the demise of the traditional pension plan, roughly 70% of employees at large companies and 95% of people who work in state and local government still have access to one. (Federal employees and workers at small businesses aren't likely to be as fortunate.) If you're eligible for a pension, ask your HR department for an estimate of your projected payout at retirement. Even a seemingly piddly pension can make a major difference. An annual payout of $20,000, for example - one you might expect to collect if you earn $100,000 a year and have been with the company for 15 years - is the equivalent of saving an extra $300,000 in your retirement account, according to Steve Vernon, an actuary in Oxnard, Calif.

Rerun the numbers. Once you have all the facts, head to an online calculator like the Retirement Planner, to get an estimate of how much you'll need to save to meet your goal. The answer isn't likely to be a huge surprise - yes, repairing your beaten-up portfolio will likely involve serious saving on your part, as the chart on the right illustrates. But as the next steps show, saving more is only one of the tools at your disposal.

2. Pump up your portfolio

Having the right blend of investments is key. And yes, we do mean blend, even though you may feel that diversification let you down last year, failing to provide a cushion against losses. Instead, everything went down; some assets just dropped less than others. But diversification is a long-term strategy that pays off over a period of decades, not months or even a few years. Then too, imagine how much steeper the drop in your portfolio might have been if you hadn't had your money spread among several kinds of investments.

Stick with a mix. Still, the losses were painful enough, and the urge to get out of stocks entirely is understandable. So, at the other extreme, is the impulse to "swing for the fences" by aggressively moving into beaten-down stocks to recoup your losses by the time you retire. Both are bad moves.

Consider the all-bond strategy. It may sound safe, but a new study by T. Rowe Price shows that switching completely into fixed-income investments after a market crash would give you only a 31% chance of your nest egg lasting through retirement. "With a 100%-bond portfolio, you simply can't keep up with inflation and your own longevity," says Christine Fahlund, senior financial planner at T. Rowe Price.

But an outsize bet on stocks to revive your portfolio isn't smart either. Even if after the past year's losses you still have a hefty amount socked away, you don't need to take the extra risk. And if you're way behind on your savings goals, it's a risk you can't afford, especially if you're within a decade of retirement. The probable payoff is just too slim.

T. Rowe ran the numbers for a 55-year-old with a $100,000 salary and just $150,000 in savings who ratcheted up his stock allocation from 40% to 80% to help his portfolio recover. After running 10,000 market scenarios, the researchers found that while the portfolio invested 40% in stocks replaced an average of 27% of the investor's salary in retirement, the 80%-stock allocation replaced only 28% - virtually no difference. That's because while stocks have historically delivered higher returns over very long periods, over any 10-year period you're more likely to suffer a few losing years, and there simply isn't enough time for your gains to compound.

Cut your risk of big losses. As a general rule, financial advisers recommend keeping about 80% of your savings in stocks when you're in your forties, 70% in your fifties and 50% to 60% in your sixties, with the rest in bonds and stable-value funds. With stocks now at their cheapest levels in nearly two decades, those allocations give you a good shot at regrowing your portfolio going forward.

But understand, the gut-wrenching volatility of the past year isn't going away anytime soon. If the thought of watching your portfolio swoon after the Dow drops 500 points in a day - again - keeps you awake at night, it may be worth it to dial back that commitment to stocks somewhat.

Yes, you'll sacrifice a bit of your potential gains. But you'll also dampen the magnitude of the losses you could suffer - a particularly important consideration if you're within 10 years of retirement. A portfolio invested 70% in large U.S. stocks and 30% in bonds historically has averaged gains of 8.9% a year vs. 8.2% for a fifty-fifty mix, according to Ibbotson Associates. How much safety does that seven-tenths of a percentage point buy you? The worst loss in a single year for the evenly split portfolio was 24.7% vs. 32.3% for the bigger stock portfolio.

As you get closer to retirement, also try to beef up your cash reserves. Keeping two to three years' worth of living expenses in CDs or money-market funds means you won't be forced to sell stocks or bonds when they're down.

Reduce your tax bite. One surefire way to boost the real return on your portfolio is to reduce Uncle Sam's cut. Today tax rates are at multi-decade lows, but given the projected $1 trillion federal deficit this year, most experts don't expect that to last.

You can take advantage of today's low rates by saving for retirement in a Roth IRA or the new Roth 401(k), either by funneling new contributions into these accounts or by converting an existing IRA. With a Roth, you pay taxes up front on the money you put in but no taxes on your withdrawals. With traditional IRAs and 401(k)s, you get an up-front break, but your withdrawals are taxed at your regular income tax rate. Says Ed Slott, a C.P.A. and IRA adviser in Rockville Centre, N.Y.: "The sooner you get rid of Uncle Sam as a partner in your retirement account, the better."

A married couple can invest $5,000 a year per person ($6,000 if you're over 50 years old) in a Roth IRA as long as your joint income is $166,000 or less. There are no income limits for Roth 401(k)s, but only 25% of companies currently offer them, according to Hewitt Associates. That's likely to reach 50%, though, in a couple of years' time.

3. Keep the paycheck... and have a plan B

"I'll just work a few more years." That's the common solution many boomers are counting on to make up for the downturn in their portfolios. But how much longer will you really have to work to make up for the hit that your investments have taken? And what's your fallback position in case your current job doesn't last as long as you need it to?

Work longer if you can... Keeping your full-time job for a few extra years isn't a silver bullet, but it's pretty darn close. For starters, you'll be able to postpone drawing Social Security, setting yourself up for a much larger monthly check when you eventually retire. Working longer also gives your portfolio more time to grow. At the same time, you'll be shortening your retirement span and the period over which you have to support yourself with those savings. Combine all of these factors and the results are powerful: A 62-year-old who keeps working until age 65 will experience a 25% boost in annual retirement income (see the graph on previous page).

...But you can lighten up. What if staying in your current job isn't an option? If you're in your forties or fifties now, there's a good chance you'll be with a different employer by the time you hit retirement age - or possibly well before then. In 2006, 43% of full-time workers ages 65 to 69 weren't working for the company that had employed them in their early fifties, the Urban Institute reports. About a quarter of those workers had changed jobs owing to layoffs - and that was before the current recession.

So to stay employed longer, you may have to change jobs, which could involve taking a pay cut or shifting to a part-time position - the typical worker 45 and older experiences a 12% drop in salary after a layoff. Fortunately, earning less or working fewer hours once you reach the career home stretch probably won't put a dent in your retirement rescue efforts, as long as you earn enough that you don't need to start collecting Social Security or dipping into your retirement savings.

Say, for instance, that you end up switching jobs at 62, making only half as much as you did before and you keep working until 65. You'd end up with only about 5% less in annual retirement income than if you'd kept your full-time position until 65, as long as you're able to cover your living expenses. The reason: The benefit of delaying Social Security and not tapping into retirement accounts far outstrips the value of any extra savings you could accumulate between ages 62 and 65. "The income you get from working part time may seem like a pittance, but it can actually have a profound effect on your retirement lifestyle," says Fahlund.

Keep your eyes open. With the pace of layoffs expected to accelerate this year, you may need to find that new job sooner rather than later. But landing a position in the midst of recession is a lot tougher for fiftysomethings than for thirtysomethings. Start laying the groundwork now by reconnecting with some of the names in your Rolodex; the vast majority of openings are still filled by knowing people who know people who know people. Use sites like LinkedIn to expand your contacts. Join a professional networking group; attend their get-togethers; and scour their job lists, which often advertise positions before they are public knowledge.

Also be alert to new opportunities and ways to transfer your current skills to new employers or industries. Put together a list of companies where you'd like to work; then research them to find out what it would take to get in the door. If you need to beef up your credentials in a certain area, volunteer for a project at work that will help you gain the skills you need. Not possible? Think about joining a nonprofit board that will provide similar hands-on experience.

4. Tap your home equity

Housing prices have fallen 23% since 2006 and economists are forecasting another 15% drop before the market bottoms. As a result, you've probably written off your home as a source of funds in retirement. Not so fast, bub.

You can still retire on the house. Or at least, the house can help. Even if home prices slump for a few more years, the sharp rise in values over the past couple of decades means that your home equity will still likely account for a third to half of your net worth by the time you retire, the National Economic Bureau reports. That can be a significant backstop if your savings plan comes up short.

You might choose to cash out your equity by selling your home and moving to a less expensive area. Or you might opt for a reverse mortgage, which lets homeowners age 62 and older draw down their home equity without repaying it for as long as they live in the house. Last year, new federal regulations raised the limits on government-backed reverse mortgages up to $417,000 (the maximum is likely to be raised soon to $625,000 in areas of the country with high housing costs). For example, a 65-year-old with a fully paid house worth $400,000 could tap about $237,000 of that equity.

But up-front costs for a reverse mortgage can exceed 10% of the loan. So if you need to borrow only a small amount or you might be moving in a few years, an ordinary home-equity line of credit would probably be a better option. Although you would have to make monthly payments, tapping a HELOC is a useful short-term strategy for generating retirement income while the financial markets are in turmoil. "It can save you from having to sell your stocks when they're down," says Cordaro.

Aim to be mortgage-free. Of course, this strategy works only if you've got equity to tap. That's why you should aim to pay off your mortgage if possible by the time you retire. If you're already maxing out your retirement savings and you have an adequate emergency fund, consider boosting the amount you pay every month on your mortgage.

Think of it as an alternative kind of fixed-income investment, in which your return is the interest rate on the loan. Say you have a mortgage with a 6% fixed rate; if you deduct your interest payments on your taxes, you'll earn 4.3% by prepaying the loan if you're in the 28% bracket. That's a risk-free return of 4.3% - nearly 1.5 percentage points better than the recent rate on 10-year Treasuries. If your mortgage rate is higher, your effective return on the accelerated mortgage payments will be higher as well.

5. Rethink your expectations

Let's be honest: Given the magnitude of the financial collapse, you may end up falling short of your savings goal by the time you quit working no matter what you do. Luckily, small changes in the way you manage your withdrawals in the early years of retirement can go a long way toward closing any gaps that are left.

Make minor sacrifices early on. Planners generally recommend that you limit your initial withdrawal from your retirement account to about 4% of your portfolio's value. Then, in subsequent years, you would boost your withdrawals to keep up with inflation.

The problem is that if you happen to retire just as the stock market is tanking, your odds of running out of money skyrocket with this withdrawal plan. There's an easy fix: Simply forgoing the inflation adjustment in the first five years of your retirement can cut your risk of running out of money in half. These days, of course, that's hardly a huge sacrifice since inflation is barely above 0% a year. But even at the long-run average rate of about 3%, you wouldn't be giving up much - about $900 in the first year on a $750,000 portfolio and about $3,700 by year five.

Tap your nest egg wisely. By the time you stop working for good, your money will likely be spread among several different kinds of accounts, including tax-deferred plans like 401(k)s, traditional and Roth IRAs, taxable brokerage accounts and ordinary bank accounts. How much money you decide to take from each one, and when, will have a big impact on how well you live.

If your portfolio still hasn't recovered by the time you stop working, refrain from cashing in any stock for as long as possible to give those shares more time to recover. Instead, start withdrawals from your bank accounts and other cash investments. By this point, ideally you'll have at least two years' living expenses set aside in cash for this type of situation. Not so ideally situated? Then tap your taxable brokerage accounts, which will allow your 401(k) and IRAs to continue compounding tax deferred.

Add up all the moves and, despite the travails of the past year, the odds are great that you'll still be able to retire in comfort, and maybe even in style.

The worst is 'behind us'

LONDON - THE worst of the economic crisis gripping the world is 'behind us,' Canadian Prime Minister Stephen Harper said on Thursday at the close of G-20 crisis talks.

'The worst aspects of instability, I do believe are behind us,' Mr Harper told a press conference. 'We're seeing some degree of stability.'

'Stability is different than recovery,' he noted, pointing to still-rising job losses.

'But we're seeing a significant degree of stability. I'm optimistic that as fiscal and economic measures kick in, we will begin to see more positive news.'

Mr Harper said leaders of the Group of 20 industrialised nations and biggest emerging economies agreed at the London summit on 'very complete and very strong' measures to stimulate the global economy.

The international community's response to the economic crisis, he said, has been 'unprecedented, coordinated, and fast,' and should give financial markets 'an awful lot of confidence.'

Earlier, British Prime Minister Gordon Brown announced that G-20 nations would inject a US$1 trillion stop-gap into the sagging global economy. -- AFP

The worst is 'behind us'

LONDON - THE worst of the economic crisis gripping the world is 'behind us,' Canadian Prime Minister Stephen Harper said on Thursday at the close of G-20 crisis talks.

'The worst aspects of instability, I do believe are behind us,' Mr Harper told a press conference. 'We're seeing some degree of stability.'

'Stability is different than recovery,' he noted, pointing to still-rising job losses.

'But we're seeing a significant degree of stability. I'm optimistic that as fiscal and economic measures kick in, we will begin to see more positive news.'

Mr Harper said leaders of the Group of 20 industrialised nations and biggest emerging economies agreed at the London summit on 'very complete and very strong' measures to stimulate the global economy.

The international community's response to the economic crisis, he said, has been 'unprecedented, coordinated, and fast,' and should give financial markets 'an awful lot of confidence.'

Earlier, British Prime Minister Gordon Brown announced that G-20 nations would inject a US$1 trillion stop-gap into the sagging global economy. -- AFP

Decide Now Which Funds You Won't Buy

By Gregg Wolper

A few weeks ago, the market was tumbling and sentiment dire. Partly to counter the gloom, I wrote a column suggesting that shellshocked readers, whose allocations might have gotten out of whack in the turmoil, take steps to ensure that their portfolios were properly situated for the stock rally that was sure to arrive at some point.

As it turned out, the current rally began the day that column appeared on Morningstar.com. I wish I could claim I'd planned it that way: The invitations to lavish parties at next year's Davos conference would already be pouring in. Unfortunately, in the column I made it clear that I had no idea when a rebound would occur. Oh well.

Anyway, whether or not the current upturn is the real thing, there's an important flip side to the advice in the previous column. Beyond figuring out what you want to be holding, and in what amounts, before a long-term revival comes around, you also should determine what you don't want to own.

Although that might sound unnecessary, deciding what you don't need is a critical task. For if the temptation during a bear market is to avoid thinking about your portfolio--or just go completely into cash--the temptation during a bull market is to chase the hottest sector in order not to miss out on the big prize.

The best way to dodge that temptation is to establish rules beforehand. If you wait until the boom is on, you'll find it extremely difficult to watch passively as the gains posted by some investment or another far surpass those of anything you own. Yet the super performers are inevitably narrowly focused investments that probably didn't merit a place in your investment plan prior to their ascendance and therefore won't deserve one afterward, either.

Building a Chinese Wall
The hottest areas of the markets during rallies are typically the riskiest. In that sense, the often-unreliable assumption that one must take higher risks to get higher rewards does pan out. So it's likely that country funds targeting a single high-growth market such as China or Russia, or funds focused on specific sectors such as natural resources or financials (hard to believe, I know) will lead the pack in a future rally as they have in the past. Along with those, some other sectors or fund types that are now obscure (or don't even yet exist) probably will also take a place in the spotlight.

The winners won't just rise a bit more than broader-based funds and indexes. They'll blow them away.

Don't wait until it happens to decide what to do. Decide now, and stick to your guns. If you have decided that your desired portfolio allocation does not include a specific China or natural-resources fund, don't buy one even when they're soaring and seem destined to soar ever higher. Then you won't be one of those unfortunate investors who jumps onto a trend when it's riding high only to lose out when it crashes not long afterward.

It Can Be Done
One need not have superhuman powers to avoid the siren call of the chart-toppers. Prominent fund managers make such decisions and stick to them, even when maintaining their stance can cost them professionally. Jim Moffett, lead manager of UMB Scout International (NASDAQ:UMBWX - News), has avoided all stocks in China for a long time. He says that he doesn't feel sufficiently comfortable with the legal protection or shareholder culture to own companies there. So even when the Chinese market caught fire in 2006-07, helping juice returns of competitors, he didn't buy. The shareholder protection hadn't gotten any better, so there was no good reason to suddenly change his tune.

Similarly, socially responsible funds set up a list of rules and stick to them. In their case, unlike that of UMB Scout International, their shareholders would rebel (and probably leave) if the fund starting buying hot stocks on the prohibited list. But it's the same idea. If an SRI fund has declared oil companies to be off-limits, then it doesn't care if oil prices skyrocket and oil stocks are the best in the world. It won't own them.

You Need Not Stay Out Completely
This isn't to say that no one should ever own a sector or country or region fund. Just have a plan and maintain it. So if you're not going to play sectors, countries, or regions (or individual stocks, for that matter), decide now and stick to your vow. Conversely, if you like the challenge, decide to put a small amount of money aside in a separate account and do your betting there, vowing that under no circumstances will you tamper with the other 90% or so that's devoted to long-term allocations.

Approaching the issue in this manner will serve you better than simply waiting around and hoping you'll behave responsibly. Rather than vague hopes, you'll have a specific plan to rely on when the next hot play shoots to the moon, your friends are buying it, the media is shouting about it, and you can't for the life of you understand why you shouldn't sink all your money into it and become rich enough to fly your own private jet to the next conference at Davos.

Gregg Wolper does not own shares in any of the securities mentioned above.

Gold's Bluff - Is A 30 Percent Drop Next?

By Simon Maierhofer

You don't have to be a 'gold bug' to see how gold stands to prosper from the current economic environment. However, projections of gold skyrocketing to $1,500 and beyond have so far been unfulfilled. Fact is that gold has gained no more than 2% over the past year and in essence has been range bound.

Gold reached an all-time high of $1,014/oz in February 2008. After correcting some 25%, gold took a stab at taking out the '08 highs in February 2009. Prices reached $1,007/oz but failed to set new highs. This non-confirmation of an up-trend is usually viewed as a bearish sign.

While investors have lost their pants with stocks, gold has at least been a safer place to park money.

As a side point concerning equities, the ETF Profit Strategy Newsletter said the following about stocks nearly three months ago: 'The best target for a low is 6,700 for the Dow (AMEX: DIA - News) and 700 for the S&P 500 (AMEX: SPY - News). Extreme pessimistic sentiment may drive the indexes even towards Dow 6,000 and S&P 600. Once the new lows are reached, the markets should stage the biggest rally seen since October 2007.'

Unless you implemented any of the ETF profit strategies given with the above update, gold was the safest place to hide. Nevertheless, if gold doesn't skyrocket in an environment where the Dow drops 2,500 points, trust in the financial sector (NYSEArca: XLF - News) has completely vanished and the government's is actively devaluing the U.S. dollar, when will it ever?

As published in the March 5th edition of the Investor's Business Daily, I've been bearish on gold and silver for several weeks (go here for the related IBD article on gold ETFs). The $900/oz level has proved to be a strong area of resistance against lower gold prices. On March 18th, gold fell below $900/oz and was down over 5% half way into the trading day. Within minutes, the tide turned. The Fed's announcement to buy $1.2 trillion of government and government agency bonds (such as Fannie Mae and Freddie Mac) propelled prices immediately.

Gold ETFs such as the SPDR Gold Trust (NYSEArca: GLD - News) and iShares COMEX Gold Trust (NYSEArca: IAU - News) gained nearly 9% before selling pressure resumed.

Silver ETFs such as the iShares Silver Trust (NYSEArca: SLV - News) and PowerShares DB Silver Fund (NYSEArca: DBS - News) soared 17% within three days. The iPath DJ AIG Platinum ETN (NYSEArca: PGM - News) was up 14% by March 26th.

Similar behavior was observed in government Treasuries of various maturities. The iShares Barclays 3-7 Year Treasury ETF (NYSEArca: IEI - News) rose 1.79% the same day. The iShares Barclays 10-20 Year Treasury Bond ETF (NYSEArca: TLH - News) spiked 5.57% for the day while the iShares Barclays 20+ Year Treasury ETF (NYSEArca: TLT - News) soared 7.11%. Those are huge movements for government bonds.

It's hard to imagine a single news item with a more profound bullish effect on gold prices than the government's plan to print an additional $1.2 trillion of U.S. dollars therefore devaluing the exiting dollars in circulation. Even China's suggestion to replace the dollar with a 'super-sovereign reserve currency' was not able to lift gold prices past the '08 high.

For over a year investors have been pouring money into gold ETFs, $31.50 billion to be exact. This flight for safety has made the SPDR Gold Trust (NYSEArca: GLD - News) the second largest ETF in the world. Yet, all the demand for gold has not translated into higher prices.

As mentioned in the January 15th, ETF Profit Strategy Newsletter, 'Once the new lows are reached (between Dow 6,000 and 6,700), the markets should stage the biggest rally seen since October 2007.' The markets have rallied over 20% since the Dow 6,446 low on March 9th.

As this foretold rally develops, investors will start to believe that the worst is behind and once again fall in love with equities again. The perception that bigger gains are to be found in stocks will rob gold of its luster. Who wants safety if you can make more money with stocks?

As the financial system deteriorates, the significance of gold as part of the monetary system will eventually increase. A retest of the $700/oz level however, is likely before a sizeable move to the upside. A break of the 2008 highs would reduce the short-term bearish case for gold and silver.

ETFs designed to benefit from falling gold prices include the UltraShort Gold ProShares (NYSEArca: GLL - News), PowerShares DB Gold Short ETF (NYSEArca: DGZ - News) and PowerShares DB Gold Double Short ETN (NYSEArca: DZZ - News). The only ETF to rise when silver prices fall is the UltraShort Silver ProShares (NYSEArca: ZSL - News).

Ironically, gold is more than just a hedge against market turmoil. Gold is actually one of the most accurate indicators of the stock market's long-term direction. The Dow Jones measured in gold is a forward looking indicator. As such, it has mapped out the long-term direction for equities already. You could say that the stock market's fate has been sealed.

Don't Get Taken

by Laura Rowley

Several times in the past month I've received a recorded call from "Heather" with "Card Services" offering to lower the interest rates on all of my credit cards to 6.9 percent. She then instructs me to "press 1" to be transferred to a live agent.

Perhaps you've received the same call. Heather, who also goes by "Cathy," is ubiquitous. She brazenly contacts consumers on the National Do Not Call Registry. She's been featured in a YouTube video. A blog called Stopping Heather is devoted to discovering her identity and, as you may have guessed, shutting her down.

Exploiting People in the Worst of Times

It's a rip-off that's exploiting strapped consumers in the worst of times. Florida State officials, who have filed civil suits to stop the schemes, say the telemarketers typically operate from a "boiler room" full of young, unskilled, minimum-wage workers (who are known to curse and hang up when their services are refused). The agents mislead consumers into believing the firm can negotiate directly with creditors to lower credit card interest rates.

And what are they actually selling? In many cases, a common-sense, debt pay-down plan that can be found in any personal finance book (including my own): Stop using credit cards, and pay extra money toward the highest-rate card. For instance, if a consumer has three credit cards with different interest rates, he should pay the minimums on time, directing as much extra cash as possible toward the highest-rate card. When that's paid off, he takes the extra money earmarked for the first card and applies it to the second card, working his way down.

The telemarketers "have a software program and type in the person's credit card information and debt information, and punch out a savings based on that approach," says a spokesperson for the Florida Attorney General's office. "That's what the consumer gets in the mail. They charge $1,000 for a service that's worth two cents, and sometimes double the charges because they're desperate to make their weekly and monthly quotas."

The Scam Is Spreading

The scam is proliferating from state to state: Workers learn the operation and then open their own franchises, sometimes paying a percentage of the profits to an individual who gets them started, according to Florida authorities.

U.S. consumers have $800 billion in revolving debt on credit cards. Robert Manning, professor at the Rochester Institute of Technology and author of 'Credit Card Nation', says the scams are multiplying as credit card companies unilaterally raise interest rates, even when consumers haven't changed their behavior with the card.

"If your interest rate goes up, your minimum payment goes up -- and lots of people are trying to pinch pennies," he says. "A lower-rate credit card sounds like right thing to do, so a lot of people who think they are doing the right thing are falling into a trap they didn't know existed."

The Florida Attorney General filed a civil complaint against one telemarketer, IXE Accelerated Financial Centers, and its two owners, Jaime Hawley and Ivan Estrella (a.k.a. Ivan Torres). It charges them with violating the Florida Deceptive and Unfair Trade Practices Act and the state's Telemarketing Act, and seeks thousands of dollars in penalties.

Details of a Complaint

IXE claims it has been in business since 1991, but it has only been operating for a year, according to the complaint. (The company's Web site is still active.) Calling itself a "banking center," IXE promises that "licensed financial specialists" will negotiate with the consumer's lenders to reduce interest rates and get them out of debt "three to five times faster than your current rates."

The complaint says the firm charged consumers from $695 to $995, and told them they could save from $2,500 to $5,000 in 30 days or receive their money back. Those who asked for their money back or refused to sign the written contract they received in the mail did not receive refunds, the complaint says.

Consumers' credit cards were charged by a variety of other company names, including Dynamic Financial Resolution; Financial Trust Resources; Computer ER of Florida; Financial Discount GRO Ozone Park N.Y.; and Bank Tech Process, according to the complaint.

When I spoke to the Card Services agent who called me, he said his firm was a division of Experian, the credit reporting bureau. "We have pre-negotiated contracts with all 550 credit card lenders," he said. "There's no out-of-pocket expense to you, this is free of charge. We get paid from the card lenders by the interest and finance charges we save you."

Warning: Stay Vigilant

Experian is "not in the credit card business and does not provide account numbers to unauthorized companies," says Susan Henson, director, public relations. "Experian regrets that consumers have been targeted by this company and warns consumers to stay vigilant about protecting their identity and credit by only providing personal information when they themselves initiate a credit transaction." The credit bureau advises consumers who have given Card Services their personal information to place a fraud alert on their credit file.

The Federal Trade Commission received 1.2 million consumer complaints in 2008. The FTC's list of "credit and loan phone scams" doesn't include the pitch from Heather and Cathy, although consumer protection offices in several states have issued warnings on their Web sites about the swindle. Florida authorities say the scam operators can shut down, move, and reopen fairly easily under another name or in another state.

Bottom line: Never give credit card information over the phone to someone who calls you. Get any offers mailed to you in writing before you agree to any service. Read the contract and make sure you are dealing with a brick and mortar establishment, and check with the Better Business Bureau before doing business with the firm. If you need debt relief, seek help from a non-profit such the National Foundation for Credit Counseling.

"The only entity that has that authority to reduce interest rates is the bank issuing that card," says Manning. Consumers should call the bank directly and ask for a lower rate, and if that is unsuccessful, contact a local credit union and see if they can transfer the balance to a lower-interest card that has no balance-transfer fees.

"We previously had one extreme of underwriting tools --- basically, if you had a pulse, you got a loan," Manning says. "Now it's the exact opposite, and it's hurting people who are good credit users."

Avoiding Recession-Era Faux Pas

by Lauren Sherman

What not to talk about during the downturn

John Scally isn't a cheapskate, but he felt like one last week.

While visiting an old friend in Portland, Ore., the 39-year-old communications consultant rejected the idea of dining at Ruth's Chris Steakhouse, the restaurant chain where a T-Bone will set you back $41. Instead, Scally suggested a less expensive Italian joint. Afterward, there was a feeling of awkwardness between the two men.

"With times being the way they are and no job safe, I didn't feel right dropping over $100 on dinner," says Scally. His reasoning backfired. "I felt like my friend thought I was being cheap or that I didn't want to have a good time."

Hoang-Uyen N., a 28-year-old advertising executive in Minneapolis, says she's often made to feel uncomfortable by a longtime acquaintance who constantly talks about how much money she makes. "She's always bragging about her latest work bonus, or how she spends without limits," says Hoang-Uyen. "I always wonder, 'Does she even know that we're in a recession?'"

In times of financial trial, socializing gets tricky. Whether you're on Scally's end, trying to save while not looking stingy, or you are one of the fortunate who still has the freedom to spend, it's tough to determine what's appropriate to discuss openly. Indeed, discretionary spending might be down, but it's not dead. There are people out there spending money on everything from beauty creams to eight-course tasting menus. For example, 12.1 million cosmetic plastic surgery procedures were performed in 2008, up 3% from 2007, according to the Arlington Heights, Ill.-based American Society of Plastic Surgeons.

But how do you know what's OK to talk about and what's not?

"Etiquette is really about making people feel comfortable, which means we all have to be a bit more sensitive when talking about money and spending right now," says Cynthia Lett, executive director of the International Society of Protocol and Etiquette Professionals in Silver Spring, Md. "If you're flush enough to go get a facial once a month, that's not something you should discuss, unless you're absolutely positive that the other person is in the same boat."

It's fair to say that recession-era cocktail party conversation should be conducted differently than the banter of the boom years. Casually mentioning that you and your wife recently closed on a second summer home, that you've joined a fractional jet ownership club or that you're planning a private $50,000 African safari vacation this autumn should be avoided.

Unfortunately, for some, that leaves little to say. "Before, everyone was constantly discussing upcoming trips, or how much they were spending on home renovations," says Peter Post, a director at the Emily Post Institute in Burlington, Vt., and author of five books on etiquette.

If you find yourself at a loss for words, Post advises, focus on those around you. Ask them how they're doing, what they've been up to, instead of injecting an anecdote from your latest shopping spree into the conversation.

Regardless of your situation, try not to feel bad about your circumstances. Scally, in eschewing the pricey steakhouse and opting for affordable Italian, did what was right for him, and that's more than acceptable, says Post. "We all have to make choices, and we should try to be a little more understanding in times like these."

Purchases You Shouldn't Talk About Right Now

1. Summer Rentals

Demand is down for summer rentals, which means many properties will be discounted. For example, in parts of Cape Cod, four-bedroom homes that last year went for $15,000 a week can be had for 15% to 20% less. If you plan on taking advantage of the reduced prices, don't make a big deal out of it. Instead, invite your less-fortunate friends down for a weekend of relaxation and inexpensive recreation.

2. Vacations

You're probably still planning at least one vacation for 2009. In fact, 82% of Americans with annual household incomes over $75,000 intend to travel during the first half of 2009, according to a December 2008 survey conducted by marketing firm Y Partnership. However, it's important to be sensitive around those who might be cutting back or skipping a holiday altogether. Only discuss the basic plans for your trip.

3. Spa Treatments

Manicures, pedicures and facials are still popular, according to the International Spa Association, which says that the number of spas operating in the U.S. grew 24%, from 14,600 in 2007 to 18,100 in 2008. However, many consumers have scaled back, visiting the aesthetician every three months instead of once a month. It's best to keep your indulgences to yourself.

4. Jewelry

While some companies in the jewelry industry are faltering--Tiffany, for example, saw a 20% decrease in sales in the last quarter of 2008--the very high end continues to succeed. If a friend inquires about your latest purchase, play down its lavishness.

5. Cars

U.S. sales for Rolls Royce increased by 26.6% over 2008, which means that more of us than ever are investing in these six-figure vehicles. But bragging about your new ride is no longer kosher, because it's likely that many of your friends have traded down in terms of luxury.

G20 Leaders Get 11 Minutes Each to Save Capitalism

by Tom Bemis

Commentary: Minute by minute at the global summit

Global leaders gathered in London at the G20 summit to save the world's economy are spending more time arriving, eating, and posing for pictures than they are actually discussing the crisis as a group.

Officially, President Obama, U.K. Prime Minister Brown, German Chancellor Merkel and the rest will be together from 7:30 a.m. until 3:30 p.m.

Of that eight hours, or 480 minutes, the first 55 were devoted to arrivals. The next 90 minutes were spent on breakfast, according to the summit schedule. At the 150 minute mark the leaders got together for the all important "family photograph."

Finally, at 10:20 a.m., nearly three hours into the event, the plenary session was slated to start, all 160 minutes of it.

All told the schedule shows 260 minutes for the mechanics of getting the leaders in, feeding them and taking their pictures, and 220 minutes for plenary sessions to talk about the crisis.

If one assumes everybody gets the same amount of time to talk, that gives each of the 20 world leaders exactly 11 minutes of floor time. But there's a catch. There are actually 30 attendees listed on the conference schedule, including the leaders of organizations like the Association of South East Asian Nations, the Financial Stability Forum, the International Monetary Fund, and so on.

So, assuming the equal time rule applies, each leader really gets a little over 7 minutes to convince the others about whatever their plan is for stimulus spending, financial regulation, boosting the IMF, or a global currency.

Throw in a few gasbags -- these are politicians after all -- and the whole schedule goes off the tracks.

Of course, informal time to network is important at any big gathering, so the real business of arm twisting and deal making will be getting done over the salad and entrees.

Absent the rhetorical skills of Lincoln, or skill as a hypnotist, the actual G20 gathering will be an afterthought to the posturing that went on before. Fortunately, the world's problems won't be going away any time soon, and the leaders will be able to get together for breakfast and lunch again in the near future.

- Tom Bemis, assistant managing editor

More signs of economic hope; grim jobs report due

More faint signs of hope for the economy as grim jobs report looms; Dow peeks back over 8,000

WASHINGTON (AP) -- Fresh signs that factories are coming back to life and a bank CEO's encouraging outlook fueled more hopes Thursday that the economy may soon emerge from the cellar, briefly lifting the Dow Jones industrials over 8,000 for the first time in two months.

The job market, among the last to turn around in an economic recovery, remains weak, though. New claims for unemployment last week were worse than forecast, and Friday's reading on how many jobs the nation lost in March is widely expected to be grim.

At the G-20 meeting of world powers in London, President Barack Obama said international agreements, including a plan to commit $1.1 trillion to fight the downturn, were a "turning point in our pursuit of global economic recovery."

The Commerce Department said orders for manufactured goods rose 1.8 percent in February, reversing six straight monthly declines and easily beating estimates of another drop.

"There is now some solid evidence that the period of economic free-fall is now behind us, that the next step will be a slower rate of decline," said Nigel Gault, chief U.S. economist for consulting firm IHS Global Insight.

Gault predicted in an e-mail that the economy will bottom out in the second half of the year, cautioning that he did not believe the economy was yet ready to grow again.

Economists expect Friday's jobs report to show U.S. employers cut 654,000 jobs in March, with the unemployment rate rising to 8.5 percent from 8.1 percent, according to a survey by Thomson Reuters. Some economists estimate as many as 750,000 jobs lost for March.

Gault expects the unemployment rate eventually to rise to 10 percent before reversing.

Still, recent economic reports have indisputably been more positive. Earlier this week, pending home sales and construction spending both came in better than expected, and there have also been signs shoppers are loosening the death grip on their wallets.

"Some of the recent economic indicators have been more encouraging than they were in the winter, when every indicator pointed in the same direction: straight down," said Stuart Hoffman, chief economist at PNC Financial Services Group.

But layoffs continue to pile up. Last week alone, the Labor Department said, initial claims for unemployment insurance rose to a seasonally adjusted 669,000, the highest in a generation and up from the previous week.

And unemployed workers are having difficulty finding new jobs. The tally of laid-off workers claiming benefits for more than a week rose 161,000 to 5.73 million, setting a record for the 10th straight week.

While initial jobless claims reflect recent layoffs, the monthly jobs report takes into account new hires and calculates a net change.

Traditionally, the job market doesn't pick up until well after a recovery starts. The stock market, on the other hand, generally bottoms out before the economy does, and stocks have been on a steady march higher for three weeks.

The Dow Jones industrial average spent most of the trading day over 8,000, its first time in that territory since early February, then dipped to close at 7,978, a gain of 216 points, or almost 3 percent.

In downturns over the past 60 years, the Standard & Poor's 500 index has hit bottom an average of four months before a recession ended and about nine months before unemployment hit its peak.

Financial stocks led the rally on Wall Street after the board that sets U.S. accounting standards gave banks and other companies more leeway in how they value assets and report losses.

Bank of America CEO Ken Lewis also bolstered the financial markets when he told CNBC that the recession is "getting close to the bottom."

At the G-20, world leaders pledged $1.1 trillion in loans and guarantees to struggling countries and agreed to crack down on tax havens and hedge funds. But they remained divided on how to attack the global recession. The United States and Britain want more stimulus measures, while European politicians want more regulation.

The European Central Bank also agreed to cut a key interest rate to a record low of 1.25 percent. In the United States, the key Federal Reserve interest rate has been at a record low for more than three months.

Employers are eliminating jobs and taking other cost-cutting measures to deal with sharp reductions in consumer and business spending. The current recession, now in its 17th month, is the longest since World War II.

Just this week, 3M Co., the maker of Scotch tape, Post-It Notes and other products, said it will cut 1,200 jobs, or 1.5 percent of its work force, because of the global economic slump. That includes hundreds in 3M's home state of Minnesota.

Companies reduced their payrolls by 651,000 jobs in February, a record third straight month of job losses above 600,000. As a proportion of the work force, the number of people on the jobless rolls is the highest since May 1983.

If job losses in the U.S. continue to mount, it could derail the "little flicker of light we've seen in the economic data," said Carl Riccadonna, senior U.S. economist at Deutsche Bank. That could mean a pullback in consumer spending and more late payments on credit cards, auto loans and other debt.

The Obama administration's $787 billion stimulus package, approved by Congress in February, is trying to counter the recession by providing money for public works projects, extending unemployment benefits and helping states avoid budget cuts.

AP Business Writer Jane Wardell in London and Tim Paradis in New York contributed to this report.

Economy contracting at slower pace, no bottom yet

WASHINGTON (AP) -- New economic reports on construction spending, manufacturing and pending home sales suggest the recession may be moving closer to a bottom.

But most analysts think the low point is still months away, with more bad news likely before the economy stabilizes and begins to rebound.

"I think the best that can be said right now is that the pace of decline has slowed, but we are still heading down," said David Wyss, chief economist at Standard & Poor's in New York. "Any recovery is still a work in progress."

Wyss predicted that the recession, already the longest in a quarter-century, will last until September. But he said the decline in the gross domestic product in the current April-June quarter will probably be just half the 6.3 percent drop that was recorded in the final three months of last year.

The Commerce Department reported Wednesday that construction spending dropped 0.9 percent in February, the fifth straight monthly decline but less than the expected 1.5 percent decrease.

Meanwhile, a trade group's measure of the health of manufacturing in March showed that key sector of the economy shrank for the 14th straight month.

The Institute for Supply Management said its manufacturing index rose to 36.3 last month from 35.8 in February. Even with the small increase, the index is stuck well below the reading of 50 that is the dividing line between growth and recession. The index hit a 28-year low of 32.9 in December.

"Manufacturing is still totally in the dumps, but it doesn't seem to be sinking further," said Joel Naroff, chief economist at Naroff Economic Advisors.

March proved to be another dismal month for U.S. automakers as low consumer confidence kept buyers away. General Motors Corp. led the slide, with a 45 percent drop in sales compared with March 2008.

Ford Motor Co. reported a 41 percent decline, and Chrysler LLC said sales plunged 39 percent.

But on Wall Street, stocks rose after the construction and manufacturing reports were better than expected, and the National Association of Realtors said pending home sales rebounded in February from a record low. The Dow Jones industrial average added more than 152 points, or 2 percent, to 7761.60. Broader indicators also rose on the first trading day of the second quarter.

The 0.9 percent fall in construction spending was led by a 4.3 percent drop in housing. That pushed housing construction to the lowest level in 11 years. Home builders have cut back sharply, but they face a rising glut of unsold homes as record mortgage foreclosures dump more properties on the market.

The manufacturing report, based on a poll of the Tempe, Ariz.-based trade group of purchasing executives, covers indicators including new orders, production, employment, inventories and prices. None of the 18 manufacturing industries grew in March, and new jobs are unlikely before next year.

Inventories will need at least three more months to fall to healthy levels. When that happens, new orders could rebound "and then it's a number of months before you see any improvement in employment," said Norbert Ore, chair of the ISM manufacturing survey committee.

"It's going to be long, and it's going to be slow," Ore said.

The Commerce Department report showed nonresidential construction rose 0.3 percent in February. That was a slight rebound after a 4.3 percent drop in January that had been the biggest decline in 15 years.

With the financial sector facing its worst crisis in seven decades, banks have tightened their loan standards, making it harder to get financing for shopping centers and other commercial projects.

Analysts are forecasting that the commercial real estate industry is poised to fall into the worst crisis since the last great property bust of the early 1990s. Delinquency rates on loans for hotels, offices, retail and industrial buildings have risen sharply in recent months and are likely to soar through the end of 2010 as companies lay off workers, downsize or close.

Construction spending by the government showed a 0.8 percent increase in February after two months of declines. All the changes left total construction spending at a seasonally adjusted annual rate of $967.5 billion in February, the slowest pace since March 2004.

AP Business Writer Tali Arbel in New York contributed to this report.

Global recession pushing millions into poverty

WASHINGTON (AFP) - - The World Bank Tuesday forecast record declines in 2009 global output and trade as the economic crisis bites, and warned a slowdown in the developing world is pushing millions into poverty.

The global economy is expected to shrink by 1.7 percent in 2009, "the first decline in world output since World War II," the bank said in an outlook update released two days before world leaders meet in London to coordinate a global response to the crisis.

The sharp contraction marks a dramatic 2.6 point downward revision from the 0.9 percent growth in 2009 forecast only last November.

The update "reflects the rapid deterioration in financial and economic conditions -- and the increasingly negative interaction between weakening economies and fragile financial systems -- that have come to the fore since late 2008 for virtually every country in the world," the 185-nation development lender said.

Developing countries have been hit harder than anticipated in the global economic crisis and lack the means to withstand the onslaught.

Gross domestic product (GDP) growth in developing countries is expected to slow to 2.1 percent, less than half the November forecast of 4.4 percent, and sharply lower than 5.8 percent in 2008.

Recessions were projected in Europe and Central Asia (negative 2.0 percent), and Latin America and the Caribbean (negative 0.6 percent).

"The 2009 downturn in world GDP and trade is unprecedented," the Washington-based bank said.

World Bank president Robert Zoellick said the recession was expected to trap 53 million more people in poverty this year, defined as subsistence living on less than 1.25 dollars a day.

"This comes after soaring food and fuel prices of recent years, which pushed 130 to 155 million people into extreme poverty, many of whom have still not recovered," Zoellick said in a speech in London.

Poor people in developing countries have little buffer to protect them against the effects of the crisis.

"In London, Washington, and Paris people talk of bonuses or no bonuses. In parts of Africa, South Asia, and Latin America, the struggle is for food or no food," he said.

Zoellick called on the Group of 20 industrialized and developing countries and the European Union, whose leaders are holding a crisis meeting in London Thursday, to support measures to help developing countries, such as the bank's appeal to developed countries to donate 0.7 percent of their stimulus spending to its Vulnerability Fund.

"Unlike economic crises in the past sixty years, this is a global crisis. It will require a global solution," the former US trade envoy said.

"These events could next become a social and human crisis, with political implications," he added.

According to the latest GDP projections, high-income economies would shrink 2.9 percent this year, a notch more than the prior estimate of 2.8 percent.

Justin Lin, the World Bank's chief economist and a senior vice president, said that China and India would continue to fuel growth in the developing world.

"If you would take out China and India (there is) zero percent growth this year," Lin said at a background briefing Monday.

The Washington-based bank projected trade volumes would drop a record 6.1 percent from 2008, led by a steep decline in manufactured goods trade.

"This is the largest contraction in 80 years, that is since the Great Depression," Lin said.

Hans Timmer, manager of the bank's Global Trends, Development Prospects group, said a key risk for developing countries was a balance of payments crisis as once-abundant private capital inflows dry up.

The World Bank projected a financing gap for developing countries of up to 700 billion dollars. Eighty-four of 109 developing countries would face financing gaps, particularly in Europe and Central Asia, Latin America, and Sub-Saharan Africa.

A "modest" recovery in 2010 was possible but highly uncertain, the bank said.

"Continued banking problems or even new waves of tension in financial markets could lead to stagnation in global GDP or even to another year of decline in 2010."

Key Advice for Your Career Strategy

by Jim Citrin

It has been a great run. Since February 8, 2006, I've written 66 Leadership by Example columns, totaling some 230 pages and 131,000 words. But the time has come to draw this effort to a close. This, the first half of a two-part final column, will synthesize my most important advice about career strategies.

How different the world looks today from when I started! In 2006 college graduates and mid-career professionals experienced the most ebullient job market in years, and opportunities continued to be abundant across all sectors in 2007. Employers hired more than 15 percent more new college graduates that year, the fourth straight year of double-digit growth, according to the National Association of Colleges and Employers, and the number of retained management and executive searches reached an all time high.

The class of 2009, by stark contrast, is wading into the roughest employment waters since the Great Depression; the 8.1 percent unemployment rate in February is the highest in a quarter century.

In this challenging context, let me organize my sweep of career advice along a roughly chronological order, one that will hopefully characterize your professional life.

How to Launch Your Career Successfully

If you have the option in today's market, try to join a blue-chip company so that you can become associated with its brand. Select your boss carefully, recognizing how important he or she will be in setting the norms and standards that will guide how you will behave in organizational life.

Recognize, too, that first impressions are lasting ones. Maintain a positive, can-do attitude, which is the single thing over which you have nearly complete control. Work hard -- get in early and stay late, not just to create face-time but to get more high-quality work done; and always meet your commitments so you develop a reputation for reliability and responsiveness.

Be a technology mentor. If you've grown up with digital technology as a normal and integral part of your life, you have the opportunity to bring tech-phobic senior managers into the modern era. Teach them how to use Facebook, how to upload a video to YouTube, how to organize digital photos on Flickr, how to create a profile on MySpace, and how to watch 'SNL' on Hulu. In the words of Bob Iger, CEO of Disney, "I believe that it's a better path to join a quality company, work hard and well with people, and navigate your way into the right roles than to join a lower-quality company, even if you start in a more senior position."

Patterns of the Very Best Careers

You can manage your career more proactively than you may realize if you understand the patterns that govern extraordinary careers. First, find the right fit in terms of a culture and role that play to your strengths, personality, and interests. Seek creative ways to gain access to new responsibilities and opportunities through cultivating mentors, volunteering for stretch assignments, and pursuing an advanced degree.
As you progress through your career, build upon your experiences from one role and apply them in fresh ways to new roles; think of your career as a series of building blocks that can be mixed and matched to best position you for new opportunities.

Recognize that your value in the market is inexorably linked to the reputation of your employer. In many cases, you'll be associated with the company you work for more than the specific job you hold. Working in a company with great people will plug you into valuable networks and offer the best opportunities for skill-building and professional development. Also, it's easier to move from a large, widely recognized, well-respected organization to a smaller or more entrepreneurial one.

It is trite to say that hard work is the foundation for enduring success. Nonetheless, as Geoff Colvin puts forth in his fabulous book, 'Talent is Overrated', great performance is in our hands far more than most people believe. What makes certain people great is not their inborn talent. Rather, it is something called "deliberate practice," a sustained, often lifelong, period of purposeful effort designed to improve performance in a specific domain. This is just as true in the case of business as it is in sports, music, medicine, chess, science, and mathematics.

The Art of the Job Interview

There are typically four parts of a job interview for which candidates should prepare: 1) The opening, which is intended to set the stage and, ideally, help you, the interviewee, feel comfortable by establishing some common ground; 2) Chronological review, where the intention is to learn who you really are as a person, how you think, and what the major influences and key turning points were in your life. Here, make sure to emphasize your work ethic, values, personality, and impact; 3) Assessment of your background and track record against the core skills, experiences, and competencies required for success in the role, which will hopefully have been defined up front; and 4) Your questions, which are just important as your answers, so be sure to prepare in advance to show the homework you've done and the insight you have gleaned about the company and its competitors.

Strategies for Internal Job Candidates

One of the most delicate situations for executives is being an internal candidate competing against one or more external candidates for a key position. How do you handle yourself? First, embrace the process without projecting resentment that you aren't just handed the job. Declare your candidacy, balancing your personal interest in the opportunity with an attitude of support for whatever is best for the organization.

Determine how the process will work and who the decision-makers are, and conduct yourself professionally and with maturity. When it is your turn at bat in the interview, organize your thoughts into a few powerful themes. Tell your story without assuming that, because you are the internal candidate, people really know who you are or from whence you've come. Use analogies to demonstrate how you've been successful in similar situations; prepare for the tough questions; and practice your examples and responses repeatedly beforehand.

Making the Best Transition

Because of the tough economy, many people find themselves having to find a job and make a transition. Believe me, I recognize the difficulty of being downsized or restructured out of a job, and let me acknowledge that it's far easier to give advice than it is to actually do this. But here is my advice nonetheless: 1) Start preparing for a transition before you need to by beefing up your internal and external relationships and broadening your skill base and credentials; 2) Take stock of your situation by objectively assessing your strengths and figuring out what gets your juices flowing; and then 3) Find ways to apply your experiences in new ways by soliciting advice from trusted friends and mentors, reading voraciously, and seeking opportunities to present your case to as many people as possible.

The First 100 Days of a New Position

When you do get that new position, it is critical to get off to a strong start to establish the foundation upon which long-term success is built. Done well, the first 100 days create momentum for the next 100 days, and the next. Done poorly, you squander the unique honeymoon period during which you get the benefit of the doubt and when your authority and influence come more from the appointment than from your accomplishments. The keys to succeeding in this period are to prepare and do your homework, set proper expectations with your boss and other key influencers, and to pick three themes around which to organize your priorities and your continuous communications.

Working Effectively with Your Boss

"What bosses want more than anything else is loyalty, good advice, and to have their personal brands polished," says David D'Alessandro, best-selling author of 'Career Warfare and Executive Warfare'. There is no single person who has more direct influence on your short- or medium-term career success than your boss. Figure out how to support his or her success, and tailor your efforts accordingly. Doing so will create and sustain your career momentum.

By contrast, there is nothing a manager disdains more than the subordinate who goes behind his back. Never make yourself look good at the boss's expense. Since the rules of the game in organizational life are governed by hierarchy, if you circumvent your boss, then you'll be seen as breaking the chain of command or, worse, betraying him or her. All intelligent bosses instinctively separate their people into three distinct categories: the sycophants, the devil's advocates, and the small percentage of employees who are the balanced players. You definitely want to be seen as a member of the third group.

The Power of Relationships in Your Career

Relationships are core to your success, since everything you do in professional life is dependent on others. Therefore, it is imperative to have a relationship mindset. This means recognizing that all business relationships are also personal relationships, that one relationship or interaction leads to another, and what goes around comes around.

People genuinely appreciate hard work and thinking on their behalf, as well as responsiveness and straightforward communications. When you're at a critical turning point in your career, it's wise not to go it alone. A proven strategy is to cultivate a small group of professional and personal relationships to serve as your sounding board, brain trust, or personal "board of directors."

A Tactical Lesson

Most of my columns generated hundreds of comments (usually robust and valuable but often requiring a thick skin). The one that was by far the most commented upon was "Tapping the Power of Your Morning Routine," in which I detailed how 20 CEOs get the most out of their early-morning time. The lessons: 1) Start early -- 80 percent of the CEOs I surveyed wake up at 5:30 or earlier; 2) Get a jump on email -- virtually all report using this time to triage their overnight email; 3) Exercise every morning -- 70 percent work out daily in the morning; and 4) Problem solve -- most use the morning, when the mind is at its clearest, to develop ideas about how to resolve the thorniest issues of the day.

The First Quarter in a Tough Year

by Todd Harrison

Commentary: Where we were and where we're going

As last year drew to a close, we revisited our 2008 themes and weighed them in kind.

Some of them came to fruition, others were early, but most hit the mark.

When we entered 2009, we offered a fresh set of forward-looking expectations. With a conscious nod that we must stay humble, or the market will do it for us, it's time for reflection as the first quarter comes to a close.

Theme 1: The Not-So-Quiet Riot

January thought: The age of austerity officially has arrived and we'll see a steady stream of social strife as the rejection of wealth increases in size and scope. While societal acrimony began to percolate last year, this dynamic will manifest through social unrest and geopolitical conflict as we edge ahead.

Update: This theme continues to build with each passing day. From public outrage over AIG bonuses, to vandals attacking the home of the former CEO of the Royal Bank of Scotland, to North Korea threatening war against Japan if they interfere with this week's missile launch, the world is an angry place.

The socioeconomic mindset remains the single greatest risk as this crisis evolves from financial to economic to social. If peaceful globalization is to arrive, the persistent trend of protectionism must give way to an orderly destruction of debt. As it stands, current policies are pointing in the wrong direction.

Theme 2: Hedge Fund Overhaul

January thought: Early last year, I opined that 50% of existing hedge funds would eventually cease to exist. The perfect storm of 2008 will expedite that process, as will reactive regulation following the Bernie Madoff scandal.

Update: Most funds typically require a 30- to 60-day notice on redemptions, so the post-Madoff fallout may not be felt fully until after the first quarter ends. Continued migration from this sector, coupled with an abatement of risk appetites, will continue to pressure this once-proud industry.

Theme 3: Seismic Readjustment

January thought: Entering September, we offered that the disconnect between equity and credit would manifest as a car crash or a cancer. Four months later, despite lower prices and massive government intervention, the equilibrium between equity, credit, commodities and currencies remains elusive.

Update: The government introduced new methodologies to combat the crisis, from the recently announced Public-Private Investment Program to the expansion of the Term Asset-Backed Securities Loan Facility and other synthetic solutions. In the process, the inherent obligations of future generations have grown at an alarming pace.

The most intuitive relief valve for these imbalances is the measuring stick that denominates financial assets. Recent calls from China and Russia to dump the dollar as the world reserve currency speaks to the growing unease of foreign holders of dollar-denominated assets.

Theme 4: Motion and Movement

January thought: My sense for 2009 is that -- all else being equal -- we'll see wild movements and a wide range. Perhaps the S&P 600 will be a nadir and one, if not two, 20% bear-market rallies filled with false hope and empty promises.

Update: A vicious downdraft began the year and took the tape of the S&P to 666, following by the first of our perceived 20% lifts. While we've seen a rush to judgment that a new bull market has begun -- and technically, that's true -- I remain of the view that it's cyclical rather than secular.

Theme 5: Pension Panic and Puny Munis

January thought: Unfunded pension plans and bankrupt municipalities should jockey for mindshare in 2009 as the financial crisis evolves. The government will fight fire with fire, perhaps allowing citizens to withdraw from their retirement accounts without tax penalties. But that solution is transient at best.

Update: The former chief regulator for the $2.7 trillion municipal bond market acknowledged last week that the governing board failed to save taxpayers upwards of $1 billion of losses due to opaque financial products, news reports said. My sense is this represents the tip of iceberg.

On the pension front, it recently came to light that the Pension Benefit Guaranty Corporation, the federal agency that insures the retirement funds of 44 million Americans, departed from its conservative investment strategy and piled much of its $64 billion insurance fund into speculative investments just months before last year's market collapse.

Theme 6: The Employment Conundrum

January thought: While it's no stretch to assume a further uptick in unemployment --remember, it was 25% during the Great Depression -- the ironic twist is that those with jobs will feel the pinch. Expect relative pay cuts, rather than salary bumps, to be a central theme this year despite folks working twice as hard to absorb the productivity chasm.

Update: While unemployment continues to rise, those left at work are being asked to pick up the slack without additional compensation. According to Mercer, a human resources consultant, 25% of companies surveyed have instituted salary freezes for 2009. Projections indicate that will rise to 33% by the end of the year. Pay cuts remain an intuitive next step.

Theme 7: Industrial Revolution

January thought: The entire spectrum of industries, from finance to media to retail to philanthropy to academia, will be forced to reinvent themselves and the leaders coming out of this crisis won't be the same as the leaders that entered it.

Update: We use the forest-fire analogy because it's so very apt, scary and dangerous, yet necessary for a fertile rebirthing. A snapshot of once-venerable icons such as General Motors (GM) , General Electric (GE) , Citigroup (C) and AIG (AIG) supports the notion that market leadership, and leadership within individual sectors, will look drastically different once this process of price discovery passes.

Theme 8: A Yen for Japan

January thought: There aren't many folks talking about Japan as a relative winner in the global marketplace. There is clearly risk to that region. But remember, they have a 25-year head start down the deflation road. You can't spend relative performance but I expect Japan to outperform U.S. equities this coming year.

Update: The Nikkei ended the first quarter 8% lower compared with a 13% loss in the Dow Jones Industrial Average, a 12% drop for the S&P and 3% hiccup in the Nasdaq.

Theme 9: Alpha Bits

January thought: Now that the equity epitaph has been written for the "buy and hold" strategy, it may be time to begin looking for babies in the bathwater. There will be deep value opportunities in small and micro-cap stocks, creating an environment where real value investors step up and stand out.

Update: Small cap underperformed large cap, and small value underperformed small growth in the first quarter, which generally means that investors are paying up for earnings and stability over cheap assets. I continue to believe this is a second-half story and tremendous opportunities will present themselves in companies with little, if any, debt, strong balance sheets and trustworthy management.

Theme 10: You Gotta Believe!

January thought: Last year was a harsh reminder that profiting is a privilege rather than a right. This is no garden-variety, one-and-done recession. It will be a prolonged process as we attempt to regain respectability on a global stage after years of mismanaged affairs.

Update: The socioeconomic ramifications of the financial crisis will reverberate for many years. Just as the creation of wealth and conspicuous consumption created an altered state of reality, the unwinding of the debt bubble and the attendant austerity will require patience, prudence and financial staying power.

These are scary times and the decisions made now will affect future generations and their standing within the world. As society is a sum of the parts, the onus is on each of us to remember our name is our word. Honesty, trust and respect are core constructs of any stable foundation.

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Roubini: Go Ahead, Keep Dreaming of That "V-Shaped" Recovery

As we noted earlier, Nouriel Roubini of RGE Monitor actually has a surprisingly non-apocalyptic forecast for the economy: The first quarter of this year will mark the worst rate of decline, and the outlook will gradually improve from there.

We'll still be in a recession through 2009, says Roubini (in contrast to most economists, who think the economy will be growing nicely by Q4). But then, finally, the economy will begin to recover.

But what will this recovery look like? Will it be the V-shaped rocket launch that some bulls are looking for?

No.

It will be an L-shaped slog, says Roubini. The economy will grow at a depressingly slow rate for quite a while, and the stock market will tread water. We may have seen the lows on the S&P 500 (or close to it) but that doesn't mean stocks will make you any money anytime soon.