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Sunday, 30 January 2011

10 Jobs That Didn't Exist 10 Years Ago

Thinking about a career change? For the best odds of snagging and hanging onto a job for the long haul, you'll want to avoid professions on the decline in today's economy (think bookbinders, textile workers and machine-tool operators) and focus on professions whose outlook is rosier (such as health care, financial analysis or social work).

Technology, cultural shifts and changing demographics combine to create new career fields all the time. Here are 10 of our favorite new roles for 2011 and beyond, ones that didn't even exist 10 years ago:

Social Media/Online-Community Manager

Salary range: $38,000 - $83,000
Education required: Bachelor's degree

Social media strategists focus on building their employers' or clients' brands through the use of social media sites and tools, whereas online-community managers specialize in fostering user discussion for the marketers they support. What does a social media or online-community manager need to succeed? Essentials include great written communication skills, a marketing background and lots of experience with social media tools (Facebook, Twitter and YouTube).

Elder-Care Services Coordinator

Salary range: $60,000 - $84,000
Education required: Bachelor's degree

An aging population and increasing interest in at-home or like-home care are factors in the growth of the elder-care services coordinator role. People who understand gerontology and end-of-life issues, and who can stay on top of health-care regulation and follow developing trends in elder-care best practices, would be well-suited to this role. Empathy, follow-through and top-notch communication skills are also must-haves for prospective elder-care services coordinators, who may need advanced degrees in gerontology (the study of aging) or related areas.

Telework Manager or Coordinator

Salary range: $30,000 - $80,000
Education required: Bachelor's degree

Telework program managers and coordinators manage the telework (telecommuting) programs for employers, resolving technical and communication issues that arise and writing policies to cover every imaginable telework-created sticky wicket. Telework program managers may oversee other programs, too. A recent Department of Commerce job listing for a combined telework/disabilities program manager offered a salary range of $89,033 - $136,771 -- not bad at all for a job you can do from home (we're assuming -- the irony would be crushing, otherwise).

Sustainability Manager

Salary range: $61,000 - $120,000
Education required: Bachelor's degree

What we now call a "corporate sustainability program" was once referred to simply as "recycling" and was a small part of someone's job. These days, nearly all sizable corporations employ highly qualified people to look after their sustainability programs, which can stop at recycling and waste reduction or can include supplier sustainability evaluation, carbon footprint issues and leadership in the areas of facilities design, green manufacturing and more. The website Greenbiz.com surveyed corporate sustainability officers and found that VPs are earning close to $200,000 per year.

Educational Consultant

Salary range: $53,000 - $98,000
Education required: Bachelor's degree; Master's a plus

Tutoring is an old field. But in its latest incarnation, educational consultants work with children and their families to get students into the educational environments best-suited to their learning needs. Educational consultants can work on their own, for larger firms or for educational institutions themselves, testing students and interviewing them and their families to help kids get the support they need.

Search Engine Optimization Specialist

Salary range: $40,000 - $105,000
Education required: Bachelor's degree

Search engine optimization pros use a combination of left- and right-brain techniques, from analysis and experimentation to gut feel and insight, to move their clients' or employers' websites up the search engine rankings, thereby bringing them more traffic and, they hope, stronger revenues. For the job, you'll need a mix of technical and marketing skills, grounding in search-engine logic and a nose for website user behavior.

Medical Biller/Coder

Salary range: $34,000 - $41,000
Education required: High-school degree

The new field of medical billing and coding has sprung up to get insurance companies (and government plans, such as Medicare and Medicaid) the information they need and to make sure that medical procedures are classified and recorded the proper way. Medical billers and coders work at doctors' offices, hospitals and other health-care facilities and typically have certification or formal education (six-month and one-year programs abound) that allow them to navigate the tricky terrain of medical terminology.

Online Advertising Manager

Average salary: $49,000 - $94,000
Education required: Bachelor's degree

Online ad managers may work for websites, selling ad programs and working with clients (advertisers) about where on the site, when and how to run online campaigns. Or they may work for advertisers, running the online side of an advertiser's business and tracking each ad's performance. Online advertising managers are savvy marketers who also understand how new technology enables cooler ad programs all the time.

Talent Management Coordinator

Salary range: $67,000 - $80,000
Education required: Bachelor's degree

Human Resources people have always had a hand in what's loosely been called Talent Management -- attracting great people (the "talent") into an organization and keeping them there. These days, corporations employ dedicated talent managers or talent coordinators to plan their workforce needs over time and make sure that the skills exist within the company to keep the organization on top of its game. They may also run their firms' succession-planning programs, keeping nervous board members and shareholders feeling good about the company's ability to hit its goals even if key individuals resign or retire.

User Experience Manager

Salary range: $79,000 - $147,000
Education required: Bachelor's degree; Master's preferred

What's a user experience? Why, it's what happened to you when you went to get your new driver's license or when you, say, read a captivating column online about new professional opportunities. User experience managers were first widely seen in Web-design firms, focusing on a website in development from the viewpoint of a user who would eventually have to navigate the thing. Now, user experience is the watchword for banks, insurance companies, restaurants and virtually any company that has reason to evaluate and improve the way its customers and prospective customers encounter its people and processes.

Saturday, 22 January 2011

Character Traits and Behaviors That Make You Rich

by Laura Rowley

There's been much ado about a new book by Yale law professor Amy Chua, "Battle Hymn of the Tiger Mother." It chronicles her traditional Chinese approach to parenting, including strategies that many Westerners find extreme and bordering on abusive. A child of immigrants, Chua requires that her own daughters be No. 1 in every subject (except gym and drama), practice their instruments for hours at a stretch and refrain from social activities like play dates, sleepovers and school plays.

A Wall Street Journal excerpt of the book, which drew more than 6,000 (often caustic) comments, describes a screaming match in which Chua forced her younger daughter to stay at the piano after dinner and into the night — no water, no bathroom breaks — until she mastered a difficult piece. When her kids fall short of her expectations, Chua calls them "garbage."

Chua defends her methods based on the results: One of her children played at Carnegie Hall at age 14, and both are clearly shoo-ins for the Ivy League. Her older daughter Sophia gave an interview in which she says she's grateful for the way she was raised, noting, "If I died tomorrow, I would die feeling I've lived my whole life at 110 percent."

While the debate persists about how to raise successful kids, the story made me think about which attitudes, character traits and behaviors play a role in financial success. Like parenting, sometimes you can achieve the goal with pretty dysfunctional behaviors (becoming the biggest cheapskate imaginable or taking wild investment risks on exotic assets). But you might be surprised by what the research has found about the traits and actions that do — and don't — make a difference in accumulating wealth:

Propensity to Plan

Would you agree or disagree with the following statement? "Before going on a vacation, I spend a great deal of time examining where I would most like to go and what I would like to do." Researchers found that people who agreed tended to accumulate more wealth than people who didn't.

"Planning behavior and wealth accumulation is a chicken-and-egg problem: Did people have a lot of wealth and therefore do a lot of planning, or did they do a lot of planning and that led to the creation of wealth?" says John Ameriks, a Vanguard economist who co-authored the research. Hence the vacation question, which doesn't really reflect income or assets but merely whether you like to map things out in advance. In a study of TIAA-CREF plan members, researchers found a high correlation between the propensity to plan and both net worth and gross financial assets.

Moreover, there was no correlation between earnings and the propensity to plan — which means you don't need to be getting a fat paycheck to build wealth. (Researchers measure wealth accumulation as a multiple of annual income. So a planner personality who earns $50,000 might sock away four or five times that amount by the time they retire by saving early and consistently, while a more impulsive type won't.)

Math Confidence

Researchers in the same study asked participants if they agreed or disagreed with the statement: "I am highly confident in my mathematical skills." "We didn't give them a test to measure math skills; it's more a question about fear of numbers," said Ameriks. "Some people find doing calculation daunting," But it doesn't matter — researchers found no significant connection between positive feelings about math skills and wealth accumulation. That might seem puzzling, until you consider the next trait.

Financial Literacy

While math confidence doesn't seem to matter, the cognitive ability to actually do the calculations and understand their implications does. For example, a 2007 study found people who cannot correctly calculate interest rates given a stream of payments tend to borrow more and accumulate less wealth. (They may also lose ground over time because they tend to pick less advantageous mortgages and are less likely to refinance in a favorable rate environment, other studies show.) Meanwhile, there's also a negative correlation between financial literacy and planning: Folks who perform poorly on financial literacy tests are less likely to plan for retirement.

"It's surprising that there's no relation to math skills, but what's important is making the connection between math and setting up retirement savings plans," says Dartmouth economist Jonathan Skinner. "You have to have an understanding of how much you should be putting away and how much cash that will mean when you actually retire. Maybe people who can do math can figure that out but don't bother. Procrastination is a really bad trait."

Smoking

It's an unhealthy habit, and nicotine buttheads spend a small fortune over time, $5 to $10 a pack, depending on state taxes. A typical non-smoker's net worth is roughly 50 percent higher than that of light smokers and about twice the level of that of heavy smokers, according to Jay Zagorsky, author of the study on the subject and a research scientist at Ohio State.

Heavy smokers had a net worth that was about $8,300 less than non-smokers, while light smokers' net worth was about $2,000 lower. And that wealth gap grows by about $410, or 4 percent, each year that a person continues to smoke. "It may be that smokers spend as much as others on everything else, and pay for smoking out of potential savings," says Zagorsky. (A separate study found the propensity to plan doesn't affect smoking behavior — suggesting financial planning might draw upon different skills than those needed to kick the habit.)

Powerlessness

People who feel a sense of powerlessness tend to splurge on high-status luxuries, a sure-fire detour from long-term wealth. "If I have more of something than others, that's one thing I can use to compensate for being powerless — I can acquire status," says Derek Rucker, associate marketing professor at Northwestern's Kellogg School of Management, and co-author of a study on powerlessness published in the Journal of Consumer Spending.

Study respondents were asked describe an occasion in writing when they felt powerful or powerless. Afterward, they took part in an online auction featuring high-status goods such as a fur coat and a silk tie along with more ordinary items. "For products with low or no association with status, there was no difference in the reservation price for those who had power or those with no power," says Rucker. "But for products associated with status, those who recalled they didn't have power indicated they were willing to pay more for them."

Conscientiousness

Psychologists look at certain personality traits that are relatively stable patterns of thinking, feeling, and acting. Sometimes called the "Big Five," they include extroversion, agreeableness, openness, conscientiousness, and neuroticism (or its opposite, emotional stability).

Of the five families of personality traits, conscientiousness and emotional stability are most closely linked with economic success, according to research by Angela Lee Duckworth of the University of Pennsylvania and David Weir of the University of Michigan. More conscientious (i.e., industrious, dependable, organized) and emotionally stable (i.e., less neurotic) had higher lifetime earnings, the researchers found.

So being diligent and organized doesn't only get you high grades in school — these traits also impact your long-term financial standing. Which traits and behaviors have helped you build wealth?

Laura is author of the book "Money & Happiness" and blog of the same name.

Sunday, 16 January 2011

The 5 Dumbest Things on Wall Street: Jan 14

5. Goldman's Recommitment Ceremony

So long Goldman Sachs, the inscrutable, all-powerful money-making machine. Hello Goldman Sachs, re-committed to being an all-powerful money-making machine.

Goldman dumped a 60-something page report on the public on Tuesday after an extensive review of the company was carried out by something it calls its "Business Standards Committee." This is a newish committee made up mainly of Goldman Sachs executives, plus one or two people intended to add outside perspective, such as Wal-Mart Chairman Lee Scott.

The choice of Scott has a certain poetry to it. It's as if Goldman, not knowing or trusting any ordinary people it could consult with to see how its behavior affects them, figured it would talk to someone who got very rich by understanding how to sell stuff to ordinary people.

But Scott only knows one way to sell stuff to ordinary people -- make it really cheap. Goldman apparently took that advice to heart when writing up its report. It's filled with cheap phrases like "the firm's culture has been the cornerstone of our performance for decades," and "the Committee believes all financial institutions, including Goldman Sachs, bear responsibility for constantly improving practices and procedures relating to the marketing and distribution of structured products." How bold.

Like many Goldman documents, the report veers from emptiness into absurdity. Take the list of abbreviations. Among TheStreet's favorites are EMD for Extended Managing Director and TCM, for Transaction Class Matrix.

And the report would not be complete without a flash of the trademark Goldman arrogance.

"We believe the recommendations contained in this report represent a fundamental re-commitment by Goldman Sachs: a re-commitment to our clients and the primacy of their interests; a re-commitment to reputational excellence associated with everything the firm does; a re-commitment to transparency of our business performance and risk management practices; a re-commitment to strong, accountable processes that reemphasize the importance of appropriate behavior and doing the right thing; and a re-commitment to making the firm a better institution."

In other words: We took a look at what we were doing. Ah, that was refreshing. Now let's go do it some more.

TheStreet Says: 60+ pages of "re-commitment" to assure customers you'll get serious about everything you do? Forgive us if we're not reassured. 4. 50 Cent's Penny Pump

The curious case of rapper 50 Cent using his Twitter account to endorse a stock in which he has a large investment could represent an evolutionary step in the blurring of the lines between celebrity endorsement and questionable stock advice.

While we don't know of any Securities and Exchange Commission cases revolving around Tweets, that day may not be far off. Maybe the SEC can announce the case against 50 Cent through its own Twitter feed, which would be a nice touch.

It's a tangled web that celebrities are weaving when it comes to stock picking, and in the least it's dangerous terrain, especially based on the fact that 50 Cent's name has a higher monetary value than the stock he was recommending as a great investment.

Much more value, actually. Before 50 Cent's Twitter recommendation sent shares of H&H Imports up near 300%, shares of the penny stock were trading at the lowest share price in their history. In a numerical irony, H&H's highest stock value occurred in June 2010, when it was trading at, yes, exactly the mark of 50 cents.

50 Cent and his lawyers are clearly concerned. 50 Cent's first Twitter post about H&H stated, "HNHI is the stock symbol for TVG there launching 15 different products. They are no joke get in now."

H&H makes a 50 Cent-endorsed line of headphones -- and when we say "makes" it's in the loosest sense of the term since H&H only has a headphone prototype, and at the recent Consumer Electronics Show in Vegas 50 Cent only had a picture of the prototype to show. Heck, even Lady Gaga was getting in on the action at CES, putting in an appearance on CNBC as well to talk up her Polaroid-branded products with Maria Bartiromo.

Once the mainstream press picked up on 50 Cent Securities, LLC's Twitter recommendations, the rapper dramatically altered his flow, going from spittin' hot fire about H&H to taking a page from an E.F. Hutton ad, Tweeting "HNHI is the right investment for me it may or may not be right for you! Do ur homework." Then reminding them that "I own HNHI stock thoughts on it are my opinion. Talk to financial advisor about it."

50 Cent owns 7.5 million shares of the company and the warrants on an additional 22.5 million shares for which he paid a total of $750,000, or 10 cents a share. Last Friday, right before 50 Cent began tweeting about H&H, shares doubled to 10 cents. By Monday, shares soared to 45 cents after the 50 Cent call -- a paper gain of $5.2 million. By the end of trading Thursday, H&H shares were back at 27 cents.

Once the media picked up on the potential "pump and dump" controversy, a 50 Cent spokesman pointed out that the rapper's shares were restricted, meaning that they could not be immediately sold as the share price jumped. Still, there were certainly some savvy investors who won on the churn.

TheStreet Says: We can see the new CNBC lineup now -- Lady Gaga replaces Erin Burnett while 50 takes over for Bartiromo. 3. Bill Gross Bugs Out

Bill Gross, founder and co-chief investment officer of Pacific Investment Management Co., dug deep into his literary tool belt for his latest investment outlook that was posted on the company's Web site last week.

"We are all ... mantises eating and being eaten, mindlessly thrusting and flailing about in activity that would make little sense to a visitor from another space-time."

From there it's on to references to Ahab, Buddha, the Dali Lama and so on and so on. But mantises are the key, make no mistake. We are all mantises of one sex or another.

Now, we have to admit, this caught our attention last week and, in hindsight, should have been a shoe-in for this column. Other dumbness, however, took precedent. It's an unfortunate reality of the gig.

Thankfully, Gross wasn't done this week patting himself on the back for his brilliant bon mots. He just can't let go of the mantis. That, and did you catch that he's read a lot of books? He's a worldly guy, OK.

"I used the praying mantis metaphor in my recent investment outlook pointing out that there are consequences for mindless political thrusting and Washington spending policies. We as Americans eventually lose our heads the way a male mantis does in the process of reproduction," said Gross during an interview with Bloomberg. "The point is the current and future generations of American mantises, male or female, will pay for this in terms of a price."

Bill, we get it. We got it last week. You see irrational, irresponsible behavior going on. Why it had to be sexually-tinged irrational and irresponsible behavior is beyond us, but, you know, your call. Now, can you please never mention this again, or at least find a way to do so that makes you sound less like a tittering 13-year old with few friends and a penchant for burning ants with a magnifying glass?

TheStreet Says: Any reason you couldn't have gone with lemmings? 2. Sears Signs On the Kardashians

Sears is looking to capture some of that Kardashian magic.

The long-suffering and almost irrelevant retailer sparked some buzz this week with the announcement that the Kardashian Kollection will be hitting store shelves at 400 stores in August. We can only assume this is phase two in the Kardashian sisters outreach program to the lower-income consumer, the first being their incredibly successful dive into the fee-laden prepaid credit card market that they had to back out of last month.

And when we think Kardashian, we immediately think of Sears. The collection, sorry, "Kollection," reportedly will consist of 60 pieces of jewelry, 30 bags, a dozen shoes and 40 apparel items. It's a natural synergy and we're sure the "Kollection" will look great right next to the Land's End merchandise.

"The exciting new collection will embrace Kim's glamorous red carpet looks, Kourtney's more Bohemian chic vibe and Khloe's rocker style," read Sears' announcement of the new line. "From timely pieces to fashionably tailored looks, the collection will appeal to all women who love fashion."

Sears has a great track record of pairing celebrities and its special brand of fashion. LL Cool J launched a line with the retailer in 2008 that sold so well that in 2009 LL Cool J himself had to come out and reassure people that the line was selling just fine and that there was no problem with his relationship with Sears.

And things are on the rise at Sears. This week the retailer reported that same-store sales were down 6% domestically in December and were down 3.8% for the year to date.

Unfortunately for Sears, the Kardashian Kollection announcement came out the same week that Advertising Age published the results of a study showing the ineffectiveness of celebrity endorsements. According to AdAge, the majority of television ads featuring celebrities in 2010 underperformed for brands, with less than 12% of the ads resulting in a greater than 10% lift for a brand. Granted, the study dealt explicitly with celebrity television spots and not c-list celebrity clothing lines, so we're sure the Kardashian's will fare better than Tiger Woods or Lance Armstrong or any other people with actual accomplishments under their belts.

TheStreet Says: Things must be bad when you turn to the Kardashian's as the first step in the road back to relevance.

1. Tostitos' Inside Man

Sports commentator, and we use the term commentator loosely here, Brent Musburger knows on which side his tortilla chip is salsa-ed.

The sports blogosphere was abuzz with accusations Tuesday that Musburger and Disney-owned ESPN cashed in for Tostitos chips before the game-winning field goal on the last play of the Tostitos BCS National Championship Game between Auburn and Oregon.

Musburger, calling the game Monday night for ESPN, said before the 19-yard-field goal by Auburn kicker Wes Byrum that gave No. 1 Auburn a 22-19 victory:

"This is for all the Tostitos."

Man that's catchy. It just rolls off the tongue, doesn't it? And who would call out Musburger for attempting a blatant and incredibly awkward product placement for those footing the bill for such a spectacle? Turns out, pretty much everyone.

Darren Rovell, CNBC sports business writer, had Tweeted that the product mention was worth $2.5 million. He then dutifully followed up with a Tweet from a spokesperson for Tostitos maker Frito-Lay, a unit of Pepsico , saying that the company did not pay for the one-liner. ESPN said it had nothing to do with it either.

Sadly, this wasn't even close to the first time Musburger has trotted out this clunky, wannabe catch phrase. It turns out that Musburger had used the same line in 2002 when Ohio State beat Michigan and would go on to play in the, why of course, Tostitos Fiesta Bowl national championship game against Miami.

TheStreet Says:Hard to beat Chris Berman's "back, back, back, back ..." home run calls, but Musburger gets added failure points for embedding corporate shilling into a signature phrase.

How to Keep Cash Coming in Retirement

Glenn Ruffenach

Chances are good you have a large-cap fund as part of your nest egg -- say, one based on the S&P 500. So, two quick questions: First, what direction has that fund been going in the past few months? (Up? Down? Sideways?) Second, what's the yield on the S&P 500? The fact that many investors can answer the first question -- and are clueless about the second -- reveals what's wrong with retirement finances today.

In short, we focus most of our attention on price movement or capital gains at the expense of income. That's no surprise. The bull markets of the past three decades, with gains of 30 percent or more in a single year, made us "greedy," says Jack Gardner, president of Thornburg Securities in Santa Fe, N.M. "We became so tilted toward growth that the whole discussion of income has virtually disappeared."

Well, let's talk. Recent history has taught us that we can go a decade or more without capital gains. That's less of a problem during our working years, when we're drawing a salary and don't need to sell off bits of our nest egg to pay the mortgage. But once we start living off our portfolios, depending on capital gains and liquidating assets to meet expenses is a game of luck. If you happen to retire at the start of a nice, long bull market, you win; your savings likely will grow and last as long as you do. If you retire at the onset of a nasty bear market, you lose. Unless you enjoy the thought of moving in with your kids.

Income, then, should be Plan A in retirement, and capital gains, if they happen to come your way, a backup. The challenge, of course, is to pick the right investments to generate that income. Annuities? Dividend-paying stocks and equity funds? Bonds and bond funds? Preferred stocks? Master limited partnerships? Rental property? Ultimately, there are two deciding factors: stability (what won't fall apart in down markets) and growth (what will keep up with and outpace inflation).

A good litmus test comes from Charles Farrell, a principal with Northstar Investment Advisors in Denver, whose investment strategy starts with an asset allocation of about 45 percent equities and 55 percent fixed income. The latter, a mix of corporate debt, Treasury bonds and agency bonds, provides a healthy dose of defense against another crash, he says. On the equities side, he aims for roughly four dozen dividend-paying stocks, domestic and international, in 10 sectors, including energy, health care and consumer staples. When sizing up prospects, Farrell and his partners look first for a current "meaningful" yield and second for a company's ability to increase its dividend faster than the rate of inflation. An index he developed (which can be found at www.northstarinvest.com/fnri) offers some specifics: The companies it holds -- Coca-Cola, General Mills, Intel and Wal-Mart, among others -- feature an average dividend yield of 3.5 percent and a five-year historical dividend growth rate of about 11 percent.

Such a combination delivers both stable income (bond interest) and growing income (stock dividends). There's also the bonus of principal protection -- again, from the bonds -- and the potential for capital gains from the equities. For most investors, these building blocks should look familiar: a relatively conservative asset allocation, diversified holdings and a buy-and-hold approach. The objective isn't price appreciation but generating steady cash.

Don't like the idea of individual stocks? Try mutual funds or exchange-traded funds that focus on dividends. Vanguard's Dividend Appreciation ETF tracks the Mergent Dividend Achievers Select index, some 140 firms that have increased dividends in each of the past 10 years. Want more security? Stephen Horan, head of private wealth at the CFA Institute, a nonprofit group of investment professionals, likes longevity insurance, an income annuity that kicks in with regular payments at, say, age 85: "It helps manage the biggest risk facing most retirees -- outliving your assets."

The larger point is this: The rapidly growing number of income products (there are now 116 fixed-income ETFs alone, double the number from just two years ago, according to Morningstar) gives you the opportunity to make cash flow from your nest egg. And given that most Americans haven't saved enough money for retirement, says Drew Denning, vice president of retiree services at The Principal Financial Group, "you have to look at every product that can help maximize income."

Of course, investing for income carries risks. Dividends can be slashed (think BP). Bonds are vulnerable to rising interest rates. Annuities typically require ceding control of a chunk of your savings. And rental property...well, we won't get into leaky toilets. What's more, if equity markets take off again, the income crowd, with its modest yields of 3 and 4 percent (however steady), will have to sit quietly, hands folded, while everyone else at the party is dancing to double-digit returns.

On the plus side -- and this is a big plus -- investing for income offers a measure of predictability. If markets and prices are random, why gamble on price appreciation? A diversified basket of income-producing securities -- bonds, dividend-paying stocks, annuities, even CDs -- is simply a higher-probability way of investing. You get a much better sense of what the downside exposure is, what the upside capacity is and what your income flow will be.

And the earlier you can start -- say, 10 years before retiring -- the better. Consider, for instance, the compounding effects of dividend growth, says Farrell. If the yield on your stocks was 3 percent at age 55, and if the dividends grew by 6 percent a year for 10 years, then your "yield on cost" (one of the most important but least understood metrics in investing) would be 5.37 percent by age 65.

If all this sounds like the thinking 50 years ago behind widow-and-orphan stocks -- producing a dependable paycheck each and every month -- you're right. And today in particular, "dependable" looks pretty good. "I remember my grandparents sitting around the table, talking about living on dividend income," says Thornburg's Gardner. "That was old-school. There's still a place for it."

Friday, 14 January 2011

What Investors Really Want

by Laura Rowley

Must investors be rational to be successful?

This question constitutes the underlying tension between classical economics and behavioral finance. The classical model assumes that what people want from their investments is the highest return relative to risk. Behavioral economists say people act stupidly in how they pursue that goal.

Meir Statman, a finance professor at the Leavey School of Business at Santa Clara University, is calling for a diplomatic truce. In his new book, "What Investors Really Want," Statman argues we don't necessarily have to be rational to be good investors. We just have to be smart.

The financial crisis spotlighted extremes in investor irrationality, and since then we've lost sight of "the normal people in the middle — and of course normal people is who we pretty much all are," Statman says. "We all do stupid things. What we need to do is increase the ratio of smart to stupid behavior and know we are not going to be computers. Investors need to have the introspection to figure out what they really want."

So how should "normal people" approach investing? Start by acknowledging what you actually want your finances to do: What is the money for? What goals are you trying to reach, both practically and philosophically? Statman taps a mountain of statistical data and dozens of compelling anecdotes to identify what investors want: to support our families, educate our kids, stay true to our values. (He includes a moving 12th century letter written by a father to his son that demonstrates the timelessness of these desires.) We want fairness, good advice and protection from fraud. We want the utilitarian benefit of growing our money without inordinate risk.

But at the same time, we want our money to say something to others about our values, tastes and status. One investor may choose a socially responsible mutual fund to signal to himself his conscientiousness; another may discuss his hedge fund investments to demonstrate his status (regardless of the fact that most hedge funds, after fees, don't surpass the returns of index funds).

And that's OK, Statman argues — just be honest about your motivation. "For me, index funds work — but for me, a Honda Accord also works, in the sense that I have a good car at a good price, and index funds have good returns relative to risk," he says. "But I would not fault someone who buys an Acura because he wants more prestige, or a sports car because he likes driving it."

So even if the historical data favors index funds or buy-and-hold strategies, trade stocks if you get pleasure from it, Statman says. Just be smart: If you're going to play the market, set aside a small amount of money for that purpose rather than the entire retirement account.

In addition, Statman explains the common cognitive errors that investors make, material that's been well-covered in other behavioral finance books. Mistakes include confirmation errors, when we search for evidence that confirms our intuition, beliefs and hypotheses, but overlook evidence that refutes them; hindsight errors, "the belief that whatever happened was bound to happen, as if uncertainty and chance were banished from the world"; and framing errors, when we make mistakes because of the way we choose to describe a scenario or decision.

For instance, people who play the market may see themselves as playing tennis against a wall when they should see it as potentially playing against Venus Williams. After all, Goldman Sachs or Warren Buffett may be on the other side of your trade.

Investors can overcome these unrealistic notions with a little honesty. "If you tell yourself you are a genius at picking stocks, get someone to audit your portfolio — and tell you whether you're just counting winners and failing to count losers," Statman advises.

I found the book reassuring; I rarely hear economists or planners admit that financial planning must be done in a giant informational vacuum. For instance, he writes about "the Number" — the amount of money we think we need to retire. Surveys have found two-thirds of people think about the Number at least sometimes, and almost half say that calculating the number is difficult and we don't know where to start.

The real stunner in the survey is not that almost half of us think that calculating the Number is difficult, but that more than half think that it's easy. "Calculating the Number is almost hopelessly difficult... not only because it requires so much information, but also because much of that information is uncertain," including the future return on savings and the rate of inflation, Statman says.

I have the same foggy feeling trying to ballpark college savings, especially when the cost of tuition has outpaced everything else in the U.S. economy except for health care. "We come to think about money in a mechanical fashion — what is the number?" Statman says. "And then we realize that life has those zigs and zags, and the biggest risk we face is not that our kid won't be bright enough to go to college or we can't afford it, but God forbid there is a sudden illness or accident — those things that are part of the human condition."

Statman says reflecting on personal experience helps him keep perspective on unpleasant financial surprises. "My parents are survivors of the Holocaust. When you think about black swans, you tell me, what do I do as a teenager when the Nazis are invading Poland? Tell me which market I can hedge?" he says. "The market we can hedge is the market of resilience. So I made a promise to myself always to remember that. If my parents made it through Siberia and Uzbekistan, and had me in refugee camp in Germany, and still managed to raise a family, it really is ungrateful to whine over the loss of a chunk of my portfolio."

What Investors Really Want

by Laura Rowley

Must investors be rational to be successful?

This question constitutes the underlying tension between classical economics and behavioral finance. The classical model assumes that what people want from their investments is the highest return relative to risk. Behavioral economists say people act stupidly in how they pursue that goal.

Meir Statman, a finance professor at the Leavey School of Business at Santa Clara University, is calling for a diplomatic truce. In his new book, "What Investors Really Want," Statman argues we don't necessarily have to be rational to be good investors. We just have to be smart.

The financial crisis spotlighted extremes in investor irrationality, and since then we've lost sight of "the normal people in the middle — and of course normal people is who we pretty much all are," Statman says. "We all do stupid things. What we need to do is increase the ratio of smart to stupid behavior and know we are not going to be computers. Investors need to have the introspection to figure out what they really want."

So how should "normal people" approach investing? Start by acknowledging what you actually want your finances to do: What is the money for? What goals are you trying to reach, both practically and philosophically? Statman taps a mountain of statistical data and dozens of compelling anecdotes to identify what investors want: to support our families, educate our kids, stay true to our values. (He includes a moving 12th century letter written by a father to his son that demonstrates the timelessness of these desires.) We want fairness, good advice and protection from fraud. We want the utilitarian benefit of growing our money without inordinate risk.

But at the same time, we want our money to say something to others about our values, tastes and status. One investor may choose a socially responsible mutual fund to signal to himself his conscientiousness; another may discuss his hedge fund investments to demonstrate his status (regardless of the fact that most hedge funds, after fees, don't surpass the returns of index funds).

And that's OK, Statman argues — just be honest about your motivation. "For me, index funds work — but for me, a Honda Accord also works, in the sense that I have a good car at a good price, and index funds have good returns relative to risk," he says. "But I would not fault someone who buys an Acura because he wants more prestige, or a sports car because he likes driving it."

So even if the historical data favors index funds or buy-and-hold strategies, trade stocks if you get pleasure from it, Statman says. Just be smart: If you're going to play the market, set aside a small amount of money for that purpose rather than the entire retirement account.

In addition, Statman explains the common cognitive errors that investors make, material that's been well-covered in other behavioral finance books. Mistakes include confirmation errors, when we search for evidence that confirms our intuition, beliefs and hypotheses, but overlook evidence that refutes them; hindsight errors, "the belief that whatever happened was bound to happen, as if uncertainty and chance were banished from the world"; and framing errors, when we make mistakes because of the way we choose to describe a scenario or decision.

For instance, people who play the market may see themselves as playing tennis against a wall when they should see it as potentially playing against Venus Williams. After all, Goldman Sachs or Warren Buffett may be on the other side of your trade.

Investors can overcome these unrealistic notions with a little honesty. "If you tell yourself you are a genius at picking stocks, get someone to audit your portfolio — and tell you whether you're just counting winners and failing to count losers," Statman advises.

I found the book reassuring; I rarely hear economists or planners admit that financial planning must be done in a giant informational vacuum. For instance, he writes about "the Number" — the amount of money we think we need to retire. Surveys have found two-thirds of people think about the Number at least sometimes, and almost half say that calculating the number is difficult and we don't know where to start.

The real stunner in the survey is not that almost half of us think that calculating the Number is difficult, but that more than half think that it's easy. "Calculating the Number is almost hopelessly difficult... not only because it requires so much information, but also because much of that information is uncertain," including the future return on savings and the rate of inflation, Statman says.

I have the same foggy feeling trying to ballpark college savings, especially when the cost of tuition has outpaced everything else in the U.S. economy except for health care. "We come to think about money in a mechanical fashion — what is the number?" Statman says. "And then we realize that life has those zigs and zags, and the biggest risk we face is not that our kid won't be bright enough to go to college or we can't afford it, but God forbid there is a sudden illness or accident — those things that are part of the human condition."

Statman says reflecting on personal experience helps him keep perspective on unpleasant financial surprises. "My parents are survivors of the Holocaust. When you think about black swans, you tell me, what do I do as a teenager when the Nazis are invading Poland? Tell me which market I can hedge?" he says. "The market we can hedge is the market of resilience. So I made a promise to myself always to remember that. If my parents made it through Siberia and Uzbekistan, and had me in refugee camp in Germany, and still managed to raise a family, it really is ungrateful to whine over the loss of a chunk of my portfolio."

Wednesday, 12 January 2011

Goldman vows to boost disclosure, avoid conflicts

By Dan Wilchins

NEW YORK (Reuters) - Goldman Sachs Group Inc, responding to pressure from shareholders, regulators and clients, said it will disclose more information about how it makes money, bolster internal compliance and seek to avoid conflicts of interest.

The investment bank released a 63-page report on Tuesday that details 39 plans for how it will change after years of investor accusations that its financial statements are opaque and client complaints about conflicts of interest.

The internal review was kicked off after Goldman was accused by U.S. securities regulators of creating and selling collateralized debt obligations linked to subprime mortgages without telling investors that hedge fund Paulson & Co had helped choose and bet against the debt.

Goldman agreed in July to pay $550 million to settle the lawsuit brought by the U.S. Securities and Exchange Commission, one of the biggest arising from the U.S. housing and credit crises.

The report also follows the passage of a sweeping financial regulatory reform bill last summer that, in part, sought to restrict big Wall Street firms' ability to make bets with their own capital.

"Goldman is going down the road of trying to repair its image," said Alan Villalon, an analyst at Nuveen Asset Management, in Minneapolis. "This is a step in the right direction, but it's only a step. What investors really want to know now is, what is the true earnings power of this company going forward."

Goldman shares edged higher in early trading, gaining 0.7 percent to $170.89. The shares have gradually recovered from a steep drop that followed the disclosure of the SEC suit last April, rising about 6 percent.

Goldman said it would start reporting more details about whether trading revenue comes from facilitating client transactions or from investing on its own behalf.

It also said it would set up a new committee to ensure that clients are being treated fairly.

The report focuses mainly on disclosure and oversight, and makes few recommendations for how Goldman will change the way it does business day to day.

Michael Holland, who oversees $4 billion of assets as chairman of Holland & Co, called the changes "yet one more smart move in a series of things they've done to repair the damage" to their reputation during and after the financial crisis.

Holland said the decision would help -- but was not limited too -- Goldman's public reputation.

"There's a very good and strong PR aspect to this. But also, when it comes to their relationship with the regulators, they probably are doing a smart thing," said Holland, who oversees holdings including bank shares, but not Goldman shares.

(Additional reporting by Maria Aspan; editing by John Wallace)

Tuesday, 11 January 2011

7 Ways to Make Extra Money in 2011

by Kimberly Palmer

Job security might be out, but freelance, contract, and temporary work is in, which makes it easier than ever to moonlight as a graphic designer while you spend your days as a public relations rep. Slimmer staffs mean companies often need the extra help, and new websites offer free tools that match potential employers with workers. And earning extra money beyond your steady paycheck, if you're lucky enough to have one, can provide a big boost to your financial security.

Here are seven ways to make extra money off the new economy in 2011:

Launch a Brand
When Kimberly Seals-Allers, former senior editor at Essence magazine, was expecting her first child, she discovered that black women face higher risks during childbirth and pregnancy. "I realized we were a special group, and I wanted to write a book about everything in black women's lives. Not just pregnancy, but money, men, and myths in our community. [I wanted] to create a new way forward."

Her first book, "The Mocha Manual to a Fabulous Pregnancy," turned into a series as well as an online magazine, maternity line, and consultancy. Seals-Allers also licensed use of the Mocha Manual name to create an instructional DVD sold at Walmart and supermarkets.

Start a Blog
The anonymous blogger behind Lazy Man and Money defies his site's name. He works about 14 hours a day on weekdays and then puts in nine hours on Saturday and Sunday. But his hard work is paying off -- his blog earns him enough to support his lifestyle; back in 2008, he estimated his annual earnings at around $30,000. But it's tough for part-time bloggers with full-time jobs to keep up with all the demands of a lucrative blog. "There's simply a lot more [to do] than what the average reader sees," he says.

Even if the blog itself doesn't generate a six-figure salary, it can lead to other money-making opportunities, such as consulting or speaking gigs. Silicon Valley Blogger at The Digerati Life has carved out a successful niche as the expert on personal finance and technology in Silicon Valley. While she says she didn't earn much during the first six months of her blog's life, she received her first $100 check from Google AdSense shortly after that point, when she was getting around 600 unique visitors a day. She now earns money from her blog-related consulting, as well.

Sell Your Skills
Whether your expertise lies in social networking, editing, or web development, several new websites can help you find potential clients willing to pay you for your work. Elance.com, Odesk.com, and Guru.com make it easy to advertise your skills and find work, which you can do from the comfort of your home at all hours of the night. To get started, explore the websites to see what might be a good fit. You can also stick with a more traditional approach and use Craigslist.org, which allows users to post advertising for their services, ranging from household labor to music lessons.

Sell a Wacky Service
For those interested in a more unusual approach, the innovative website fiverr.com allows users to sell (and buy) services for $5. Current offerings include sketching a stylized portrait, writing a name on a grain of rice, and digitally restoring a photograph. It's one of the trendiest ways to make a quick buck for the internet-savvy; dozens of videos, websites, and blogs offer advice on how best to earn money off the site. The best advice? Since you're only going to make $5 a pop, sell a service that you can do easily and quickly.

Talk and Teach
Colleges, organizations, and companies are constantly on the lookout for new experts that can inspire an audience. If you've built up an expertise on a subject, perhaps through your blog, then consider branching out with some speaking gigs. Offer to talk for free at first to build up your reputation, and then a speakers' bureau can help connect you to paying gigs (for a cut of your fee).

Design T-Shirts
Companies such as CafePress.com allow people to design and sell their T-shirts for a cut of the profits. According to the company's website, some users earn over $100,000 a year. But it's not always easy: Jen Goode, who earns enough through CafePress to pay her mortgage each month, found success after a year and a half of long, sometimes 16-hour days. Her time is spent creating designs and then uploading them. She has uploaded about 2,500 designs, many of which are cartoon oriented, including the popular penguin series. For her, she says, the secret has been to make many different images that are steady sellers, as opposed to creating one or two megahits. Now, she says she doesn't need to put as much time into her shop because she has such a large inventory of designs.

Sell Other People's Products
Make-up companies such as Avon and Mary Kay are always looking for new sales representatives, as are other companies such as kitchen products seller Pampered Chef. "If you don't have to make a big investment to get into it, it's probably not a bad idea," says Marcia Brixey, author of "The Money Therapist." But she warns people to stay away from businesses that require sellers to make significant up-front purchases that they might not be able to unload.

The bottom line: The new economy offers plenty of creative ways to earn extra money; to find the best fit for you, consider your skills, lifestyle, and ambitions.

Wednesday, 5 January 2011

Slow and Steady Saving Still Pays

by Tom Lauricella

The path toward having enough money to enjoy a comfortable retirement is a long one. And as the recent decade in the U.S. stock market shows, it's one where patience pays off.

For younger retirement savers who diligently put money away, that long march of time also provides a crucial ally: the ability to recover from inevitable losses. That's especially the case for 401(k) investors who don't pass up the essentially free money that comes by taking full advantage of any matching contributions provided by their employers.

There's no reason to sugar-coat the miserable experience most stock investors have had since the collapse of the technology-stock bubble beginning in March 2000. The Standard & Poor's 500-stock index, the most commonly used market barometer, has risen an average of just 1.4% per year over the past 10 years, a 3.6% gain once dividends are included.

It was only last month that the Dow Jones Industrial Average pushed above where it stood in mid-September 2008 when giant brokerage house Lehman Brothers collapsed.

But let's look at how steady savings and the passage of time can benefit younger 401(k) investors. Consider a person making $40,000 per year in 2000 who contributed 6% of her salary — $200 per month — in the first year with a company match of 3%, or $100 to start.

Beginning back in January 2000, that money goes into the Vanguard 500 Index mutual fund, which tracks the S&P 500.

Over time that person gets a 3% raise per year, with her contributions rising accordingly. That would mean in the second year, the investor contributes $206 per month out of her pocket and gets an additional $103 put in the account by the employer.

When it comes to timing, starting off as an investor in January 2000 would have been especially dispiriting. Within three months, stocks entered a bear market that would last nearly three years.

By March 2001, that investor and her employer would have made contributions of $4,527 but would have had only $3,833 in her account — more than a 15% loss — thanks to the stock market's decline, according to data compiled by Financial Engines.

But an investor sticking with the program would have seen her fortunes rebound nicely. By June 2007, our investor opening her 401(k) statement would have had $40,736 in her account, of which only $19,866 was her contributions. Some $10,000 would have been company contributions, and returns on the investment would have approached 37%, according to Financial Engines.

Of course, the roller coaster dipped again with the financial crisis, wiping out those gains and more. At the end of February 2009, the account would have been down to $25,449, a loss of nearly 32%.

Fast forward to today, however, and the numbers are once again looking better. As of the end of November 2010, there would be almost $52,000 in that account, with just $30,470 of that money coming from the saver's own pocket. The rest would have come from the company match and a nearly 14% gain in the S&P 500 fund from January 2000.

Skeptics would point out that there would have been a lot more money in that account if the investor has pulled out of stocks before the late-2008 market collapse or even invested entirely in bonds. The most widely used benchmark for the bond market, the Barclays Aggregate, is up 95% in the past 11 years.

While it's true both would have been good strategies, it's hard enough for professional investors to time the markets' ups and downs, never mind individual investors.

And as for bonds, there's basically nowhere for interest rates to go but up; because bond prices move in the opposite direction from rates, the result could end up being losses on bond investments, as seen in the last month in 2010.

For younger retirement investors, the long-run part of the equation is what matters. Despite the stomach-churning ups and downs of the stock market during the past decade, an investor who started with $300 in an account 11 years ago, and who has nearly $52,000 socked away today, is much further down the path toward a comfortable retirement.

Tuesday, 4 January 2011

Happy New Year to all my readers!! Wishing you success and good health ahead! :)

2011: A hiring boom, even at 9% unemployment

After three years of economic pain, a growing number of economists think 2011 will finally bring what everyone's been hoping for: More jobs and a self-sustaining recovery.

"We're looking at some leading indicators on employment, and they're all flashing green lights," said Bernard Baumohl of the Economic Outlook Group, a Princeton, N.J. research firm.

Though most economists still expect a painfully high unemployment rate of about 9% at the end of this year, some think that stat masks more important signs of strength.

Economists surveyed by CNNMoney are forecasting an average of 2.5 million jobs added to the U.S. economy this year, which would be the best one-year gain in hiring since the white-hot labor market of 1999.

Of the dozen economists who responded, several of the more bullish are predicting more than 3 million jobs added -- about 250,000 jobs a month. Even the most pessimistic of those surveyed, David Wyss of Standard & Poor's, expects 1.8 million jobs to be added this year, roughly double the pace of hiring in 2010.

That wouldn't be enough to climb out of the 8-million job crater created by the Great Recession and won't bring down the unemployment rate by a significant amount. An improved job market could even bring a short-term rise in the jobless rate, as those discouraged from job hunting resume looking for work and are once again counted as unemployed.

But the forecasted hiring boom could get the economy back into gear and provide real relief for many Americans.

Those projecting better hiring in 2011 point to a number of factors. Among them, job openings by employers rose 17% from June to October of last year, the most recent reading available from the Labor Department, and are up by about a third compared to a year earlier.

And there has been a downward trend in newly laid-off workers filing for initial jobless claims, which fell below 400,000 in the most recent reading for the first time since the summer of 2008. That might have been distorted by the holiday season and bad weather, but the four-week average is also at a two-plus year low.

On the business front, capital expenditures -- typically followed by expansion and hiring -- have been on the rise.

"Forecasters generally underestimate the strength of a recovery once it is underway," said Bill Cheney, chief economist for Manulife Asset Management. He's forecasting 2.5 million to 3 million new jobs this year.

"Once things get moving, they feed on themselves," he said. "There is so much pent-up demand. People have been frugal for three years. There will be a lot of new cars, a lot of new furniture, a lot of people moving out of their parents' basement."

A rebound in the creation of new jobs has the potential to help both the still struggling housing market and the economy as a whole. Many recent college grads or those who lost their homes or jobs have been stuck living with friends or family members. As they find work and move back out on their own, they'll have to spend.

About 3 million fewer jobs were added over the course of the past three years compared to the annual average of first eight years of the last decade.

"Jobs feed income and income feeds more consumer spending. Consumer spending hasn't come back in a meaningful way compared to other recoveries," said Brett Ryan, economist with Deutsche Bank. His firm forecasts consumer spending will finish 2010 up between 1.4% to 1.7% when the final numbers are in, but that will jump to more than 3% growth next year.

Baumohl says another non-traditional employment indicator, the number of day-care workers, has been edging up for four months and is now about 2% higher than a year ago. "People need more day care when they've got jobs to go to," he said.

Sure, Stocks Are Rallying, But Are Investors Too Bullish?

The stock market's path to prosperous times ahead is unlikely to be smooth, with increasing volatility along the way and hazards both domestic and foreign.

While the new year begins with most strategists expecting big things, a recurring theme is that investor complacency is nearing an end.

The market's main fear gauge, the CBOE Volatility Index (Market Data Express: VIX), is just above its holiday season lows and around a level last seen in April 2010, before sovereign debt concerns drove a summer-long slump in stocks.

Indeed, market pros have their eyes open for any number of obstacles that could make the journey higher a bumpy one.

"While stocks should be boosted by good economic news flow, a variety of troubling factors...could all contribute to fairly uneven progress for the S&P 500 with a number of spikes and dips for investors to navigate," Tobias Levkovich, chief investment strategist at Citigroup, wrote in a research note for clients.

Among the most commonly mentioned hazards include European sovereign debt, concerns regarding overly accommodative Federal Reserve policy that may not last, as well as political instability that could come about should President Obama and the new Republican-controlled Congress start to clash.

But there are technical factors at play, also.

Technicians fear that such a low level of investor fear, as expressed through the VIX, is simply unsustainable and indicating that any type of shock at this point could send the market reeling.

"What we know is that when the VIX gets down to this level, it's a period of instability," Jim Strugger, derivatives strategist at MKM Partners, said in a recent CNBC interview. "What exactly triggers that shock could be almost anything."

A chart analysis shows the VIX is about three and a half years into a five-and-a-half-year cycle of high volatility. The recent dip in investors fear is merely a break in "another two years of the high-volatility remine," Strugger said.

As a matter of investment strategy, Strugger says investors should be looking at some of the other volatility instruments that offer longer-term protection against market shocks. Some include the iPath S&P 500 VIX Short-Term Futures (NYSEArca:VXX - News) and the same iPath Long-Term Futures (NYSEArca:VXZ - News) exchange-traded notes.

"I would be buying volatility down here given how cheap it is," said Dave Lutz, managing director of trading at Stifel Nicolaus in Baltimore. "That said I would probably be looking to hedge some of my equity positions through the options markets with earnings coming right around the corner."

Lutz sees health care as being an especially volatile sector and says he'll be watching the upcoming JPMorgan health care conference for clues about the industry's direction. Republicans have been rattling sabers about repealing the so-called ObamaCare nationalized health plan, and that could make industry stocks unstable.

Indeed, volatility will be about more than that which can be measured through the VIX, which by design is a fairly simple options buy that protects against movements in the market. However, the VIX usually has an inverse relationship with the market, meaning that when stocks are up the VIX is down.

But true volatility is a many-faceted phenomenon that poses a number of challenges for investors. By other more accessible measures, the market has been in a long-standing state of volatility that is likely to continue.

For instance, the S&P 500 (INDEX: .SPX) has risen or fallen by 2 percent or more in a single day an average of just five times a year since 1950. However, that has happened an average of more than 14 times a year in the last 10 years, and spiked at 54 times during 2009, according to Sam Stovall, chief equity strategist at Standard & Poor's.

Looking at the recent trends in when the market hits tops and bottoms, this one could have a ways to go before it reaches a bottoming point, based on volatility trends.

"So if history should repeat itself, and there's no guarantee it will, the S&P 500 may have to endure another dip deep into negative territory before the rolling 10-year performance finally bottoms during this secular bear market," Stovall wrote in a note to clients.

Citigroup is among the firms that also believe the market will finish 2011 higher but faces a treacherous path there. The firm has raised its full-year target for the S&P 500 to 1,400 and its Dow target to 13,150.

But Levkovich said he worries that too many investors are relying on historical trends, such as the market's usual outperformance during the third year of the presidential cycle, as reasons to believe the market has nowhere to go but up.

As such, he believes investors are going to have to be quick on their feet this year and willing to change positions to capitalize on market gains.

"[O]ne has to be careful in arguing a point using simple data that just supports a view without trying to disprove the idea with more intensive and insightful analysis," he wrote. "In this context, markets can move up another 10-12% in our view for 2011, but the trajectory is likely to be quite uneven with potentially sharp moves in either direction requiring a nimble trading orientation rather than an easy buy and hold strategy."

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