Showing posts from September, 2011

Three steps to avoid a global depression: Soros

LONDON (Reuters) - Policymakers have lost control of the economic crisis and financial markets are forcing the world into a depression, George Soros said on Friday, urging Europe to create a common Treasury, recapitalize its banks and protect vulnerable states.

Soros, chairman of Soros Fund Management who made a fortune during the 1992 sterling crisis, said the most important task was to "erect safeguards against contagion from a possible Greek default."

"Since a euro zone treaty establishing a common Treasury would take a long time to conclude, in the interim the member states have to appeal to the ECB (European Central Bank) to fill the vacuum," he wrote in an article for the Financial Times newspaper.

"Both the banks and bonds of countries such as Italy and Spain need to be protected ... To relieve the pressure on the government bonds of countries such as Italy, the ECB would lower its discount rate."

Soros said the ECB could then encourage countries to fi…

“It’s Going to Get a Lot Worse”: ECRI’s Achuthan Says New Recession Unavoidable

By Aaron Task

Weakness in leading economic indicators has become so pervasive the Economic Cycle Research Institute now predicts a new recession is unavoidable.

"The vicious cycle is starting where lower sales, lower production, lower employment and lower income [leads] back to lower sales," co-founder Lakshman Achuthan declares in the accompanying video.

Whereas Achuthan said the jury is still out in late August, the weakness in leading economic indicators — and ECRI uses a dozen for the U.S. alone, he notes — has become a "contagion" that is spreading like "wildfire."

Although the recovery has been "subpar" by nearly every measure, Achuthan refutes the idea the economy never got out of recession in the first place. "Just because it looks and feels a certain way doesn't mean it's a recession," he says. "You haven't seen anything yet. It's going to get a lot worse."

It's too soon to predict just how bad it'…

The Game Is Rigged: Jack Bogle

By Matt Nesto

Just as I was considering another attempt at hastening my journey to wealth via some form of speculation on stocks, a wise old sage came along and told me not to.

"The game is rigged," says Jack Bogle, the octogenarian founder of The Vanguard Group. "It is too convoluted. It is too complex. You shouldn't be playing the game. You don't need to play the game."

With his paternal loyalty intact, the man who created the first index fund 35 years ago is unbending in his belief that speculators lose, and owning the broader market for the long haul is the best path to wealth appreciation. Not surprisingly, the enormous popularity and diversity of offerings within the fast growing universe of exchange traded funds or ETFs, has failed to convert him.

"The index investor doesn't need to be touched by any of the lunacy that is going on in the ETF market,"says Bogle. "The ETF industry, which has got to be the greatest marketing idea of this …

Fund Goes Down Blind Alley

by Robin Sidel

Developer Set Up Vehicle to Invest in Banks but Couldn't 'Make the Numbers Work'

Real-estate developer Stephen Ross and his partners spent more than a year digging into U.S. banks, including more than 100 with loans to local bakeries, gas stations and amusement parks. They hoped to spend about $1.1 billion buying or investing in lenders.

But the deeper they went, the worse things looked. As a result, Related Cos., the New York firm in which Mr. Ross is chief executive, gave back the money it raised from roughly 150 investors, including hedge-fund manager David Einhorn. The firm did find several investments it was interested in but was outbid.

Just 18 months ago, Mr. Ross thought the U.S. banking industry was a lucrative investment opportunity that could yield big profits as the economy recovered. At the time, private-equity firms, hedge funds and other investors were pouring capital into banks.

Since then, signs of economic improvement have faded, leaving many of…

Double your salary in the middle of nowhere, North Dakota

By Blake Ellis

NEW YORK (CNNMoney) -- Believe it or not, a place exists where companies are hiring like crazy, and you can make $15 an hour serving tacos, $25 an hour waiting tables and $80,000 a year driving trucks.

You just have to move to North Dakota. Specifically, to one of the tiny towns surrounding the oil-rich Bakken formation, estimated to hold anywhere between 4 billion and 24 billion barrels of oil.

Oil companies have only recently discovered ways to tap this reserve. And along with the manpower needed to extract the oil, the town is now scrambling to find workers to support the new rush of labor.

Watford City is at the center of the Bakken formation. While it is home to less than 3,000 permanent residents, there are about 6,500 people there right now, as job hunters relocate to seek out high-paying jobs.

Aaron Pelton, the owner of Outlaws Bar & Grill in Watford, said his sales have been nearly doubling every year -- and it's only getting busier. Servers at his restauran…

'I can't flip this house'

By Les Christie

NEW YORK (CNNMoney) -- Buy a home on the cheap and flip it for big profits? That dream is all but dead.

Sales of homes to investors have dropped by more than half over the past five years.

Plus, the number of those investors who quickly sell off those homes -- the flippers -- has fallen even faster.

This July, investors flipped only 50% of their purchases, down from 75% a year earlier, according to Tom Popik, research director for Campbell Surveys, which tracks housing trends for major banks and government agencies. They held onto the rest to rent out.

David Hicks, president of HomeVestors, the "We Buy Ugly Homes" company, says his clients are now much more likely to buy rentals than to flip -- 57% more likely than two years ago, according to a recent survey the company conducted.
Affordable mansions for sale

In Phoenix, according to Tanya Marchiol of Team Investments, which buys homes for individual investors, "Everything is buy and hold -- I tell my clients …

Is Market Replaying Decade of the 1930s?

by Mark Hulbert

Commentary: March 2009 low might be analogous to July 1932's

Playing a script from the 1930s?

If we only could be so lucky ...

Some in the investment arena have been drawing analogies to the 1930s for several years now, of course. While such speculation died down somewhat when the market was behaving well in 2010 and early this year, it has returned with a gusto in recent weeks, owing to the stock market's extraordinary weakness — including another 3.5% decline on Thursday of this week alone for the Dow Jones Industrial Average (^DJI - News).

But drawing analogies is more of an art than a science, especially when you are picking and choosing from a decade like the 1930s. Contrary to the popular imagination, which regards that decade as one unremitting horror show, the 1930s actually contained one of U.S. history's most powerful bull markets.

So, depending on how you draw an analogy between today's market and the 1930s, you can paint either a very bullish or a…

How to Protect Young Investors From a Baby Boom Bust

Are Generation X and Generation Y investors ready for a baby boom beating?

As the first wave of that pig-in-a-python generation — the 79 million Americans born between 1946 and 1964 — move into retirement, experts warn a boomer stock sell-off could cause equity valuations to plummet, likely sending the portfolios of young investors into a tailspin.

"The peak of the valuation in U.S. equities was 10 years ago," says T. Doug Dale Jr., an adviser with Security Ballew Wealth Management in Jackson, Mississippi. "Valuation levels are coming down. You have a lot of baby boomers selling off assets as they need to liquidate for retirement and that will further exacerbate the decline in valuations."

Researchers from the San Francisco Federal Reserve recently said that demographics actually point to a bearish trend in stocks. Aging populations create headwinds in the market, they said after studying the link between demographics and asset prices.

The Fed researchers looked at the…

Be ready for downturn, World Bank tells developing nations

By Pascal Fletcher

WASHINGTON (Reuters) - Developing countries can prepare for the threat of a global recession by improving policies to generate growth and jobs, diversifying economies, bolstering their banking sectors and readying social safety nets, the World Bank's top economists said on Wednesday.

Bank chief economist and senior vice president Justin Yifu Lin told a round table in Washington that the sentiment in the international economic community had abruptly changed from a feeling of general confidence in global recovery six months ago to "alarming uncertainty" now facing policy-makers.

"We once again are seeing the financial markets in the world in turmoil," Lin said, adding that the creditworthiness of several countries "on both sides of the Atlantic" was now in question, fuelling the general crisis of confidence.

This was a worrying scenario for the world's developing countries, as investors and consumers across the globe might now be incl…

Business leaders 'still optimistic about prospects'

An overwhelming majority of business leaders worldwide are confident of their companies' prospects despite the economic jitters, a study by global law firm Allen & Overy found.

This upbeat outlook could be due to globalisation, which allows capital to flow more freely to countries where growth remains strong, said Mr David Morley, senior partner at Allen & Overy, at a briefing on Wednesday.

'There's been a huge rise, particularly over the last four to five years, in the number of markets in which companies are operating,' he said. 'Companies are saying that there are more than 100 markets that they are looking at in terms of growth opportunities. The global economy has opened up; it's given businesses more choices.'

In the study, carried out between July 4 and Aug 26, about 96 per cent of the 1,000 business leaders surveyed said they were 'very or reasonably confident' about their businesses' prospects in the next 24 months.

The rising cost of raising a child

By Jessica Dickler

NEW YORK (CNNMoney) -- Forget designer strollers and organic baby formula, just providing a child with the basics has become more than most parents can afford.

The cost of raising a child from birth to age 18 for a middle-income, two-parent family averaged $226,920 last year (not including college), according to the U.S. Department of Agriculture. That's up nearly 40% -- or more than $60,000 -- from 10 years ago. Just one year of spending on a child can cost up to $13,830 in 2010, compared to $9,860 a decade ago.

"Everything is more expensive and each family makes its own set of trade-offs," said Ellen Galinsky, president of the Families and Work Institute in New York. "Many parents are working longer hours, or another job, and they are giving up time at home. It's a complete catch-22."

From buying groceries to paying for gas, every major expense associated with raising a child has climbed significantly over the past decade, said Mark Lino, …

Still not putting volunteer work on your resume?

If not, new research from LinkedIn shows why it's time to start.

By Anne Fisher, contributor

True, you didn't get paid to streamline the database at the local Red Cross office, or organize that huge fundraising auction for Oxfam, or put your accounting skills to work at your church. So it doesn't really count -- right?

Not so fast. According to a new survey from LinkedIn (LNKD), 89% of U.S. businesspeople have significant volunteer experience. Yet only 45% include it in their resumes.

The same report tells why leaving it out is a mistake: 41% of hiring managers say they consider free labor for a good cause to be "equally valuable" as other experience, and one in five has hired someone for a paying job because of his or her volunteer work.

"Professionals often have the misconception that volunteer work doesn't qualify as 'real' work experience," observes Nicole Williams, whose title at LinkedIn is connection director. "But in the current hype…

How to Handle Awkward Money Situations

If you've ever had a family member ask you for a loan or been asked to split the bill when all you got was a salad, then you are familiar with the awkwardness that can surround money and relationships. In Isn't It Their Turn to Pick Up the Check?, Jeanne Fleming and Leonard Schwarz offer strategies for dealing with the most cringe-inducing scenarios. U.S. News spoke with Fleming and Schwarz about how to handle relatives who ask for loans, splitting the check at the end of the meal, and when, if ever, to lie about money. Excerpts:

Does lending money within families usually hurt or help relationships?

Forty-three percent of the people we surveyed told us that when it came to the largest amount of money they'd ever lent a friend or relative, they were never repaid in full. Moreover, 27 percent said they never got so much as a dime back. That's a lot of people being stiffed and, in turn, a lot of resentment being created. And what these statistics don't capture, of cours…

First Person: Recession Round Two?

Consumer spending is down, unemployment remains high, and job growth has slowed to a crawl - is the U.S. slipping into another recession? To find out what everyday Americans think about the potential for another downturn, we asked our contributors to tell us how their own financial situations are changing and how they're getting ready to face another recession. Below are some of their stories.

Keeping our costs down

"Right now we could afford to pay a little more rent so we could live someplace where our neighbors are an acre away, and we could burn wood to keep warm. That is our dream. In case work dries up, though, we feel more secure keeping our rent as low as possible and saving the extra income so we have it to buy food some day." - Cherise Kelley

You say recession, I say opportunity

"I could be like everyone else, throwing my hands up in the air and shrugging my shoulders while balancing my checkbook. I could stand in line at the grocery store and shake my head at…

Euro zone cannot be saved, says Mr Lee Kuan Yew

Collapse will be painful, but one-tier Europe too hard to achieve, he says

By Rachel Chang & Teo Wan Gek

Former Prime Minister Lee Kuan Yew believes the euro zone cannot be saved, although the collapse of the currency union will be 'a very painful business'.

Speaking at a dialogue on Wednesday to mark the seventh anniversary of the Lee Kuan Yew School of Public Policy, he said European leaders will try very hard to keep the euro zone from collapsing as this would be 'an admission that their aspiration of one Europe is not achievable'.

'But I do not see it being saved. But they'll try and keep it going.'

He was speaking in response to a participant asking if Singapore would buy the bonds of debt-ridden European countries. The participant was referring to reports that Italy had asked China to buy its bonds.

5 Steps to a Secure Retirement

It's time to size up your plan. You may be in better shape than you think.

If you're like many Americans whose retirement savings took a major hit during the market meltdown a few years ago, you're probably wondering if you'll ever be able to retire. The eye-popping stock market drop in early August and the downgrade of the U.S. credit rating no doubt add to your jitters. Or maybe investment performance isn't your major worry. A spate of unemployment or depressed home values can make yesterday's vision of retirement seem like an im­possible dream.

Don't be discouraged: Recent statistics on recovering 401(k) and IRA balances suggest that many savers are already back on track. Plus, "Americans have proved themselves to be both resilient and resourceful," says Jay Wintrob, president of SunAmerica Financial Group, which recently released its "Retirement Re-Set" study. More than 80% of respondents to the survey said they learned important lesso…

5 Questions Every Worker Should Ask Before Retirement

Wall Street's recent turmoil has many investors questioning whether they will have enough to retire the way they've always dreamed, or to retire at all, for that matter.

Whether your post-work life is just around the corner or far away in the distance, there's never a bad time to reevaluate your definition of retirement: what it means ideologically and financially.

"How you answer that question has very important implications about where you're going to be and what you're going to spend," says author and certified financial planner Eleanor Blayney. "There's so many demands on the dollars we thought we'd be using in our 60s or 70s. Retirement used to be a going away from the workplace. Now it has to be thought of as 'what am I going toward?'"

When it comes to retirement planning, it is important to evaluate the big picture: desired lifestyle, trips and activities to pursue and of course, financial security and retirement.

"You ha…

My three bits of advice to avoid ending up in a career disaster zone like me

Anonymous candidate

I’m looking for a new job. Over the past year I've met recruiters, spoken to friends and trawled the web to no avail. Here are the three big mistakes which I’ve made and you should avoid:

1) Avoid stagnating in the same firm

Now that I’ve been working (hard!) for almost five years in the same company, it should not have been too difficult to get a job offer. But alas, I have not even gone to a single interview.

Why? Well, because what I have done over the past five years has added little value to where I want to be. This is especially so in the current “middle child” phase of my career – I’m either too junior or too experienced for the roles that would get me ahead. I either take a plunge in salary and start from the bottom, or stay until the next recession knocks everyone around like a game of musical chairs.

2) Everything you do must boost your resume

In hindsight, this one seems so obvious. But in five years, I never paid attention to my CV. You must ask yourself …