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Sunday, 26 February 2012

Buffett says he was 'dead wrong' on housing market

OMAHA, Neb. (AP) -- Billionaire investor Warren Buffett said Saturday that he was "dead wrong" with a prediction that the U.S. housing market would begin to recover by now, but he remains optimistic about the nation's economy.

In his annual letter to Berkshire Hathaway shareholders, Buffett said he is sure housing will recover eventually and help bring down the nation's unemployment rate. But he did not predict when that will happen.

Investors eagerly await the letter from Buffett, 81, the so-called Oracle of Omaha, who built a roughly $44 billion fortune by following a steadfast, no-nonsense investing strategy.

Buffett said housing "remains in a depression of its own," but he predicted, in typical plainspoken style, that the housing market will come back because some human factors can't be denied forever.

"People may postpone hitching up during uncertain times, but eventually hormones take over," he wrote. "And while 'doubling-up' may be the initial reaction of some during a recession, living with in-laws can quickly lose its allure."

The housing prediction proved painful for Berkshire Hathaway. It owns more than 80 subsidiaries, including the Geico insurance company and See's Candy, and five of them depend on construction activity.

Those businesses, which include Acme Brick, Clayton Homes and Shaw carpet, generated pre-tax profits of $513 million last year. That's well off the $1.8 billion those companies added to Berkshire in 2006.

Berkshire's insurance companies took $1.7 billion in catastrophe losses last year, including from the earthquake and tsunami in Japan. Berkshire reported only $154 million in underwriting profit, down from $1.3 billion the previous year.

But several of Berkshire's larger non-insurance businesses — Burlington Northern Santa Fe railroad, MidAmerican Energy, Marmon Group, Lubrizol and Iscar — all generated record earnings in 2011.

That helped Berkshire as a whole to generate $10.3 billion in net income, or $6,215 per Class A share, last year, down from nearly $13 billion, or $7,928 per share, in 2010.

A Class A share of Berkshire stock, which has never been split by the company, traded for $120,000 on Friday. Its more affordable Class B shares traded for about $80.

Buffett reassured Berkshire shareholders that the company has someone in mind to replace him eventually, but did not name the successor. He emphasized that he has no plans to leave.

Glenn Tongue, a managing partner at T2Partners investment firm, said he was struck by the fact that Buffett chose to deal with the succession topic as one of the first items in his letter.

"I think this was a forceful and stronger attempt to put this issue to bed," Tongue said.

Buffett offered a couple of details about Berkshire's succession planning in this year's letter. Investors have long worried about who will replace Buffett as Berkshire chairman and CEO.

Buffett said the Berkshire board is enthusiastic about the executive it has picked and said there are two good back-up candidates.

"When a transfer of responsibility is required, it will be seamless, and Berkshire's prospects will remain bright," Buffett said.

Previously, Buffett had said only that the board had three internal candidates for the CEO job. Berkshire plans to split Buffett's jobs into three parts to replace him with a CEO, a chairman and several investment managers.

Berkshire has also cleared up some succession questions by hiring two hedge fund managers, Todd Combs and Ted Weschler. Buffett says those two have the "brains, judgment and character" to manage Berkshire's entire portfolio eventually.

Thursday, 23 February 2012

Falling victim to your job's low expectations

If you aspire to become a great manager, simply striving to meet your company's actual (versus espoused) standards probably won't get you there.

By Linda A. Hill and Kent Lineback, contributors

FORTUNE -- One morning, years ago, Kent heard loud laughter outside his office and found several people clustered around Charley, the head graphic designer who was easily the largest and most popular member of the marketing department Kent ran.

"Charley lost 25 pounds," someone said when Kent joined the group. Charley's weight was a common topic of office conversation but only because Charley himself brought it up so often.

"That's great, Charley," Kent said. "Congratulations!" Then -- always the boss, though this was hardly a management matter -- he asked, "What's your goal?"

The smile dropped from Charley's face.

"That," he said, "was it."

It wasn't one of Kent's most sensitive moments. Later, when he apologized to Charley one-on-one, Charley said, "You were right. I need to lose more. But I got in a group and we all swore do-or-die to lose 25 pounds. That became my goal."

To be sure, there's little connection between losing weight and business performance except that Charley's experience illustrates a principle -- the Opportunity Gap -- that we in business often overlook because we work in groups and group norms are powerful forces of influence.
See also: Dating and business: Not all that different

An opportunity gap is the difference between our current performance and what we're capable of doing. Many times, though, we focus not on our opportunity gap but on our performance gap, the difference between current performance and what we're expected to do. We're content to achieve what others expect rather than what we're truly capable of doing.

Yes, expectations can sometimes exceed our capabilities. A medical condition may have made weight loss extremely difficult for Charley. Or a salesman may be given a quota that truly is unrealistic. But expectations often do reflect only a portion of what's possible. Charley, for example, ultimately shed four times what he lost in his weight loss group. That was his opportunity gap. But, for a time, he fell into the trap of accepting his performance gap, the 25 pounds expected by the group, as his ultimate goal.

We believe the disparity between performance and opportunity gaps goes far to explain something we've observed in our combined 60 years of teaching, researching, practicing, and observation: most managers fall short of what they could be. They simply stop getting better at what they do.

We see this every time we ask bosses to assess themselves as leaders and managers. The great majority say they could be better. When we ask how they could be better, many can identify at least one area -- "delegation" is a common answer -- where they have room for improvement.

If many, and perhaps most, managers think they could and even should be better, why don't they take active steps to improve?

Becoming a great manager requires persistent effort over a long period of time. It can require difficult personal change. Converting management principles into practice isn't easy. There aren't many role models.

All those reasons play their roles, but we think one is key: Companies simply don't expect enough of their managers. A statistic we came across recently astounded us: A 2009 survey of companies by Bersin and Associates revealed that they considered nearly four of every 10 mid-level managers no better than "poor" or "fair."
See also: Internal competition at work: Worth the trouble?

This figure is an admission by companies that they are failing in their fundamental task of creating a corps of competent, capable managers. If 40% of their mid-level -- not first-level -- managers are mediocre at best, why don't they recognize that they face a corporate crisis and take dramatic steps to improve?

We're not aware of any companies that have declared such a state of emergency, which seems to confirm something our experience and observations have also told us: even though companies may claim, implicitly or explicitly, that they set high standards for their managers, they in fact condone managerial practices and behavior that persistently fall short of those standards.

This whole topic deserves more study and discussion, but for individual managers, it seems to convey one clear point: if you aspire to become a great manager, simply striving to meet your organization's actual, versus espoused, standards probably won't get you there. Being rated "meets expectations" or even better isn't necessarily a good measure of your skill or progress.

To grow as a manager, you will need to define your own opportunity gap – identify what you can become -- rather than accept the actual performance gap for managers in your firm. This is the first step in taking responsibility for your own development.

Note: We adapted the terms "Opportunity Gap" and "Performance Gap" from Winning Through Innovation: A Practical Guide to Leading Organizational Change and Renewal by Michael L. Tushman and Charles A. O'Reilly II.

4 Market Tells That Are Better Than The Dow

By Jeff Macke

The Dow Jones Industrial Average which briefly topped 13,000 yesterday for the first time since 2008, made for a great headline but the event was slightly less exciting to those who make their living investing.

"Nobody really looks at the Dow anymore except for news outlets and retail investors," says Dan Fitzpatrick, founder of StockMarketMentor.com. It's an observation based less on snobbery than the simple fact that the Dow has been replaced by other indexes and sectors generally regarded as more useful than a 30 company index based on the dollar value of each share, rather than market capitalization of the underlying company.

The obvious question for Fitzpatrick then is what he is looking at to help him divine market direction, if not the Dow. Fitzpatrick has four better market "tells" he's got his eye on:

The Dow Transports

Unlike the DJIA, which attempts to cram all relevant sectors into 30 stocks, the transportation index is, appropriately enough, all about transportation companies. People, boxes, coal or Christmas cards, if a company moves something from point A to B it's sub-sector is represented in the Transports.

Compared to the major averages the the Transports (^DJT) are lagging; a possible sign that the economy may not be all that it may seem. It's also an obvious reflection of the fact that the airline business may be the toughest industry to make money in the history of man. That's why Fitzpatrick uses more than one tell.

Semi-Conductors

Left for dead as decade ago, the semi's (^SOX) have been perking up. It's not the first sign of life since the bubble burst; there have been other head fakes before. Still, positive action in semi-conductors can't be ignored. It's not just a matter of whether or not you're long Intel (INTC), which I am. Semi's reflect economic expansion, something the bulls obviously want to see.

Financial Stocks (ETF: XLF)

Speaking of left for dead, since the bubble burst in housing and took most of the banking sector down with it, the financials have bounced in a tight range adding up to nothing. "I want to see the financials at least firming up" prior to going bullish, says Fitzpatrick.

The banks are firm but it's fair to say an explosive move to the upside remains hypothetical.

Crude Oil

Brent crude oil is to the more commonly quoted West Texas Intermediate as the S&P 500 is to the Dow. Brent is the index that actually matters while the WTI grabs the headlines. With Brent breaking over $120 a barrel and making 8-month highs today, Brent staying in the background is probably for the best.

"If we get $5 gas the retail sector is going to implode," says Fitzpatrick, merely chipping at the top of the potential gas nightmare. $5 a gallon is a wild long shot but prices are at all time highs for this time of year, up 12% year over year. Tack 12% on last year's high of about $4 a gallon and you have prices near $4.50. Obviously a negative.

Fitzpatrick is in the camp of cautious bulls. He's long now and looking for the dip that's been overdue for weeks before adding exposure. It's not as neat a headline as "Dow 13,000!" but making money in stocks seldom is so pithy.

We want to know what you think! Share your favorite market "Tell" with us in the comment section below or Tweet me @Jeffmacke.

How to Greece-Proof Your Portfolio

By Lindsey Bell

NEW YORK (TheStreet) -- A second bailout to save Greece from defaulting has been agreed to by eurozone finance ministers, but for U.S. investors, the story is far from over.

A deal to secure 130 billion euros ($172 billion) to prevent the sovereign nation from defaulting on its debt in late March (when the next tranche is due) was reached. In return, creditors will accept a 53.5% write-down on their debt and a reduction in the interest rate paid on 56 billion euros in loans from the prior bailout.

This will reduce the ratio of debt to GDP of the country to 120% by 2020. This news originally led to a 1.2% pop in the Euro Stoxx 50 index, which measures the performance of 50 stocks in 12 eurozone countries, but the index ended up declining.

The worries follow concerns that the agreed-upon austerity measures that are to be implemented in order to receive the payment could be reversed to some degree after elections are held in Greece. The election is slated to take place in two months. According recent polls, leftist parties opposing the bailouts are rising in popularity.

Wayne Lin, portfolio manager and investment strategy analyst for Legg Mason Global Asset Allocation, says investors should watch the election carefully and manage their portfolios accordingly. U.S. investors have become comfortable with the situation in Europe, especially as our own economy is showing an improvement.

However, volatility could increase substantially if the incoming government plans to reduce austerity measures, putting the stability of Greece's debt position in jeopardy of default. Talks of exiting the euro would also lead to uncertainty and increased volatility. As the election evolves over the next few months, U.S. investors should actively manage their market positions.

Lin recommends taking some money out of risky assets if one of these scenarios becomes likely. He points out that risk premiums reached historic highs in August and if equities were to approach those levels again, that would signal a good exit point.

Even though the S&P 500 has rallied nearly 9% so far this year, there are still attractive investing opportunities. Looking for undervalued stocks is one of the best ways to play the field. Lin says he "expects the market to trade sideways to slightly up for a while. Getting to the next level is going to require something big to happen."

10 Latin American Stocks Soaring Up to 30% in 2012

Scott Kimball, portfolio manager for the BMO TCH Corporate Income Fund says, "As an investor, you have to figure out what degree the situation in Greece will spill over into Europe and the U.S. If you think there is going to be a spill-over effect, then you're setting yourself up for a flight to quality, like U.S. Treasuries and high quality U.S. investment grade corporate bonds."

Kimball has found value in corporate bonds in the telecom space. He recommends DirecTV and CenturyLink . He explains, "DirecTV has a very emerging business in Latin America, which diversifies the risk away from the U.S. and Europe. CenturyLink (provides voice, internet, data and video services) is entirely a domestic story where they're bringing bundles to areas in the U.S."

If you have a longer-term investment horizon, you will probably be better able to withstand fluctuations in the market related to the Greece debt debacle. If you're in it for the short term, manage your investments more actively.

--Written by Lindsey Bell in New York.

10 Places You Can Always Get Freebies

The only thing we like more than getting a deal is getting a freebie. And we're not talking about those buy one, get one free deals, either -- we mean a true, no-purchase-necessary freebie.

So where should you go to find all this free stuff? There are websites like FreeStuffTimes and IHeartFreebies that aggregate free sample offers, and we also try to bring freebie offers to your attention on our Free Stuff page. But if you'd rather go right to the source, there are several retailers and companies that regularly give away freebies. Here are a few.

IKEA

No, IKEA doesn't give its furniture away for free, but the Swedish furniture store is almost as famous for its food as for its hard-to-assemble bookcases, and it's often willing to give away food for free if it gets people in the door. Usually that takes the form of a free breakfast -- this past weekend, for instance, shoppers could come in Saturday through Monday before 11 a.m. and get a platter of eggs, bacon and hash browns, plus a cup of coffee, on the house.

The usual price of that breakfast is only $1.78 (99 cents for the breakfast and 75 cents for the coffee), so it's not as if you're making out like a bandit here. To keep up on all the free food offers from IKEA in the future, bookmark the retailer's special offers page.

Panda Express

We know, Panda Express has its share of detractors, but if there's one thing to be said of the Chinese fast-food chain, it's that it tends to be fast and loose with the freebies. It seems every time Panda Express launches a new product it offers up a coupon to get a free serving of the new menu item. And while it has received complaints in the past for the tiny portions it serves for these promotions, you can't really complain about something you got for free. To keep up with all these offers, follow Panda Express on Facebook.

Kmart

Kmart's website has what may be a freebie fiend's dream come true: The SampleCenter. Every week the retailer links to a number of manufacturers currently offering samples of their products, and this week there are links to samples of Emergen-C powder and Purex laundry detergent, among several other things. Put the site in your bookmarks and check back on a weekly basis to see what you can get for free.

[Also see: No-Money Makeovers for Your Home]

Amazon's Kindle Store

You won't get bestsellers for free from the Kindle store, but there are still thousands of e-books that you can have for free and watch on your Kindle, computer or other device with a Kindle reading app. There are a few ways to navigate the loads of free books there, but the best way might be to visit the bestsellers list, which includes the top 100 best-selling free e-books. You can also sort by genre so you can see, for instance, the top 100 free e-books on cooking and get loads of free recipes.

While you're there, make sure you check out the Amazon Appstore. Every day, users of Android devices are presented with a different paid app for free.

Bath & Body Works

We asked Erin Huffstetler, a veteran deal hunter and editor of the About.com Frugal Living Guide, where she tends to find a lot of freebies. She pointed to Bath & Body Works, noting that the fragrance and soap shop tends to give away a free sample on its Facebook page whenever it launches a new product.

Earlier this month, for instance, the retailer had a coupon for a free travel-sized item up to $5 in value. For more of the same, follow Bath & Body Works on Facebook.

Sears Outlet

Huffstetler also reminded us of a recurring freebie we found last month: Every Tuesday, Sears Outlets give a coupon for one free item of clothing. To get the deal you'll need to be a Shop Your Way Rewards member, and since it's good in stores only, you'll probably need to live near a Sears Outlet to take advantage on a regular basis. Also note that while the original program was something of a free-for-all (no pun intended), there are now extensive terms: The coupon is only good for clearance items (denoted as such by a green or yellow tag), and you can't get outerwear, leather coats, dresses or Levi's merchandise for free.

Still, that's a free article of clothing for free every week. To get the coupons, follow Sears Outlet Stores on Facebook.

Giveaway of the Day

If a weekly freebie isn't good enough for you, how about a daily freebie? That's what you'll get at Giveaway of the Day, a daily deal site that presents you with a free software download every day.

You won't be getting Adobe Photoshop on here, or the latest PC games -- what you'll find, rather, are simple software tools such as PDF converters or a program that can easily turn a video file into a DVD. Many of them might be of no interest to you, perhaps because you already have a similar program on your computer. But it's worth putting in your bookmarks to see what they have to offer you.

Wal-Mart

You can always count on free sample tables at Walmart. And if you're a serious freebie hunter, you can coordinate your Walmart run to fall on a day when your favorite food maker or other company has set up shop there. The retail giant has a special page on its website that lists which events are taking place in Wal-Mart stores in the foreseeable future. This week, for instance, expect to see Kraft set up at the Bright Ideas station, where it will be sampling four new cheese offerings. There's no cheese like free cheese.

Target

Walmart isn't the only big retail chain that regularly has samples for its customers -- Target regularly lists free samples on its website, and unlike Walmart, you don't actually need to set foot in the store. Just visit the Target "Sample Spot," click on any samples you'd like to receive, then answer the applicable survey questions and punch in your address for home delivery. Just make sure you check the page on a regular basis -- the samples sell out fast.

Want to know which retailers have the best samples in stores? Check out MainStreet's roundup of the best retailers for free samples.

Victoria's Secret

Finally, here's one for the ladies: Huffstetler tells us that subscribers to the Victoria's Secret catalog get coupons for free panties throughout the year. Play your cards right, and you'll never pay for underwear again!

While we're on the topic, it's worth noting that Victoria's Secret frequently throws in a freebie with select purchases. Earlier this month, for instance, it offered small boxes of truffles with all purchases of more than $75, and right now when you make a purchase of Victoria's Secret Pink merchandise and use the coupon code LIVEPINK, you can get a free tote bag. That's not a freebie in the strictest sense of the word because a purchase is necessary, but if you're shopping there anyway you should take full advantage of whatever they choose to throw in.

Sunday, 19 February 2012

5 Easy Ways to Improve Your Job Prospects

By Miriam Salpeter

Not landing the job you want? How can you change your luck? Stop what you're doing and make some changes; you may be surprised by the results.

1. Don't apply for positions if you are overqualified. While you may assume that having more than the necessary qualifications will help you land a job in a tough job market, the opposite is likely true. For example, if the job is primarily administrative and you've held executive-level positions and boast a master's degree in business administration, the hiring manager is unlikely to consider you a serious candidate. Why? Many hiring managers will assume an overqualified applicant, if hired, will resign the minute something better comes along. Others are concerned that overqualified candidates will expect inflated salaries. Don't waste your time applying for jobs if you are overqualified--it makes you look desperate.

[See our list of the Best Careers.]

2. Create a resume focused on your future job. Make sure your resume highlights details relevant to your target opportunity, and that it isn't just a rundown of your past work history. Study the job description, and be sure you specifically address the hiring manager's needs when you apply. Don't include information in your application materials that wouldn't interest THIS employer. Describe your background using relevant words and phrases. Conduct a "search and destroy" mission for irrelevant buzzwords and jargon in your materials. Eliminate details or words that could confuse a reader or make her think you are looking for a different position.

3. Stop assuming. Most likely, a computer will conduct an initial scan of your application materials. Even when a human reviews your resume, studies show you will receive a cursory, 10-second or less, review. Recruiters will not give you credit for accomplishments you do not highlight in your materials. Do not expect anyone to read between the lines of your resume. If you improved sales or increased profits, make a point to say so, and quantify those accomplishments. Clarify every important detail. For example, if you earned an award, state the name of the award, but don't assume everyone will know why you won it; it's up to you to describe why it is important.

4. Start talking to people you don't think can help you. Especially in today's "connected" world, when just one or two "links" may separate you from the person who has the authority to hire you, you never know who will be your next key connector. It's just as likely to be someone you assume cannot help you as it is to be the person you've spent the last three months trying to meet.

It's hard to overstate how important it is to include informational meetings in your job search. If you have not identified several people to meet and interview about their careers and their organizations' needs, then you are missing a great opportunity to learn details that could help you apply effectively to your next job. You never know--your next-door neighbor or a friend of a friend could help you make a great connection.

[See Building a Network in 8 Steps.]

5. Don't tell everyone you're looking for a job. Instead, be subtle and let your circles know about your skills, accomplishments, and goals without wearing a metaphorical "J" for job seeker on your chest. It's a fine line between keeping everyone aware of your job search and becoming a nuisance at parties and networking events, but you can strike a balance.

Use your social media updates to clue people into your job search plans. If you're finishing up a certificate to help you change jobs, tweet about it, post about it on Facebook, and let your LinkedIn network know what you are studying. Share links and news about organizations where you'd like to work. For example, if you are seeking work in the financial industry, read relevant blogs and post frequent links and updates. People will notice that you're a resource and will be more likely to refer you if they hear of a job opportunity.

Miriam Salpeter is a job search and social media consultant, career coach, author, speaker, resume writer, and owner of Keppie Careers. She is author of Social Networking for Career Success. Miriam teaches job seekers and entrepreneurs how to incorporate social media tools along with traditional strategies to empower their success. Connect with her via Twitter @Keppie_Careers.

The Forever Portfolio

By William Baldwin

In its first half-century the Nobel Foundation had a rough go of it. Its assets shriveled. The value of the five famous prizes it funds shrank by 69%. And then the outfit began a ­remarkable resurgence that has brought the awards to $1.5 million apiece—in purchasing power that’s ahead of where they started.

In that decline and recovery lie some powerful lessons for investors who need to make their savings last: Bonds are dangerous, taxes are deadly, your spendable yield is low and your portfolio’s survival may hang on diversification well away from your homeland.

Alfred Bernhard Nobel was an ­inventor who made a tidy fortune in dynamite and other chemicals. When he died at 63 in 1896, the childless bachelor left behind a hand-scrawled will leaving most of his estate to a new foundation that would reward scientific and cultural achievement. It took five years for the legal and ­operational battles over this murky document to be resolved.

The foundation opened for business in 1901 with awards (to X-ray man Wilhelm Röntgen, among others) worth $1.2 million in today’s money. And then things went downhill. One problem was that an expected tax exemption did not come through; for a long while the foundation was Stockholm’s largest single taxpayer. The other was Alfred Nobel’s instruction that his money be invested in “safe securities.”

What does “safe” mean? It was presumed that the endowment should buy mortgages and bonds, explains Lars Heikensten, the former head of Sweden’s central bank who took over management of the foundation last year. Fixed-income assets, though, proved to be anything but safe during the last century’s bouts of inflation. Measured in Swedish kronor, the prizes dipped only a little. Measured in spending power, they collapsed.

The Nobel Foundation saved itself by getting the rules changed. It won a tax exemption in 1946 and seven years later permission to invest in stocks and real estate. The 1982–99 bull market, a well-timed fling in Stockholm real estate, and caution in advancing the prize values combined to restore the endowment. It’s now worth $430 million—not quite double, in real terms, the sum that Nobel left behind.

What should an individual investor get out of this story?

Spend sparingly. The foundation is drawing down 4% of its assets annually to cover the prizes and the costs of the selection committees and the awards ceremony. Heikensten says that level of spending is not sustainable. He is determined to get the number closer to 3%, by getting ­corporate sponsors, for example, to pick up some of the ancillary expenses.

A rule of thumb in financial planning is that retirees can spend 4% of their assets annually. That works for a 70-year-old. It doesn’t for someone who retires at 55 and has a younger spouse.

Go light on bonds. The Nobel Foundation has only 23% of its money in cash and fixed-income investments. The rest is in stocks, real estate, private equity and hedge funds.

Are you, like Alfred Nobel, partial to “safe” government bonds? Real returns are meager and likely to remain so for years, predicts Heikensten.

You might be dazzled by long Treasurys’ 34% total return last year, occasioned by a drop in ­interest rates. That number means ­nothing. This is what matters: If you own one of those bonds now, you are destined to get only 2.9% a year over its remaining life. Now ­subtract inflation, for which a 2% expectation is rather ­optimistic. You are left with 0.9% to spend.

Don’t want to take a chance on ­inflation? Buy an inflation-protected Treasury. Now you are assured of getting a rotten return: 0.6% a year over 30 years or –0.3% over 10.

Stocks are scary, particularly given the uncertain economic recovery. But it is quite possible for stocks to do well when economies are not doing well, says Kent Janér, a Stockholm money manager who sits on a Nobel advisory committee. It comes down to whether stocks are reasonably cheap—whether, that is, they price in the unpleasantness in Europe and elsewhere. Janér thinks they do. You just have to be prepared to weather the next bear market.

Watch your tax bill. The Nobel Foundation lobbied for the exemption that saved it. What can a private investor do? Two things.

The first is to maximize the sums stuffed into tax-deferred accounts, ­including both 401(k)s and IRAs. (Mitt Romney has been particularly adept at this strategy.)

The other is to minimize the income from any assets held outside those shelters. That means selling losers but not winners, holding stocks that provide appreciation rather than dividends, and holding tax-favored assets like real estate and master ­limited partnerships.

Cut your costs. The Nobel Foundation is paying 0.6% of assets annually for money management. Heikensten hopes to get that number lower by using the foundation’s prestige to win fee concessions.

Small investors can’t cut deals, but they can put a large portion of their money in index funds that cost 0.1%.

Cast a wide net. Only 38% of Nobel’s money is invested in Sweden. To be sure, a 62% foreign allocation would be high for an American, whose home market is larger. Still, most investors are too chauvinistic.

It is easy for either a Swede or an American to get complacent, warns Janér. Neither country has lost a war in the last century or experienced a bear market quite like Japan’s. Better include some other continents in your mix, he says.

After all, you don’t know what the next century is going to look like.

Do Rich People Live Longer?

Those looking for a magic elixir to keep them healthy and happy need look no further than their bank account. Wealth and, more broadly, socioeconomic status, play a powerful role in determining how long we live.

"It's clear that those who have less wealth will have fewer years to live than those with more wealth," says James Smith, senior economist at the research group RAND. The connection is so widely accepted that researchers have given it a name: "the wealth gradient in mortality." What's far more complicated to understand is why the connection exists, and whether wealth causes better health, or vice versa.

The longest-running longitudinal study of health, run by George Vaillant, professor of psychiatry at Harvard Medical School, found education to be one of the biggest determinants of longevity, along with behavioral factors--excessive drinkers were more likely to die young, for example. Out of the 500-plus Harvard students and inner-city Boston men the study has followed since 1937, the Harvard students lived an average of 10 years longer than the inner-city men, says Vaillant. In fact, 3 in 10 of the Harvard students lived to 90, compared to the 3 to 5 percent one would expect from that age group.

Among the inner-city men who attended college, health was just as good as that of Harvard students who attended college but not graduate school, says Vaillant. "[The Boston men] went to terrible colleges by Harvard standards, but they did get 16 years of education, and that absolutely evened the playing field," says Vaillant. People who go to college tend to drink less, smoke less, and are less likely to be obese, he adds, all factors that contribute to longevity. In fact, after controlling for education and other factors, Vaillant found that income alone had little effect on longevity.

People who pursue higher education, explains Vaillant, tend be more focused on the future, which probably also helps them make healthier choices. "In order to get an education, especially if you're poor, you have to think you have a future," he says.

Indeed, says Smith, one hypothesis is that "more-educated people are more forward-looking, and when they make decisions, they take into account the future more than uneducated people. A lot of things you might do don't have an immediate negative impact--excessive drinking, smoking, and doing drugs can [feel good in the short-term]--but the fact is it's going to kill you in the future." Another possibility is that people with higher levels of education are more likely to maintain their health, have better access to healthcare, and follow doctors' directions when it comes to taking pills or other instructions.

Smith's research also suggests that causality doesn't just run one way; health contributes to wealth, as well. "Because you are healthy and able to work, you are wealthier," he explains. At the same time, poor health often takes a toll on a person's wealth, either because it prevents one from working or because of expensive medical treatments. Taken together, researchers at the University of Chicago estimate that the gains in life expectancy between 1970 and 2000 resulted in an additional $3.2 trillion a year in national wealth.

Meanwhile, as income disparities continue to grow in this country, so do life expectancy disparities. According an analysis by from the Social Security Administration, life expectancy for 65-year-old men in the top half of the earnings distribution has increased by five years, to 21.5 more years. For those in the bottom half of the earnings distribution, life expectancy has increased just over one year, to 16.1 more years.

A likely factor, says Monique Morrissey, an economist at the Economic Policy Institute, is differing access to healthcare. "Not just people who are not insured, but if you have better insurance, you might get tested earlier, have better access to care, and be better able to follow complicated treatments--there have been a lot of improvements in cardiovascular care, especially for men," she says. While behavioral factors such as smoking and obesity likely explain much of the overall connection between wealth and health, they can't account for the growing disparity in life expectancy, since those behavioral factors are not growing disproportionately themselves.

Among younger Americans, health disparities are particularly pronounced, which could adversely affect U.S. life expectancy in the future. Eric Reither, associate professor of sociology at Utah State University, has found that among younger Americans, obesity-related diseases like heart disease and diabetes will likely increase.

As a result, Reither says he envisions two Americas in the coming decades. "One that is relatively poor and adversely affected by obesity and related conditions, and one that is relatively well-off and less affected by these diseases. Life expectancy trajectories for these groups will likely follow different paths, with the former stagnating and perhaps even experiencing some decline, and the latter continuing to inch upward."

As for that magic elixir, a group of British scientists now say they have identified a hormone more prevalent in the wealthy that they link to longevity. The hormone regulates one's stress response and is connected to diet, exercise, and relationships--all known longevity-inducing factors. One can imagine that hormone being packaged and marketed as some kind of magic youth serum, next to antioxidant pills and superfoods.

But for Vaillant, the answer is much simpler. "Those wonderful pills that are marketed to let you live forever--those things just don't seem to be terribly important," he says. Instead, it's making bigger behavioral choices, such as avoiding drinking too much and nurturing a stable marriage, that let people prolong their lives. And as for what makes people happy in old age, Vaillant says it has more to do with strong, loving relationships than anything for sale at a store. Says Vaillant, "I'm 77, and what I enjoy most are my grandchildren."

Wednesday, 15 February 2012

Do Rich People Live Longer?

By Kimberly Palmer

Those looking for a magic elixir to keep them healthy and happy need look no further than their bank account. Wealth and, more broadly, socioeconomic status, play a powerful role in determining how long we live.

"It's clear that those who have less wealth will have fewer years to live than those with more wealth," says James Smith, senior economist at the research group RAND. The connection is so widely accepted that researchers have given it a name: "the wealth gradient in mortality." What's far more complicated to understand is why the connection exists, and whether wealth causes better health, or vice versa.

The longest-running longitudinal study of health, run by George Vaillant, professor of psychiatry at Harvard Medical School, found education to be one of the biggest determinants of longevity, along with behavioral factors--excessive drinkers were more likely to die young, for example. Out of the 500-plus Harvard students and inner-city Boston men the study has followed since 1937, the Harvard students lived an average of 10 years longer than the inner-city men, says Vaillant. In fact, 3 in 10 of the Harvard students lived to 90, compared to the 3 to 5 percent one would expect from that age group.

Among the inner-city men who attended college, health was just as good as that of Harvard students who attended college but not graduate school, says Vaillant. "[The Boston men] went to terrible colleges by Harvard standards, but they did get 16 years of education, and that absolutely evened the playing field," says Vaillant. People who go to college tend to drink less, smoke less, and are less likely to be obese, he adds, all factors that contribute to longevity. In fact, after controlling for education and other factors, Vaillant found that income alone had little effect on longevity.

People who pursue higher education, explains Vaillant, tend be more focused on the future, which probably also helps them make healthier choices. "In order to get an education, especially if you're poor, you have to think you have a future," he says.

Indeed, says Smith, one hypothesis is that "more-educated people are more forward-looking, and when they make decisions, they take into account the future more than uneducated people. A lot of things you might do don't have an immediate negative impact--excessive drinking, smoking, and doing drugs can [feel good in the short-term]--but the fact is it's going to kill you in the future." Another possibility is that people with higher levels of education are more likely to maintain their health, have better access to healthcare, and follow doctors' directions when it comes to taking pills or other instructions.

Smith's research also suggests that causality doesn't just run one way; health contributes to wealth, as well. "Because you are healthy and able to work, you are wealthier," he explains. At the same time, poor health often takes a toll on a person's wealth, either because it prevents one from working or because of expensive medical treatments. Taken together, researchers at the University of Chicago estimate that the gains in life expectancy between 1970 and 2000 resulted in an additional $3.2 trillion a year in national wealth.

Meanwhile, as income disparities continue to grow in this country, so do life expectancy disparities. According an analysis by from the Social Security Administration, life expectancy for 65-year-old men in the top half of the earnings distribution has increased by five years, to 21.5 more years. For those in the bottom half of the earnings distribution, life expectancy has increased just over one year, to 16.1 more years.

A likely factor, says Monique Morrissey, an economist at the Economic Policy Institute, is differing access to healthcare. "Not just people who are not insured, but if you have better insurance, you might get tested earlier, have better access to care, and be better able to follow complicated treatments--there have been a lot of improvements in cardiovascular care, especially for men," she says. While behavioral factors such as smoking and obesity likely explain much of the overall connection between wealth and health, they can't account for the growing disparity in life expectancy, since those behavioral factors are not growing disproportionately themselves.

Among younger Americans, health disparities are particularly pronounced, which could adversely affect U.S. life expectancy in the future. Eric Reither, associate professor of sociology at Utah State University, has found that among younger Americans, obesity-related diseases like heart disease and diabetes will likely increase.

As a result, Reither says he envisions two Americas in the coming decades. "One that is relatively poor and adversely affected by obesity and related conditions, and one that is relatively well-off and less affected by these diseases. Life expectancy trajectories for these groups will likely follow different paths, with the former stagnating and perhaps even experiencing some decline, and the latter continuing to inch upward."

As for that magic elixir, a group of British scientists now say they have identified a hormone more prevalent in the wealthy that they link to longevity. The hormone regulates one's stress response and is connected to diet, exercise, and relationships--all known longevity-inducing factors. One can imagine that hormone being packaged and marketed as some kind of magic youth serum, next to antioxidant pills and superfoods.

But for Vaillant, the answer is much simpler. "Those wonderful pills that are marketed to let you live forever--those things just don't seem to be terribly important," he says. Instead, it's making bigger behavioral choices, such as avoiding drinking too much and nurturing a stable marriage, that let people prolong their lives. And as for what makes people happy in old age, Vaillant says it has more to do with strong, loving relationships than anything for sale at a store. Says Vaillant, "I'm 77, and what I enjoy most are my grandchildren."

Dividend Stocks Will Be Winners for a Whole Decade

BOSTON (TheStreet) -- The dividend trade is crowded, with almost every investor on the hunt for high yields. Wells Fargo analysts, however, say companies may only now be catching on to how investors are selecting stocks based on dividends.

Dividend-paying U.S. shares have been a favorite for investors following a 20% decline in stock market indices late last year. With economic growth expected to plod along and interest rates likely to remain incredibly low, investors have been forced to look for yield and steady income in other places.

In 2012, though, the market has booked the best gains in a quarter century to start the year, led not by dividend stocks but small-cap and speculative companies. Investors, it seems, are comfortable taking on more risk as Europe continues to figure its way out of a massive debt crisis.

Wells Fargo senior analyst Gina Martin Adams took a deeper dive into dividends, which she calls this decade's winning theme. While investor appetite for dividends has never been greater, Adams notes that dividend payouts are actually near record lows. She points out that the dividend payout ratio for the S&P 500 is at 27%, well below the long-term average of 53% and is at the lowest level on record since 1871.

"Companies may be only just beginning to catch on to the fact that investors are keenly interested in dividend paying stocks, for while dividends are increasing, payout ratios are at an all-time low," Adams writes. "Dividends still have plenty of room to grow."

At 2.1%, the dividend yield for the entire S&P 500 rivals the yield of the 10-year U.S. Treasury but remains below the long-term average of 4.5%, Adams notes. While that average yield may seem low, Adams points out that dividends have actually been providing the bulk of the return to shareholders. Since 2001, the S&P 500 has a total return of 26.4%, although the price-only return is just 2.3%.

The slow economic recovery has only benefitted dividend-paying companies. Adams says that, on a rolling monthly basis for the past two years, companies that grew dividends faster than their sector average have outperformed over the following six- and 12-month periods.

"Limited secular growth prospects, given debt deleveraging, combined with demographically driven investor demands seem likely to continue to elevated dividend payer relative performance," Adams adds.

Adams notes that after a combined 140 companies slashed or cut dividends in 2008 and 2009, the recent earnings recovery has aided 256 dividend increases in 2010 and 342 dividend increases in 2011. As a result, dividend breadth is the best in at least a decade.

However, Adams says, dividend increases have paled in comparison to the acceleration in profits. She has come up with three different ways for investors to take part in the dividend delight. These opportunities are highlighted on the following pages, with some of the stock picks that fall under each category.
Seek Yield

In the hunt for dividend yield, Wells Fargo says investors should seek out higher yields. This may seem like a no-brainer, but Adams and her team make the distinction of comparing current dividend yields up against other sources of income.

For example, Adams notes that there are currently 227 companies in the S&P 500 that offer a dividend yield that is higher than the 10-year U.S. Treasury yield. Of those, 51 offer a dividend yield higher than AA-rated corporate credit.

Adams drilled down further and found more than a dozen companies in the S&P 500 with a dividend yield that is higher than the average corporate credit yield for companies of a similar rating. Merck tops that list due to its strong credit rating of Aa3. According to Moody's, corporate credit rated Aa3 has an average bond yield of 4%, below the 4.3% yield on Merck shares currently.

Moving down the list, A2- and A3-rated corporate bonds have an average yield of 4.4%, which is below the dividend yields of AT&T , Eli Lilly , Pitney Bowes , Avon Products and Verizon , among others.

Corporate debt rated Baa3, Ba1 and Ba2 have average yields of 5.9%, a yield outpaced by dividend-paying stocks like CenturyLink , Frontier Communications , Windstream and Wynn Resorts .

However, Adams doesn't make specific mention about the durability of a dividend payment for some of the high-yielders. My colleague Lindsey Bell recently noted that while Frontier Communications has the highest yield in the S&P 500 at 18%, the company's payout ratio exceeds 100%.
Buy Aristocrats

Wells Fargo says that investors concerned about the growth and earnings outlook may be best served to stick with the 51 current Dividend Aristocrats.

Dividend aristocrats are defined by Standard & Poor's as large-cap companies in the S&P 500 that have increased dividends every year for at least 25 straight years. Investing in only the aristocrats has been a profitable strategy, with the group returning 5.3% last year, compared to a flat return on the broader index.

Earlier this year, TheStreet offered up a list of 10 best Dividend Aristocrat stocks for 2012, but Adams and Wells Fargo break down the entire list of 51 stocks to point out every opportunity.

For example, consumer staples as a group is little changed this year even though 13 consumer staples names make the Aristocrat list, including Clorox , PepsiCo , Coke , Wal-Mart and Procter & Gamble , among others.

The next largest group of Dividend Aristocrat stocks is consumer discretionary. Inclusions on the list include McDonald's , Target , Lowe's and VF Corp. .

Investors also have plenty to choose from in the financials, health care, industrials and materials sectors. However, the decision is easy when it comes to buying energy, tech, telecom and utilities, as each sector only has one stock as an Aristocrat representative. They include Exxon Mobil , ADP , AT&T and Consolidated Edison .
Find Potential Payers

Figuring out which companies may pay dividends is a daunting task for any investor. Think about Apple , which has a massive cash hoard yet does not reward its shareholders with a dividend.

Still, Wells Fargo says as third opportunity for investors on the hunt for yield emerges with lower-than-average payout ratios and high free cash flow growth. The case is made stronger by the massive amount of cash on balance sheets (around $2 trillion) and a slowing but stable growth environment.

Adams says that this combination points to three sectors of the market, all of which are rated "overweight" by Wells Fargo's equity strategy team. They are consumer discretionary, technology and health care, all of which have below average but increasing payout ratios.

Adams notes that both consumer discretionary and technology companies have recorded among the fastest growth in free cash flow among sector over the last three years. Meanwhile, both health care and technology have the largest amount of cash sitting on balance sheets, Adams notes.

It hasn't been easy for health care investors this year. After ending 2011 as one of the best performing of the S&P 500's 10 sectors, health care is up only 3% this year, well below the rise of the overall market. Technology and consumer discretionary, meanwhile, have outperformed the broader market this year after lagging last year.

So how to the other sectors measure up for Wells Fargo? Industrials, consumer staples and utilities are rated "marketweight," while energy, materials, financials and telecom are rated "underweight."

-- Written by Robert Holmes in Boston.

Saturday, 11 February 2012

Why Bank of America is the new Citigroup

By Pallavi Gogoi, AP Business Writer

NEW YORK (AP) -- On a normal day, 4 billion shares of stock change hands on the New York Stock Exchange. One in 10 belongs to a single company. It's not McDonald's or IBM, both of which have been on a tear.

It's Bank of America — bailed out by the government three years ago, reviled for being part of the mortgage frenzy that helped wreck the economy and selling for not much more than an ATM fee.

When the market goes up because of positive news about the economy, Bank of America stock shoots up past the stocks of other big banks. When traders get worried about Greek debt, Bank of America takes the biggest plunge.

The big swings are not driven by a fundamental bet that the bank will be more profitable because the economy is getting better or a real concern that it will lose more money than others if there is a default in Greece.

Instead, Bank of America is the stock of the moment for high-frequency trading, the supercomputer-driven buying and selling that barely existed a few years ago and now accounts for as much as two-thirds of U.S. trading.

The bank's single-digit stock price and flood of shares on the market — three times as many as its nearest big-bank competitor — make it an attractive target for hedge funds and banks that employ high-powered, computerized trading.

"The movement of Bank of America stock on most days has nothing to do with Bank of America," says Joseph Saluzzi, co-founder of brokerage firm Themis Trading.

In other words, the stock moves because it moves. Bank of America stock has risen or fallen 1 percent or more on 20 days this year. The Standard & Poor's 500 index has only done it three times.

For the year, Bank of America is up 46 percent, best of the 30 stocks that make up the Dow Jones industrial average. Big banks collectively are up 15 percent.

In high-frequency trading, investors use computer algorithms to exploit small changes in a stock's price. If a computer can seize on a stock like Bank of America a fraction of a second faster than the rest of the market, it can book a tiny profit.

Those pennies add up over tens of millions of shares a day to produce big gains. And when computers rush to buy or sell a stock like Bank of America, it can result in accelerated moves in the stock price. Buying leads to more buying, selling to more selling.

Bank of America is part of the Standard & Poor's 500, and therefore held in mutual funds in the retirement accounts of millions of Americans. And mutual fund managers hate high-frequency trading.

Not only does it make the stocks in their portfolios more volatile, but fund managers fume that high-frequency computers can detect their stock orders, step in to change the price of a stock slightly and pocket a small profit.

"It has nothing to do with the fundamentals," says Leon Cooperman, a billionaire investor, chairman of hedge fund Omega Advisors and former CEO of Goldman Sachs Asset Management.

For computers to move in and out quickly, there must be enough shares available to trade. Bank of America has a truckload — 10.5 billion shares outstanding, compared with 3.8 billion for JPMorgan Chase and 2.9 billion for Citigroup.

The stock traded as high as $15.31 last year. Then investors, worried about how deep the bank's mortgage problems might be, drove it below $10 in July. High-frequency traders pounced, and Bank of America's volume exploded. It was 147 million shares last summer. On Thursday, 477 million shares changed hands.

The low price put it in the sweet spot for high-frequency trading. If a high-frequency operation is trading blocks of 100 shares at a time to capitalize on a 1-cent change, there's a lot less risk working with a $5 stock than a $500 one.

It makes Bank of America "a juicy trade at very little risk," says Adam Sussman, director of research at Tabb Group, a markets advisory firm.

In 2009 and 2010, Citigroup, then part-owned by the government, was in the same spot. Its price was in single digits, and it seesawed day to day. It was often the highest-volume stock — as many as 500 million shares changing hands in one day.

Last year, Citi reduced the number of shares by exchanging one share for every 10. That brought its stock price up — $33 on Wednesday — and high-frequency traders stopped flocking to it. Volume on a normal day has dropped to 50 million.

Bank of America went the opposite way in November and December and sold 400 million more shares to the market to raise $3.5 billion and improve its financial stability.

Today, some investors — the human ones — are buying Bank of America because they like CEO Brian Moynihan's efforts to shore up the company's finances. Other investors won't touch it because they are afraid of the billions Bank of America is still spending to fight mortgage lawsuits. Charles Bobrinskoy, director of research at Ariel Investments, even calls the company "unanalyzable."

But none of those groups is driving the stock. Some days, it moves with little or no tangible reason.

On Jan. 5, the stock jumped 8 percent with no explanation. The Wall Street Journal blogged that the stock was rising on "reports/rumors/blind hopes" about President Barack Obama appointing a new head to the federal housing agency.

On Jan. 10, a Barclays bank analyst lowered his price target on Bank of America stock and Morgan Stanley and Zacks Investment Research downgraded the stock. The stock didn't fall — it popped up 6 percent more.

Analysts say high-frequency trading is partly responsible for the huge daily swings in the market in 2010 and 2011. The technique gained notoriety after May 6, 2010, the day of Wall Street's "flash crash." The Dow fell almost 1,000 points in minutes, bewildering traders and inciting panic. The market recovered to close down 348 points.

High-frequency trading was blamed and attracted scrutiny from regulators. The Securities and Exchange Commission didn't ultimately blame high-frequency trading for the crash, but said it exacerbated the decline. Regulators haven't done anything to curb it.

Sometimes high-frequency traders don't even profit from the trade itself. They buy and sell shares at the same price and make money by sending large orders through the exchanges.

NYSE, Nasdaq and others want to attract the most traders. So they offer rebates of 20 to 32 cents per 100 shares to traders who send in large orders. On the electronic exchange NYSE Arca, traders who can move 35 million shares pocket a quick $112,000.

"Rebates will be the same no matter what the price, so the computers keep trading all day long," says Keith Bliss, senior vice president at brokerage firm Cuttone & Co.

Bank of America says it has no position on high-frequency trading. At some point it could reduce its shares, as Citi did. But the bank is focused on strengthening its finances, the reason it sold more shares in November and December.

Bank of America's chief financial officer, Bruce Thompson, told reporters in January that the bank isn't likely to buy back stock this year. So for now, those human investors will have to buckle up for the ride.

Thursday, 9 February 2012

Seven Secrets of Self-Made Multimillionaires

By Grant Cardone

First, understand that you no longer want to be just a millionaire. You want to become a multimillionaire.

While you may think a million dollars will give you financial security, it will not. Given the volatility in economies, governments and financial markets around the world, it's no longer safe to assume a million dollars will provide you and your family with true security. In fact, a Fidelity Investments' study of millionaires last year found that 42 percent of them don't feel wealthy and they would need $7.5 million of investable assets to start feeling rich.

This isn't a how-to on the accumulation of wealth from a lifetime of saving and pinching pennies. This is about generating multimillion-dollar wealth and enjoying it during the creation process. To get started, consider these seven secrets of multimillionaires.

No. 1: Decide to Be a Multimillionaire -- You first have to decide you want to be a self-made millionaire. I went from nothing—no money, just ideas and a lot of hard work—to create a net worth that probably cannot be destroyed in my lifetime. The first step was making a decision and setting a target. Every day for years, I wrote down this statement: "I am worth over $100,000,000!"

No. 2: Get Rid of Poverty Thinking - There's no shortage of money on planet Earth, only a shortage of people who think correctly about it. To become a millionaire from scratch, you must end the poverty thinking. I know because I had to. I was raised by a single mother who did everything possible to put three boys through school and make ends meets. Many of the lessons she taught me encouraged a sense of scarcity and fear: "Eat all your food; there are people starving," "Don't waste anything," "Money doesn't grow on trees." Real wealth and abundance aren't created from such thinking.

No. 3: Treat it Like a Duty - Self-made multimillionaires are motivated not just by money, but by a need for the marketplace to validate their contributions. While I have always wanted wealth, I was driven more by my need to contribute consistent with my potential. Multimillionaires don't lower their targets when things get tough. Rather, they raise expectations for themselves because they see the difference they can make with their families, company, community and charities.

No. 4: Surround Yourself with Multimillionaires - I have been studying wealthy people since I was 10 years old. I read their stories and see what they went through. These are my mentors and teachers who inspire me. You can't learn how to make money from someone who doesn't have much. Who says, "Money won't make you happy"? People without money. Who says, "All rich people are greedy"? People who aren't rich. Wealthy people don't talk like that. You need to know what people are doing to create wealth and follow their example: What do they read? How do they invest? What drives them? How do they stay motivated and excited?

No. 5: Work Like a Millionaire - Rich people treat time differently. They buy it, while poor people sell it. The wealthy know time is more valuable than money itself, so they hire people for things they're not good at or aren't a productive use of their time, such as household chores. But don't kid yourself that those who hit it big don't work hard. Financially successful people are consumed by their hunt for success and work to the point that they feel they are winning and not just working.

Related: How to Conquer Your Sales Fears

No. 6: Shift Focus from Spending to Investing - The rich don't spend money; they invest. They know the U.S. tax laws favor investing over spending. You buy a house and can't write it off. The rich, in contrast, buy an apartment building that produces cash flow, appreciates and offers write-offs year after year. You buy cars for comfort and style. The rich buy cars for their company that are deductible because they are used to produce revenue.

No. 7: Create Multiple Flows of Income - The really rich never depend on one flow of income but instead create a number of revenue streams. My first business had been generating a seven-figure income for years when I started investing cash in multifamily real estate. Once my real estate and my consulting business were churning, I went into a third business developing software to help retailers improve the customer experience.
Lastly, you may be surprised to learn that wealthy people wish you were wealthy, too. It's a mystery to them why others don't get rich. They know they aren't special and that wealth is available to anyone who wants to focus and persist. Rich people want others to be rich for two reasons: first, so you can buy their products and services, and second, because they want to hang out with other rich people. Get rich -- it's American.

Tuesday, 7 February 2012

5 Career Resolutions Everyone Should Make

When you're not happy at work, making a New Year's career resolution is easy: Get a new job. (Or, get a raise, snag that promotion, make it through a work week without using profanity—plenty to choose from.)

But when things are going well, you should still be setting work-related goals for yourself. And what better time to do it than the new year?

If you need some inspiration, we've compiled five career resolutions that everyone should make. Choose a couple or resolve to do them all—we guarantee you'll set yourself up for success in 2012.
1. Have an Annual Career Check-Up

You probably think about your job every day, but when was the last time you really thoughtabout it? Kick off 2012 by taking yourself out to lunch or coffee, and writing down how you're feeling about your career. What makes you happy, and what would you like to change? Is your current job really what you want to be doing? Or, at the least, is it helping you reach your goals? Also do some salary research—is your income in line with your field and position?

Consider this process an annual check-up for your career health. If you feel good about everything—great! But if there are things that could be improved, think about how you can fix them this year, whether that's taking on new responsibilities, working towards a promotion, or keeping your eye out for that next position.

2. Update Your Resume (and Everything Else)

Keeping your resume up-to-date is important for several reasons. For one, if a recruiter or a friend-of-a-friend calls out of the blue with a great job opportunity, you're going to want to have it ready to go. Plus, it's a lot easier to update your accomplishments periodically, when they're fresh in your mind, rather than trying to add in a couple of years of experience all at once.

And while you're getting your resume in shape, go through the rest of your documents too—refresh your portfolio, edit your LinkedIn bio, and update (or create) a personal list of accomplishments (a running tally that you don't hand out, but that's helpful for talking points for cover letters and interviews). Also shoot your references a note to say hello—but really to make sure you have their updated contact information.
3. Add a Bullet to Your "Skills" Section

Even if you're not adding a new job to your resume this year, you can still add to the other sections! Make it your goal in 2012 to add at least one new bullet to "Skills" or "Education." Are there technical skills that would make you more competitive in your field? Tools that could make your job (or your boss' job) easier? A management class that would better position you for a promotion?

For inspiration, check the LinkedIn profiles of your colleagues a step or two higher than you current position, and think about how you can add their areas of expertise to your own skill set.

4. Expand Your Network

Contrary to popular belief, the best time to network isn't when you're looking for a job—it's long before then. Why? Having a broad, diverse network already in place will make the job search that much easier—and besides, people tend to be happier to meet you when you don't have that desperate "please help me get a job now" tone in your voice.

And before you say "I hate networking" and move on to the next resolution, remember that there are plenty of ways to make new connections outside of hitting the industry luncheon circuit. You could ask your boss to pay for a conference that looks interesting, ask a former co-worker and her new co-workers out to a happy hour, or, at the very least, join some LinkedIn groups.

At minimum, try to meet one new person every month (you'll have a dozen new contacts by this time next year!). If you're feeling really ambitions, try Classy Career Girl's 4×4 Networking Challenge to meet four new people and strengthen four existing relationships—every month!

5. Be More Productive

There are plenty of techniques out there to help people be more productive—check out the Pomodoro Technique, time blocking, and anything on WorkAwesome. Different approaches work for everyone, but I guarantee there's some method or trick out that will work for you, and help you save time, streamline a process, or just generally get stuff done a better way. So, make it goal to try at least four new ones this year, and see what works for you. (For bonus points: organize your inbox so you're not spending an hour each day deleting Groupons and sale announcements.)

Career advancement is a year-round process, but why not let the momentum of January help kick-start your success? Here's to a great year!

How to Handle Uncomfortable Situations at Work

Whether it's a stinky coworker or an inappropriately dressed assistant, you're guaranteed to run into some awkward circumstances at work from time to time. Here are five of the most uncomfortable, and some advice on how to handle them.

1. Your coworker slacks off constantly, while you're hard at work. The solution: Try to ignore it. Sure, it's possible your boss is letting your colleague get away with this behavior, but it's also possible that you don't realize your boss is addressing it behind the scenes. Either way, the answer for you is the same: If it's not affecting your work, it's not your business. If it does affect your ability to do your job--because you have to take on extra work, or because you're dependent on your coworker to help you do your own job--then raise it with your boss from that perspective, keeping the focus on how it affects your productivity.

Of course, if you're the slacker's manager, then you need to address it forthrightly.

2. Your assistant's outfits reveal far more of her than you're comfortable seeing. The solution: Couch the discussion in terms of dress code and professional image. Say something like, "Jane, you're a great employee and I feel a bit awkward about bringing this up, but some of your blouses are more revealing than you might realize. You're very professional otherwise and I don't want this to impact people's perceptions of you. I'd like to ask that you raise the neckline on your blouses."

Have this conversation at the end of the day, so that she doesn't have to spend the rest of the day feeling self-conscious about what she's wearing.

3. Your coworker's strong perfume makes your throat close up whenever she's near. The solution: Make the problem about you, not about her. Say something like, "Karen, I love your perfume. But I'm allergic to some perfumes and have some respiratory issues when I'm around strong ones. It's lovely, but do you think you could wear less of it while at work?"

4. Your colleague monopolizes every meeting with long, rambling off-topic rants. The solution: Speak up! Redirect the conversation by saying, "Turning the topic back to where we started, we need to cover A, B, and C before we wrap up." Or when he pauses for breath, say, "I'd love to hear what others think about that." But if you're the one running the meetings where this happens, you should also talk to your coworker privately. Tell him, "I appreciate hearing your input, but I want to make sure that we're hearing from other people as well. Next time, I'd love it if you'd help me encourage others to contribute."

5. Your coworker has terrible body odor. The solution: First of all, if you're not this person's manager, considering bringing this to the manager to handle. This is an extremely awkward conversation, and you might as well take it to the person who gets paid to have it.

But if you are the fragrant employee's manager, think about how you'd want it handled if it were you. You'd probably want someone to bring it to your attention kindly and discreetly. Be honest, direct, and as nice as possible. Start by mentioning that his work has been good (assuming that it has been) and then say something like, "I want to raise something that's awkward, and I hope I don't offend you. You've had a noticeable body odor lately. It might be a need to wash clothes more frequently or shower more, or it could be a medical problem. This is the kind of thing that people often don't realize about themselves, so I wanted to bring it to your attention."

Alison Green writes the popular Ask a Manager blog where she dispenses advice on career, job search, and management issues. She's also the author of Managing to Change the World: The Nonprofit Leader's Guide to Getting Results and former chief of staff of a successful nonprofit organization, where she oversaw day-to-day staff management, hiring, firing, and employee development. She now teaches other managers how to manage for results.

Wednesday, 1 February 2012

5 Out-of-Date Job-Search Tactics

By Liz Ryan

“Is it still correct to use ‘Dear Sir or Madam’ in a cover letter?” a reader asked in an e-mail.

“That isn’t such a great idea,” I wrote back. “No one uses ‘Dear Sir or Madam’ anymore, unless they’re actually writing to a madam, such as Heidi Fleiss.” I’m not sure my e-mail correspondent caught the joke.

It’s not that using out-of-date job-search approaches brands you as older. Rather, it’s that using no-longer-in-fashion job search techniques marks you as out of touch.

Employers pay us, in part, to be aware of trends and phenomena that affect the workplace. Working people (and job-seekers) should follow the news, keep a bead on our changing world, and stay abreast of changes in business, technology, politics, and cultural shifts. That isn’t an unreasonable expectation. If a job-seeker isn’t curious and perceptive enough to notice that the last time he saw “Dear Sir or Madam” on a letter was around the time Chevy Chase impersonated Gerald Ford falling down the stairs, how will he notice what’s changing in his field?

Here are five formerly useful, now dangerous job-search approaches that hark back to an earlier age. Get them out of your job-search repertoire, pronto.

1. Dedicated Résumé Paper and Envelopes. Don’t use nubbly beige or pink or stone-grey résumé paper, or any other kind of special paper or matching envelopes, in your job search. Dedicated-use résumé paper is a 1980s artifact. Most of your résumés will reach employers electronically, in which case the employer will print it out. For résumés you print on your own, use plain white bond paper. (If you want to use a heavier stock than usual, do it.) Keep résumé formatting simple. You don’t need horizontal lines or curlicues, unless you are yourself a creative person, in which case you can go hog-wild with artistic expression. What matters in your résumé is its content. You won’t win any points with a résumé or cover letter on fancy paper that whispers, “I have a stack of Christopher Cross cassettes in my car.”

2. Creaky Cover Letter Language. When I read “Dear Sir or Madam,” I instantly get a picture of a person wearing white gloves and carrying tiny mother-of-pearl opera glasses in her handbag. Don’t get me wrong—I have opera glasses and I wish white gloves were still in style. They’re not. Never use “Dear Sir or Madam”—or its cousin, “To Whom It May Concern”—in a cover letter for the same reason. In 2012, companies are porous. We can find our hiring manager’s name in two seconds using LinkedIn. We are obliged to try: Correspondence that begins “To Whom It May Concern” means death to a job search. “Dear Hiring Manager” is just as bad. Find the name of the relevant person or lob a résumé into the Black Hole and skip the cover letter altogether.

3. Here’s Why You Should Hire Me. People get hired when a hiring manager believes, intellectually and emotionally, that the person sitting in front of him or her can do the job. It isn’t a linear process. That’s not great news to people who believe that power comes from their degrees and certifications because those folks are often more comfortable pushing their skills out in front of them than sitting and talking with a manager in a way that inspires confidence and trust. But tons of job-search books and articles nonetheless encourage job-seekers to grovel and beg, as though any manager has ever been convinced of an applicant’s heft and power by hearing the applicant say: “Please hire me—I’ll do anything you want!”

Groveling doesn’t work, which is why compiling and mailing goofy lists such as “here are 10 reasons you should hire me” are terrible things to do. When we write a post-interview thank-you note or e-mail, we should use it to continue the substantive conversation that started during a job interview, not to mewl and beg for a job. We never, ever want to construct lists of reasons an employer should hire us. We won’t convince anyone of our value that way. If the reasons to hire don’t come through in an interview, you’ve already missed the boat.

4. Endless Bullets. It used to be the thing to create long lists of bullets following each job listed in your résumé. Nowadays, time and attention are in short supply. Limit yourself to two or three bullets for each of your past jobs. A short, bulleted point that tells the reader what you’ve gotten done in your career and how you roll—“When our two biggest rivals merged, I launched a grass-roots e-mail marketing campaign that ramped sales 20 percent”—beats the heck out of long lists of tasks and duties or general statements like “solved tricky customer service issues.” Use your résumé to tell your story. Give it a human voice, a breezy tone, and quick, pithy stories to bring your power across on the page. No one cares about your daily tasks. (Most of us can extrapolate those from your job titles, anyway.)

5. Gratuitous Research. I warn job-seekers about the Hermione Granger Effect, the tendency for eager job-seekers to try to win gold stars from hiring managers for their teacher’s-pet-type preparation, research, and general submissiveness. Sure, it’s always appropriate to learn about the companies you’re targeting for your job search, and LinkedIn, ZoomInfo, Glassdoor.com, and other company-research sites make that task easier. Your research has value for what it tells you about your next employer’s business situation, recent changes, and competitive challenges.

Still, the last thing you want to do as a job-seeker is seek brownie points by whipping out a file folder full of clippings at an interview or by saying, “I spent the weekend researching your company.” That’s groveling. You should act as a consultant and business adviser during a job search. Do whatever research you need to do—and keep quiet about it. If you ask a pithy, research-fueled question like “What’s your take on the Acme Explosives-Toontown Motors merger? That’s got to be having some ripple effects for your firm,” you’re advancing a business conversation, not trying to get a pat on the head.

Watch out for these five destructive job-search practices, and you’ll be unstoppable. A wise individual once told me: “When people are in themselves fully, they’re larger than life.” Get out of your head, show up on a job search to experience the moment, and see what great things result.

How to Land a New Job

By Ben Baden

Whether it's rewriting your cover letter, reviewing the way you approach interviews, or rethinking what kind of job will make you happy, here are some tips for landing a new job in the new year. You'll hear from authors, career experts, career coaches, and even entrepreneurs.

Position yourself as a thought leader in your industry. Create a professional blog and write insightful posts about industry trends and advice. Comment on other top blogs to increase your visibility within those communities. Join and participate in niche communities, such as LinkedIn groups related to your expertise and skills. Share relevant articles (and your own content) on Twitter, Facebook, and Google+. Not only will this help to develop your online presence, but you'll inadvertently network with people who might lead you to your next job opportunity.

Heather R. Huhman is a career expert, experienced hiring manager, and founder & president of Come Recommended, a content marketing consultancy for organizations with products that target job seekers and employers.

Let a job find you. If you are a job seeker, you need to shift your focus. Instead of spending all of your time identifying jobs and applying, you should also think about how to help people who want to hire you, find you. Ramp up your networking efforts. A Jobvite study showed 89 percent of U.S. companies will use social networks for recruiting in 2012 and 73 percent of social hires are via LinkedIn. In its job-seeker survey, Jobvite found 78 percent of job seekers who credited their current job to social networking named Facebook as the key factor in landing their position and 42 percent mentioned Twitter. Ignore any of these key social networks at your own risk.

Miriam Salpeter is a job search and social media consultant, career coach, author, speaker, resume writer, and owner of Keppie Careers.

Write a new cover letter. If you're still using a generic cover letter that simply summarizes your resume, you're missing out on one of the most effective ways to get an employer's attention. In 2012, throw out that old letter and start writing new ones for each job for which you apply. In this job market, you can't afford to squander an entire application page repeating what's on your resume. Instead, use your cover letter to provide information about how you're fit for the job; information that isn't available on your resume, such as personal traits, work habits, and why you're excited about the position. For instance, if you're applying for an accounting job that requires top-notch organizational skills, and you're so neurotically organized that you color-code your bills every month, most hiring managers would love to know that about you. And that's not something you'd ever put in your resume, but the cover letter is a perfect place for it.

Alison Green writes the popular Ask a Manager blog where she dispenses advice on career, job search, and management issues.

Bring questions to a job interview. When an interviewer asks you if you have any questions, make sure you do. And make sure they're good ones. Having smart questions will show an interviewer that you are discerning about the company for which you work, that you have prepared for the interview, and that you're familiar with the company. Spend some time looking at company reviews online and reading the latest news about the company and about the industry overall. Possible question topics include: corporate culture, organizational structure, day-to-day responsibilities of the position, the company's standing in the industry, and the company's five-year plan.

Luke Roney is content manager for CareerBliss, an online career community dedicated to helping people find happiness in the workplace.

Follow up after an interview. If you are genuinely interested in the job after the interview, make a habit of sending a follow-up note of appreciation. While a thank-you note doesn't guarantee you'll get the job, it certainly won't hurt you. Not only is it a gesture of common courtesy, it's a perfect place for you to reiterate your interest and show the hiring manager why you are the right person for the job. It also gives you the chance to add a detail about your background that you may have not had the opportunity to explain in the interview or to just simply reinforce the connection. Sending a follow-up note via email is acceptable and quick, however, a hand-written note will set you apart from the competition.

Lindsay Olson is a founding partner and public relations recruiter with Paradigm Staffing and Hoojobs, a niche job board for public relations, communications and social media jobs.

Create your own business. When you look at the history of business over the last 100 years, you will find that many of today's most successful companies started in the 1930s--the same decade as the Great Depression. The fact is, innovation and business growth comes out of downed economies because entrepreneurs are problem solvers (and there are certainly enough problems to be solved in times such as these). We are in the age of the entrepreneur. The new economy has forever changed the social norms of yesteryear, so 2012 is as good a time as any to join the entrepreneurial revolution. So break free of the resume life, start something small that can grow organically with hard work and undying passion, and make it in this world on your own.

Scott Gerber is the founder of the Young Entrepreneur Council and co-founder of Gen Y Capital Partners.

4 Ways to Get a Promotion in 2012

By Heather Huhman

Things are looking up for the job market in 2012, but we're not out of the woods yet. If you're hoping for a promotion in the new year, be aware that it will be tough--but not impossible.

Follow these four tips to get a promotion and climb the corporate ladder even in a stagnant economy:

1. Focus on achievements. No one gets a promotion without being valuable to a company, and the best way to show your value is by focusing on your achievements. Rather than describing your day-to-day duties, focus on things you accomplished at your current position, namely, specific results.

Using numbers is a great strategy. For example, "increased profits by 40 percent" or "doubled sales in the first quarter" give tangible, measurable amounts of value you provided your company. When talking to your manager about a promotion, make sure to convey your value in the form of your achievements.

2. Ask for more. Show that you're ready to take the next step by taking on more responsibility. Ask for--and volunteer for--more tasks and projects, especially those that correspond with your desired post-promotion position. Also, take the initiative and go the extra mile on anything you're assigned. In order to get a promotion, you need to show you're not only able to handle extra responsibility, but able to produce quality work at the same time.

3. Up your skills. Show your employer that you're committed to a future at your company and to a higher position by investing in some professional development and training programs. Staying on top in the business world means keeping your skills up-to-date with the newest technology, best practices, etc.

Not sure what skills you should improve? Look into the skills necessary for the position you want. What are some skills people at that level have? More importantly, what are some skills people at that level should have but don't? If you can offer a necessary skill that's currently lacking at your desired level, you're offering your employer a great opportunity to promote.

4. Be patient. Even though hiring is expected to rise this year, companies are still bouncing back from the recession and the economy is still tough. If you've made it clear you want a promotion and have done your best to showcase your achievements, capabilities, and skills, the rest is out of your hands. It may be the case that your company isn't in a position to promote at the moment; while this is disappointing, it's a situation that will hopefully change in the future. Keep up the good work, and keep making your goals known.

Have you been promoted recently? Share your tips with us below.

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