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5 Out-of-Date Job-Search Tactics

2012-02-01T01:48:00.000+08:00

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It’s not that using out-of-date job-search approaches brands you as older.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

2012-02-01T01:47:00.000+08:00

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

2012-02-01T01:45:00.000+08:00

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.

Tax Deductions: Enjoy Them While You Can

2012-01-28T12:06:00.001+08:00

By Andrea Coombes

Two-thirds of U.S. taxpayers claim the standard deduction, but if ever there was a time to make the most of valuable tax deductions and credits, it might be now, before it’s too late.

Given the general tenor in Washington these days, there’s no telling which tax breaks will survive and which will disappear.

Already some tax perks are gone. Remember Schedule L? On that now-defunct form, taxpayers could claim above-the-line deductions (that is, no itemizing necessary) for certain disaster losses, sales taxes paid for the purchase of a new car, and a limited amount of property taxes. Those benefits are not available on your 2011 return.

And the tax credit for homeowners who make energy-efficient improvements? That’s worth just $500 in 2011, down from $1,500 in previous years — and it’s a lifetime total so if you claimed it before, there’s a good chance you’ve wrung that tax break dry. Tax mines that could blow up your return

“Over the last couple of years we’ve lost a few credits and deductions,” said Mark Luscombe, principal tax analyst with CCH Inc., a Riverwoods, Ill.-based tax publisher and a unit of Wolters Kluwer.

That makes doing your taxes “maybe a little bit simpler,” he said, but “those deductions were all saving someone some money probably.”

And the outlook for other tax breaks is far from certain. The so-called tax extenders — a group of tax breaks that Congress generally renews each year — expired at the end of 2011. That includes, among other things, a provision for older Americans to make a tax-free IRA distribution to a charity, a deduction for college tuition and a deduction for state and local sales taxes.

Will they, or won’t they?

It’s not the first time the tax extenders have expired. In the past, lawmakers renewed them and other tax breaks retroactively. But, while lawmakers eventually may extend some or all of these perks, it’s no sure thing in the current political climate.

And that means a lot of tax uncertainty ahead.

For instance, businesses enjoyed a bonus depreciation perk on 100% of the cost of qualified property in 2011; in 2012, that’s down to 50% and it’s unclear whether the more generous allowance will be resurrected. Similarly, small businesses enjoyed a $500,000 limit for expensing business assets under Code Section 179 in 2011; that drops to $125,000 in 2012 and will fall to $25,000 in 2013 if Congress doesn’t act, according to CCH Inc.

Paying for college costs? The American opportunity credit is worth up to $2,500 (and up to $1,000 of that is refundable) for certain higher-education expenses, but under current law it’s not available after 2012. In 2013, that credit goes back to being the Hope credit, worth up to $1,500, nonrefundable.

And consider the tax credit for adopting a child. It’s a refundable credit worth more than $13,000 in 2010 and 2011. In 2012, the credit is down to $12,650 and nonrefundable. In 2013, it’s slated to disappear (a much smaller credit will remain available for adoptions of special-needs children).

Of course, the Bush-era income-tax rates, set to expire at the end of 2012, would affect the broadest swath of taxpayers. If lawmakers don’t act, the top income-tax rate rises to 39.6% from 35% now, the other tax brackets inch higher and the lowest tax rate becomes 15%, from 10% now.

Will Congress bring back any of these tax breaks? That’s tough to say in the current climate of gridlock and lawmakers’ focus on deficit reduction.

“Given the repeal of the estate tax, it wouldn’t surprise me” if lawmakers let the Bush-era tax cuts and other tax breaks lapse, said Jack Nuckolls, the San Francisco-based national director of private client tax services at accounting firm BDO.

He’s referring to the fact that Congress allowed the estate tax to expire in 2010 for one year — a situation that stunned many tax professionals, many of whom expected lawmakers to reinstate the estate tax for that year retroactively. (Eventually, the Tax Relief Act, passed late in 2010, gave estates the option of paying the estate tax or avoiding the estate tax but facing less-generous cost-basis rules for heirs.)

Still, absent an overhaul of the entire tax code — where tax breaks are eliminated and tax rates are reduced, which is much desired by some lawmakers but difficult to attain — some say Congress is likely to extend many of the most popular tax breaks.

“The basic approach of the Republicans is ‘no tax increases,’ and eliminating a tax break without reducing tax rates looks to them like a tax increase,” Luscombe said. And Democrats “might like phase-outs for the wealthy but they want tax breaks generally for the middle-class and poorer people.”

Whatever lawmakers end up doing, Nuckolls said, don’t expect much tax-law legislation before the election in November.

Take advantage of those deductions

So, what’s a taxpayer to do? Planning ahead for your 2012 tax return is no easy task, though some planners say pulling income into this year may make sense, particularly for high-income taxpayers, in case higher tax rates do kick in next year.

High-income taxpayers also face a limit on itemized deductions that’s slated to kick in again next year — that would suggest maximizing deductions as much as possible this year.

At this point in time, of course, it’s near-impossible to change your 2011 tax situation, though you do have until April 17 to make a 2011 IRA contribution.

But one big decision taxpayers still must make — and many may be getting it wrong is whether or not to itemize.
It’s time to make the most of valuable tax deductions and credits, before it’s too late.

Just one-third of tax returns claimed itemized deductions in 2009, according to CCH. Certainly, taking the standard deduction — worth $5,800 for single filers on 2011 returns, up from $5,700 a year earlier (double that if you’re married-filing-jointly) — is a good call for many taxpayers. And it’s much easier than tracking receipts and calculating your tax breaks. But at least one study found that many people who take the standard deduction are overpaying taxes.

As many as 2.2 million tax returns claimed the standard deduction when itemizing would have reduced their tax bill, according to a 2002 report, based on 1998 data, by the U.S. Government Accountability Office, the investigative arm of Congress. Taxpayers overpaid by an estimated $945 million, with about 24% of those taxpayers overpaying by more than $500 each and 76% overpaying by $500 or less. GAO report

Meanwhile, other data show that taxpayers are claiming hefty sums, and likely reducing their tax bills substantially. For instance, for people with adjusted gross income of $50,000 to $100,000, the average deduction claimed for interest paid is $10,133; for taxes paid, $6,247; and for charitable contributions, $2,775, according to CCH Inc., based on 2009 data. (The figures are the average for the taxpayers in that income group who claim the deduction.)

Among taxpayers with adjusted gross income of $250,000 or more, the average deduction claimed for interest is $25,527; for taxes paid, $48,317; and for charitable contributions, $18,488.

Next time you start up your tax software or get out your tax forms, make sure you run the numbers to see whether itemizing makes sense for you.

Andrea Coombes is MarketWatch's personal finance editor, based in San Francisco.

9 Things You Should Know About Your Credit Card Receipt

2012-01-28T12:05:00.000+08:00

By Melody Warnick

You may know them as those annoying scraps of paper that litter your purse or flutter from your wallet at inopportune moments, but receipts for credit card transactions are actually worth paying attention to.

Here's what you probably didn't know about them, but should:

Receipts are more secure than you think ... Unless a merchant made a big mistake, you won't see your whole credit card number on a receipt. That's because the federal Fair and Accurate Credit Transactions Act -- an amendment to the Fair Credit Reporting Act that took effect in 2006 -- legislated that for better financial security, only the last four or five digits of your card number can appear. That's why you see something like XXX-XXXX-1234 instead. Your card expiration date can't show either.

... but receipts aren't totally thief-proof. Your truncated card number isn't enough to steal, but those digits "should still be treated as sensitive, confidential information," says Jamie May, chief investigator at AllClear ID, an identity protection company. Scam artists who get their hands on even part of your card number can use it to phish for the whole number by posing as your credit card issuer or utility company over the phone. "Your card company will never call you and ask you to give them your whole card number," May says. "A good rule of thumb is to hang up and call them back at a number you know is theirs."

Receipt numbers aren't just gobbledygook. Besides the recognizable parts of your receipt, like your truncated card number and the date, are a slew of mysterious numbers. They're not alien communications; they're codes that identify the store to the company that processes their credit card payments -- for instance, a merchant ID number, an approval code, a reference sequencing number and sometimes a terminal number to identify which cash register took the payment. They're generally the same on every receipt issued by the same store. Consider them behind-the-scenes details that you can safely ignore.

Store copies and customer copies are the same. You've eaten a nice restaurant meal, tallied the tip and signed the credit card receipt -- only to realize that you've walked off with the wrong copy. "It's usually not a problem," says Heather Petersen, CEO of National Merchants Association, a payment and transaction processor. Most companies now put the tip and signature line on both copies of the receipt, so it's not a big deal if you signed the wrong one. Even if you left only an unsigned copy of the receipt, your dinner will still get charged.

You can sign as Mickey Mouse, but you shouldn't. Speaking of signatures, they matter more than you think. In an ideal world, a cashier should compare the signature on your receipt to the one on the back of your credit card. However, that rarely happens these days, and certainly no one at the bank is scrutinizing electronic signatures. That doesn't mean you're free to scrawl whatever you want, though. "This is a legally binding contract," says Petersen. "It states right on there that the undersigned agrees to pay." If the seller does notice that you signed a silly name, he can void the transaction. Plus, if you need to dispute a fraudulent charge, the signature can be a key bit of evidence. Signing your receipt "Kim Kardashian" will not help your case.

Your receipt and your bill may not always match. When your credit card bill arrives, pull out your receipts and make sure what you signed for is actually what you were charged, paying particular attention to transactions where you wrote in a tip. It's easy for a cashier to mis-key the wrong amount or to fraudulently add a few bucks to your tip. Plus, if you messed up on your math, your cashier will generally go by what the total is -- but not always. "It could be a case where they take the liberty of saying, ‘I'm pretty sure they meant $5, so I'm going to charge $5,'" says May. If something is off, your credit card receipt gives you the ammo to dispute the charge with your credit card company.

It's wise to keep your receipts around. "By far the best reason for archiving receipts is in case of an IRS audit," says Jake Brereton, marketing manager for Shoeboxed, a company that digitizes customers' receipts. But it's also helpful in case you need it to use a warranty, get a refund challenge a charge or (duh!) make a return. With Shoeboxed, you mail in an envelope of receipts and wait for them to be added to your cloud-based archive; basic service starts at $10 a month. To do it yourself, file receipts for a year or two, then shred.

Old-fashioned isn't best. Remember those clunky machines that cashiers once used to make an imprint of your credit card? Occasionally you still see them (or hand-written receipts) when small businesses lack the infrastructure to process your credit payment electronically. It seems like an innocent throwback, but "those are riskiest kinds of transactions," warns May, because you have no idea what happens to your credit card number afterwards. If a salesperson hauls out the old-school imprint machine, it's best to go get some cash.

You don't have to get a receipt. If you don't plan on keeping your receipt, don't ask for it. "It's better to not have it than throw it in the trash," points out Petersen -- not only because it's not secure, but because it's a waste. Plus, many retailers have moved toward electronic receipts and ask whether you'd like your receipt emailed to you vs. receiving a paper receipt. According to some estimates, it takes approximately 9.6 million trees to create the 640,000 tons of paper that go into receipts each year. So, if you choose an emailed receipt or just hit "no receipt" when you pay at the pump, you'll be doing yourself a financial and environmental favor.

The eurozone: still reasons to be fearful; The widespread adoption of fiscal austerity will keep hobbling the region

2012-01-26T09:47:00.001+08:00

Vikram Khanna

(SINGAPORE) In town last week was Klaus Regling, CEO of the European Financial Stability Facility (EFSF), which is the eurozone's main bailout fund for troubled sovereign debtors.

Part of his mission, it appeared, was to reassure the growing tribe of eurosceptics that the eurozone was well in control of its crisis, which is the stuff of headlines these days.

Candid and straightforward, he made a strong case for the durability of the eurozone and left no questions unanswered. But for all that, it was still a less than fully convincing effort.

Mr Regling, whom The Economist magazine has dubbed the eurozone's 'Chief Bailout Officer', arrived at a slightly awkward moment; on Jan 16, ratings agency Standard and Poor's (S&P) had downgraded the EFSF (from AAA to AA+), after having three days earlier cut the ratings of nine eurozone sovereigns (including France, Italy and Austria).

He pointed out that the cut in the EFSF's ratings (which came from only one credit rating agency) would make little difference to its lending capacity or to confidence in the institution. On this, he was probably right; there was certainly no discernible negative reaction from the markets. The EFSF will live on and might even thrive.

However, the rest of Mr Regling's presentation to the media here was not as reassuring as he perhaps wanted it to be.

He began with a slide titled: 'Don't underestimate Europe!' He pointed out that the European Union, which comprises 27 member states, is the largest economic area in the world, accounting for about 20 per cent of the world's GDP.

He claimed that Europe's economic performance 'has been better than perceived', noting that growth in per capita GDP has been 'identical with the US in the last 20 years'; it is only because of its poorer demographics (basically lower birth rates) that Europe's absolute GDP growth has been lower.

While Europe is indeed a major engine of growth, from the perspective of its trading partners, its absolute growth rate (as well as import intensity) matters more than its per capita growth rate. Moreover, in the midst of the eurozone crisis, past growth is less important than present and future growth.

And here, the projections for the eurozone are troubling. In its September 2011 World Economic Outlook, the International Monetary Fund (IMF) forecast euro area growth for 2012 at 1.1 per cent, compared to 1.6 per cent for the United States. The OECD Economic Outlook of November 2011 is even more pessimistic for the euro area, projecting growth of just 0.2 per cent, versus 2 per cent for the US this year and 1.4 per cent (versus 2.5 per cent for the US) in 2013.

One of the reasons the eurozone is poised for slow growth, if not recession, in 2012 and 2013 is the widespread adoption of fiscal austerity. This has been enshrined in a so-called 'fiscal compact' championed by Germany and agreed by European leaders last December.

Under this compact, countries will aim to keep their fiscal deficits to no more than 3 per cent of GDP and national debt to 60 per cent. Leaving aside the fact that these targets are far away from where troubled debtors are today, they are the same targets that were agreed under the eurozone's 'stability and growth pact' in 1997. Several countries breached the targets then.

Mr Regling maintained that the difference this time is that enforcement will be stronger; the fiscal and debt targets will be written into countries' national laws. Those who breach them can be taken to the EU's highest court, the European Court of Justice, and face sanctions.

The credibility of these 'enforcement mechanisms' is doubtful, however. At the national level, legal limits on budget deficit levels have had a mixed record. More often than not, political pressure to maintain or increase expenditures prevails over legalisms, or governments tend to find creative 'off-budget' ways to spend what they need to spend.

At the European level, if breaches of deficit and debt levels are exceptions to the rule, it is possible that the violators will be taken to court and sanctioned. But whether that will happen when breaches are more the rule than the exception - as happened with the old stability and growth pact, when even France and Germany were in breach - is moot.

The eurozone also suffers from the fact that, unlike the United States, it lacks a system of easy fiscal transfers. Labour mobility is lower as well, even though it is (in theory) a unified labour market.

Mr Regling explained the measures taken by individual countries, describing Ireland as a 'success story', Portugal as being 'on track' and Spain as 'taking swift action'.

While the accuracy of these descriptions can be disputed, there is no denying that eurozone governments have taken many tough decisions, especially on the fiscal side. The question is whether those were the right decisions. Many economists think not; pursuing fiscal austerity is not what countries should be doing when faced with ballooning deficits and debts in a recessionary environment, and where no easy mechanisms for cross-border fiscal transfers exist.

Mr Regling, in tune with many German officials, urged that investors look more at the medium term - that is, three or more years out. He complained that Anglo-Saxon investors especially (though not Asian investors) were very short- term in their focus and did not pay enough attention to medium-term issues.

To underline the importance of the medium-term view, he drew a parallel with the Asian crisis of 1997/98, pointing out that, at the time, the IMF was much criticised for the tough monetary and fiscal policies imposed on the crisis-hit countries of South Korea, Thailand and Indonesia. But subsequently, these countries emerged stronger. So will it be with Europe, he suggested; the austerity being imposed now will show up in better performance later.

These arguments are problematic. First, on the issue of investors being 'too short-term focused': the fact is that many eurozone debtors do not have the luxury of time. They are faced with having to make bond repayments (or do bond issues) within weeks, and the success of these efforts have frequently been in doubt. In that sense, many of them - most dramatically Greece, but not just Greece - have urgent short-term problems too.

Short-termism therefore comes not from investors' faulty mindsets but from the very nature of the problems of the eurozone. Indeed, any investor accused of excessive short-termism might well respond: when your house is burning, you don't think of the medium term.

The parallel Mr Regling draws with the Asian crisis is also invidious. One of the critical measures that enabled South Korea, Thailand and Indonesia (and Malaysia as well) to restore their competitiveness and recover from the crisis was sharp devaluations in their exchange rates. This option is not available to the eurozone's beleaguered sovereign debtors. Stuck with the straitjacket of the euro, they are forced to engineer sharp 'internal' devaluations - that is, cuts in domestic prices and wages, in some cases of the order of 30 per cent in a single year. Even if this were economically wise (which it isn't), it is politically unworkable, and the fact that few countries have come even close to achieving it is no surprise.

There was, however, one particular area where Mr Regling did have a point. That slide was titled: 'The ECB has taken significant measures.'

After having dithered for the better part of two years, the European Central Bank, under its new president Mario Draghi, has indeed acted decisively and imaginatively. It has cut interest rates (something it should have done back in 2010, if not earlier); continued buying sovereign bonds from the secondary market; and liberalised its requirements for collateral from banks. Most significantly, on Dec 21 last year, it launched a 489 billion euro (S$804 billion) long- term refinancing operation (LTRO) under which it has provided eurozone banks with three-year financing at an interest rate of one per cent.

This facility has helped improve liquidity across the eurozone and enabled banks to shore up their capital as well as reduce their holdings of sovereign debt, which they can park with the ECB as collateral. Some banks have also used the cheap funding to buy sovereign debt, earning a nice spread. The ECB has indicated it will launch yet another LTRO facility in February - which might be even larger than the last.

The ECB's actions have probably prevented a financial meltdown in the eurozone. They are the main reason for the decline in bond yields and the equity market rally we have seen since the start of this year. Indeed, if the zone gets through the sovereign debt crisis in one piece, it would be due in no small part to Mario Draghi's creativity.

However, this creativity does not resolve the fundamental problems of the eurozone, which are essentially too much debt, too few resources to service it, and too few ways to obtain those resources - even from other parts of the eurozone.

So, especially as long as fiscal austerity remains the centrepiece of Europe's strategy to deal with its crisis and policies to promote economic growth remain off the agenda, there remain reasons to be fearful - including about the break- up of the eurozone itself.

Global financial system in danger zone: IMF; It wants to prevent panic deleveraging of assets by banks

2012-01-26T09:22:00.000+08:00

Anthony Rowley; In Tokyo

THE global financial system has moved 'deeply into the danger zone', the IMF warned in a report published last night while calling for the establishment of some kind of 'gatekeeper' mechanism to prevent panic deleveraging of assets by banks in Europe and elsewhere as they seek to shore up capital ratios.

This warning in the IMF's latest Global Financial Stability Report came as the Washington-based financial institution also slashed its growth forecast for the global economy in 2012, following the example set last week by the World Bank.

'Financial conditions have deteriorated, growth prospects have dimmed and downside risks have escalated,' the IMF said in a World Economic Outlook Update, adding that 'the global economy is threatened by intensifying strains in the euro area and fragilities elsewhere'.

In a third report called the Fiscal Monitor Update, also published last night, the IMF further warned that national fiscal policy will have to 'walk a narrow path' in many countries 'as downside risks rise'.

The IMF has downgraded its forecast for global economic growth this year from the near 4 per cent it forecast last September to 3.25 per cent now, chiefly because of the continuing problems in the eurozone.

This is not as severe as the forecast issued last week by the World Bank, which dramatically cut its forecast for global economic growth in 2012 from 3.6 per cent to 2.5 per cent, mainly in the light of problems in the eurozone.

Advanced economies are expected by the IMF to grow at just 1.2 per cent in 2012 compared with 1.6 per cent last year while emerging and developing economies are likely to see just 5.4 per cent growth this year compared to 6.2 per cent in 2011. Even China is forecast to see its growth rate fall to 8.2 per cent in 2012 from 9.2 per cent last year.

But the IMF reserved its strongest warning for what it sees as risks in the global financial system as bank deleveraging poses a mounting threat of contagion across the advanced and developing economies.

'The US and other advanced economies are susceptible to spillovers from a potential intensification of the euro area crisis,' said the IMF, while adding that emerging Europe and other emerging economies are at risk of contagion from the eurozone crisis.

Actions taken so far in the eurozone have helped to improve financial market sentiment but 'sovereign financial conditions remain challenging and downside risks remain', the IMF said.

Chief among these risks is a further round of deleveraging by leading banks in the light of the 'funding challenges' they are facing. 'Public funding should be made available as a backstop' to efforts by banks to raise private capital, the IMF said.

'There needs to be a pan-euro-area facility with the capacity to take direct stakes in banks there,' it suggested.

Meanwhile, a 'macro-prudential gatekeeper' is needed to ensure that deleveraging plans are consistent with sustaining the flow of credit to support economic activity.

A parallel risk to bank deleveraging on the part of banks is the danger of governments tightening fiscal policy unduly, the IMF said. 'Governments should avoid responding to any unexpected downturn in growth by further tightening policies.'

'Countries with fiscal space, including some in the euro area, should reconsider the pace of near-term adjustment' while others such as the US and Japan 'need to clarify their medium-term debt reduction strategies', the IMF said.

How to Shape Up Your Finances in 12 Months

2012-01-24T13:49:00.001+08:00

By Lisa Bertagnoli

All 12 months of a fresh new year means 12 opportunities to get your credit shaped up and your budgeting under control. Here, experts offer one seasonally relevant idea for each month of 2012 to do exactly that.

January: Request your free credit reports.

Why January for this exercise, a favorite among financial advisors? “You want to get financially fit,” says Denise Winston, owner of Money Start Here, a Bakersfield, Calif.-based financial advice firm. Federal law entitles consumers to a free copy of their credit report from each of the three bureaus (Equifax, Experian and TransUnion) each year. To get these reports, visit annualcreditreport.com, the website set up by the three bureaus. Pull all three; each contains different information, Winston says. Review them for accuracy and take steps to fix incorrect information. Letting mistakes slide can cost: Missing an error, and having to settle for a higher interest rate, cost Winston and her husband $15,000 in extra interest on their mortgage.

February: Give your credit cards a break.

For the next 29 days, use cash or a debit card for all purchases. “It’s a good strategy all our counselors talk about,” says Hank Keaton, president and chief executive officer at American Financial Solutions, a nonprofit debt-counseling service in Bremerton, Wash. Keaton recommends stashing cash to pay for the month’s needs in four envelopes: groceries, auto, dining out and miscellaneous expenses. “When it’s gone, it’s gone,” he says. “It’s a simpler, visual way to stick to a budget.” If you have racked up card debt, consider getting a balance transfer credit card with a zero-percent rate to help undo the damage.

March: Start planning your summer vacation.

It’s not too soon to begin vacation planning, particularly if you’re using frequent-flier miles or points to pay (desirable flights and rooms go fast, especially in this economy). Even if you’re not, last-minute airplane rides and hotel rooms are expensive. “The sooner you start planning, the better,” says Keaton from American Financial Solutions. One idea: Look at trip-planning sites for budget-minded bundles on hotel, airfare and car rental.

April: Think charitably, and strategically.

Contributions to legitimate nonprofits (501(c)3s) usually are 100 percent tax deductible, with no dollar limit on the amount you can contribute a year. Before you donate, check out the charity on www.charitynavigator.org or another charity-rating website. Then consider giving via a monthly donation charged to your credit card. The charity will benefit from your regular donation; you’ll benefit from the tax deduction and perhaps a token of appreciation from the charity, says Brian Wodar, director of wealth management research at Bernstein Global Wealth Management in Chicago. Don’t, however “set it and forget it,” he says: Review the charity and amount of the contribution each year, as well as your nonprofit-giving goals, to make sure the two still line up.

May: Use your tax refund wisely.

Households usually get some kind of refund this time of year. What to do with the “free” money? Pay off credit card bills with it, advises Shane Scott, counseling services manager at American Financial Solutions. The goal is a low debt-to-income ratio; ideally with a debt (both credit card debt and secured debt, such as auto loans and mortgages) percentage of no more than 36 percent. “The lower, the better,” Scott says. And adjust your tax withholding using a W-4 form, so next year you minimize your refund. Why loan money to Uncle Sam?

June: Shed some mortgage debt.

If you aren’t underwater (that is, your mortgage is higher than the value of your home), consider paying off your mortgage faster. Making one additional payment per year consistently can save years off a mortgage, thousands of dollars in interest, plus improve your debt-to-income ratio, says Joe Lucey, President of Secured Retirement Advisors, LLC, a financial advising firm in St. Louis Park, Minn. If you can’t manage an entire extra payment, round up to the nearest $100 with each payment. Even with such a small step, “the ultimate savings can really add up,” Lucey says.

July: Take a vacation; keep your budget intact.

Along with your swimming trunks, pack a debit card loaded with the amount earmarked for food, souvenirs, tourist attractions and other vacation necessities, suggests Neil Ellington, executive vice president at Consumer Education Services Inc., a nonprofit credit-counseling firm in Raleigh, N.C. Try your bank for the card -- most will offer the service free of charge, he says. You’ll also get a statement of your purchases. Use that statement to analyze vacation spending, and use that information to create a tighter budget for your next vacation, Ellington suggests.

August: Dial down cellphone spending.

When kids go back to school, texting and phoning escalates; is your cellphone plan up to it? If not, start comparison shopping, says Todd Ossenfort, chief operating officer at Pioneer Credit Counseling, a nonprofit debt-counseling service in Rapid City, S.D. Ossenfort suggests fixed plans (ones that include a set amount of minutes and texts) rather than per-call/per-text plans, “so you don’t have that surprise at the end of the month,” he says. Friends and family plans sometimes offer free calls/texts from users in your network, he adds.

September: Inspect now, save later.

In many parts of the country, September weather is clement enough to get outside and find money-draining leaks and faults in roofs, shingles, windows and insulation. It’s also a good time to do an energy audit, says Karen Carlson, director of education at InCharge Debt Solutions, a debt-counseling agency in Orlando, Fla. One example: Cleaning gutters to allow rainwater to drip off effectively can extend the life of a roof by five to six years, Carlson says. When chilly fall weather sets in, keep the thermostat down, and bundle up in sweaters and warm socks, she adds.

October: Check in on college kids’ spending.

College can play havoc with finances, especially for freshmen not used to budgeting for themselves. This month, have a midterm check-in with students on their spending, suggests Heidi Albert, co-founder of School2Life, a Chicago-based firm that helps teach kids about finances. Review spending for everything from books and school supplies to meals out and dorm-room decorations; look for too many impulse purchases, Albert says. Work with spendthrift students to create a reasonable budget, or hand them a debit card (or prepaid card) with the amount they’ll need to finish the semester.

November: Rein in holiday spending, starting now.

Thanks to Thanksgiving and early-bird specials, the holiday spending spree starts this month. Take the fear factor out of bills by recording credit card charges in your checkbook, advises Mary Hunt, the Cypress-Calif.-based author of “7 Money Rules for Life: How to Take Control of your Financial Future.” “I tell people ‘Wise up, you’ve already spent the money,’” Hunt says. Here’s how: Take your checkbook register with you when shopping. When you make a credit card purchase, record the amount and deduct it from the balance as if you were writing a check. (Hunt uses a red pen to make finding the credit-card transactions easier). When you get your credit card bill, reconcile the bill with your check register, then write a check. “No more surprises,” Hunt says. “It sure keeps you aware of what you’re spending.”

December: ‘Tis the season to pay cash.

Start 2013 off on the right financial foot -- without a huge credit card bill on the horizon. Denise Winston of Money Start Here suggests carrying cash, not credit cards, to the mall. It’s easier to resist temptation with that finite amount of cash in your wallet. Merchants are more willing to bargain, returns beget cash (not a credit card credit a month later) and thus help with cash flow, and cash makes budget-minding easier. “The bottom line -- cash is king,” Winston says. “You can’t spend what you don’t have.”

What the Top 1% of Earners Majored In

2012-01-24T13:46:00.000+08:00

We got an interesting question from an academic adviser at a Texas university: could we tell what the top 1 percent of earners majored in?

The writer, sly dog, was probably trying to make a point, because he wrote from a biology department, and it turns out that biology majors make up nearly 7 percent of college graduates who live in households in the top 1 percent.

According to the Census Bureau's 2010 American Community Survey, the majors that give you the best chance of reaching the 1 percent are pre-med, economics, biochemistry, zoology and, yes, biology, in that order.

Below is a chart showing the majors most likely to get into the 1 percent (excluding majors held by fewer than 50,000 people in 2010 census data). The third column shows the percentage of degree holders with that major who make it into the 1 percent. The fourth column shows the percent of the 1 percent (among college grads) that hold that major. In other words, more than one in 10 people with a pre-med degree make it into the 1 percent, and about 1 in 100 of the 1 percenters with degrees majored in pre-med.

If course, choice of major is not the only way to increase your chances of reaching the 1 percent, if that is your goal. There is also the sector you choose.

A separate analysis of census data on occupations showed that one in eight lawyers, for example, are in the 1 percent -- unless they work for a Wall Street firm, when their chances increase to one in three. Among chief executives, fewer than one in five rank among the 1 percent, but their chances increase if the company produces medical supplies (one in four) or drugs (two in five). Hollywood writers? One in nine are 1 percenters. Television or radio writers? One in 14. Newspaper writers and editors? One in 62.

Undergraduate Degree / Total / % Who Are 1 Percenters / Share of All 1 Percenters

Health and Medical Preparatory Programs	142,345	11.8%	0.9%
Economics	1,237,863	8.2%	5.4%
Biochemical Sciences	193,769	7.2%	0.7%
Zoology	159,935	6.9%	0.6%
Biology	1,864,666	6.7%	6.6%
International Relations	146,781	6.7%	0.5%
Political Science and Government	1,427,224	6.2%	4.7%
Physiology	98,181	6.0%	0.3%
Art History and Criticism	137,357	5.9%	0.4%
Chemistry	780,783	5.7%	2.4%
Molecular Biology	64,951	5.6%	0.2%
Area, Ethnic and Civilization Studies	184,906	5.2%	0.5%
Finance	1,071,812	4.8%	2.7%
History	1,351,368	4.7%	3.3%
Business Economics	108,146	4.6%	0.3%
Miscellaneous Psychology	61,257	4.3%	0.1%
Philosophy and Religious Studies	448,095	4.3%	1.0%
Microbiology	147,954	4.2%	0.3%
Chemical Engineering	347,959	4.1%	0.8%
Physics	346,455	4.1%	0.7%
Pharmacy, Pharmaceutical Sciences and Administration	334,016	3.9%	0.7%
Accounting	2,296,601	3.9%	4.7%
Mathematics	840,137	3.9%	1.7%
English Language and Literature	1,938,988	3.8%	3.8%
Miscellaneous Biology	52,895	3.7%	0.1%

6 Careers to Watch in 2012

2012-01-23T04:41:00.000+08:00

For many people, the new year sparks fresh interest in finding a new job. Some are just looking to switch workplaces, but others are hoping to start or change careers. So where are the jobs?

According to Tig Gilliam, CEO of staffing and recruiting firm Adecco Group North America, they aren't within the government, nor are they in construction. Key indicators of those sectors' slackened openings include post office closures in 2011 and a long-suffering housing market, says Gilliam. However, highly specialized professions, particularly in the healthcare, information technology, and finance industries, should provide a wide-range of employment opportunities. "These sectors have fared well throughout the recession and are poised for growth in the year ahead," Gilliam says. "Finance, mortgage-related, and accounting jobs will show growth based on low interest rates and homeowners opting to refinance."

The Labor Department's projections on the fastest-growing occupations corroborate Gilliam's predictions. According to the Labor Department's findings, here are six careers that should provide plenty of job openings in 2012 and the years to come.

1. Accountant

Accountants are in especially high demand in April. But throughout the year, large firms require the assistance of public accountants to prepare, analyze, and verify financial documents. The Labor Department projects that more than 279,000 accounting positions will become available between 2008 and 2018.

One pleasant perk: Many accountants are their own bosses. The Labor Department estimates that 8 percent of those in the profession are self-employed.

How to nab an accounting job: You'll need a bachelor's degree. For the best job prospects, you should also take and pass the exam to become a certified public accountant, or CPA, which has its own educational requirements. You might also gain a competitive edge if you have a master's degree in accounting or business administration.

2. Registered Nurse

Caring for others could be considered more of a calling than a career. Still, the Labor Department includes registered nurses on its list of professions that will continue to hire plenty of workers in the coming years--an estimated 582,000 nursing jobs will need to be filled between 2008 and 2018. One reason demand remains high is because of the profession's exhaustive number of specializations, which include variances in work setting, medical treatment type, particular diseases, and particular organs.

One pleasant perk: Most RNs work in hospitals, but the Labor Department estimates that 40 percent of employed nurses provide care in homes, schools, and community centers. Those healthcare professionals are likely to keep normal business hours.

How to nab a nursing job: There are three ways to become a nurse. The least common method involves enrollment in a hospital-administered diploma program that lasts for three years. Another route is to pursue an associate degree in nursing at a community or junior college. For more in-depth training and potentially better job prospects and pay, you might consider the third option: pursuing a bachelor's degree in nursing at a four-year college. If you already hold a bachelor's degree, you could opt for an accelerated Bachelor's of Science in Nursing program that takes about 18 months to complete.

3. Computer Systems Analyst

The need for well-trained, information technology professionals is apparent, given our digitized society. People who choose a career in this field are problem solvers whose responsibilities entail building, matching, or fixing a computer system to meet the needs of their clients. Those clients could range from corporations to laid-back Internet start-ups. There should be as many as 108,000 computer systems analyst openings between 2008 and 2018.

One pleasant perk: Computer systems analysts and other IT professionals with advanced specialized knowledge or experience can parlay their skills into independent consulting or may start their own business.

How to nab an analyst job: Most computer systems analysts have at least a bachelor's degree in a technical field like computer science, mathematics, or even engineering. And a complementary graduate degree is preferred for many companies looking to hire in the profession. For example, analysts who work in a corporate setting often pursue a master's degree in business administration.

4. Social Worker

Social workers help people to cope with significant transitions in their lives, like the adoption of a child, the loss of a parent, or the adjustment to sobriety from substance abuse. For the next few years, these types of professionals will be in demand throughout the country, particularly those who specialize in medical and public health (also known as clinical social work). According to the Labor Department, there should be more than 103,000 new positions for social workers between 2008 and 2018, and nearly 58,000 of those are healthcare positions.

One pleasant perk: You could increase your marketability by focusing on a specific niche. Examples include family, child, and school social workers who specialize in deaf children, or clinical social workers who administer to cancer patients.

How to nab a social worker job: The minimum requirement is a bachelor's degree in social work or a related field like psychology and sociology. An increasing number of social workers also hold a master's degree, particularly those who do clinical work. After basic courses are completed, social workers must obtain licensure, granted from sitting exams and practicing a certain number of supervised hours of fieldwork.

5. Dental Hygienist

Of course dental hygienists clean teeth. But they have a handful of additional duties that vary by state. Some hygienists can place fillings, others can administer local anesthetics, and still others remove sutures. All hygienists strive to help educate patients about the best practices for brushing and flossing their teeth and gums, however. And according to the Labor Department, there should be more than 62,000 positions to fill in this profession by 2018.

One pleasant perk: This could be an ideal occupation for someone who requires a flexible schedule. The Labor Department reports that approximately half of all dental hygienists work part time.

How to nab a hygienist job: Aspiring hygienists must study at an accredited dental hygiene program. Those who work in a private office have at least earned an associate degree within their program. Bachelor's and master's degrees are also offered, with which a hygienist could choose to do research or teach. And similar to dentists, hygienists must be licensed by the state in which they practice.

6. Sales Manager and Representative

This profession requires a cool head and a competitive spirit. Sales representatives and their managers are customer service representatives in the most basic sense, seeing as they make sure to keep their paying clients happy and loyal. But they also are charged with bringing in new customers to meet and improve their bottom line. Those in the managerial role are often still salespeople, but they also have the charge to hire, fire, and motivate their team to exceed expectations.

One pleasant perk: While it could be difficult to obtain a sales job and rise in the ranks without a bachelor's degree, it's not impossible. Experience, plus strong communication and sales skills, could serve you just as well in your career.

How to nab a sales job: As mentioned, many sales representatives and managers have a bachelor's degree. Good word-of-mouth also helps, as many people working in this industry completed an internship at the firm where they were eventually hired. Those who are managers most likely ascended through the ranks.

Feng shui investing: year of the dragon

2012-01-19T13:49:00.000+08:00

by Josh Noble

With the year of the rabbit drawing to a close, thoughts turn to the prospects for the year of the dragon. Dragons are said to be highly auspicious, provided their natural ferocity can be kept in check.

Should investors be scared? Or do the soaring wings of the mythical beast offer equity markets a flight into the stratosphere?

CLSA’s Philip Chow, shipping analyst and occasional feng shui master, offered up his findings after a look into the crystal ball using the ancient Chinese art of feng shui.

As a quick reminder, last year was tough. Few investors will miss the timidity of the rabbit – an easily frightened animal, who bolted underground at the very mention of the letters EFSF. The year was also burdened by elemental imbalance, with a dangerous excess of fire and metal. Chinese markets performed poorly.

But the dragon – the only mythical beast among the 12 zodiac signs – is made of sterner stuff. What’s more, 2012 in has no fire in its charts at all, and only a touch of metal, making it a generally smoother ride.

However, the first half of the year looks troubling, with the dragon – a black water dragon to be precise – keeping its head firmly underwater.

The summer months will suffer from a scorching amount of heat, meaning the market is set for a lacklustre first six months, and July could see the worst of it. Sell in May and go away.

Another worrisome reading comes for Angela Merkel. The German chancellor is (zodiac-wise) a wooden horse, and is thus unsuited to a water dragon year. In fact, Chow says Merkel’s charts predict a “shocker of a year”. Assume the eurozone crisis continues throughout, perhaps escalating in the summer.

The dragon, however, is essentially a gamechanger, and is characterised by both dramatic turns of direction, and extreme speed.

August should see an inflection point, with the dragon bursting out of the sea and soaring into the sky. The third quarter rally should be a powerful one.

The reading for heir-apparent Xi Jinping offers further hope. Dragons herald a change in emperor. Historically, new leaders would often “see dragons” just before assuming power, and thus have the blessing of the gods. Xi’s charts look fine – if somewhat unspectacular. If China is about to crash, it won’t be this year.

The flow of money is set to head from east to west. Expect China to keep snapping up eurozone bonds and European assets, and expect capital outflows to continue making their way into Manhattan penthouses. Treasury yields will remain low.

As for sectors, it’s all about water and wood. That means load up on water-related sectors like Macao gaming, shipping, tourism, and woody plays in agriculture and fashion. Of particular interest should be cement – a neat mixture of water and earth.

There’s a saying in Chinese – you can never see the dragon’s head and tail at the same time. That’s because it moves so fast. The rally will run out of steam by December, and dragon is likely to rest for the remainder of the lunar year.

The silk-clad Chow is keen to stress that CLSA’s feng shui index is presented with tongue firmly in cheek. Indeed, last year’s predictions were somewhat off.

But those pondering an August inflection point would do well to mark the Jackson Hole address in the diaries. Any announcement of QE3 from Ben Bernanke could be just the catalyst needed to turn things around.

2012-01-17T07:11:00.001+08:00

The beginning of a new year is usually a good time to reflect on the past in order to make certain resolutions about the coming one. In investing, future success can have little to do with what has worked well in the past. Trying to predict short-term market movements is also generally an investment strategy that can lead you to financial ruin. Keeping these perspectives in mind, below are five of the dumbest things you can do with your money in 2012.

Trade Volatility
Lately, it has been en vogue to consider volatility its own asset class. Trading volatility has become possible through vehicles based off the Chicago Board Options Exchange Market Volatility Index, or VIX for short. A range of exchange-traded funds (ETFs) have been created so that investors can make bets on the extent to which the market bounces up and down. There are even ETFs that let investors gain twice the exposure to market volatility, which can be used to make bets on both advances and declines in the market.

The problem, as with most short-term strategies, is developing a compelling trading strategy capable of predicting market volatility. Trading VIX-related indexes may make sense for hedging near-term market fluctuations, but there is simply not going to be any way to predict market moves with any certainty. Major inflection points in the market are missed by the best investors and include the credit crisis, flash crash and latest concerns over sovereign debt levels in Europe. Without a crystal ball, speculating on future market volatility has to be one of the dumbest things investors can do with their money.

Buy Bond Funds
U.S. interest rates have been on a steady decline since around 1980 when they reached the double digits. These days, shorter-term rates are hovering around zero, while the 30-Year Treasury Bond rate is extremely low at roughly 3%. These low rates qualify as all-time lows in many instances, such as for bank Certificate of Deposits (CDs), mortgages and U.S. Treasury rates.

Savvy investors, including Pimco's Bill Gross, have lamented at the low interest rate environment. Sadly enough, Gross's near-term call on the appeal of U.S. Treasuries has left his flagship Pimco Total Return Fund badly lagging its index and an estimated 84% of its peer group. Given the low historical rates, many see it as only a matter of time before rates start to rise. As bond prices move in the opposite direction of yields, there is the potential for sizable losses for many investors in bond funds. At the very least, investors should consider investing in individual bonds to at least ensure the return of their principal at maturity.

Speculate in Currencies
As with trading volatility, speculating in short-term currency movements is another dubious investment strategy. As with most investing, a long-term perspective can be much more meaningful. The Economist magazine issues a Big Mac Index, the origin of which has been described as a "light-hearted way to make exchange-rate theory more digestible." Namely, it looks at the price of a Big Mac across the world as a proxy for the extent that currencies are either undervalued or overvalued, relative to each other. Specifically, it states "that in the long run, the exchange rate between two countries should move towards the rate that equalizes the prices of an identical basket of goods and services in each country."

Betting on short-term movements in currencies is a certifiably dumb strategy, as shorter-term fears and emotions can push currency relationships far off from what is reasonable over the long haul. The carry trade, or borrowing in a currency with a low interest rate to invest in one with a higher interest rate, is a case in point. A popular carry trade in recent years involved borrowing in the Japanese yen, and it has unraveled at various times, including during the credit crisis in 2007 and natural disasters earlier this year. As with many short-term market movements, many speculators were caught by surprise.

Load Up on Gold
A market strategist at Fifth Third Bank recently suggested that investors in gold implement a gambling strategy that also works in Las Vegas. After a big win or run up in any investment, put your initial capital back in your pocket and continue to play with house money. This minimizes the potential that an investment, such as gold, which has had an amazing price run, stops for a breather or gives up most of its original gains. Investors in residential real estate back in 2005 and 2006 would have been well served with this strategy, and while gold may continue to have a strong run (gold is up more than 150% over the past five years, while the stock market is flat), buying it aggressively at these levels is likely a very foolish trading strategy.

Invest in Social Media
The fact that many social media firms continue to push through initial public offerings (IPOs) in the face of a difficult stock market should serve as a solid indicator that these companies have unknown underlying business appeal over the long haul. Firms including Groupon, LinkedIn, Facebook, Zynga and Twitter may be growing sales rapidly, but they are spending just as much to advertise and boost sales.

Collectively, they have unproven business models, barriers to entry are very low as competing sites are rather easy to develop, and hundreds of millions of dollars of investment capital are pursuing only a handful of good ideas in the space. It all spells a recipe for disaster, for investors looking to invest these days.

The Bottom Line
Smarter investment choices include buying into blue-chip stocks and even residential real estate in many markets in the U.S. With a long-term perspective, many wise investment choices can be made. The dumber ones generally consist of trying to predict short-term market movements and piling into investments that have had very strong price runs or are extremely popular.

22 Signs That We Are On The Verge Of A Devastating Global Recession (GMF, FXE, UUP, SHLD, XLF)

2012-01-16T11:19:00.000+08:00

Michael Snyder: 2012 is shaping up to be a very tough year for the global economy. All over the world there are signs that economic activity is significantly slowing down. Many of these signs are detailed later on in this article. But most people don’t understand what is happening because they don’t put all of the pieces together. If you just look at one or two pieces of data, it may not seem that impressive. But when you examine all of the pieces of evidence that we are on the verge of a devastating global recession all at once, it paints a very frightening picture. Asia (NYSEARCA:GMF) is slowing down, Europe (NYSEARCA:FXE) is slowing down and there are lots of trouble signs for the U.S. economy (NYSEAWRCA:UUP). It has gotten to a point where the global debt crisis is almost ready to boil over, and nobody is quite sure what is going to happen next. The last global recession was absolutely nightmarish, and we should all hope that we don’t see another one like that any time soon. Unfortunately, things do not look good at this point.

The following are 22 signs that we are on the verge of a devastating global recession….

#1 On Thursday it was announced that U.S. jobless claims had soared to a six-week high.

#2 Hostess Brands, the maker of Twinkies and Wonder Bread, has filed for bankruptcy protection.

#3 Sears (NASDAQ:SHLD) recently announced that somewhere between 100 and 120 Sears and Kmart stores will be closing, and Sears stock has fallen nearly 60% in just the past year.

#4 Over the past 12 months, dozens of prominent retailers have closed stores all over America, and one consulting firm is projecting that there will be more than 5,000 more store closings in 2012.

#5 Richard Bove, an analyst at Rochdale Securities, is projecting that the global financial (NYSEARCA:XLF) industry will lose approximately 150,000 jobs over the next 12 to 18 months.

#6 Investors are pulling money out of the stock market at a rapid pace right now. In fact, as an article posted on CNBC recently noted, investors pulled more money out of mutual funds than they put into mutual funds for 9 weeks in a row. Are there some people out there that are quietly repositioning their money for tough times ahead?….

Investors yanked money out of U.S. equity mutual funds for a ninth-consecutive week despite a bullish 2012 outlook from Wall Street and a December rally that’s carried over into the New Year.

#7 There are signs that the Chinese (NYSEARCA:FXI) economy is seriously slowing down. The following comes from a recent article in the Guardian….

Growth had slowed to an annual rate of 1.5% in the second and third quarters of 2011, below the “stall speed” that historically led to recession.

#8 The Bank of Japan (NYSEARCA:FXY) says that the economic recovery in that country “has paused“.

#9 Manufacturing activity in the euro zone (NYSEARCA:FXE) has fallen for five months in a row.

#10 Germany’s economy actually contracted during the 4th quarter of 2011. At this point many economists believe that Germany (NYSEARCA:EWG) is already experiencing a recession.

#11 According to a recent article by Bloomberg, it is being projected that the French (NSYEARCA:EWQ) economy is heading into a recession….

The French economy will shrink this quarter and next, suggesting the nation is in a recession as investment and consumer spending stagnate, national statistics office Insee said.

#12 There are a multitude of statistics that indicate that the UK (NYSEARCA:EWU) economy is definitely slowing down.

#13 In the UK, the average price of a gallon of gasoline has risen to an astounding $9.67.

#14 It is being reported that the Spanish (NSYEARCA:EWP) economy contracted during the 4th quarter of 2011.

#15 Bad loans in Spain (NYSEARCA:EWP) recently hit a 17-year high and the unemployment rate is at a15-year high.

#16 According to a recent article in the Telegraph, the Italian government is forecasting that there will be a recession for the Italian economy in 2012….

The Italian government predicts GDP will contract 0.4pc next year, but many economists fear the figure is optimistic.

“We can say without mincing words that we have already slipped into recession,” said Intesa Sanpaolo analyst Paolo Mameli. “We expect GDP to keep contracting for the next 3-4 quarters.”

#17 Italy’s (NYSEARCA:EWI) youth unemployment rate has hit the highest level ever.

#18 The unemployment rate in Greece for those under the age of 24 is now at 39 percent.

#19 Greece is already experiencing a full-blown economic depression. About a third of the country is now living in poverty and extreme medicine shortages are being reported. Things have gotten so bad that entire families are being ripped apart. According to the Daily Mail, hundreds of Greek children are being abandoned because the economy has gotten so bad that their parents simply cannot afford to take care of them anymore. The note that one mother left with her child was absolutely heartbreaking….

One mother, it said, ran away after handing over her two-year-old daughter Natasha.
Four-year-old Anna was found by a teacher clutching a note that read: ‘I will not be coming to pick up Anna today because I cannot afford to look after her. Please take good care of her. Sorry.’

#20 In Greece, large numbers of people are simply giving up on life. Sadly, the number of suicides in Greece has increased by 40 percent in just the past year.

#21 In many European countries, the money supply continues to contract rapidly. The following comes from a recent article in the Telegraph….

Simon Ward from Henderson Global Investors said “narrow” M1 money – which includes cash and overnight deposits, and signals short-term spending plans – shows an alarming split between North and South.
While real M1 deposits are still holding up in the German bloc, the rate of fall over the last six months (annualised) has been 20.7pc in Greece, 16.3pc in Portugal, 11.8pc in Ireland, and 8.1pc in Spain, and 6.7pc in Italy. The pace of decline in Italy has been accelerating, partly due to capital flight. “This rate of contraction is greater than in early 2008 and implies an even deeper recession, both for Italy and the whole periphery,” said Mr Ward.

#22 The major industrialized nations of the world must roll over trillions upon trillions of dollars in debt during 2012. At a time when credit is becoming much tighter, this is going to be quite a challenge. The following list compiled by Bloomberg shows the amount of debt that some large nations must roll over in 2012….

Japan: 3,000 billion
U.S.: 2,783 billion
Italy: 428 billion
France: 367 billion
Germany: 285 billion
Canada: 221 billion
Brazil: 169 billion
U.K.: 165 billion
China: 121 billion
India: 57 billion
Russia: 13 billion

Keep in mind that those numbers do not include any new borrowing. Those are just old debts that must be refinanced.

As I mentioned at the top of this article, things do not look good.

The last thing that we need is another devastating global recession.

As I wrote about yesterday, the U.S. economy is in the midst of a nightmarish long-term decline. The last major global recession helped to significantly accelerate that decline.

So what will happen if this next global recession is worse than the last one?

Sadly, the people that will get hurt the most by another recession will not be the wealthy.

The people that will get hurt the most will be the poor and the middle class.

So what should all of us be doing about this?

We should use the time during this “calm before the storm” to prepare for the hard times that are coming.

As always, let us hope for the best and let us prepare for the worst.

But things certainly do not look promising for the global economy in 2012.

Courtesy of Michael Snyder, The Economic Collapse

Here’s how having a beer or cappuccino could help you nab your next banking job

2012-01-15T23:56:00.000+08:00

by Shree Ann Mathavan

You no doubt know the drill when it comes to formal interviews, but the line can get a little fuzzy when it comes to meeting prospective employers at a café or bar. With this in mind, we present a guide to coping with cappuccino meetings.

Although not exactly new to Asia, these sessions are growing in popularity, says Annie Yap, managing director, AYP Associates in Singapore. She cites a recent case of a candidate who was hired after three coffee meetings – even signing the appointment letter took place outside the office.
What

They are informal dialogues between you and the line manager. The entire team won’t be sizing you up at a coffee shop, so relax. The discussions are typically the purview of senior professionals (VP and above), especially in the front-office and private banking, says Yap.

Although the get-togethers are usually preliminary chats before the formal interview, Johannes Tan, senior consultant, financial services and banking, PSD in Shanghai, has seen them happen afterwards, such as when a candidate expresses doubts about making the job switch. “Having a coffee with the line manager to discuss these concerns can really help. Leaving the familiarity of their current firm can be tough for experienced hires, so it helps if they can get support from the new firm,” says Tan.
Where and when

The meetings can take place in cafes, hotel lobbies, pubs (if it’s after work) or at a restaurant over a meal.
Why

The rationale is simple. Most of these candidates are fairly senior and given that the talent pool in their field may be small, they wouldn’t want rumours spreading that they have been interviewing at a rival firm. From an organisational perspective, casual meetings are logical as well. Yap explains: “The whole hiring cycle can take a very long time because of bonuses and interviews, so it makes sense that line managers meet up with potential candidates first – in anticipation of headcount. It gives them a head start.”

Another factor why they are especially prevalent during this time of the year is because candidates aren’t willing to commit to jobs before bonuses are doled out, adds Tan.
Who pays

The onus is on the firm to foot the bill.
Dress code

The setting may be casual, but this isn’t some boozy shindig. Behave as you would in a formal interview. “Put your best foot forward. You need to present yourself well and this means dressing like you would in a proper interview,” advises Tan.

Even if the meeting takes place over the weekend, Yap advises candidates to avoid jeans. Smart casual is preferred with collared shirts and slacks for the men and dresses for women.
Preparation

“Prepare exactly as you would for a structured interview. This means finding out as much as you can about the role, the hiring manager and the company,” says Yap. Tan also recommends asking the potential employer lots of questions. And of course the usual protocol, like not being late, applies.
Money

Discussing compensation can be very tricky in a casual setting and recruiters we spoke to had mixed views on the issue. Yap says: “I don’t think it’s presumptuous to bring salary up because if expectations aren’t managed, it could end up wasting the time of both parties.” Keep it simple: state your current remuneration and the increase you hope to get. “As long as you aren’t being too demanding, it won’t create a negative impression.”

Tan on the other hand, thinks it’s best not to bring up compensation at the initial stage. If the subject does arise, he suggests giving a flexible salary range. “Convey the fact that you are open. You don’t want to appear to move jobs only because of money, which can be a huge turn-off.”

Investing For Success in 2012

2012-01-15T23:46:00.002+08:00

By Sheraz Mian

Stocks were all over the place last year, but finished close to the starting point. Should we expect more of the same?

Or, as some doomsayers never tire of reminding us, should we get ready for that day-of-reckoning stemming from problems in Europe and fiscal imbalances in the U.S?

I don't buy into those scenarios. In fact, I firmly believe that we entered 2012 in much better shape than in the last several years. Don't let the endless harangues from doomsayers about Europe and China scare you away from the stock market.

I am not brushing the problems under the rug; Europe's debt problems and questions about China's growth are real and remain a concern. But there are reasons to believe that we will have a lot more clarity on these issues in the coming months than was the case last year.

I am not someone who always sees the glass half-full. My sunny outlook for 2012 has a sound fundamental basis, which I want to share with you here. Suffice it to say, I see a lot better performance this year than what we saw in 2011.

What Will 2012 Bring?

Many of the issues that kept the market in check last year are still with us and will likely remain so through at least the first few months of the year. But I expect visibility to improve going forward, driving most of the gains for 2012.

Recessionary worries about the U.S. have eased, with the economy expected to grow a little over 2% in 2012. It is hard to get excited over that level of growth. But a 2% growth pace starts looking a lot more attractive relative to the outlook for the other major developed economies.

Importantly, this is plenty of growth for the corporate sector to sustain its profitability momentum. With the fourth quarter earnings season just getting into high gear, it is expected to show a lower growth rate than what we have become accustomed to in the last two-plus years. But that shouldn't be much of a worry given where we are in the earnings cycle. With margins effectively at peak levels and top-line gains getting hard to come by due to the relatively softer global economic backdrop, growth rates were bound to come down. And they have.

Using different valuation metrics, I arrive at stocks generating gains in excess of +10% from current levels this year. But I am not looking for a nice straight up move in 2012. In fact, I envision two distinct phases in the stock market this year, with each requiring its own set of investment strategies.

How Investors Can Exploit Greed and Fear

2012-01-15T23:46:00.001+08:00

By Tim Lee

There are many adages and sayings in the money management business, but one of my favorites comes from Warren Buffett: "Be fearful when others are greedy and greedy when others are fearful."

Mr. Buffett has made a fortune many times over using that logic. However, for most investors that sage advice is difficult to follow. Here, I'd like to offer some insight into how to do just that in 2012.

I recently read a research report on the cyclical nature of the stock market that ranked various industry groupings by past performance. The report highlighted the tendency of groups which have performed well over the past couple of years to perform poorly in the coming year, and vice versa.

I'll cut to the chase and focus on two groups: one of 2011's best performers and one of the year's worst performers. Based on their 2011 performance relative to other industry groups, trading companies were ranked in the top five. In contrast, asset managers were ranked toward the bottom for 2011 as well as for the past several years.

Where are others looking greedy?

The trading companies group is currently trading at a relatively high valuation, with the group's average P/E ratio sitting at over 30. Compare this with the S&P 500 index's trailing multiple of 14.5 and you can see that these companies have been valued quite richly by the market over the past year. This group includes firms which distribute products and provide MRO (Maintenance, Repair & Overhaul) services. Given the propensity of market rhythms to favor an industry group, and then throw the same group out of favor, it seems that these stocks have had their few fat years and may be ripe for taking profits.

Where are others looking fearful?

In contrast, the asset managers group has been beaten up with the rest of the financial sector over the past couple of years. It seems as though any stock in the financial sector has the hangover of the 2008 crisis and the specter of the European crisis to contend with before investors even examine a cash flow statement. However, unlike many of the large banks, or the mortgage finance sector, these firms have limited direct exposure to the residential real estate markets, and they have pretty consistent, if variable, revenue streams. This tone of fear around the sector, and the industry group's poor relative performance in 2011, suggests this could be a place for investors to look more closely. This is especially true if the U.S. economy continues to produce surprising growth, or if the U.S. markets show strength in 2012.

Conclusion

In general terms, market volatility seems unlikely to abate in the short term as headlines drive traders from "risk-on" to "risk-off" and back again. To quote another old market adage: "You'll never go broke taking profits." We believe it makes sense in today's environment to be conservative and take profits when the investments you've made have performed favorably. With that said, we continue to believe that finding the sectors and groups that have strong fundamental underpinnings and a favorable structural environment offers the best opportunities.

Maintaining the discipline to be selling when the markets seem to have no top, and buying when the future looks darkest, has historically produced the best investment returns. As always, we believe that the foundation of any successful investment strategy should be formed through careful and detailed planning, with the specifics of each individual's situation driving appropriate investment allocations.

Timothy R. Lee, CFP®, is a managing director and cofounder of Monument Wealth Management in Alexandria, Va., a full-service investment and wealth management firm. Monument Wealth Management is backed by LPL Financial, an independent broker-dealer and Registered Investment Advisor, member FINRA/SIPC. Monument Wealth Management has been featured in several national media sources over the past several years. Follow Tim and Monument Wealth Management on their blog Off The Wall, on Twitter at @MonumentWealth, and on their Facebook page.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for individuals. To determine which investment is appropriate, please consult your financial advisor prior to investing. All performance references are historical and are not a guarantee of future results. Stock investing involves risks, including loss of principal.

How to get a pay raise

2012-01-15T23:45:00.000+08:00

By Daniel Bortz

Another year, another piddling pay raise? For some, sure.

The average increase in base salary is expected to be just 3% in 2012, up only a hair from last year's 2.9%, according to human resources consulting firm Mercer.

Still, managers are concerned about retaining top talent, which explains why the best performers will see a brighter 4.6% on average. And if you're among the office MVPs, you've got a decent shot at persuading the boss to give you even more than that. Use these strategies:

Time it right

Most companies planned for 2012 salaries by the end of 2011, says Catherine Hartmann, a principal with Mercer. "But finalizing the budget seeps into January and February," she adds.

So speak up now. By the time your performance review comes around -- in February or March, for most workers -- the cash could be committed to somebody else.

Will you get a raise in 2012?

Get in the boss's corner

Execs are under a lot of pressure these days, so starting the conversation with money can doom your case. Engender a positive feeling by immediately emphasizing your commitment to the employer, advises Kate Wendleton, president of career coaching firm The Five O'Clock Club.

"Say how much you love the job, that you're excited about the direction of the company, and speak to how you see yourself as a devoted contributor," she says.

Prove your worth

As you come up with your talking points, highlight responsibilities and accomplishments that align most with the firm's priorities.

"If you're the key contact for the biggest clients, you have leverage," says Caroline Ceniza-Levine of New York career coaching firm SixFigureStart.

Career resolutions: How to negotiate a raise

Keep in mind that juggling multiple jobs also affords you power, says Wendleton: "If you left, they'd have to replace you with two or three people."

She advises writing on the left side of a piece of paper the things you were hired to do, and on the right what you're doing. Provide this as evidence of your growing role, being careful not to appear resentful.

Name your number

Conventional wisdom held that you should wait for the boss to throw out a dollar figure.

"But on average, the first person to make an offer gets closer to what they want," says Northwestern management prof Adam Galinsky, who has done research on the subject.

Send The Help Desk your money questions

Further, a recent study by University of Idaho psych professor Todd Thorsteinson found that those who requested implausibly high raises -- teasingly asking for $1 million -- ended up with 9% to 10% more on average than those who didn't.

Still, in this economy, a really bold request could annoy your boss. So use payscale.com and salary.com to find the market value for your job. Then, says Thorsteinson, ask for an amount 7% to 10% higher -- a meaningful jump but not so big that your boss will think of you as a joke.

Invest in Yourself to Retire Well Reuters

2012-01-15T23:30:00.000+08:00

By Linda Stern

I have a particularly resourceful friend who lives a pretty good life, despite never having quite enough money. She is hardworking and popular with her wide circle of friends, neighbors and colleagues. She networks, barters and works for what she really wants.

A former chef turned teacher, she finessed enough grant money to pay for a two-week trip to cooking school in Italy. She knows where all the good used furniture stores are, has bartered home cleaning for a two-week stay in a vacation home in Vermont, and is working on an arrangement now that will get her free housing in France for several weeks this summer. Tres bien!

I'm pretty sure my friend will do really well in retirement, though I strongly suspect she has nowhere near the $1-million plus that you would think her lifestyle would require. She has a different kind of capital: skills, smarts, and a great social network.

"Everyone is focused on the money, but when somebody retires, they usually manage," said Larry Cohen, director of Consumer Financial Decisions, a consulting group that studies consumer behavior. "If they don't have the money, they have human capital like skills and education, and social capital in terms of friends, neighbors or a church. All these things help."

Cohen predicts that "The (retirement) solutions for the future are going to involve more of these other forms of capital."

Experts are increasingly focusing on the non-financial assets that workers can bring into retirement to help them manage on fewer dollars than might be optimal.

The Retirement Income Industry Association, a group that represents a cross section of insurance, investment and research firms, has its own program for training and certifying "retirement management analysts." The training handbook used in that program includes items such as membership in religious and civic organizations, and the ability to earn money as forms of "capital" that are foundational in the new retirement world.

So what are the best non-financial forms of capital that pre-retirees can invest in now to ensure a good retirement? Here are a few.

Investing knowledge. Even (or especially) in this era of auto-enrollment in 401(k)s and the proliferation of financial advisers and products, nothing good can come of being uninformed about investing. The more you know, the more you can grow small contributions into a retirement kitty you can live off of. Break it into small bits and learn a little every month. Learning about mutual funds, stocks, taxes, portfolio management and the like will help you, at the very least, choose the right adviser. And it will also help you stretch your income after retirement.

A money-earning skill. The baby boom may well have psychological problems adjusting to the "withdrawal" era of their lives. It could be harder than you think to pull money out of a treasured 401(k) plan to go see a movie or make a car payment. So develop something now that can earn money in the future. Some popular money-earning side business include eBay sales, handyman work, cooking, babysitting and driving.

Practical money-saving skills. Gardening, appliance repair, lawn mowing, scratch cooking, vacuuming... got it? If you're the kind of person who currently pays others to do all of these things for you remember this: In retirement you'll have more time and less money. For every $100 a month you want to pull out of your tax-deferred retirement account, you need to have roughly $37,500 in assets in that account. So, save $200 a month in do it yourself activities and that's $75,000 you won't need to have saved.

Good friends and neighbors. Can you drive each other to the airport? Share big bargain packages of toilet paper and tomatoes? Check in on each other when you haven't surfaced for a while? Does someone in the crowd make their own tomato sauce and another fix cars? Or own a beach house or a garden tiller? There's no end to the savings that a supportive collective like that can generate. And, of course, people who are connected to others enjoy life more and may be able to entertain themselves more cheaply.

The best body possible. Healthcare costs for retirees will top $350,000 for their lifetimes, the Insured Retirement Institute, an industry group, reported yesterday. And that's for the healthiest folk. The better shape you are in going into retirement, the less you'll spend on pain pills, back braces and more. Of course, you can't control everything that befalls you, but moving into retirement with strong bones and muscles, a good sense of balance, and cardiovascular fitness will improve your retirement fun and cut your retirement expenses.

That hard-to-define craftiness. Retirement can be like a second chance; the rules come off and you can do things you might not have considered while you were in your main buttoned-down job. Practice creativity now, just like my friend, and you'll be ahead of the game when your new job is making that smaller-than-you'd-hoped retirement fund last a long and happy time.

Skyscrapers have 'unhealthy' link to financial crises: bank

2012-01-11T18:53:00.001+08:00

The construction of enormous skyscrapers has an "unhealthy" link with looming financial crises and investors should therefore keep a close eye on China and India, Barclays Capital said Wednesday.

China is currently the biggest builder of skyscrapers, while booming India is constructing the second largest tower in the world, the group said in its latest annual 'Skyscraper Index' survey.

"Our Skyscraper Index continues to show an unhealthy correlation between construction of the next world's tallest building and an impending financial crisis -- New York 1930; Chicago 1974; Kuala Lumpur 1997 and Dubai 2010," Barclays Capital said in a report.

"Yet often the world's tallest buildings are simply the edifice of a broader skyscraper building boom, reflecting a widespread misallocation of capital and an impending economic correction.

"Investors should therefore pay particular attention to China, today's biggest builder... and India, which with just two completed skyscrapers, now has 14 skyscrapers under construction."

Barclays Capital also warned of a "bubble" in China, whose property boom has been powered by cheap liquidity.

"Looking forward, using skyscrapers under construction, it is evident that the skyscraper boom in China continues to grow," it said.

"China will complete 53 percent of the 124 skyscrapers under construction over the next six years, expanding the number in Chinese cities by a staggering 87 percent.

"China's skyscrapers are not only increasing in number -- it now has 75 completed skyscrapers above 240 metres in height -- but the average height of the skyscrapers that it is building is also increasing as past liquidity fuels the construction boom."

The bank said India was set to experience its largest boom in skyscraper construction.

"China is not alone in the growth of its building bubble ... India it seems is playing catchup," it said.

"Today India has only two of the worlds 276 skyscrapers over 240 metres (788 feet) in height, yet over the next five years it intends to complete 14 new skyscrapers, in what will prove to be its largest skyscraper building boom.

"Worryingly as well, India is also constructing the second tallest building in the world, the Tower of India, which should complete by 2016.

"The writing, so to speak, would seem to be already on the glass curtain walling. For if history proves to be right, this building boom in China and India could simply be a reflection of a misallocation of capital, which may result in an economic correction for two of Asias largest economies in the next five years."

How You Can Prosper More and Risk Less

2012-01-03T23:18:00.000+08:00

It’s not sexy. It flies in the face of conventional wisdom. But Zvi Bodie says it’s possible to prosper and to do so with less risk.

That’s the big idea behind the Boston University finance professor’s just-published book, aptly titled “Risk Less and Prosper.” (Published by Wiley, to be released Dec. 27 with co-author Rachelle Taqqu.)

“This is essentially a different approach to investing for ordinary people who are saving and investing for retirement, kid’s tuition, but essentially investing over their whole life,” Bodie said in an interview. “What we try to stress is that you should always start from the least risky end of the spectrum, which really is insurance. You want to make sure that you have your basic needs covered.”

According to Bodie, the basic idea is that you should save and invest so that you match your future liabilities or expenses with assets designed to pay for that obligation, and to do so with investments that are guaranteed and that — at a minimum — keep pace with inflation.

And the sort of investments that you might consider include Treasury Inflation Protected Securities (TIPS) and I-Savings Bonds. “You are trying to make sure that whatever you save maintains its purchasing power,” Bodie said. “Those are the starting low-risk end-of-the-spectrum instruments. And that is the natural starting place.”

Though it’s contrary to popular opinion, Bodie said, much of what is considered to be in the realm of investing today actually really belongs in the realm of insurance. And that investing — which involves risk-taking — is much more akin to speculating.

“Do you want to speculate with your kid’s college tuition?” he asked.

The answer, according to Bodie, is no.

But that’s not what happens today. Today, many people invest in risky assets, stocks in particular, in the hope that their investments will appreciate enough in value to pay for future needs, be it college or retirement. And that strategy could lead to less prosperity, not more prosperity, according to Bodie.

So, according to Bodie, the first step to risking less and prospering more however starts with human capital. “The issue of counting your human capital, your human wealth in the form of your future earning power as a central element in your portfolio,” is critical said Bodie. “It’s our human capital that constitutes most of our wealth. And so the riskiness of that human capital and how procyclical it is, how secure you feel your career is, how long you can continue in that career, maybe on a part-time basis. Those are the key determinants of how much risk you can take in the rest of your portfolio.”

From his point of view, it makes no sense to just look at one’s stock and bond portfolio separate from one’s human wealth.

To be sure, there’s a cost associated with implementing the risk less and prosper strategy. And it might mean work longer rather than saving more. “If you are not saving enough to cover your needs in retirement, I would say for most people, the easiest thing to do, instead of changing your savings rate is to plan to work longer … even if that means part-time,” said Bodie. “That will add an awful lot to your human wealth.”

Saving more is important, but he said the vast majority of American might not be able to do that. “It’s hard to do,” he said.

Given that, he said many Americans would benefit from investing in learning to improve their future earning power. “When you invest in learning different skill so that let’s say you can switch to a different job in your later years, that you like more, or that’s less demanding physically, that’s investment. It doesn’t count as saving because you are spending on taking courses.”

So how then can one risk less and prosper?

Figure out how much you would have to save to afford your retirement plans, your consumption, spending in retirement years. If you earn zero in real terms (such as with I Savings bonds) anything that you contribute will maintain its purchasing power, but it won’t grow in terms of purchasing power. “That’s where you should start,” he said. “So let’s say anything I contribute, anything I save is just going to maintain its purchasing power, how much would I have to save or when can I afford to retire? And then you ask: ‘Suppose I invest half the money in the stock market so how does that affect things?’”

“Well that means you will likely earn a higher rate of return, but you could earn a much lower rate of return,” he said. “And that’s what taking risk means. If you don’t like the results you get using just I Savings bonds and other inflation-protected Treasury securities because they are not going to beat inflation, because they are just going to keep pace with inflation, and you say I can’t afford to do that so I’m going to invest in the stock market, you can actually do worse, you could do a lot worse by investing in the stock market.”

To be fair, Bodie is not suggesting that one shouldn’t invest in the stock market. Rather, investors should be aware that this is the speculative part of investing. “That’s what taking risk means,” he said. “And it doesn’t matter how long your time horizon is. So often, you will hear the wildly-believed fallacy that if you have a long time horizon, the risk of investing in stocks goes away, that is not true.”

To prosper while risking less, according to Bodie, is to invest in inflation-protected securities to the point it can cover for one’s minimum standard of living and then invest the balance in index funds. “That’s the way to do it,” he said. “It can be implemented very easily.”

Robert Powell is editor of Retirement Weekly, published by MarketWatch.

Expect 'longish' period of slow growth: Lim Hng Kiang

2012-01-03T12:06:00.002+08:00

By Lim Yan Liang

Singaporeans must brace themselves for a longish period of slow growth, as the global economy is expected to be in for a slowdown, said Minister for Trade and Industry Lim Hng Kiang.

The Government, however, does not expect an economic crisis. Growth this year for Singapore is still expected to be positive, slowing to between 1 and 3 per cent, from last year's 4.8 per cent.

Singaporeans can also expect some reprieve from inflation, which is expected to ease this year, he said on Monday. The minister was speaking to reporters at the sidelines of the launch of the Labrador Nature and Coastal Walk on Monday.

His comments came a day after Prime Minister Lee Hsien Loong urged Singaporeans to take this year's slowdown in their stride.

'No global financial crisis for now'

2012-01-03T12:06:00.001+08:00

SINGAPORE - A full-blown global financial crisis, which will plunge the Republic into recession, is not on the cards for now, according to Trade and Industry Minister Lim Hng Kiang.

Still, with the euro zone crisis delicately poised, the Government is prepared to switch gears and tackle any potential fallout, he said yesterday.

Speaking ahead of the release of advance gross domestic product (GDP) estimates today, Mr Lim said that, despite weaker-than-expected fourth-quarter figures dragging down full-year growth to 4.8 per cent last year, the Government is maintaining its economic growth forecast of between 1 and 3 per cent this year.

Mr Lim was speaking to reporters on the sidelines of the opening of the Labrador Nature & Coastal Walk. He noted that the economic performance between October and last month was weighed down by the pharmaceutical and electronics sectors. Nevertheless, the Q4 figures come on the back of a better-than-expected performance in the previous quarter, he said.

Mr Lim said: "Right now, our expectation is that the global economy will slow down but there is no global financial crisis ... and we, in fact, have to prepare for a somewhat longish period of such slow growth."

But he added: "If the euro crisis is mismanaged and there is a global financial crisis, then of course we will turn into a different gear and take different actions."

Despite signs of an improving United States economy and a rebound in China's manufacturing output, Mr Lim reiterated that Singapore "cannot take things for granted".

"In the beginning of last year, the prospects looked better, and there was a lot of talk about shoots of growth. Then, we had a downturn in the second quarter. So similarly, we are watching the situation very carefully," he said.

On Sunday, at a community event, Prime Minister Lee Hsien Loong had called on Singaporeans to take this year's slowdown "in our stride". Responding to questions on what could be in store for the coming Budget, Mr Lee noted that last year's S$3.2-billion package had provided "considerable help".

Economists Today spoke to all but ruled out the prospect of a global crisis for now, which is why they expect the coming Budget to be relatively modest.

CIMB-GK economist Song Seng Wun said: "It won't be as generous as the election budget last year, and we are unlikely to see the Government embark on an expansionary budget."

Mr Song felt that the measures could focus on "helping businesses cope with a tougher environment", such as delaying the progressive increase in foreign worker levies. Keeping its powder dry, the Government will be "prepared to spend more if required to" later on, when the health of the global economy becomes clearer, he said.

Barclays economist Leong Wai Ho noted that policymakers have "probably started crisis planning" even though the situation remains under control.

"Trade-wise, the US and China have always been more important to Singapore and Asia, so if it's just Europe choking and sputtering, we can live with that. But if Europe causes a banking crisis ... that might actually curtail US confidence and spending, that's when all bets are off," he said.

Mr Leong noted the market concerns about European countries such as Italy being unable to raise enough money to roll over their debts in the months ahead. But "doomsday predictions" are unwarranted, given the backing of the European Central Bank, he said.

Concurring, Mr Song said that, in any event, "central banks and governments are a lot more prepared this time round, and reaction time will probably be much faster to ensure liquidity is available".

While Singapore's economy is headed for a slowdown, Mr Lim noted that inflation is somewhat "persistent" due to factors such as global commodity prices, "particularly fuel and oil prices". Other causes include the Government's domestic policies on housing and car ownership, he added.

Reiterating that core inflation is "not unusually high", Mr Lim said: "So if you are an owner of a HDB flat, the housing prices don't affect you, and if you are not buying a car, the car prices also don't affect you."

Nevertheless, the Government expects headline inflation numbers to fall this year, he added.

Investing in 2012: Resolve to keep it simple

2012-01-02T23:40:00.001+08:00

By Walter Updegrave

NEW YORK (CNNMoney) -- I think too many investors (myself included) try to outsmart the market by constantly fine-tuning their portfolio. Wouldn't we all be better off just keeping it simple by holding a small handful of index mutual funds or ETFs and just rebalancing that portfolio once a year? -- P.C., Boise, Idaho

As we reflect back on the tumultuous events of 2011, I think "keep it simple" ought to be at or near the top of everyone's list of investing resolutions for the New Year.

Because if there's one thing we should have learned over the last year it's that investing on the basis of speculation, whim or fear is a loser's game that's incompatible with building wealth over the long term.

Investors' fortitude was really put to the test this year, however. Three major themes dominated the investment scene in 2011: the notion that bonds were a bubble about to burst; that the haggling over increasing the debt ceiling would send the markets into a death spiral; and that the European debt crisis would unleash Armageddon on the global financial markets.
'Terrified' of the stock market: What should I do?

Given the financial press's typically hyperbolic coverage of these issues, it's no surprise that I received a steady stream of emails throughout the year from terrified investors ready to dump their investments and huddle in cash.

So how did investors who acted on all all those dire predictions make out?

Let's take bonds first. Although there were a few dips and dives in the bond market over the course of the year, the big bond bust never materialized. Quite the opposite, in fact.

With just two business days left in the year, the Barclays Capital Aggregate bond index -- a widely followed benchmark of investment-grade government and corporate bonds -- had gained almost 8% in 2011. So anyone who dumped bonds in anticipation of a rout this year overreacted -- and gave up a shot at a decent return in a tough year.

And what about U.S. stocks? Congress's seeming inability to agree on a way to increase the federal debt ceiling last summer had many investors wondering whether they'd be better off dumping stocks and moving into cash to avoid a market rout.
Stay cool when news gets scary

And, indeed, if you look at a chart of the stock market's performance during the year, you'll see that the market did slump 19% from early July to early October. But that had more to do with the unfolding debt crisis in Europe than the haggling over the debt ceiling here at home.

Besides, by Wednesday's close, stocks had regained roughly 60% of that drop. And investors who were in stocks at the beginning of 2011 and held on actually experienced a gain of almost 2%. Granted, those returns are hardly anything to rejoice over, but they are a far cry from the cataclysm many feared.

The third issue that galvanized investors' attention this year was the European debt debacle. This little drama started in Greece but quickly cast a pall over most of Europe. The result: Foreign stocks -- European shares in particular -- took a drubbing, dropped more than 25% from early May through late November and lost roughly 13% on a total return basis from the beginning of the year.

Of course, how individual investors fared depends on the overall makeup of their portfolio.

If you had 50% of your holdings in bonds and 50% in stocks (of which, say, a quarter was in foreign shares) then as of Wednesday's close you had a 3% gain for the year. If you had more in stocks, say, 60% (again, with 25% of that stake in foreign shares), then you squeaked by with a smaller gain of almost 2%. And if you were more aggressive -- say, 80% in stocks (with the same proportions of U.S. and international as above) and just 20% in bonds, then you had a modest loss of less than a half a percentage point.

These figures represent the return you would have earned on the money you had invested from the beginning of the year, assuming you reinvested interest and dividends and didn't move your money around. This is hardly what you would call knock-your-socks-off performance. But, considering all the Sturm und Drang and ominous predictions, not a catastrophe either.

Ah, but couldn't someone have done a lot better by moving out of both domestic and international stocks before they slumped and then getting back in for the rebound?

Sure. You could easily construct a scenario where someone would have earned a higher return jumping in and out of the market at key turning points. But the question is whether you believe that's possible in real time vs. 20/20 hindsight. I don't think it is.
When to put your cash back into the market

All in all, I think the past year provided a good demonstration of the futility of trying to invest off the headlines -- and a reminder of why you're better off setting an asset mix that makes sense given your investing time horizon and sticking to low-cost index funds which limit the drag of fees.

To set that mix, you can consult our Asset Allocation tool. And for the names of index funds and ETFs, you can check out our MONEY 70 list of recommended funds.

Aside from periodic rebalancing, you'll then want to stick with that blend, resisting the urge to buy or sell based on market movements or, worse yet, on the blather emanating from Wall Street and the financial press.

So I hope that anyone looking for a New Year's investing resolution will take your suggestion to heart. But whatever strategy you and other investors eventually decide on, I wish you all the best in 2012.

Stern Advice: Financial Predictions for 2012

2012-01-02T23:13:00.001+08:00

By Linda Stern

(Reuters) - Sigh. A lot of people are predicting more of the same for 2012: Another year of stock market volatility, high unemployment, banking industry upheaval, weak housing and more talk about Facebook, mobile commerce, 401(k) plans and taxes.

But maybe that's just because it's hard to envision change. Not everything will stay the same. For example, a year from now, we'll not be having weekly Republican presidential debates, and we will most likely know who the President will be in 2013. Conventional wisdom holds that by this time next year, Facebook will be a publicly traded company and not just a huge time suck.

It's easier to imagine the European economic situation getting better or worse in 2012 than it is to imagine it lurching along as it has been for a whole other year. And federal financial regulators who have spent a year threatening to increase their oversight of mortgage lenders, financial advisers and 401(k) plans may stop talking and start doing.

What does all that mean for your wallet? Here are some financial predictions for 2012.

-- You may play with your money more. Banks and other financial companies don't have much in the way of interest rates to offer, so they're turning their services into games to win and keep customers. Like every other kind of company, they're investing more in social networking. So expect more game-like random rewards and Facebook-hyped deals from the financial industry, says Philip Blank of Javelin Strategy & Research.

For example, one new company called SaveUp runs a sweepstakes-type game for bank customers, who earn the right to "play" when they save money or pay down debt. The rewards vary from coffee pots and gift cards to a grand prize of $2 million.

-- You'll be courted, but you'll pay more for bank convenience. Bank of America may have backed away from its $5 per month debit card fee in the face of consumer wrath. But the big banks will have no choice but to charge for services that don't make money for them. At the same time they'll be fighting off competitive pressures from community banks and credit unions. Writes Mark Schwanhausser of Javelin, "2012 is shaping up as a year in which...(financial institutions)... fight to retain and steal customers - with a central focus on the tradeoffs of fees vs convenience."

-- Safety stocks may not be the safest. Recovery stocks may recover. Staid dividend-payers have already been bid up, and the consumer essentials, like toilet paper and toothpaste, may give way to recovery type companies, suggests Sam Stovall, chief equity strategist for Standard & Poor's. "We recommend overweighting the consumer discretionary sector on the lessening of recessionary pressures in the U.S. as well as above-market EPS growth prospects, and favorable technicals." S&P and MFS Investment Management (among others) are also recommending technology stocks for 2012.

-- You'll charge more, and debit less. Issuers will up their credit card rewards to pull users away from less profitable debit cards, says Ken Lin of CreditKarma, a credit scoring and comparison site. As consumers move out of full-recession mentality and shop more, they'll find themselves reaching for credit cards more, he says.

-- Housing may bottom. Real estate pros believe we have at least six more months of falling - or flat - home prices, but they are increasingly predicting that 2012 may be the year in which home prices stabilize. That's the word from HomeGain, Zillow, Credit Suisse and other market analysts. That doesn't mean there will be a new race to the top or a frothy sellers market anytime soon, just that the blood may be stanched.

-- You'll be studying your 401(k) more carefully. Beginning in May 2012, employers will have to show workers much more information about the fees they pay for their plans. Expect new investment alternatives and more focus on fees.

-- Cheaper investment advice will grow in availability and popularity. Just about everyone needs help figuring out how to invest for retirement, and there's a cadre of relatively new companies that has figured out they can do that with software. By focusing on balanced portfolios of stocks and bonds, index mutual funds, and ultra-low fees, they are aiming for mainstream middle-class investors. The latest savvy? Online advice firm Hedgeable is offering free financial advice. Flesh and blood advisers can be expected to respond with hourly fees and lower cost approaches.

-- Taxes will be somewhat predictable. Most of the individual income tax provisions run through 2012, and no students of Washington politics expects big tax legislation before the Presidential election. As for what you'll be paying and deducting in 2013? That's wide open and probably will be a year from now, too.

-- Prices may rise. Predicting inflation is always tricky, but investors are now buying Treasury inflation protected securities (TIPS) at negative yields. That's because they believe inflation will take off, boosting the adjustable rates on those bonds. Other bonds could suffer if prices and rates rise, of course. But most financial savants were predicting that last year too, and 2011 was a very good year for bond buyers. The take-away? The future is un-knowable. Diversify and wait.

(The Personal Finance column appears weekly, and at additional times as warranted.; Editing by Gunna Dickson)

2012 to be worse than 2011: German finance minister

2012-01-02T21:40:00.000+08:00

BERLIN (AFP) - The new year will probably be worse than the last, but Germany, Europe's biggest economy, should be able to withstand it, German Finance Minister Wolfgang Schaeuble said in an interview on Monday.

'2012 will probably be more difficult than 2011, but the German economy is in good shape,' Mr Schaeuble told the mass-circulation daily Bild.

The minister urged euro zone countries to 'do their homework... consolidate their budgets and push through the necessary reforms' to resolve the long-running debt crisis.

The bailout mechanisms put in place by member states 'can only buy time for states to take the necessary measures and win back confidence,' Mr Schaeuble added.

HAPPY NEW YEAR 2012 TO ALL MY READERS AND FRIENDS!!! :)

2011-12-31T09:49:00.001+08:00

After many ups and downs, stocks end flat for 2011

2011-12-31T09:47:00.002+08:00

NEW YORK (AP) -- The stock market ended a tumultuous year right where it started.

In the final tally, despite big climbs and falls, unexpected blows and surprising triumphs, all the hullabaloo proved for naught. On Friday, the Standard & Poor's 500 index closed at 1,257.60. That's exactly 0.04 point below where it started the year.

"If you fell asleep January 1 and woke up today, you'd think nothing had happened," says Jack Ablin, chief investment officer of Harris Private Bank. "But it's been up and down all year. It's been crazy."

It was a year when U.S. companies were supposed to run out of ways to make big profits. But they didn't, and in fact generated more than ever. It was a year when the U.S. lost its prized triple-A credit rating, which should have spooked buyers of its bonds. Instead investors bought more of them and made Treasurys one of the best bets of 2011. It was a year when stocks caught fire, then collapsed to near bear-market lows.

Among stocks, there were some surprising winners. Scaredy-cat investors who bought the most conservative and dullest of stocks — utilities — gained 15 percent this year, the biggest price rise of the ten industry sectors in the S&P 500. Other winning groups were consumer staples, up 11 percent, and health care companies, 10 percent.

Other market curiosities:

— Bad year, great quarter. Despite disappointing returns in 2011, the last three months of the year were impressive, which could bode well for the new year. The S&P 500 rose 11 percent. The Dow Jones industrial average, comprising 30 big stocks, climbed 1,344 points, or 12 percent. That was the largest quarterly point gain in its history. The Dow closed up 5.5 percent for the year.

— Best of the bad. U.S. stocks delivered little this year, but other markets did even worse, including ones in fast-growing economies. Brazil's Bovespa index fell 18 percent in 2011. Hong Kong's Hang Seng dropped 20 percent. In Europe, many of the biggest markets ended down in 2011. Britain's FTSE 100 lost 5.6 percent, Germany's DAX 14.7 percent.

— Buy American is back. A broad index of the Treasury market gained 9.6 percent, despite the fact that the U.S. government is now slightly less likely to repay its debt, at least according to Standard & Poor's. In August, the rating agency stripped the U.S. of its triple-A rating, citing mounting U.S. debt and political squabbling over what to do about it.

For stock investors, 2011 wasn't supposed to end this way.

At the start of the year, the Great Recession was officially 1½ years behind us and the recovery was finally gaining momentum. The economy added an average of more than 200,000 jobs a month in February, March and April. And U.S. companies kept reporting big jumps in profits, defying naysayers.

The stock market roared in approval. On April 29, the S&P closed at 1,363, double its recessionary low of March 2009.

Then manufacturing slowed, companies stopped hiring and consumer confidence plummeted, taking with it those hopes of big stock gains for the year. Adding to the misery, Japan was rocked by an earthquake and tsunami. That shut down factories run by crucial parts suppliers to U.S. firms, in particular auto makers.

Gridlock in Washington didn't help. After much squabbling, politicians eventually decided to raise the cap on how much the federal government can borrow in early August. But the heated debate took its toll. The Dow Jones industrial average swung more than 400 points four days in a row — down and up and down and up.

Overhanging it all was fear that the debt crisis in Greece had spread to Italy and Spain, countries too large for other European nations to bail out.

Talk of another blockbuster year for stocks turned to dark musings about the possibility of another U.S. recession. And so stocks kept falling. On Oct. 3, stocks had dropped 19 percent from their April high. That was just one point short of an official bear market.

Since then, U.S. housing starts have increased, factories are producing more, unemployment claims fell and U.S. economic growth rose. And companies are still generating impressive profits. Those in the S&P 500 have increased profits by double-digits percentages for nine quarters in a row.

The good news pushed stocks up in the closing months of the year.

The biggest winner in the Dow was McDonald's Corp, up 31 percent for the year. Bank of America Corp. was the worst performing stock, down 58 percent.

Including dividends, the S&P 500 returned 2.11 percent for 2011. That means investors lost money after inflation, which was running at 3.4 percent in the 12 months ending in November. At least they're getting more than investors in the benchmark 10-year Treasury note, which currently pays a yield of just 1.88 percent.

The outlook for stocks in the new year is either great or grim, depending on your focus.

Italy has to repay holders of $172 billion worth of it national bonds in the first three months of 2012. It will do so by selling new bonds. The question is how much interest they will demand to be paid to compensate for the risk they're taking on. If they demand too much, fear could spread that the country will default. That could sink stocks.

After Italy was forced to pay unexpectedly high rates in a bond auction earlier this month, stocks fell hard around the world.

There are also questions about whether China's economy is slowing too much and whether the U.S. politicians will agree to raise the debt ceiling again in 2012 or extend Bush-era tax cuts.

On the bright side, stocks seem to be well-priced.

The S&P 500 is trading at 12 times its expected earnings per share for 2012 versus a more typical 15 times. In other words, they appear cheaper now. Partly based on that many strategists, stock analysts and economists expect the index to end next year at 1,400 or more, up 10 percent or so.

The Standard & Poor's 500 index rose 5.42 points, or 0.4 percent on Friday. The Dow Jones industrial average lost 69.48 points, or 0.6 percent, to 12,217.60. The Nasdaq composite index fell 8.59 points, or 0.3 percent, to 2,605.15 The Nasdaq is down 1.8 percent for the year.

Trading has been quiet this week with many investors away on vacation. Volume on the New York Stock Exchange has been about half of its daily average. Markets will be closed Monday in observance of New Year's Day.

Stern Advice: Financial Predictions for 2012

2011-12-31T09:47:00.001+08:00

12 Retirement Resolutions for 2012

2011-12-31T09:46:00.001+08:00

By Emily Brandon

There are some new developments that could help you save more for retirement in 2012, including a higher 401(k) contribution limit and better access to 401(k) fee information. Of course, your ability to save and invest will largely determine your retirement success. If you're aiming to improve your finances in the new year, try to incorporate a few of these tips into your retirement plan. Here are 12 ways to get better prepared for retirement in 2012.

Save $500 more next year. Consider resetting the automatic contribution to your 401(k) to include an extra $42 per month. The contribution limit for 401(k)s, 403(b)s, and the federal government's Thrift Savings Plan will increase by $500 in 2012, to $17,000. And workers age 50 and older will be able to contribute an extra $5,500 next year. "Always allocate a percentage to your retirement account from your paycheck before you spend, even if it is a tiny amount," says Elaine King, a certified financial planner and managing director of wealth planning at Lubitz Financial Group in Miami. "It is the discipline that counts."

Get a 401(k) match. If you're unable to completely max out your 401(k), aim to at least save enough to capture any 401(k) contribution match your employer offers. For example, if you earn $50,000 and your company offers a match equal to 3 percent of pay, your nest egg could get an extra $1,500 boost.

Maximize tax breaks for retirement saving. There are a variety of tax breaks for retirement savers. You can defer taxes on up to $17,000 in a 401(k) and $5,000 in an IRA in 2012. Those limits jump to $22,500 in a 401(k) and $6,000 in an IRA if you are 50 or older. Low-income savers whose modified adjusted gross incomes are less than $28,750 for singles, $43,125 for heads of household, and $57,500 for married couples may also be able to claim the Saver's Credit, which is worth up to $1,000 for singles and $2,000 for couples.

Put some of your savings in a Roth. Consider allocating some of your retirement savings to a Roth 401(k) or Roth IRA account, especially if you're young or in a low tax bracket. While you won't get an immediate tax break, Roth accounts give you easier access to your money before retirement and more withdrawal flexibility in retirement. The $100,000 income limit for converting a traditional 401(k) or IRA to a Roth was eliminated in 2010, which means almost anyone can allocate some of their retirement savings to a Roth account in 2012.

Scrutinize 401(k) fees. Those with 401(k)s will have access to more information about the costs and fees deducted from their accounts, thanks to a 2010 Labor Department regulation that goes into effect in 2012. Pay close attention to mailings from your 401(k) plan next year and use this information to minimize the fees you pay. "You'll be receiving a new type of quarterly account statement from your plan sponsor that details the actual dollar amounts charged against your account and mutual fund choices," says Mark Miller, a Reuters retirement columnist and author of The Hard Times Guide to Retirement Security. "The easiest way to determine if you're paying too much is by making an apples-to-apples comparison between a passive index fund in your plan -- say, an S&P 500 fund -- with the same fund offered elsewhere. If your plan's fund charges 75 basis points, but you could buy the same thing in an IRA for seven basis points, ask your employer why--nicely."

Avoid penalties during rollovers. If you roll money over from a 401(k) to another retirement account this year, make sure to avoid fees and penalties. The best way to do this is to have your former employer transfer the money directly to an IRA or your new employer's retirement plan. If you have the check made out to you, 20 percent of your account balance will be withheld for income tax and you could be charged taxes and penalties if you don't meet the 60-day deadline for depositing the money in a new account and replacing the withheld 20 percent.

Rebalance. Volatility in the stock market this year may have caused your current holdings to shift significantly from their target allocations. Rebalance your portfolio by using new contributions to purchase investments in underweighted asset classes or sell some investments that performed well until you reach your target allocation.

Take advantage of advice. You may be offered investment advice through your 401(k) or IRA plan next year. A new Labor Department rule will allow retirement plan administrators to provide investment advice to account holders in 2012. To prevent conflicts of interest, the rule requires that the advice be given by a financial professional whose compensation does not vary based on the investments selected or a computer model that an independent expert certifies as unbiased.

Remember required distributions. Traditional 401(k) and IRA account holders who are over age 70½ must take required minimum distributions from their retirement accounts each year. Retirees who fail to withdraw the correct amount must pay a 50 percent tax penalty on the amount that should have been withdrawn.

Reconsider your retirement age. Retirement at age 65 isn't for everyone. "For those who go through the income and expense review and find that they can't afford to retire comfortably, working a few extra years can really help," says Daniel Goldie, president of Dan Goldie Financial Services in Menlo Park, Calif., and coauthor of The Investment Answer: Learn to Manage Your Money & Protect Your Financial Future. "This allows them to save more, gives more time for their investments to grow, and reduces the number of years they'll need retirement income. It can also allow them to delay taking Social Security, which increases their payment amount."

Save part of windfalls for retirement. Every once in a while we receive a windfall of extra cash, such as a bonus, tax refund, gift, or inheritance. Consider putting a portion of these lump sums aside for retirement.

Talk to someone who is retired. Find out what they wish they had done differently in the final years of their career and early part of retirement. "Resolve to meet up with a few former coworkers who've been retired for at least a year in order to learn from their real-life experiences," says John Nelson, a life planning coach and author of What Color Is Your Parachute? For Retirement. "What you learn may change the timing of your own retirement, and uncover things you'll want to explore--both before and after you retire."

10 Trends from 2011 We Don't Want to See in 2012

2011-12-31T09:45:00.000+08:00

By Philip Moeller

Looking back on 2011, the New Year can't come fast enough. Will things be better in 2012? Without wanting to tempt fate, rarely has a coming year had such a low bar to being better than the previous year. With all fervent wishes for a great 2012 for everyone, here are 10 things that happened in 2011 that should stay in 2011:

1. Congress. The petty yet exhausting fights in Congress produced well-deserved ridicule from an ungrateful nation. The Congressional approval rate hit an all-time low of 11 percent earlier this month, according to Gallup's tracking poll. "This month's record-low congressional job approval rating is one of a number of measures of Congress that have reached historical low points this year." Gallup said. "This suggests that 2011 will be remembered as the year in which the American public lost much of any remaining faith in the men and women they elect and send off to Washington to represent them."

2. Europe. Coming in close second in the discord department is Europe. Every time the U.S. economy threw off some good news, Europe hogged the headlines with a new variation on its inability to fashion a work-out plan for national debts. Lovers of irony may appreciate that Europe, in holding the U.S. economy hostage, is simply returning the favor that America's fiscal irresponsibility has been sending over the pond for several decades.

3. Republican Presidential Contenders. Reality TV is not what we need from our political parties but it's sure what we've gotten from the Republicans. Has there ever been a sillier season of primary debates, gaffes, and personal peccadilloes? Whatever happened to serious discussions of the nation's many serious issues?

4. The Economy. Forget what the experts say. We all know a recession when we see it, and ours has not gone away. There were signs as the year ended that we might be on a steady trajectory of slow growth. But, of course, Congress was not in session at the time.

5. Stock Market. U.S. stocks ended the year at about the same place they started it. But the intervening gyrations and extreme volatility produced a coronary bushel of end-of-the-world trading sessions. Dullness never looked so good.

6. Home Values. Just when the housing gurus agreed the worst of the mortgage mess was behind us, it became painfully clear that it will take years, if not decades, for this statement to be true. Yale economist Robert Shiller, who tracks housing values closely, thinks no one should be surprised if prices are flat for the next 20 years.

7. Entitlement Reforms. Like the boy who cried wolf, politicians and government fiscal experts have reformed Medicare and Social Security through countless plans, a commission, the Gang of Six, and, finally, a Supercommittee. Still, there are zero actual reforms in place. Social Security's retirement income program could survive without reforms for decades. Not so with Social Security's disability program, or Medicare and Medicaid. They continue to hurtle toward very nasty days of reckoning. Where once we had the luxury of instituting reforms gradually, that cushion largely has disappeared.

8. Aging Boomers. Read all about the early-edge boomers turning 65 in 2011. See panic in the streets as we are flooded with old people. See these same boomers turn 66 in 2012, when they will be entitled to their full Social Security benefits. Get ready for more panic. The elderly are coming, the elderly are coming! Please.

9. Retirement Fears. There may be a shortage of retirement savings and investments. There is no shortage of opinion polls and studies about these shortages. Roosevelt said during the Depression that "we have nothing to fear but fear itself." Add fear of gloomy retirement surveys to the list.

10. Social Media Meanness. If you want to ruin a perfectly nice day, spend a few minutes reading the comments on nearly any public blog. Our loss of social civility is stunning. Until things get better, I leave you with the posting etiquette presented on his blog by journalist Barry Ritholtz: "Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous."

10 surprises for 2012

2011-12-31T09:44:00.001+08:00

By Matthew Lynn

LONDON (MarketWatch) — Shortly before the 1929 stock-market crash that ushered in a global recession, the American economist Irving Fisher made a rightly celebrated forecast: “Stock prices have reached what looks like a permanently high plateau.”

That should be enough to warn anyone off making predictions, particularly where finance and business are concerned. Still, since we are stuck in the quiet space between Christmas and New Year’s day, here are a few things that might or might not happen in 2012.

1. Mario Draghi resigns

Predictions for the euro zone make as much sense as trying to forecast the weather for the summer of 2020. The situation is so volatile, no one really has any idea what is going to happen any more. Here is one thought, however. The simplest way out of this crisis is for the European Central Bank to start printing money, but the main problem is selling that fix to the Germans. When it comes to the crunch, Draghi will step aside, a German will be installed, and the printing presses will be switched on.
Reuters European Central Bank (ECB) President Mario Draghi

2. Britain starts an Olympic revival

As the French will spend most of 2012 telling everyone, the U.K. economy is in as bad a shape as any in the world. Its debts are a towering 450% of GDP, its key industry — financial services — is in structural decline, and its main trading partner is heading into a deep recession. But the London Olympics will be a huge success. With a devalued currency, falling wages, and a flexible labor force, the U.K. economy will start reinventing itself — and the Olympics will be seen as the point where the economy started to recover.

3. Vladimir Putin resigns

The Russian leader faces what now looks like a tricky campaign for the presidency in March. He’ll win, but without a convincing majority. The political leader he most resembles is France’s General de Gaulle — nationalistic, conservative and authoritarian, but with a deep sense of his country’s history and place in the world. After de Gaulle suffered a setback in a referendum, he resigned in 1969. Before the end of the year, President Putin will step down on health grounds. Once he’s gone, Russia will liberalize — and investors will move into its cheap stocks.

4. The dollar starts a bull run

Barack Obama may or may not be a great president, but with the opposition unable to come up with a convincing alternative, he will cruise to a relatively easy re-election. In a world where the euro zone is imploding, Russia is in turmoil, and the Chinese economy will be looking wobbly, the U.S. will seem to be the only real safe haven. Everyone will want to get that portion of their portfolio that isn’t in gold into dollars — and the currency will embark on a long-term bull run.

5. France accepts a reduced role in the world

This will be a traumatic year for the French. The country will lose its triple-A rating, and sink back into recession. The far-right National Front leader Marine Le Pen will be the star of the presidential election. But in the end, the dull-as-watching-paint-dry Francois Hollande will replace the grand-standing Nicolas Sarkozy as president. By the end of the year, the French will have started to accept that they are no longer major players in the world, either on their own, or through the EU.
Reuters France's President Nicolas Sarkozy

6. Poland steps up to the plate

Which country is the strongest player in the European Union? One with strong growth, healthy public finances, low debt, and a sizable population. That would be Poland. The government deficit was 5.9% of GDP in 2011 and will drop below 2.9% in 2012. Government debt as a percentage of GDP will fall to 52% next year. It is forecast to grow by 2.5% in 2012 even as the euro zone slips into recession. And with 38 million people, this is a major country. As countries such as France lose their triple-A rating, and nations such as Britain drift away from the EU, there will be space for Poland to have an increasingly assertive voice.

7. An investment bank shuts down

An estimated 233,000 staff have been laid off in the banking industry in 2011. Every day brings news of yet more redundancies, and it is only going to get worse in the new year. This is an industry in serious trouble. Banking expanded during the three decades that the developed world leveraged up. During a two-decade de-leveraging, banking is going to become a smaller industry. There isn’t enough business to support so many companies, with so many lavishly paid staff. One of them will close in 2012.

8. Europeans start to migrate

The traditional response of Europeans to economic trouble is to get up and go somewhere else. The U.S. is exhibit A, Australia is exhibit B. With a deep recession looming, many will try their luck elsewhere. It’s already happening. Greek, Portuguese and Irish emigration numbers have all soared in the past year. In 2012, the Italians and Spanish will join the

exodus.

9. Everyone looks to Iceland

At the height of the credit crunch, everyone bought into the idea that you had to bail out your banks or else the economy would go bust. Except for Iceland. It was too small, and its debts too big, and it ended up defaulting on $85 billion of debt. Mainstream opinion said the country was finished. Not so. This year, it grew by 2.5%, and it is forecast to grow by 1.5% next year. That is a faster rate than the euro zone. Capital controls are being steadily lifted, and the exchange rate is strengthening again. The lesson is inescapable. You don’t need to bail out your banks after all.

10. The Christmas e-card goes out of fashion

Do any of us really need festive greetings from a small bank in Latvia we’ve never spoken to? Is that Austrian management consulting firm sincere in wishing me the best for the holiday season? I doubt it. Listen up guys. It’s not thoughtful. It’s not touching. It’s spam. Frankly, I’d rather get another email from that friendly Ukrainian company that supplies Viagra without a prescription. By Christmas 2012, sending out e-cards will be socially unacceptable — and not too soon.

Matthew Lynn is a financial journalist based in London. He is the author of "Bust: Greece, the Euro and the Sovereign Debt Crisis," and he writes adventure thrillers under the name Matt Lynn.

Beware of amped-up ETFs

2011-12-24T09:43:00.001+08:00

By Janice Revell,

FORTUNE -- Given the extreme volatility in the market these days, the idea of being able to capitalize on all that whipsaw action is alluring. And the fund industry is offering that very opportunity, in the form of leveraged exchange-traded funds.

They're a day trader's dream, and they've been increasing in popularity. But beware: Used improperly, these high-octane investments can wreak destruction on your portfolio -- even if the market moves the way you anticipated.

Leveraged ETFs are amped-up versions of traditional exchange-traded funds, which track the performance of various indexes and asset classes including stocks, bonds, commodities, and currencies. These funds -- which go by such names as "Ultra" or "Double Long" -- use derivatives to deliver two or three times the daily returns of the underlying index. Inverse leveraged ETFs (a.k.a. "Double Short" funds) are designed to produce the opposite performance of the benchmark they track and give investors a way to profit from a declining market.

Sales of leveraged ETFs have soared recently, and now account for about $45 billion in investor assets. As the market tumbled in August, investors plowed about $3 billion into leveraged ETFs, the second-highest money inflow of all ETF categories, according to research firm Strategic Insight.
10 best stocks for 2012

But here's the problem: If you hold a leveraged ETF for more than 24 hours, your returns could be drastically different than what you might expect. That disconnect has prompted both the Securities and Exchange Commission and the Financial Industry Regulatory Authority to issue investor alerts.

The danger lies in the fact that most leveraged ETFs "reset" daily. That resetting, combined with leverage, can cause an ETF's returns over weeks or months to diverge wildly from that of the benchmark. "Predicting the direction of the market is only part of the challenge," says Paul Justice, director of ETF research at Morningstar. "You also have to correctly predict the path the investment is going to take."

Here's how resetting can distort returns. Say you make a $100 investment in both a traditional index fund and a "Double Long" fund that tracks the same underlying equity index. On day one the index rises 10%. The regular index fund closes at $110 and the leveraged ETF adds 20% to finish at $120. Then on day two the index falls 10%. The traditional fund drops to $99 (a 10% loss from $110). But the leveraged ETF plummets to $96, because it started the day at $120 and its return was -20%, or a $24 loss. Repeat that process 50 or 100 times, and the gap between expected and actual returns can grow wide.

If you want to roll the dice on what the market will do tomorrow -- with money you can afford to lose -- then a leveraged ETF is a useful tool. But to make a real investment, stick with plain-vanilla funds.

-- A former compensation consultant, Janice Revell has been writing about personal finance since 2000.

This article is from the December 26, 2011 issue of Fortune.

Procrastinators' Tax Checklist: 10 Money Saving Moves to Make by Dec. 31

2011-12-24T09:23:00.001+08:00

By Janet Novack

Let’s face it. Most of us put off tax chores from time to time---not as chronically or recklessly as Congress, but often enough that it can end up costing us. So as a service to the frazzled, here are 10 money saving moves that must be made before Dec. 31 and five others that can be safely postponed until the beginning of next year.

BY DEC. 31:

1. Grab expiring tax breaks. Dozens of tax breaks expire on Dec. 31, and while Congress is likely to reauthorize some of them retroactively, others could permanently disappear. So, for example, if you’re self employed or own a small business and are in the market for a new vehicle, consider buying before Dec. 31. Until then you can write off the full cost of purchasing a new luxury SUV—provided it’s used 100% for business and its gross vehicle weight is more than 6,000 pounds. (More details here.) If you’re considering making energy efficient home improvements, get the work done before Dec. 31 to take advantage of an expiring $500 tax credit. (More on this green credit here.) What about the expiring payroll tax cut you’ve heard so much about? Unless you run the payroll department of a business, there’s nothing you need to do about it.

2. Check the terms of your medical FSA. With a medical flexible savings account, money is deducted from your salary before tax and put in an account to pay medical, dental and vision expenses not otherwise covered by insurance. The catch is, by law, any money you don’t spend in the year it’s saved is forfeited. Back in 2005, the IRS ruled that employers can give workers an extra 10 weeks---meaning until March 15th of 2012 if a plan is on a calendar year, as most are---to use up their cash. But not all employers allow this grace period. So check your plan terms and FSA balance immediately---you might need to order those new contact lenses or go to the chiropractor before Dec. 31. (For surprising ways to use up your FSA dollars, including driving to Wal-Mart to pick up a prescription, click here.)

3. Get charitable checks in the mail or donate online. To claim a deduction for a 2011 charitable contribution, you must mail your check by Dec. 31. You don’t have to worry about the check actually clearing before the end of the year, but play it safe and put it in the mail before the 31st. Any donations you charge to your credit card by Dec. 31 are also deductible for 2011, even if you don’t pay your credit card bill until next year. You’ll find 12 tips for yearend charitable giving from Kelly Phillips Erb, a.k.a. Taxgirl, here . If you would like a deduction for 2011 and aren’t sure yet what charity you want to benefit, Ashlea Ebeling explains here the appeal of a donor advised fund. By contributing to one of these funds, you can claim a deduction for 2011 and then dribble out the money to specific charities when you’re ready. For help picking a worthy charity, Forbes rates the 200 largest here.

4. Accelerate other deductions into 2011. Consider making your Jan. 1, 2012 mortgage payment, or paying state and local tax bills due in January, before the end of 2011. That will give you the tax savings from those itemized deductions a year earlier. Warning: If you are subject to the alternative minimum tax or expect to have a much higher income in 2012 than you had for 2011, accelerating deductions can backfire---so check with a tax pro if you think you might be in that situation.

5. Harvest capital losses if you have them. Sell losing positions in your taxable (meaning non-retirement accounts) to offset any taxable capital gains you’ve realized during the year. Didn’t take any gains this year? Watch out, your mutual fund may have taken them for you; taxable gains get passed on from funds, even if you’ve sold no shares. Anyway, up to $3,000 a year in net capital losses can be used to offset ordinary income (say from your salary), and the rest of any excess losses you harvest can be banked to offset gains in future years. Forbes Investment Strategies columnist William Baldwin explains the basics of capital gains here and how to harvest losses without risking missing out on a market move or running afoul of the “wash-sale” rule here.

6. Make annual gifts to family and friends. You can give $13,000 a year to as many people as you want without it counting against the amount you can give during your life without having to pay gift tax. That lifetime gift tax exemption is currently $5 million, but is scheduled fall to $1 million in 2013. The annual exclusion is a use it or lose it proposition---if you don’t use the 2011 exclusion by Dec. 31, you can’t bank it. (Deborah Jacobs has more advice on tax smart ways to give to family and friends here.)

7. Contribute to a 529 state college savings plan. Thirty-seven states permit you to claim an income tax deduction (anywhere from $500 to Pennsylvania’s generous $13,000 per beneficiary) for contributing to a 529 state college savings plan. But to get the tax break for 2011, you must contribute before the end of the year. You can find an up-to-date list of breaks here at Savingforcollege.com. This isn’t just for people saving for their kids’ or grandkids’ educations. If you’re planning to go to graduate school, you can contribute to a 529 for yourself. In fact, Ashlea Ebeling explains here that you can contribute in December, bank your tax break, and then use the money in the 529 for graduate classes in 2013. (Of the states that give tax breaks, only Indiana has a 12 month holding period before you can use a contribution.)

8. If you’re self-employed, set up a one-person 401(k) . So long as you set up a one-person 401(k) by Dec. 31, you can make contributions for 2011 until the due date of your 2011 return with extensions—as late as Oct. 15, 2012, if you operate as an unincorporated sole-proprietor attaching a Schedule C to your individual tax return. Mutual fund companies, including Fidelity, the Vanguard Group and T. Rowe Price offer easy-to-setup one-person 401(k)s, as do Charles Schwab , Merrill Lynch and Edward Jones. More on the benefits of a solo 401(k) is here.

9. If you’re an employee, max out your 401(k). If you have an accommodating payroll department and haven’t yet contributed the maximum allowed to a 401(k) for 2011, you might still be able to get money withheld from that last paycheck of the year. For 2011 you can contribute up to $16,500, or $22,000 if you’re 50 or older, to a pre-tax 401(k), a Roth 401(k) or a combination of the two. Contributions to a Roth won’t save you any 2011 tax, but the money in a Roth grows tax free and you can be withdrawn from the account tax free when you retire or before that if you leave the company, have had the account for at least five years and are 59 1/2 or older.

1o. Take required minimum distributions from IRAs. If you’re over 70 ½ or have inherited an IRA from someone other than a spouse, you must take an annual required minimum distribution from your IRA by Dec. 31. (If you just turned 70 ½ this year, your first RMD can wait until as late as April 1 2012. That’s April 1, not April 15th.) Your RMD for 2011 is based on the balance in your IRA as of Dec. 31, 2010 and your age, in some cases your spouse’s age, and whether the account is your own or an inherited one. (There are three different tables in the appendices of IRS Publication 590 for calculating the percentages of your balance you must withdraw.) Note that while you don’t have to take an RMD from your own Roth IRA, if you have inherited a Roth from someone other than a spouse, you must take RMDs.

Whew! Well, at least these five items can wait until after January 1st.

1. Fund an IRA for 2011. You have until April 17th 2012 (the due date for 2011 tax returns) to make a contribution to a traditional or Roth IRA. Note that the April date holds even if you get an extension to file your taxes. Those with earned income can contribute up to $5,000 a year ($6,000 if they’re 50 or older) to a traditional or Roth IRA, or a combination of the two. There are, however, income restrictions on who can open a deductible IRA or contribute to a Roth. (Details here.) If your teenage children had earned income in 2012, consider opening a Roth IRA for them. (More on this and other ways to turn your kids into millionaires here. )

2. If you’re self-employed or moonlighting, open a SEP IRA. A 401(k) isn't the best option for everyone with self-employment income. For example, if you are moonlighting and have a regular job with a 401(k), a SEP IRA is a better choice. That’s because one annual limit for contributions to a 401(k) applies to all your 401(k) accounts, combined. That means you might be able to save more in a SEP IRA. Even better, you have until the due date of your 2011 returns, with extensions—meaning until Oct. 15th 2012---to set up and fund a SEP IRA for 2011. For more on the best retirement plans for the self-employed, see Kerry Hannon’s rundown here.

3. Pay fourth quarter estimated taxes. If you’re self employed or will owe more than has been withheld from your salary, you have until January 17th 2012, to pay your fourth quarter estimated taxes for 2011. Most states give you until mid January too, but if you want to deduct that fourth quarter state tax payment on your 2011 federal income tax return, you must get the money to your state before Dec. 31.

4. Begin your wealth transfers. If you’ve already made those $13,000 annual gifts for 2011, you can wait until after the first of the year to consult an attorney about transferring more wealth. But don’t delay too long. The current estate tax law, which allows you to give $5 million to your kids and grandkids while you’re alive, expires at the end of 2012---at which point the amount you can give away drops to $1 million. Moreover, certain sophisticated techniques—such as a grantor retained annuity trust—that enable you to give away a lot more than $5 million, benefit from current low interest rates. Plus, there’s no guarantee such techniques won’t be limited in any future deal to renew the $5 million exemption. (In fact, the Obama Administration has proposed restrictions.)

5. Write to your Congressman. Fed up with how uncertain the tax code has become, with dozens of provisions expiring each year? Enjoy your holiday now and write an angry letter after the good cheer has worn off.

When to Put Your Cash Back Into the Market

2011-12-24T09:02:00.000+08:00

By Walter Updegrave

I have a substantial amount of cash I want to move into stock and bond mutual funds I already own. I'm aware of the concept of dollar-cost averaging, but I'm afraid that as soon as I move the money it will decline in value and take years to recover. My question is not about what to invest in, but how to make those investments timing wise. -- Robert P.

Dollar-cost averaging and timing aren't the central issues here. They're sideshows.

The real question is: Does the mix of stock and bond mutual funds you already own truly represent the balance of risk versus reward you're comfortable with as an investor?

If it is, then you should immediately invest the cash along the same lines your current investments are allocated. So if you decided that a portfolio of 60% stocks and 40% bonds is the right investment mix for your time horizon, then you should put 60% of the new cash into stock funds and 40% into your bond funds.

But if you're not okay with your current asset mix, then you need to change it to one that's appropriate -- and then immediately invest your new money in the same proportions.

I realize this isn't the standard advice you would get from many, if not most, personal finance journalists, advisers, talking heads on cable TV business shows and much of the blogosphere. The conventional answer would be to tout the supposed benefits of dollar-cost averaging and talk about the way it reduces risk or boosts returns or performs all sorts of wonderful magic.

But all of that is nonsense. Dollar-cost averaging is a clunky, inefficient way of investing. It's just been mindlessly repeated so many times that it's become dogma, which, as the late Nobel laureate Paul Samuelson once told me, is "a truth so truthful that we dare not question it."

But if you step back a moment and look at your situation from a slightly different vantage point, I think you'll see what I'm getting at.

While your fear of losing your money as soon as you invest it is understandable, you need to remember that you're already vulnerable to market declines. It's a natural consequence of investing. If the market tanks, the money you already have in stock and bond mutual funds will take a hit.

But you don't guard against that possibility by pulling your money out of your funds every time you're worried about a setback and then re-investing it when you feel better about the market. That's a recipe for selling low and buying high.

No, you protect against the risk of market setbacks by practicing asset allocation -- that is, you put together a mix of stock and bond funds that can generate decent long-term returns while keeping the downside to a level you can tolerate.

So what makes you think you should you do anything different with this new cash you're looking to invest? You shouldn't.

As for the oft-recommended strategy of dollar-cost averaging, or gradually moving your cash into your portfolio, say, by dividing it into twelve pieces and investing one piece each month, all you're really doing is taking a year to get to the asset mix you've decided is right for you. In short, you're undermining the investment strategy you've set.

So here's what I recommend instead.

Start by going over your current mix of funds and make sure that it truly reflects your tolerance for risk. The fact that you're so concerned about investing this new money makes me wonder whether you're investing more aggressively than you should.

I'm not suggesting that you huddle down in money-market accounts, bond funds or anything like that. But the key to investing is assuring that you're comfortable with your overall portfolio.

There are a couple of tools that can help with that assessment. If you go to Morningstar's Asset Allocator tool, for example, you can re-create your current portfolio and see how your investments might grow over different periods of time and get a sense of what kind of short-term setbacks you might suffer along the way. You can then try different mixes of stocks and bonds to see how they might perform.

You might also want to take a look at Fidelity's Portfolio Review tool. After choosing a goal and plugging in some info about your investments, you'll get a pie chart showing how you're currently invested, along with some stats showing the best and worst one-year return for that that mix as well as its average performance over the past 85 years. You can then use the slider to create more conservative and aggressive portfolios and see how they performed.

Once you're comfortable with the make-up of your portfolio, you can turn your attention to the cash you want to invest. And there the solution is simple: take the cues from the portfolio you've decided is right for you. No timing, no dollar-cost averaging. Just invest the cash into your existing funds in the same proportions they represent of your overall portfolio.

Following my recommendation doesn't mean the value of your investments won't decline if the market falls apart. But short of getting out of the market altogether (which then leaves you guessing about when to get back in) there's no way of avoiding that.

But going through the process I've outlined gives you your best chance of investing all your money, new and old, in a way that has a decent shot at getting the returns you want, while keeping risk at a level you can handle.

Think Before Buying: Material Possessions Won’t Make You Happy, Says Consumer Expert

2011-12-20T00:58:00.000+08:00

Can money buy happiness? Those who don't have money believe it can. Money means having fancy clothes, designer accessories and desirable cars, bigger homes and exotic vacations. Money allows entry into the gilded and coveted life of the rich and famous. Or maybe having money simply means being able to pay for your child's higher education and having the ability to fix that leaking roof or broken refrigerator.

The timeless aphorism "money doesn't buy happiness" solicits the classic response "of course it doesn't" but many individuals still act like it does, according to Jim Roberts, a marketing professor at Baylor University and author of Shiny Objects: Why We Spend Money We Don't Have in Search of Happiness We Can't Buy. Americans are addicted to material possessions, he says, and his research on consumer behavior shows that consumers are seeking happiness in all the wrong places, leading to unaffordable credit card bills, no savings and in the worst case, personal bankruptcy.

He tells The Daily Ticker's Aaron Task in the attached clip that we've become "compliant" - retailers tell us to shop on Black Friday and we do, for example — and money "is good, but up to a point." Individuals can use money for their own betterment, such as giving to others. Vacations with friends and family also foster and nurture personal satisfaction because traveling can lead to lasting memories and unforgettable experiences.

It's important for people to search for what truly makes them happy. Money and material possessions aren't necessarily evil he says, but "it's the love of money and material possessions" that's the root of all evil. The statistics he uses as evidence against consumerism are quite shocking if not startling:

-More than 1.5 million Americans filed for bankruptcy in 2010

-The average American household carried nearly $10,000 in credit card debt in early 2011

-70% of Americans live paycheck to paycheck

What's more, Americans undergo an "endless binge-and-purge cycle of 'things'," Roberts notes in Shiny Objects. This includes throwing away 150 million cell phones each year or tossing out two million water bottles every five minutes. For all the compulsive and mindless spending, consumers can be saved, Roberts says. But "until your attitudes change your behavior is not going to follow," he warns.

Roberts' simple steps for controlling spending and avoiding debt include:

-Having an emergency fund of $2,500 for the unexpected expenses

-Regularly making investments to a retirement account

-Putting at least six months of living expenses in the bank

The Truth About Wealth

2011-12-20T00:31:00.001+08:00

By Robert Frank

Affluence Is Becoming a Temporary Phenomenon. Here's How to Dodge the 'Beta Trap' and Hold On to What You've Got

Who says the rich always get richer?

Despite heated rhetoric emanating from politicians and pundits, the top 1% is hardly a fixed group that enjoys consistent income gains. To the contrary, the wealthiest have become the most crash-prone group in our economy.

The total income of the top 1%—or those earning more than $343,000 in 2009—fell by more than 30% from 2007, according to the most recent Internal Revenue Service data. By contrast, the average income of the bottom 90% fell less than 3% during the same period.

A November Federal Reserve study, meanwhile, found that a third of the people in the top 1% in 2007, as measured by wealth, were no longer in the top 1% in 2009.

The good news: Despite the turbulent new economics of wealth, there are safeguards that the rich and future rich can deploy to cushion the shocks and mitigate their risks.

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The wealthiest have likely recouped some of their sunken fortunes since 2009, along with financial markets. Yet the latest wave of data points to an indisputable trend—we have entered the age of "High-Beta Wealth."

On Wall Street, "beta" measures volatility relative to the overall market; a beta of 1.0 signals alignment with the market. Technology and gambling stocks can have betas of 1.5 or more, since they tend to overshoot the market in cyclical ups and downs. Utilities, by contrast, both rise less and fall less than the overall market and usually have betas below 1.0.

The new rich have become the high-betas of our economy. With their dependence on financial markets, their leverage and their hyperspending, the top 1% have income swings that now are more than twice as high as those of the rest of the population.

A study by Jonathan A. Parker and Annette Vissing-Jorgensen of Northwestern University found that the beta of the top 1% nearly quadrupled between 1982 and 2007 to 2.39. The top 0.01% had a beta of 3.96, making even the riskiest tech stocks look safe by comparison. Economists and wealth managers say the betas of the rich have likely soared even higher in recent months as markets gyrated sharply.

"Being a high-beta in today's environment is different from being a high-beta in the '80s or even the '90s," says Craig Rawlins, president of Harris myCFO Investment Advisory Services, which serves wealthy families. "People are more susceptible to making bad decisions than they've ever been. There is higher risk in the marketplace today, with a lot more volatility."

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Lee Hausner, a California-based psychologist who works with the ultrarich, has one client she calls "The Phoenix," a real-estate developer and investor who borrowed and spent heavily. He has surged and crashed twice over the past decade, reaching a net worth of $400 million, losing it, then hitting $200 million and losing it again.

"He's an impulsive risk-taker," she says. "He always lays everything on the line."

For risk-takers who want to get rich and stay rich, Ms. Hausner advises taking a step back every so often and evaluating important decisions rather than leaving them to impulse.

"Some of these people roll the dice and they get rich," she says. "But they have to realize that if they roll it again, the result may not come out as well. They need to stop themselves before they roll again, and deliberate."

When the Wealthy Falter

Though the high-beta wealth trend has been growing for close to three decades, it has accelerated markedly in recent years—enough to pique the interest of some financial pros.

In 2003, private-banking chief Maria Elena Lagomasino set out to study why so many rich people she knew were blowing up. Entrepreneurs, tech tycoons, real-estate titans and even CEOs who were known for their money savvy would make millions one year and lose it the next.

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"This question just fascinated me," says Ms. Lagomasino, CEO of Genspring Family Offices, a wealth-management firm based in Palm Beach Gardens, Fla. "How is it possible that people who are on top of the heap can fall so precipitously?"

Her report, called "Beating the Odds: Improving the 15% Probability of Staying Wealthy" and commissioned when she was chief executive of J.P. Morgan Private Bank, found that only 15% of the Forbes 400 stayed on the list over a 21-year period. (Deaths accounted for less than a third of the drop-offs.)

The report grouped the reasons into five main categories:

Overconcentration. The path to rapid riches for many of the wealthy involves betting big on a single company or asset class, whether it is a tech start-up, real-estate or gold. When those assets boom, the gains are huge. When values decline, they can take an entire fortune with them.

Leverage. Debt has become the rocket fuel for lifting the rich into another financial orbit, amplifying gains and magnifying losses. In recent years, the wealthy have been using more debt than ever to maximize their investment gains, expand their businesses and fund their lifestyles Yet unexpected changes in their businesses or incomes can turn manageable debt levels into wealth destroyers.

Spending. Even among the more-restrained wealthy, "some of these folks really don't have a clue how much they are spending," Ms. Lagomasino says. Many look at their paper net worth and assume they can afford that private jet or fourth home. Yet their spending often exceeds their cash flows and returns, leaving them one crisis away from a financial collapse.

The "toxic cocktail." The first three reasons are often linked, with the newly wealthy betting big and borrowing big on a business, then using their paper wealth to fund a large lifestyle. When these three factors unwind at the same time, often forcing the rich to sell at distressed prices, they can instantly destroy huge fortunes.

Family issues. These include divorce, inheritance battles and family-business disputes.

There also are macroeconomic reasons. Before the 1980s, wealth came largely from inheritance, oil and privately owned businesses—all fairly predictable and stable sources of money. After the 1980s, more large wealth came from the stock market.

Executives became wealthy from stock-based pay. Entrepreneurs got rich by starting and selling companies, either through initial public offerings or mergers. And Wall Street bankers, hedge-fund managers and private-equity chiefs made money from market bets.

How to Keep It

So how can investors and entrepreneurs stay wealthy without becoming high-beta casualties?

Wealth managers, psychologists and financial advisers say the age of high-beta wealth requires new financial and psychological tools to make and preserve family fortunes.

Gregory Curtis, chairman of Greycourt & Co., a Pittsburgh-based wealth-management firm, works with old-money families, some of whom have preserved their fortunes for four or five generations. He says one secret to enduring wealth is for families to divide their fortunes into two buckets: the "spending" bucket and the "appreciation" bucket.

He said families should live almost entirely off the spending bucket, which should be filled with a diversified, liquid portfolio of dividend-paying stocks and bonds and cash equivalents.

The appreciation bucket can be mostly stock or an ownership stake in a company. This bucket also can contain hedge funds, bets on currencies and commodities, and other investments.

The important point is that families should never have to rely on the "appreciation" bucket to fund day-to-day expenses.

"The biggest risk we see is concentrated holdings," he says. "So we say, 'Your lifestyle should be supported entirely by a liquid portfolio.' Even if they lost everything in the appreciation bucket, they're still OK."

The high-beta rich often have more than half of their wealth in one asset, whether it is a company or a single stock. As a general rule, wealth managers tell clients to avoid having more than 20% to 30% of their wealth in a single asset.

Limiting debt also is critical to avoiding crashes. The debt load of the top 1% has tripled over the past 30 years. Experts say a family's debt shouldn't exceed 25% of its assets, even though few follow the rule.

Stephen Martiros, a Boston-based adviser to family offices, says wealthy families should secure credit lines with longer time horizons (think years instead of months) to help them cope with economic storms.

"The real question for the high-beta wealthy is, 'Can you weather a worst-case storm?'" he says. "You don't want to be in a position of being forced to sell an asset at the wrong time because of leverage. That's when you get into real trouble."

Start-Up Come-Downs

What about entrepreneurs? Those who launch companies and bet everything on their success are loath to cash out too soon. Based on Facebook's latest valuations, co-founder Mark Zuckerberg would have given up nearly $1 billion in future value for every percentage point of equity he might have sold in the name of diversification. That isn't to mention the negative signal it sends to shareholders.

Yet wealth managers suggest that the Zuckerbergs of the world should regularly sell off small chunks of their stock as soon as their companies go public—or even sooner. They may be losing some upside, but they are building a critical safety net in case of a fall.

Netflix CEO Reed Hastings, for instance, has regularly sold shares of Netflix stock for years as part of a planned stock-sale program. While he may have given up millions in paper wealth during the stock's rise, the cash from those sales was protected when Netflix stock fell by nearly 75% this fall. (Many shareholders weren't as lucky, of course.)

In Silicon Valley, the latest wave of tech founders is cashing out earlier and taking more money off the table than previous generations, learning the lessons from the high-beta-rich crashes of 2001. Groupon's largest shareholder, co-founder Eric Lefkofsky, reaped more than $300 million from dividends and stock sales before the company even went public last month.

Last March, Zynga founder Mark Pincus sold a small piece of his stake back to the company for $109 million, according to regulatory filings.

The sale price was $14 a share—higher than the stock's IPO price of $10 on Friday.

"These private sales appear to be increasing, providing the potential for high-beta wealth to take some money off the table," says Mr. Rawlins of Harris MyCFO.

How High Is Your Wealth Beta?

To find out your "beta" rating—a measure of the volatility of your wealth relative to everyone else—answer these seven questions.

1. Is your total debt relative to net worth ...

Less than 10% (1 point)

Between 10%-20% (2 points)

More than 20% (3 points)

2. Is your total annual spending relative to net worth ...

Less than 3% (1 point)

Between 3%-5% (2 points)

More than 5% (3 points)

3. Your most valuable asset is what percentage of your total net worth?

Less than 10% (1 point)

Between 10%-20% (2 points)

More than 20% (3 points)

4. What percentage of your total wealth is illiquid—that is, invested in a house, company or investment that can't quickly be converted to cash?

Less than 10% (1 point)

Between 10%-20% (2 points)

More than 20% (3 points)

5. How often do you gamble, bet or play the lottery?

Never or almost never (1 point)

Once a month (2 points)

More than once a month (3 points)

6. In social or business situations, do you believe you are the smartest person in the room?

Never (1 point)

Sometimes (2 points)

Most of the time or always (3 points)

7. Do you think your lifestyle five years from now will be ...

Worse (1 point)

Unsure or the same (2 points)

Much better (3 points)

SCORE

7–10: Low beta

11–15: Medium beta

15–19: High beta

19 or higher: High-beta crash waiting to happen

Write to Robert Frank at robert.frank@wsj.com

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Frustrated With Stocks? Here’s How to Profit From Pessimism

2011-12-16T01:17:00.000+08:00

If you're frustrated with today's jittery financial markets, you're certainly not alone. Unfortunately there are no quick fixes to resolve the issues fueling the market's ups and downs --namely the European debt crisis, a shaky global economy, and U.S. political gridlock. But before you throw in the towel and unwind your positions into the recent weakness, Alec Young, global equity strategist at Standard & Poor's Capital IQ has some sectors to reconsider into year-end.

"We think the best thing (the Consumer Discretionary) (XLY) sector has going for it is extremely low expectations on the domestic economy," says Young. Just like the better than expected Black Friday sales, he sees more positive surprises ahead since the economic pessimism is "more than factored in."

For the record, FactSet research shows Q4 Consumer Discretionary sector earnings are seen growing by 4% vs 14% for the full S&P 500, with sales up 8% vs 7% for the index.

Young is promoting a similar GARP (Growth At A Reasonable Price) strategy in his affinity for the Tech Sector (XLK), which he thinks will "outgrow a pretty anemic overall economy" as companies strive to increase productivity. Instead of cherry-picking winners, Young's approach on tech is to own "the top 10 or 20 holdings" by market cap, which he says tends to "drive the bus" anyways.

By way of context, there are currently 72 stocks in the S&P 500 Information Technology sector, with the 10 biggest being, Apple (AAPL), IBM (IBM), Microsoft (MSFT), Google (GOOG), Oracle (ORCL), Intel (INTC), Cisco (CSCO), Qualcomm (QCOM), Visa (V), and Hewlett-Packard (HPQ).

And again, Young says "We think tech can exceed a very low bar of expectations."

It probably comes as no surprise that Young's final favored sector is a defensive hedge in the form of the Consumer Staples (XLP), which he says is "also a nod to the fact that Europe remains a massive wildcard."

Along that same line of thought, Young is avoiding Financials (XLF). He simply doesn't see value yet in the market's hardest hit sector, which fallen about 20% this year.

"We really need to feel that we're through the worst with Europe," he says, adding that Financials ''have the most to lose" if the sovereign debt crisis escalates.

"There isn't more uncertainty anywhere than in the financial sector," Young says. "Investors hate uncertainty."

7 Ways to Tweak Your Retirement Plan for 2012

2011-12-13T07:10:00.000+08:00

By Mark Miller

"Set it and forget it," infomercial marketer extraordinaire Ron Popeil used to say.

That might have worked for Ron's easy-to-use chicken rotisserie -- but it's not a good approach for your retirement portfolio. Even the best-built retirement plan needs a periodic check-up, so here's a list of seven tips, tweaks and reminders for the year ahead.

1. Adjust your 401(k) contribution.

The maximum employee contribution allowable by the IRS rises by $500 in 2012, to $17,000; workers over age 50 can contribute another $5,500 in catch-up contributions. If you're already maxing out, adjust your contribution rate for 2012 accordingly. Deductible contribution maximums for traditional IRAs and Roth IRAs are unchanged for 2012 - you can sock away $5,000 (or $6,000 if you are over age 50).

2. Rebalance.

Make sure your equity and fixed income allocations are on target by buying or selling assets as needed to make sure you're not taking more risk than desired. Adds Jessica Ness, director of financial planning at Glassman Wealth Services: "Rebalancing puts an automatic buy-low and sell-high methodology to work because you trim asset classes that have grown in size and you contribute to asset classes that have shrunk." Ideally, you should rebalance quarterly.

3. Consider Roth IRA options.

A Roth isn't always the best investment option for available pre-tax dollars because it's a bet on future tax rates, and what you expect your personal tax rate will be in retirement. But a Roth is a slam-dunk option if you're investing after-tax dollars because everything in the account grows tax-free.

Income eligibility limits to qualify for a Roth IRA contribution will increase in 2012. Single income tax return filers with modified adjusted gross income (AGI) less than $110,000 will be eligible to make the maximum contribution to a Roth; for joint filers, the income limit will be $173,000.

If you don't meet the income qualifications, there's another option: the so-called "back-door Roth." It's a two-step process; first, you make a contribution to a non-deductible traditional IRA; then immediately convert that IRA to a Roth. "The key is to do the conversion right after you make the contribution, so the account doesn't have time to accrue taxable earnings," says Maria Bruno, a senior investment analyst at Vanguard Investments.

A caveat: This strategy works best if you don't have other traditional IRA assets, because federal law requires you to aggregate all your IRA assets for tax purposes. So, if you have significant IRA assets that were funded with pre-tax contributions, you'll need to weigh the potential tax bite.

4. Don't forget to take required distributions.

Retirement investors over age 70 1/2 must take the required minimum distribution (RMD) from most types of retirement accounts (except Roths). But some retirees seem to be forgetting this; Fidelity Investments reports that two-thirds of its IRA customers haven't taken RMDs as of early November.

RMDs are calculated for each account you own by dividing the prior December 31 balance by a life expectancy factor that you can find in IRS Publication 590. Often, account providers will calculate RMDs for you -- but the final responsibility is yours. Any RMD amounts that you don't withdraw on time will be taxed at 50 percent.

5. Top off liquid assets.

A great strategy for extending portfolio life in retirement is to make sure you have sufficient cash on hand to meet expenses without being forced to sell equities when the market is down. Yearend is a good time to refill your "liquid asset pool," that may have been depleted this year, notes Christine Benz, director of personal finance at Morningstar. When considering what to sell, think about your overall portfolio asset allocation, investment strategies and taxes, she says.

"A positive side effect of ensuring that you have adequate cash reserves is that you can keep a cool head during volatile markets, knowing that your near-term living expenses are covered," Benz adds.

6. Give away your IRA.

The law allowing donors over 70 1/2 to make charitable contributions from an IRA is set to expire at the end of this year, unless Congress acts. The Qualified Charitable Contribution provision allows contributions up to $100,000 to be made direct to a single or multiple charities. The gifts aren't deductible, but they are excluded from your income -- and that can help you avoid triggering high income premium surcharges on Medicare or Social Security taxes. The gifts also can be counted toward your RMD.

7. Evaluate your draw-down strategy.

Most Americans don't have a "decumulation" plan -- that is, how much to draw down from savings and when. The trick here is finding a balanced approach that meets income needs while avoiding the risk of running out of money especially in difficult market conditions.

"Ensure that you know how much you have withdrawn over the past year and the amount you may need to withdraw next year," says Ness. "Portfolio values may be down, so withdrawing the same amount in 2012 that you did in 2011 could have a greater negative impact on your portfolio. Knowing how much you need to withdraw for next year and understanding the impact that could have on your portfolio will allow you to make any adjustments necessary, before it is too late."

Singapore braces for sharply slower growth in 2012

2011-12-07T01:12:00.001+08:00

By Bernice Han

Singapore on Monday predicted sharply lower economic growth of 1.0-3.0 percent in 2012 amid an export slowdown and warned the situation could worsen if Europe's debt woes trigger a global crisis.

"This does not factor in downside risks to growth, such as a worsening debt situation or a full-blown financial crisis in the advanced economies," the Ministry of Trade and Industry (MTI) said in a statement releasing the data.

"Should these risks materialise, growth in the Singapore economy in 2012 could come in lower than expected," it added.

The city-state's 2011 gross domestic product (GDP) growth is estimated at 5.0 percent, down from an all-time high of 14.5 percent in 2010 when the economy was coming off a 0.8 contraction during the 2009 recession.

Singapore's open and trade-driven economy is regarded as a bellwether for Asia's exporters, which depend heavily on electronics and other manufactured shipments to North America and Europe for growth.

"It looks like the risk is towards the downside," Chua Hak Bin, a Singapore-based economist with Bank of America-Merrill Lynch, said of the implications of Singapore's forecast for the rest of Asia.

"The fact that the tech exports were weak will mean other Asian economies will also see tech exports being pulled down," he told AFP.

Asia's fate will depend to a large degree on whether Europe can contain its debt crisis which has engulfed large economies including Italy and Spain, according to Chua.

Singapore's GDP was valued at Sg$284.6 billion ($219 billion) in 2010, and total trade was more than three times as large.

"The longer the European debt crisis drags out with no clear solutions, it will have a negative impact globally," said Selena Ling, an economist with Singapore's Oversea-Chinese Banking Corp.

"We are starting to see the impact come through."

The MTI said it expects Singapore's electronics industry and other sectors that rely heavily on overseas orders to remain under pressure despite support from Asia's better-performing economies.

"Although resilient domestic demand in emerging Asia will provide some support to global demand, it will not fully mitigate the effects of an economic slowdown in the advanced economies," the MTI said.

Even the financial-services sector will be affected by heightened uncertainties in the external environment, it added.

The forecast came as data released separately Monday by the trade promotion body International Enterprise Singapore showed electronics exports tumbling 17 percent in the third quarter from a year ago.

The ministry's downbeat projections for 2012 came as it released third-quarter figures showing GDP grew 6.1 percent, an improvement from 1.0 percent in the second quarter.

Singapore is a significant producer of high-end telecommunications and computer-related parts shipped to the rest of the world as well as petrochemical and pharmaceutical products.

"Within the manufacturing sector, the electronics cluster is expected to register a lower level of output given the downturn in the global electronics cycle," the MTI said.

"This in turn will have knock-on effects on the precision engineering cluster and wholesale trade."

ADB cuts East Asia growth forecast as risks grow

2011-12-07T01:11:00.000+08:00

Kelvin Chan

HONG KONG (AP) -- Economic growth in East Asia will continue to wane in 2012 as sovereign debt problems in Europe and an anemic U.S. economy raise the risk of a deep global downturn, the Asian Development Bank said Tuesday.

The ADB cut its 2012 growth forecast for 14 East Asian economies excluding Japan to 7.2 percent from the 7.5 percent predicted in September. In a worst-case scenario -- in which the U.S. and Europe slow as much as they did in the 2008-2009 global crisis -- East Asia would grow only 5.4 percent in 2012, the development lender said.

The ADB also lowered its 2011 forecast slightly to 7.5 percent from 7.6 percent.

The Manila-based lender said its "cautiously optimistic" outlook for the region faces "much greater downside risks than just a few months ago."

Those risks include a deep recession in both the Europe and the U.S., rising protectionism and persistent or resurgent inflation.

"The recovery in advanced economies lost steam this year and they will continue to struggle," the report said. "While U.S. economic growth could strengthen somewhat, the eurozone will likely fall into either a brief recession or a more severe long-term downturn."

Emerging Asian economies are "certainly not immune" to a major slowdown in advanced economies, which would hurt their economic growth and pose "significant policy challenges," it said.

Many developing Asian countries including China are dependent on economic growth in the U.S. and Europe, which are major markets for the toys, clothing and electronics churned out by the region's countless factories.

Safeguarding the region's robust growth against another global crisis is the biggest challenge, said the report, which urged policymakers to increase regional trade and financial ties and expand links with other emerging economies to reduce their dependence on the U.S. and Europe.

The report covers China, Hong Kong, Taiwan, South Korea and 10 Southeast Asian countries.

Rich-Poor Divide Is Widening OECD Says

2011-12-06T01:59:00.001+08:00

The gap between rich and poor is widening across most developed economies as skilled workers reap more rewards and top executives and bankers benefit from a global job market, the Organization for Economic Cooperation and Development said.

The average income of the richest tenth of the population is now about nine times that of the poorest tenth, the Paris- based OECD said today in a report. The gap has increased about 10 percent since the mid 1980s.

Mexico, the U.S., Israel and the U.K. are among the countries with the biggest divide between rich and poor, while Denmark, Norway, Belgium and the Czech Republic are among those with the smallest gap. The earnings multiple is 14-to-1 in the U.S. and Israel, compared with about 10-to-1 in the U.K., Italy and Japan and 6-to-1 in Germany and Denmark.

"The social contract is starting to unravel in many countries," OECD Secretary-General Angel Gurria said in a statement. "This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that the greater inequality fosters greater social mobility."

The OECD used a "Gini coefficient," or standard measure of income inequality that ranges from zero to one. At zero an entire population would have identical incomes, while at one all income would go to one person. The coefficient stands at about 0.316 today, up 10 percent since the mid-1980s.

The coefficient rose in 17 out of 22 OECD countries for which long-term data are available. Only Turkey, Greece, France, Hungary and Belgium recorded no increase or small declines in their coefficients, the OECD said.

"There is nothing inevitable about high and growing inequalities," Gurria said. "Up-skilling the workforce is by far the most powerful instrument to counter rising inequality. The investment in people must begin in early childhood and be followed through into formal education and work."

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Five Myths About Emerging Markets

2011-12-06T01:58:00.001+08:00

This year's mutual-fund scoreboard highlights an interesting conundrum about investing in emerging markets.

Economies of big emerging-markets countries such as China, India and Russia have been growing much faster than the plodding U.S. economy. Yet if you own a fund that focuses on emerging-markets stocks, the chances are good that its performance this year has been lagging far behind the returns of the U.S.-stock funds in your portfolio.

How could that be?

The idea that a nation's economic performance is the main driver of returns in equities is one of several unfounded beliefs many investors have about the relative merits of developed and emerging markets. And this year, it has helped fuel strong demand for emerging-markets stock funds, which were one of the few areas in the equities fund world to see continued inflows during recent stock-market volatility.

If you're considering buying or selling an emerging-markets stock fund, it might be worth taking a closer look at some of these myths:

Myth 1: High stock valuations aren't a big deal in fast-growing economies.

The reality is that even in fast-growing nations it matters whether stocks are cheap or expensive relative to company fundamentals.

Investors have flocked to emerging markets for several years, expecting stronger economic growth there to produce stock returns well above those in the U.S. and Europe. As a result, emerging-markets stocks grew relatively expensive among global markets, based on valuation yardsticks such as price-to-earnings ratios.

The idea was that the high valuations weren't all that important. But they were. And investors discovered that, to their chagrin, when authorities in China, Brazil and other nations, concerned that their economies were overheating, tightened their money supplies and took other steps to temper growth and discourage speculation. Diversified emerging-markets stock funds were down 17.1% on average this year through Nov. 30, according to Thomson Reuters Corp.'s Lipper unit. And the stocks aren't expected to rally strongly anytime soon, according to a survey of forecasters by New York-based Heckman Global Advisors.

Meanwhile, in the U.S., investors bid stock prices sharply lower during late summer amid worries that the economy was headed for another recession. But when economic data continued to suggest that growth would remain positive, if sluggish, U.S. stocks began to look like a bargain.

Investors rushed back in. Through Nov. 30, the Standard & Poor's 500-stock index was down 0.9% in price and up 1.1% in total return including dividends.

Here's a silver lining: If you're considering adding emerging-markets funds to your portfolio, this might be an opportunity. "On a historical basis, emerging markets look pretty cheap today,'' says Michael Reynal, who heads the emerging-markets group at Principal Global Investors, Des Moines, Iowa.

Myth 2: Emerging-markets stocks are well-insulated from financial upheavals elsewhere in the world.

The thinking here is that emerging markets would march to their own beat simply because of their supercharged growth. That might have been true in the past. But today, stocks in most emerging nations trade closely in sync with those in New York and London. That's happened as companies in emerging nations have become bigger players on the world stage and as global flows of money have accelerated.

This year, as in developed markets, emerging-markets stocks were hit by fears about financial contagion spreading from Europe. In fact, they were hurt more than U.S. stocks. That's because the U.S., for all its economic and fiscal headwinds, still is viewed as the safest place to park money.

As you manage your portfolio allocations, think of emerging-markets stocks as akin to U.S. small-cap stocks in terms of risk, says Brian Gendreau, a veteran Wall Street money manager and market strategist for Cetera Financial Group, an El Segundo, Calif., advisory concern. "The more you allocate to emerging markets, the higher your expected return—and the higher the volatility of your portfolio,'' he says.

Myth 3: Emerging markets are a growth play.

Emerging-markets funds may indeed provide good growth if you invest smartly and have a long time horizon. But that's not the whole story. It also may be worth looking at emerging-markets funds that can provide income by focusing on bonds or dividend-paying stocks.

Eaton Vance Emerging Markets Local Income (EEIAX-News) invests in bonds of emerging nations, such as Malaysia and Indonesia, that are denominated in their local currencies. It is designed to provide income and diversification for U.S. dollar-based investors and it recently yielded about 4.7%. WisdomTree Emerging Markets Equity Income (DEM-News) is an exchange-traded fund that focuses on emerging-markets stocks with high dividend yields. It yields about 8.5%.

Some newer funds own mixes of emerging-markets stocks and bonds, similar to U.S.-focused balanced or allocation funds.

Strategic Latin America (SLATX-News), which has about $24 million in assets, holds a roughly equal mix of equities and bonds. Its performance was hurt recently by big declines in Latin American stocks and currencies. But over long periods, its share price should gyrate less than half as much as major U.S. stock indexes, says the fund's manager, Heiner Skaliks, making it possibly useful as a diversifier.

Pacific Investment Management Co. and Franklin Templeton Investments this year also launched funds that provide exposure to a range of emerging-markets assets, such as stocks and bonds. But these are still relatively untested.

Myth 4: Emerging-markets currencies will appreciate as the dollar continues its long-term decline.

That may prove true over many years, amplifying the returns for U.S. investors who buy into emerging markets, but it certainly wasn't the case in recent months. So far this year, emerging-markets currencies have generally weakened against the dollar; while the MSCI Emerging Market Index was down 14.8% in local currencies through Nov. 30, it was down 19.4% in dollar terms.

In September, worries about Europe's fiscal crisis sparked a rush back to the dollar, which investors viewed as a temporarily safer haven than some alternatives. The currencies of Brazil, Hungary, South Africa and Poland, among others, were savaged. The two Central European currencies trade closely in sync with the euro, because of close trading ties, and so slid as Europe's financial crisis flared. Brazil's widely traded currency may just have been an easy asset for big investors to sell when markets turned more choppy.

In calmer times, emerging-markets currencies could generate very attractive returns for U.S. investors, gaining against the dollar as the result of global financial imbalances, says Michael Cirami, who helps oversee emerging-markets funds at Eaton Vance Management. But sometimes they can significantly add to the volatility of emerging-markets funds, he cautions.

Myth 5: You can do even better by concentrating on just a few of the strongest emerging nations.

In recent years, investors have piled into exchange-traded funds that focus on individual nations, such as Brazil, Russia, India and China. iShares MSCI Brazil Index (EWZ-News), among the largest, has about $9 billion in assets.

But such ETFs offer much less diversification. And because they are highly liquid, or easy to trade in large amounts, their prices can be buffeted by abrupt shifts in global investor sentiment that may have little to do with longer-term fundamentals.

This year through Nov. 30, for example, WisdomTree India Earnings (EPI-News) is down 33% even though India's economy is likely to grow by better than 7% in both 2011 and 2012, according to Morgan Stanley Research.

Investors who want to capitalize on the growth prospects of emerging markets, but with less volatility, should consider funds that target broad regions or a wide range of emerging-markets countries, says Karin Anderson, a senior analyst at Morningstar. Among her recommendations is Vanguard MSCI Emerging Markets ETF (VWO-News), which holds about 900 stocks in nearly two dozen emerging countries.

Mr. Pollock is a writer in Ridgewood, N.J. Email him at reports@wsj.com.

A rather depressing summary of bad bonuses forecasts in Singapore, Shanghai and Hong Kong

2011-12-02T07:55:00.001+08:00

Shree Ann Mathavan

Bank bonuses seem to be universally shrinking. Asia, often cited as the engine of growth for many firms, isn’t impervious to suddenly skinnier payouts either. Even front-office staff – the revenue-generators who are typically well compensated – will be hard hit by the bonus crackdown. Here’s a forecast of what the pool will be like for front-office employees in Singapore, Hong Kong and Shanghai.

Singapore

Angela Kuek, head of front-office banking and financial services, Hudson, predicts a “significant decline” in bonus payments. “Last year top performers got 75 to 100 per cent on their base salary and average performers got a bonus of a couple of months. This year average performers will either get zero bonuses or be told to go. Anything from 50 per cent on base salary and above will be considered above average.”

Kuek doesn’t expect a rush of post-bonus activity. “I don’t think there will be much supply of roles in the front-office because deal flow isn’t going to be that strong, at least not in the first six months of 2012.” Whatever little movement there is will be due to redundancies – both teams and individuals. Although most Singapore-based candidates aren’t looking to move right now because of job-security fears, Kuek is seeing increased interest from returning Asians and professionals based in Europe.

Hong Kong

Hubert Tam, managing partner, Sirius Partners, sees bonuses falling by about 50 to 60 per cent in Hong Kong. However, he cautions that payments will vary between different front-office roles. Equity derivative positions will be pretty badly hit. Some senior candidates have already been made redundant in Hong Kong, he says. The flow side of businesses, like cash equities and FX, however, is likely to do slightly better.

Tam has seen a handful of strong equity derivatives candidates quit their roles within the last month – even without another position lined up. The resignations were sparked off by news that they would get doughnut bonuses. “I think everyone realises that banks are not doing well, but the willingness to accept a zero bonus is not very high because these candidates make money for the bank. They do expect some kind of reward.” Like Kuek, he reckons post-bonus activity will be minimal and will be mostly triggered by layoffs.

Shanghai

Zhangliang Cao, senior consultant, banking, Antal International, predicts a 50 to 80 per cent drop in payouts from last year. While zero bonuses are possible, Cao says management will consider handing out performance bonuses in a bid to retain staff, especially because there is fierce competition for talent on the mainland. “Top performers will still receive bonuses, but this will be a decrease, to correspond with the average drop in bonuses.”

Cao believes it’s too soon to tell what the post-bonus outlook will be, but says the China market will remain buoyant well into 2012.

The only way to succeed in finance is by playing nasty office politics – here’s what I’ve seen and learnt

2011-12-02T07:53:00.002+08:00

If there is ever a poignant piece of advice that university lecturers and textbooks failed to warn me about upon graduating and entering the workforce, it is the fundamentals of office politics. Not long after finding my feet in my new professional environment, I learnt pretty quickly that sometimes it’s the brownnosing and “who you know, not what you know” ticket that guarantees movement up the corporate ladder.

I have sat back and watched in amusement as co-workers, managers, directors and the like strategise to get themselves promotions and bigger bonuses. They masterfully do whatever it takes to get their own way and they make the game of office politics look like an art form.

My disappearing manager

I once had a manager who disappeared from his desk at 12pm sharp every Friday and would stumble back to the office every few hours smelling of cigarettes and alcohol. He used these bar-hopping benders as quality bonding time with his higher-ups. As everyone would agree, there is a definite correlation between this fraternisation and my manager always getting what he wanted.

Another co-worker started off as a lowly analyst in the bank. She was poor in experience but had a killer personality, was super talented at banking and invited us to the wildest parties. She knew exactly how to win over everyone in the office. Two years into her job, she set a precedent by skipping one management level and was catapulted up to become associate director.

Gang rivalries

Perhaps the most memorable display of politics I’ve witnessed was when my recent manager was looked over for the CFO position she had patiently waited ten years for. The job was taken by an outsider after she returned from holiday.

In response to what felt like a scathing slap in the face, she made her new boss’ life miserable by withholding information, refusing to work in unison, wearing the passive-aggressive front on a daily basis, and ultimately garnered the sympathy and backing of the staff. Refusing to be bullied, the new CFO mobilised new recruits and slowly started to take power. It was a sad case of office gang rivalry – more nonsensical and dramatic than West Side Story.

My takeaway

My observations and experience have been isolated to the highly competitive and cut-throat world of finance, where capitalism is the name of the game. Financial services can unfortunately have the ability to seduce employees to do whatever it takes to get more money, more power and more recognition. The advice given to me by a colleague on this unavoidable dilemma is: “Do your work and stay out of it”.

But if you have been overlooked for a promotion you were deservingly next in line for (and then you took the moral high ground and didn’t cave into playing politics), better luck next time.

Don’t hate the player, hate the game.

The awful job market is now pushing people out of banking

2011-12-02T07:53:00.001+08:00

Shree Ann Mathavan

Bleak prospects in the banking industry are making some people contemplate a career change. A few employees, especially those in the middle and back office, are now even thinking the previously unthinkable – leaving banking altogether.

Derek Kenny, director, Gulf Connexions Group, has seen an increase in such moves among finance tech (project management and business analysis), finance and HR professionals.

“Banking is becoming a pretty easy place to headhunt out of for organisations in other industries such as tech firms, telcos and aviation. A top candidate is a top candidate and although there will be a learning curve when you move industries, companies are willing to invest in smart people,” says Kenny. He knows of one corporation which specifically looks to hire candidates from banks.

John Mullally, manager, financial services, Robert Walters Hong Kong, has seen job seekers move into professional services firms like management consultancies or accountancy practices. However, in most instances these people still work within the broader finance industry.

Staying on is getting increasingly harder

It used to be that traders who were let go from tier-one banks could count on getting employed fairly easily in tier-two banks. However, such moves are increasingly difficult to pull off now, says Kenny. Employees who are laid off are facing the new reality that getting re-employed takes time. With banks downsizing, Kenny reckons this will “inevitably” lead to more people leaving the industry over time.

That certainly seems to be the case for traders in the commodities and energy markets whose teams have recently shrunk because of a harsher trading climate. Reuters recently reported that at least 10 bank traders have left their jobs in Asia over the past year. More than half joined physical oil trading companies and only three others joined banks.

Challenges

Making the transition to a non-banking role isn’t easy, of course. Mullally says the move is likely to result in a considerable pay cut. “It is unlikely for most banking professionals to switch industries and receive a salary increase. Firstly, they are probably not bringing a huge amount of domain knowledge to said industry and secondly, bankers are actually paid quite well, in comparison to professionals in other industries.” Those looking to leave banking will also need to retrain.

The road ahead

Mullally says there will continue to be career opportunities for banking professionals, just not on the same levels that the industry has been accustomed to. However, areas like compliance and risk management remain hot.

Although there may be a trend of even more people moving out of the industry in the near future, this is likely to be triggered by further redundancies, he adds. “The interesting trend to look at will be how many graduates over the new few years choose to pursue a banking career as it has undoubtedly lost some of its lustre, and graduate programmes will have far smaller intakes.”

2011-12-01T17:46:00.001+08:00

DPM Tharman warns of severe slowdown in global economy

2011-11-19T22:59:00.000+08:00

SINGAPORE: Deputy Prime Minister Tharman Shanmugaratnam has warned of a possible severe slowdown in the global economy due to the debt crisis in Europe.

He said that this could test the leadership of Singapore's government and union movement.

Mr Tharman said: "Unfortunately, troubles are brewing once again, this time in the eurozone... We have to prepare for the possibility, the very real possibility of rough times ahead, a severe slowdown in the global economy. Once again, this will test leadership, leadership not just within government but leadership within the union movement."

He was speaking at a graduation ceremony for the Ong Teng Cheong Labour Leadership Institute, where Mr Tharman and Labour Chief Lim Swee Say gave out certificates and diplomas to 99 graduates.

Mr Tharman's comments come a day after the Monetary Authority of Singapore (MAS) warned that the global economy is at its most fragile state since the last financial crisis.

However, Mr Tharman believes Singapore will be able to use crises to become fitter, more skilled and more ready to take on future opportunities.

He said: "That has been the way we have dealt with past crises, not become all defensive, not retreat, but use the crisis as an opportunity to build up skills and build up competitiveness.

"And if we go through difficulties once again next year and possibly beyond, we will be able to once again show the world how we use crises to build up our competitiveness and to emerge even stronger, just like we did the last time."

Mr Tharman said Singapore's brand of tripartism (where the union works together with the government and companies), has resulted in Singaporean workers today enjoying better working conditions and higher salaries - something not many other countries have been able to achieve.

But he added that there is still the ongoing battle to uplift those with low wages who are struggling to survive, and to correct working conditions which are still substandard in pockets of the economy.

During the ceremony, Mr Tharman also highlighted graduates who made an effort to upgrade. One of them was 50-year-old Mohd Rasi Taib, president of the National Transport Worker's Union, who did not let age stop him from upgrading his skills.

Another is Mr Ramanathan Doraisamy. He was retrenched but picked up leadership skills learnt at the institute and secured a new job as a quality assurance engineer.

The graduates included union leaders, as well as industrial relations and human resource practitioners.

-CNA/ac

“Don’t Get Too Bearish”: 5 Keys to the Market’s Next Move

2011-11-15T23:36:00.001+08:00

By Aaron Task

After a third quarter of wild swings and a big rally in October, the stock market heads into the home stretch virtually unchanged for 2011. After Monday's decline, the S&P 500 is down 0.5% year—to-date.

Four key issues hold the key to whether 2011 ends up being the first down year since 2008 or whether the Santa Claus rally comes to town, according to Greg Zuckerman of The Wall Street Journal:

The Core of Europe: Now that Europe's debt crisis has moved from the "periphery", markets will take their cues from interest rates in Italy and France. On Monday, for example, Italy sold $4.1 billion of 5-year debt at the highest yields since 1997, which pretty much set the tone for financial markets worldwide.

It's the Economy, Stupid: A big reason for the big rally in October was better-than-expected U.S. economic data. Many money managers were braced for an imminent "double-dip" and the positive surprises on GDP, employment, retail sales and other metrics helped account for the S&P's nearly 11% rise last month. Whether the economy continues to surprise on the upside, or slides back into the doldrums will go a long way in determining the market's next big move.

Junk in the Trunk: "The U.S. lending market needs to revive if growth is to rebound," Zuckerman writes. "To get an indication of the strength of lending markets, look to the junk-bond market" for cues on the ability of "lower-rated and riskier" companies to access the debt market.

China's Landing: Whether China's economy has a 'hard' or 'soft' landing is the critical question on many investors' minds. As the world's second-largest economy and a major importer of myriad commodities, the outcome will have a major impact on financial markets worldwide. "It's not yet clear if [Chinese leaders] will be able to slow things to a more manageable and healthy pace, or if a painful crash is inevitable," Zuckerman observers.

In the accompanying video, Zuckerman and I discuss these market forces as well as a fifth factor, which is less easy to quantify but potentially most important of all: Performance anxiety.

As of Oct. 30, the average hedge fund was down nearly 3% for the year and underperforming the S&P 500, according to Hennessee Group. Some noted hedge fund stars, like John Paulson, are faring far worse than the average (and the index), a sign of how even the "smartest" of smart money is struggling to make sense of (and profits in) an increasingly volatile market.

Considering the fees being charged by hedge funds and the "reputational risk" of lagging mutual funds, Zuckerman notes underperforming money managers may be tempted to "chase" the market if it exhibits any signs of strength.

As a result, Zuckerman's conclusion is that investors should "not get too bearish" before year-end, even if there are plenty of things to worry about these days.

Aaron Task is the host of The Daily Ticker. You can follow him on Twitter at @aarontask or email him at altask@yahoo.com

Make Money in 2012: Investments

2011-11-15T23:34:00.000+08:00

By Carla Fried

As some of the uncertainties surrounding the economy lift over the course of the year, attention is bound to turn back to the fundamentals of the private sector, says Katherine Nixon, chief investment officer for the Northeast region at Northern Trust.

And on that front, things don't look so bad. Corporate profits are hanging tough. Yes, growth has been slowing noticeably in recent months, but earnings for firms in the S&P 500 are still expected to climb an above-average 9% next year, according to S&P Capital IQ.

As for whether stocks represent a good value now, the picture is decidedly mixed. A conservative measure of price/ earnings ratios -- which relies on 10 years of averaged earnings -- would suggest equities are too expensive to load up on. But the S&P's P/E, based on projected profits, points to stocks being a decent buy. "Anyone willing to take on volatility and invest in equities today with a three-year time frame should see large positive returns," said Chuck de Lardemelle, a co-manager of IVA Worldwide Fund.

Meanwhile, interest rates are near all-time lows. That's good news for stocks, but fixed-income investors will have a tough time making money. Tom Atteberry, manager of FPA New Income Fund, notes 10-year Treasuries were yielding less than 2% in the fall. At that paltry level, a fraction of a percentage point increase in rates could wipe out what little your bonds are yielding -- and then some. Yet economists think 10-year rates will climb modestly. So it will be critical to diversify your bond portfolio into other areas, in particular, corporate debt.

The action plan -- In a market likely to produce only modest gains, diversify your fixed-income bets and focus on relatively safe equities.

Stocks: Ride the big dependables. Early on in a recovery, small-company stocks traditionally give you the biggest pop. At this stage, it's the big boys with balance-sheet might that are likely to outperform, as was the case in 2011. Not only do large firms provide greater exposure to foreign markets -- including emerging economies that are growing much faster than the U.S. -- their bigger dividends can account for a sizable portion of your gains in a low-return year, says Northern Trust's Nixon. Funds that pay particularly close attention to high-quality blue chips are Jensen Quality Growth and T. Rowe Price Blue Chip Growth. Both are on the MONEY 70, our recommended list of mutual funds and exchange-traded funds.

Seek out revenue growers. Brad Sorensen, director of market and sector analysis at the Schwab Center for Financial Research, expects businesses to upgrade technology to boost productivity. It's already happening. In the third quarter, business spending jumped 16.3%. Another area likely to enjoy better-than-average revenue growth is the industrial sector, where firms are seeing strong demand from emerging markets building out their infrastructure. For an added dollop of tech, go with the Vanguard Information Technology ETF, which bulks up on tech giants like Apple and IBM. For industrials, check out iShares S&P Global Industrials.

Investing: Throw out conventional wisdom

Bonds: Bet on high yield. As recession fears rose in 2011, economically sensitive high-yield bonds sold off bigtime. Result: The gap in yields between "junk" bonds and short-term Treasuries jumped to more than nine percentage points, up from six points in early 2011. "That spread represents a pretty good value," says Robert Ostrowski, in charge of taxable fixed-income strategy at Federated. LPL Financial market strategist Anthony Valeri says junk is trading as if defaults will spike to 9%, up from 2%. "We just don't see a 9% default rate as remotely likely," he says. Given junk's tendency to bounce around, Valeri recommends keeping a modest stake of 5% to 10% in these bonds. You can accomplish that through a diversified junk fund like Fidelity High Income.

Don't get stuck in the middle. On the other end of the fixed-income spectrum are Treasuries, which won't default but are at risk if rates rise. Treasuries maturing in five to seven years are paying barely more than cash, so it makes little sense to buy them. Ostrowski recommends a "barbell" strategy, with 80% of your Treasuries in short-term securities and 20% in long-term bonds. He says the Fed's campaign to buy long-term Treasuries, dubbed Operation Twist, should make long Treasuries less of a risk. And this strategy could yield around 2.5%, nearly a point more than what seven-year Treasuries are paying.

Dr. Dooms...

Though the economy is healing, some long-standing bears are still bracing for Armageddon. Yet each has a different take on how to prepare for the fallout.

Nouriel Roubini, Economics professor who called the mortgage crisis

Forecast: Decent chance of another recession.

Advice: Favor U.S. stocks over European equities.

Peter Schiff, Strategist who predicted a decade-long bear

Forecast: Expect an actual depression.

Advice: Avoid dollar-denominated assets. Buy gold and silver.

Marc Faber, Investment analyst who called the 1987 crash

Forecast: A collapse in China threatens the global economy.

Advice: Keep a quarter in cash, a quarter in gold, a quarter in real estate, and a quarter in stocks.

Henry Kaufman, Economist dubbed "Dr. Gloom" in the '80s for his general pessimism

Forecast: The U.S. economy will stagnate.

Advice: Buy stock in firms with strong balance sheets.

... And a Dr. Hope

Richard Sylla, Economist and financial historian who foresaw the "lost decade"

Forecast: Expect better returns over the next decade.

Advice: Shift from cash to stocks in stages, putting a quarter in every few months.

Why Investors Make Terrible Decisions

2011-11-15T23:31:00.000+08:00

By Daniel Solin

There is much talk in the financial media about the market volatility that commenced in 2008. The markets experienced a very sharp downturn in 2008, and a remarkably quick recovery in the ensuing years. You would think that investors who relied on their brokers or advisers for advice during this period would have fared well. Market volatility should provide the perfect environment for investment pros who say they can time the markets.

Unfortunately, the opposite occurred. Investors were caught by surprise at the steep market decline in 2008, and some of them panicked, sold, and missed the market recovery.

According to an analysis by Byran Harris, senior editor at Dimensional Fund Advisors, the market began its steep decline in late 2008. It bottomed out in early March 2009 and then began a rapid recovery through June, 2011. During this period, investors dumped over $266 billion of their U.S. stock mutual funds. The biggest outflows occurred in early 2009, just as the markets began to recover. Net outflows remained negative even after the market recovery.

This pattern of bad investor behavior was not unique to this time period. Russel Kinnel, the director of mutual fund research at Morningstar, analyzed investor returns for the past decade in an article aptly titled: Bad Timing Eats Away At Investor Returns. Here's what he found: For the decade from 2000 to 2009, the average investor in U.S. stocks earned a pathetic 0.22 percent annualized, compared with 1.59 percent for the average fund. Investors in all funds also significantly underperformed the average fund, earning an annualized return of 1.68 percent, compared with 3.18 percent for the average fund. Investors in municipal bond funds did worst of all. They earned only a 2.96 percent return, compared with total returns of 4.57 percent annualized.

Kinnel has a number of suggestions for investors who want to avoid these dismal results. He counsels investors to "steer clear of higher-risk funds" that led them to make poor timing decisions. Curiously, he suggests taking a look at the valuations of your fund after rallies and sell-offs because "fund portfolios tend to be real bargains after a long sell-off and rather unattractive investments after a long rally." This seems like the kind of market timing that got investors into this mess.

Kinnel ignores the elephant in the room: The advice you received from your broker or adviser during this period. Many money managers advertise their ability to time the markets by telling you when to get in and when to get out. This data, and reams of academic studies, demonstrate they don't have this expertise. Relying on brokers has cost many Americans their opportunity to retire with dignity, if at all.

The real lesson is never mentioned by Kinnel. Fire any broker or adviser who tells you he can beat the markets by engaging in stock picking, market timing, or picking actively managed mutual funds or hot fund managers that will outperform the markets. Instead, focus on your asset allocation, the division of your portfolio between stocks and bonds. Purchase a globally diversified portfolio of low management fee stock and bond index funds, exchange-traded funds, or passively managed funds. Rebalance your portfolio once or twice a year to insure your risk level is appropriate for you.

Ignore short term market volatility. The greater your exposure to stocks, the more volatile your portfolio will be. If you are in the right asset allocation, you can ride out these bumps in the road and reap the expected returns that have historically been earned by long term investors.

The current system is fundamentally flawed. You don't have to participate in what amounts to nothing more than a charade of faux experts exploiting your nest egg.

Dan Solin is the author of the New York Times best sellers, The Smartest Investment Book You'll Ever Read, The Smartest 401(k) Book You'll Ever Read, and The Smartest Retirement Book You'll Ever Read. His new book, The Smartest Portfolio You'll Ever Own, was released in September, 2011.

The views set forth in this blog are the opinions of the author alone and may not represent the views of any firm or entity with whom he is affiliated. The data, information, and content on this blog are for information, education, and non-commercial purposes only. Returns from index funds do not represent the performance of any investment advisory firm. The information on this blog does not involve the rendering of personalized investment advice and is limited to the dissemination of opinions on investing. No reader should construe these opinions as an offer of advisory services. Readers who require investment advice should retain the services of a competent investment professional. The information on this blog is not an offer to buy or sell, or a solicitation of any offer to buy or sell any securities or class of securities mentioned herein. Furthermore, the information on this blog should not be construed as an offer of advisory services. Please note that the author does not recommend specific securities nor is he responsible for comments made by persons posting on this blog.

The 9 Steps I Took to Get My Finances Back on Track

2011-11-15T23:12:00.000+08:00

by Mandi Woodruff

As the youngest daughter of two borderline baby boomers, like many other Generation Yers, I grew up watching my parents spend cash faster than they made it and had no concept of financial planning whatsoever.

When I scored my first full-time job after college, I'll never forget the rush I felt seeing all those numbers fill up my bank account. I bought new furniture for my apartment, stocked my closet with fancy new work clothes, and spent paydays filling my shopping cart on Amazon.com.

Ten weeks later, my entire department was laid off.

At that point, I had no savings, my credit score was crap, and I had absolutely no backup plan. I scraped by for two months with a few freelance jobs until I took a $10,000 pay cut just to get by.

Things finally turned around, and a couple years later, I found myself in the same place as many of my friends in their mid-twenties. We're paying rent comfortably for the first time and are able to start building our nest eggs. The problem is many of us have no idea how to start doing it.

Rather than turn into some sort of cautionary tale for future generations, I decided after my last birthday that I was going to take a good hard look at my finances.

I asked for tips from a trio of financial whizzes who broke down a few actions us 20-somethings can take today to start to getting our money on the right track. Here's how I did it and you can too.

Know your numbers

I have something akin to post-traumatic stress disorder from my days when I was in constant fear of over-drafting my account or bouncing my rent check.

But Chris Hobart, president and CEO of Hobart Financial Group, said knowing how much debt you have is the first step to chipping away at it.

I laid out how much I owe in student loans and on my two credit cards, set up auto-payments for each, and worked out a plan to start paying off more than my minimum payments each month to get rid of the debt faster and cut back on interest.

Get your credit score — every year

When my bank only gave me a $300 limit when I applied for a credit card as a college freshman, I didn't know someone had stolen my identity and had taken out a $12,000 Chase credit card. The person maxed the card out and defaulted on every payment, dragging my credit score down to the pits.

I got my first credit report only two years ago and that's when I found out. I was able to have it erased, but some damage was already done. During college, I was constantly turned down for credit limit extensions which hindered my opportunity to really build up my credit.

Avoid this by checking your credit report annually at Experian.com, Transunion.com or AnnualCreditReport.com.

Clean up your accounts

When I lost my credit card in January and was issued a new one, I went weeks before realizing my auto payments weren't being debited from my checking account and that my credit card was way overdue.

I could have avoided this if I'd simply checked my account once or twice a week to be sure everything was in order.

Now I watch my accounts like a hawk and updated them with my current email address so all my important bank alerts come to my primary email.

See that savings account? Use it.

The fail safe rule for savings is to have at least three months' worth of cash for an emergency fund, but Hobart recommends saving up for six months, given the current economy.

"Before you even start worrying about a 401(k) or investments, you should have emergency savings," he says.

Until recently, my savings account was more of a formality than anything else. I probably had $5 in the thing just to keep it active, but I started automatically shifting 10 percent of my income there per month.

Use that dirty B-word: Budget

As a reformed Groupon addict, nothing makes me less excited about finances than the idea of having a budget.

But it's a necessary evil and disciplining myself in how I manage my cash. An easy way to do so this is to set up a handful of savings accounts for different goals, says Casey Weade, a financial planner.

Have money auto-deposited from your checking account before you even have the chance to touch it, he says. You'll never miss it and your nest egg will grow.

Adjust your expectations

When I turned 18 and could start applying for credit cards, I just knew I wanted things. Lots of them.

"This is a very dangerous mindset," Hobart says, and it's commonly found among children of baby boomers. "Kids say they want their parents' life right away and they're willing to go into debt to get it."

I'm shooting for reachable financial goals now, like saving for a nice vacation and paying off my student loans, rather than beating myself up because I haven't bought a house yet.

Don't let terms like 401(k) scare you

Nothing sounded more grown up and terrifying to me than the idea of getting a 401(k).

But setting up a 401(k) with your employer is one of the first things you should do when you've got your first full-time job, says Scott Holsopple, president and CEO of Smart401k.

Ask your human resource department about a matching 401(k) plan and sign up if the company offers it. Otherwise you're basically turning down free money. If they have a matching plan, then contribute the maximum amount, Holsopple says.

Caution: If you're barely scraping by, it might be better to use a regular savings account that you can easily access for now. You'll lose money if you try to withdraw from your 401(k) before you retire.

Face it: Eventually you'll need to retire

Retirement, believe it or not, is something we should be thinking about now. But full disclosure: I couldn't have told you what an IRA even was or why we need one until I chatted with Weade.

He advises us to ask our employers about setting up a specific type of retirement fund, called a Roth IRA.

With a Roth IRA, you pay taxes on the money you put into your retirement account now. When you're ready to start using the fund once you've retired, the money is tax-free. This type of IRA is ideal for 20-somethings, Weade says.

"We've still got 30 to 40 years left to go before we even touch that money," he says, which gives it plenty of time to grow in value.

Find a mentor

Treat your finances like your career and find a mentor, Weade advises.

Like many 20-somethings, I can't afford to hire a pricey financial planner, so I turned to family for advice. My uncle is a pro at all things banking and he isn't afraid to give me tough love.

When he found out I was laid off and had no savings to lean on, he told me straight up what a moron I was (you know, in a loving way).

Needless to say, he's been checking up on me ever since.

3 ways to gauge a scary market

2011-11-11T01:22:00.000+08:00

FORTUNE -- With the economy wobbling, what's the best way to tell whether the stock market is headed for a complete meltdown or poised for a roaring rally? Simple: Watch the spreads. No, not the latest lines from Vegas oddsmakers. Rather, experts point to three key metrics in the credit markets that have historically given investors a good sense of the risk environment ahead.

Start with the so-called TED spread, which measures the difference between the rates on three-month U.S. Treasury bills and the three-month London interbank offered rate, or Libor (the rate at which banks borrow from one another). The wider it is, the more skittish banks are about lending. Right now, the TED spread is telling investors to "tread lightly in stocks," warns Gina Martin Adams, an equity strategist at Wells Fargo Securities.

The TED spread has more than doubled since Jan. 1 and now hovers around 40 basis points (100 basis points equals one percentage point). That's a far cry from the 400-plus basis points reached during the 2008 financial crisis, but it's still a troubling trend. Wells Fargo's Adams points out that even as the S&P 500 (SPX) index was soaring more than 11% during early October, the TED spread continued to widen. That kind of divergence is "usually a warning sign worth noting," she says. "Credit markets have not confirmed the positive tone of equities."

Another gap worth watching is the difference between the yields on 10-year U.S. government bonds and high-yield (junk) bonds. It reflects the premium that investors demand for taking on the extra risk of default, and it has widened significantly of late. The spread between the Bank of America Merrill Lynch U.S. High Yield Master II index and 10-year Treasuries hit 7.6 percentage points in late October, well above the historical average of around six points. That indicates that bond investors are anticipating a rise in defaults.

Finally, keep an eye on the spreads for credit default swaps (CDS), contracts that insure a buyer of debt against the possibility of default. The spread represents the annual cost paid by the buyer of the credit protection; the higher the spread, the more skeptical the market is of the debtor's ability to repay.

Monitoring the heavily traded CDS market for sovereign debt is a good way to gauge the prospects of struggling European economies, says William Mast, director of fixed-income indexes for Morningstar. As of late October, for example, France's five-year CDS spread stood at 1.9 percentage points, meaning it costs an average of $190,000 a year to insure $10 million of debt. That's almost double the cost investors paid for that same protection in January, a reflection of the mounting worries that the eurozone debt crisis could deteriorate into a full-blown economic disaster.

Until spreads tighten again, it makes sense to stay cautious.

--A former compensation consultant, Janice Revell has been writing about personal finance since 2000.

This article is from the November 7, 2011 issue of Fortune.

The latest round of layoffs feels like the macabre GFC all over again

2011-11-10T22:28:00.001+08:00

Anonymous candidate

I will never forget that particular day in March 2009. Neither will 400 or so of my ex-colleagues who were laid off at the US firm in Asia Pacific that we all worked for.

In the months leading up to it, a circulated memo stipulated 20 per cent of employees would be given the flick. Working for a financial corporation brought to its knees during the global financial crisis (GFC), every single one of us were moving targets, and every day until doomsday, the fear became palpable and the nervousness among the staff was electrifying.

However, being part of a lean and small finance team i.e. under-resourced and over-worked, my colleague Anna and I were told by our manager, the CFO that the team was safe and there was absolutely nothing to worry about. Phew. What comforting words!

Broken promises

But in an instant, these words snapped like delicate glass. As I wander over Anna’s empty desk unwittingly thinking she was in a meeting, Mark, who sat next to her, solemnly said Anna had been summoned to the CEO’s office to be given the awful news she no longer had a job. Anna could return to her cubicle, swallow her pride and stay on for another two weeks or leave instantaneously. She did the latter.

The little bit of dignity Anna had left wasn’t enough to bring her downstairs, collect her bag and bid her colleagues goodbye. Mark had to bring her bag to her. Over the fence, a lady in marketing was also given her marching orders but went about her job as if nothing had happened and three women from other departments, who were all pregnant then, were also “coincidentally” kicked to the curb.

For those of us left behind, the crux of this demoralising experience was undeniably going through Anna’s desk, taking her personal belongings, sealing them in a box and mailing out the bits and pieces accumulated during four years of dedicated service. Feeling disgusted and infuriated, it seemed as though I was helping to put the finishing touches on the company’s dirty work.

None of it makes sense

It didn’t matter that Anna was unable to find a job for the next four months nor did it matter that the mums-to-be didn’t have a job waiting upon completion of maternity leave. It didn’t matter that as soon as Anna left, we were pulling our hair out urgently trying to tabulate and despatch billings she generated each month. Our manager hired a contractor from a place of desperation and threw him off the deep end to figure out where Anna left off. I’m not sure how all that even made sense, but none of it mattered to the firm.

I understand that if a company is on a downward slope— business won’t be what it used to be and the firm cannot feasibly support its existing workforce with whatever maladies economic factors impose. I get that. But as I looked around, CEOs were still frequently fly business class, upper management still got paid hefty bonuses, and a few weeks later, newly created positions were advertised and these contractors are all of a sudden made permanent.

Does anybody else see anything wrong with this picture? Has corporate greed and corporate stupidity become so widely accepted and expected that no one bothers to stand up against such practices until about a month ago when workers started occupying Wall Street, Rome, Greece and Sydney?

I wonder if these bigwigs sleep at night with the decisions they make. I often wonder if there are still leaders with a little bit of heart left, who make decisions based on what’s best for other people and not just his or her wallet. Just maybe, the entirety of the GFC and its ramifications could be avoided. Maybe.

Press repeat and play

Fast forward to the present and it seems to be business as usual. As I saunter over my manager’s office to get numbers signed off, she hastens past with her bag, rushes out the door and is unusually absent the rest of the week. In the most astonishing blow, she was mysteriously made redundant and we would never see her again.

A classic case of corporate karma perhaps?

Singapore PM: Economy Is Visibly Slowing Down

2011-11-10T12:32:00.001+08:00

Singapore's economy is visibly slowing down and will continue to do so into the first half of 2012, as global economic conditions get tough, Prime Minister Lee Hsien Loong said Wednesday.

"We are now in a period where incomes will be under pressure at the low-end. I think even in the middle, white-collar workers will also be coming under pressure," Lee told CNBC.

On a quarter-on-quarter annualized basis, Singapore's economy grew 1.3 percent over July-September, after contracting 6.3 percent in the previous quarter, according Ministry of Trade and Industry.

Annual growth is expected to slow to around 5 percent in 2011, after a record 14.5 percent rise in 2010, the Monetary Authority of Singapore said late October.

"There will be uncertainties because the (economic) cycles are shorter, things go up, things go down," PM Lee said.

For the economy to continue to grow at a strong pace, Lee said Singapore needs "more workers, more skills, more talent."

Foreigners account for nearly one-third of the country's 5.18 million population, according to the Department of Statistics' latest data.

"The more you tighten the inflow, the slower growth is going to be and that's something Singaporeans will have to understand," he added.

The World in 2100: Ten Billion People, No Oil and Not Enough Food

2011-11-07T08:50:00.000+08:00

by Eric Goldschein and Robert Johnso

With global population now at seven billion, it may be time to start planning for what the world will look like in the coming years.

Though most of us won't be around to see it, the United Nations has projected that our incredible population growth will level off at around 10 billion people by the year 2100.

Already, at seven billion, we are experiencing severe poverty, hunger, a shortage of resources, increased urbanization and climate change issues.

Will we be doomed by 2100, or can we make it work? Since we've only got one planet (so far), let's hope for the latter.

By 2100, 80 percent of the world's populations will live in cities.

Increased urbanization will be one of the main ways the planet will sustain 10 billion people. There will be a lot of new cities, and mega-cities (cities with a population of over 20 million) will become more common.

Possible candidates for mega-city status include: Beijing, Delhi, Jakarta, Mexico City, Mumbai, São Paulo, and Shanghai.

The world will have a few hundred languages at the most.

Right now, there are over 7,000 languages spoken. But lesser used languages will fall by the wayside, while English will become the most used form of communication around the world.

22.3 percent of people will be at least 65 years old.

That will be a huge increase, up from 7.6 percent in 2010.

The burden on the youth to carry the old will be greater than ever.

Most of the population growth will come from the developing world, especially Africa.

Africa's population will go from one billion in 2010 to 3.6 billion in 2100.

The demographic shift, and subsequent geopolitical shift, will be momentous, when there are "five sub-Saharan Africans for every European."

Other regions will see slower growth. For example, the U.S. population will rise from today's 311 million to 478 million.

Global life expectancy will be around 81 years.

Nowadays, our life expectancy is at 68 years.

The UN report does not, however, include the possibilities of improvements in life expectancy from "research in genetic engineering, nanomedicine, exponentially increasing intelligence."

It also doesn't consider risks such as alien invasion or pandemics in its projections.

An increasing population will see a food shortage — thanks to global warming.

We already have 925 million hungry people worldwide. An increase in population will add to that number, and global warming may hinder our ability to fight the problem.

Rising temperatures worldwide "shorten the growing season in the tropics and subtropics, increase the risk of drought, and reduce the harvests of dietary staples such as rice and maize by 20 percent to 40 percent." That means hundreds of millions of people will have to look elsewhere when traditional sources of food dry up.

The world's coral reefs, and the delicate ecosystems they house, could disintegrate.

Carbon dioxide is expected to reach a level of 560 parts per million by the end of the century, resulting in the destruction of over 9,000 coral reefs worldwide.

Besides being nice to look at, reefs are home to thousands of species of fish and are the feeding and spawning grounds of countless other animals.

The ability of coral reefs to regenerate is compromised when water acidity levels and temperature are too high.

Use of oil, natural gas and coal will drop to almost zero.

These finite sources of energy will eventually become extinct, especially at our rate of consumption. Some tables have oil use declining at five percent a year after 2040. Gas is expected to decline even faster.

Hydro energy and renewable energy (such as wind and solar power) are expected to see continued increasing use, and should become our primary sources of power by 2100 and beyond.

A more mobile talent market will mean less homogeneity in countries like China and Japan.

An increasingly globalized world will mean more and more people taking their talents abroad, crossing borders to find better opportunities. Diversity will become more common in countries that now have general ethnic homogeneity, as Americans travel to Asia and an even bigger melting pot in Europe.

Countries and cities that don't go after global talent will fall behind.

There might be up to five billion more of us — or a billion fewer.

The UN report that predicts 10 billion people by 2100 also had two alternate, though less likely, scenarios: there could be as many as 15.8 billion people, or as few as 6.2 billion.

While 6.2 billion would be manageable, 15.8 could be "a danger" to the planet.

We would need to take drastic steps to control population levels if we were to survive. 10 billion may be too much of a strain as it is.

Consumer confidence in Singapore hits 2-year low

2011-11-01T13:42:00.002+08:00

By Magdalen Ng

Consumer confidence in Singapore has fallen for the second consecutive quarter to a two-year low, amid growing worries of an economic recession.

The Nielsen Global Consumer Confidence Index for Singapore fell nine points to 94 in the three months to September compared to the quarter before.

A number above 100 indicates positive consumer sentiment, while a figure below 100 indicates pessimism.

'Singaporean consumers turned into a more pessimistic group as the prospect of a prolonged global macroeconomic malaise became more pronounced. The continuing inflationary pressures and higher volatility in asset prices also contributed to a higher level of uncertainty among consumers, who are increasingly concerned about how to protect their wealth,' said Ms Grace Liu, head of consumer research at Nielsen Singapore.

OECD warns against EU failure to implement agreed measures; It says short-term economic uncertainties have 'risen dramatically'

2011-11-01T13:42:00.001+08:00

Anthony Rowley; in Cannes

ON the eve of this week's G-20 summit in Cannes, the OECD warned yesterday that failure by leaders of the eurozone countries to fully implement the crisis-averting measures agreed to last week could have a dramatic impact on the global economy.

The warning came as leaders of the score of advanced and emerging countries that make up the G-20 prepared for a summit that is expected to be dominated overwhelmingly by the eurozone crisis because of its global importance.

Heads of the leading emerging economies, including those from China and Brazil, are expected to put strong pressure on their counterparts from Germany and France and others to ensure that the eurozone crisis is contained.

In return, these emerging economies, along with Japan, will probably offer to subscribe to new bonds to be issued by the European Financial Stability Facility (EFSF) to help finance the bailout of Greece and other economies at the periphery of the eurozone.

In a pre-summit briefing published yesterday, the Organisation for Economic Cooperation and Development (OECD) said that 'uncertainties regarding the short-term economic outlook have risen dramatically in recent months'.

A number of events, notably related to the euro area debt crisis and fiscal policy in the United States, are likely to dominate economic developments in the coming two years.

In an 'event-free' scenario and in the absence of comprehensive policy action to resolve current problems, real GDP is projected to grow about 3.9 per cent this year, 3.8 per cent in 2012 and 4.6 per cent in 2013 on average in G-20 countries.

'This average masks a wide divergence among country groupings, and emerging-market economies are much more buoyant, despite some softening,' the OECD said.

In the euro area, a marked slowdown with patches of mild negative growth is likely. Growth is also projected to remain weak in the United States, with a gradual pick-up from 2012 towards the end of the projection period. Unemployment is set to remain high in many advanced countries.

'A better upside scenario can materialise if the policy measures that were announced at the Euro Summit of Oct 26 are implemented promptly and forcefully. These measures go in the right direction and could help restore confidence and create positive feedback effects that could trigger a scenario of stronger growth.

'In contrast, the outlook would be gloomier if the commitments made by EU leaders fail to restore confidence and a disorderly sovereign debt situation were to occur in the euro area with contagion to other countries, and/or if fiscal policy turned out to be excessively tight in the United States.

'OECD analysis suggests that a deterioration of financial conditions of the magnitude observed during the global crisis (between the latter half of 2007 and the first quarter of 2009) could lead to a drop in the level of GDP in some of the major OECD economies of up to 5 per cent by the first half of 2013.'

To resolve the euro area crisis, it is important to clarify and implement fully and decisively the measures announced on Oct 26 to break the link between sovereign debt and banking distress, to deal with Greece, to ensure that the sovereign debt crisis does not spread to other European countries and to secure appropriate capitalisation and funding for banks.

Detailed information is needed on how the package will be implemented.

Businesses see dark clouds ahead; Three new surveys forecast gloomy days for most sectors

2011-11-01T13:39:00.000+08:00

Melissa Tan

FIRMS in Singapore have turned decidedly gloomy about the business outlook.

Three newly released surveys suggest darker days ahead across most sectors as deteriorating global conditions continue to hobble the local economy.

A survey conducted by the Economic Development Board (EDB) found that manufacturers are expecting business conditions to worsen over the next six months through till March next year.

In all, 17 per cent of manufacturers expect things to get worse, a figure which exceeds their more upbeat peers by 10 percentage points, the EDB said yesterday.

The numbers are weighted according to 'contribution to employment and value added', EDB said.

This dovetails with the results of the D&B Business Optimism Index survey, also released yesterday, which found that businesses in Singapore are generally gloomier about the fourth quarter.

'Singapore's economy has been undermined by softening global market conditions weighed down particularly by currency volatility and weaker global demand,' said business information firm D&B in a statement.

'Closer to home, recent floods in Thailand have further dampened hopes of economic growth within the region.'

In the EDB survey, the gloomiest factory operators were those hit hardest by the global economic slowdown, such as electronics and precision engineering.

For both these clusters, the portion of firms with a pessimistic outlook exceeded the number of optimistic ones by a net weighted balance of about 20 percentage points.

UST Technology, which makes equipment and related products for micro-electronics companies, is among the doomsayers.

'I don't see any recovery in the next six months, and it will definitely worsen in November and December,' said chief financial officer Lee Yoke Keng.

'We're closed for a week in the last week of December, and also shut down every other Friday,' she said, adding that the firm was not replacing workers who had resigned.

She added that the floods in Thailand were a 'double blow'.

'My customers in Thailand, the semiconductor plants, are all shut and are not going to open until January due to massive damage to their plants. It will take time to clean up. All my orders have been pushed back.'

Mrs Lee said that the situation was not merely like a 'little flu where you just have some rest and you'll be fine, no need for medication'.

'There's no visibility, and for my Thai customers, we don't even know where they're headed. It's very difficult for us.'

The dampening of sentiment is not confined to electronics and precision engineering. The EDB survey found that 'all clusters in the manufacturing sector are more pessimistic in their outlook'.

Manufacturing output for the current fourth quarter is also expected to slacken compared to the third quarter.

The only bright spots within the manufacturing sector are the marine and offshore engineering, aerospace and land transport segments, the EDB survey found.

To make matters worse, the service sector, which accounts for around two-thirds of the economy, is also downbeat, according to a Business Expectations Survey conducted by the Department of Statistics.

It found that overall, the portion of pessimistic firms was a weighted 25 per cent, which exceeded the proportion of optimistic firms by a net weighted balance of 9 percentage points.

But there were a few notable exceptions - retailers, hotels and food and beverage firms see brighter prospects.

'For the next three months it should be good still because the year-end is coming with the festive season,' said Ms Yvone Lim, managing director of halal Japanese noodle restaurant Ramen Ten.

'Usually, after Chinese New Year, it's a slow period, so it's quite expected for F&B to slow down, but I'd think that for the mass market, people still need to come out and dine. After six months we wouldn't know, we would have to play it by ear.'

Dark clouds on horizon despite EU deal: PM; He warns of slower growth as economy matures, population growth slows

2011-10-31T14:10:00.002+08:00

Teh Shi Ning; In Perth

PRIME Minister Lee Hsien Loong says 'there are dark clouds on the global economic horizon', despite the great relief that a long-awaited eurozone rescue deal brought to markets late last week. And back home, the 'price to pay' of managing Singapore's population by constricting foreign worker inflow, coupled with a maturing economy, will mean that growth of 3 or 4 per cent a year ought to be considered 'not a bad year', he said.

Speaking to Singapore media on the sidelines of the Commonwealth Heads of Government Meeting (CHOGM) in Perth yesterday, Mr Lee said the Monetary Authority of Singapore's prognosis last week of stalled growth over the next few quarters, was 'not surprising'.

MAS had said that 2012 growth may fall below the economy's potential of 3-5 per cent, before recovering again towards the end of next year. It is an 'optimistic' view, Mr Lee said. Even if things do improve by then, he thinks the longer-term problems in Europe are unlikely to 'disappear next year' and expects 'several years of difficulty in the economy', which Singapore must be prepared for.

Describing last week's rescue deal - to write down the value of Greek government debt held by banks and other private investors by half and boosting the eurozone's bailout fund to around one trillion euros (S$1.76 trillion) - as a 'temporary solution' that 'hasn't made the problem go away by any means', Mr Lee said it must first be implemented to be proven effective.

There are concerns over whether the bailout fund is large enough, and longer-term structural issues such as fundamental differences in productivity, fiscal balance and inflation tolerance remain. Closer political ties and a more cohesive Europe is the way forward, but is unlikely to be achieved any time soon too, Mr Lee said. 'It depends on countries feeling for one another, but for the Germans to feel for the Greeks, never mind like the Greeks, and vice-versa, I think that's a work of many, many years.'

These 'dark clouds on the horizon' and the possibility that world economies are headed for a second dip in the medium term, have already slowed demand and hit Singapore, Mr Lee said.

Reiterating that higher growth rates of 5-7 per cent of previous years can no longer be expected in future, Mr Lee said 3-4 per cent should be deemed 'not bad' in the economy's new phase of growth.

'It's a different phase. When you're an adolescent, you grow and shoot up inches every year, but when you mature you hope to grow, not necessarily taller, but wiser and better. We have to make that change of gear,' he said.

Acknowledging that moves to limit the inflow of foreign labour via stricter criteria and higher levies have been painful for employers, many of whom are small and medium enterprises, Mr Lee said Singapore faces 'some very difficult choices'.

'It's not as if, if you sent away all the foreign workers or kept out all the foreign workers, then we'd live in paradise. There is a price, and it's quite a high price to pay. As we try to manage the population in Singapore, we're going to also have to accept a lower growth rate,' he said.

Singapore politics, too, has entered a new phase. Giving his take on the first sitting of the new 12th parliament, which closed just over a week ago, Mr Lee noted 'a lot of excitement and interest' over what the newly elected Members of Parliament (MPs) had to say.

Opposition MPs 'put a lot of effort into their speeches' but it remains to be seen if they will 'participate in helping to solve problems', Mr Lee said. Parliament is 'not just a show, it's not just theatre', rather, it is 'a place where we should have serious discussion and we should discuss, not just criticise'.

Referring to several occasions on which opposition MPs floated criticism of the government as 'what people say', Mr Lee said the responsibility of an MP is not merely to repeat others' views but to have their own views and 'express them fearlessly'.

'To dare to challenge a government doesn't take courage because the government is not the emperor - it cannot chop your head off. But to dare to stand up and say something which is true but may be difficult, spiky issues which the population may not wish to hear, that takes courage, because the population has votes,' he said.

The government's responsibility is to 'speak the truth to Singaporeans' and the opposition's is to 'acknowledge the truth and speak it, whether or not it's politically advantageous to them', Mr Lee said.

Mr Lee: 3-4 per cent should be deemed 'not bad' in the economy's new phase of growth

Too early to give US economy the all-clear; Unemployment rate remains high and risk of a recession is real

2011-10-31T14:10:00.001+08:00

Andy Mukherjee, Senior Writer

IF HISTORY is any guide, it may be unwise for investors to give too much importance to a report last week that suggests the US economy is speeding up again.

Data released last Thursday by the US Commerce Department showed that gross domestic product (GDP) expanded at an annualised 2.5 per cent rate in the third quarter, almost double the 1.3 per cent pace in the previous three months.

The data release was impeccably timed. News that Europe's politicians had finally managed to come up with a plan for containing their region's sovereign debt crisis already had traders itching to extend their risky bets.

The fine print of the US GDP report, which showed spending by households grew at a faster pace than expected by economists, only added to that sense of optimism. The S&P 500 Index shot up 3.4 per cent last Thursday.

Amid this carnival of enthusiasm, investors chose to more or less ignore the US Department of Labour's more sombre assessment of the unemployment situation. That report, which was also released last Thursday, showed that in the week ended Oct 22, initial jobless claims had stayed resolutely above 400,000.

In the past 29 weeks, there have been only two weeks when the claims have been below that danger mark. This is entirely consistent with a bleak picture for the overall labour market.

The US economy is driven by household spending, which can grow meaningfully, and in a self-sustaining way, only if people have jobs that pay decent wages. With the US unemployment rate refusing to budge from a very high 9.1 per cent in the past three months, that's unlikely to happen soon.

So what's going on with the GDP data? Why is it pointing to a recovery'

For a possible answer, we need to go back a decade.

On April 27, 2001, the Commerce Department announced its advance estimate of 2 per cent GDP growth for the first quarter of 2001. That was double the pace of expansion in the final quarter of 2000.

That data release caught Wall Street by surprise. Few analysts had expected the economy to show such remarkable resilience following the dot.com collapse.

Indeed, the bond market was by then expecting a full-fledged recession, and Mr Alan Greenspan, who was then chairman of the US Federal Reserve, had confirmed the debt market's pessimism by unexpectedly cutting interest rates on April 18, nine days before the Commerce Department issued its clean bill of health for the economy.

Then, on May 25, 2001, the growth estimate was lowered to 1.3 per cent from 2 per cent. Another tweak, one month later, saw the figure being clipped further to 1.2 per cent. The revised number, while significantly lower than the advance estimate, still suggested a decent level of expansion for the economy in the first quarter.

Then came the Sept 11 terror attacks on New York and Washington, and all remaining optimism in the economy vanished. Stocks came under heavy selling, which continued until the third quarter of 2002.

Much later, the very last revision to the data would show that the pessimists - and Mr Greenspan - had been right all along, and that instead of expanding, the US economy had actually contracted in the first quarter of 2001 by as much as 1.3 per cent.

Separately, the National Bureau of Economic Research confirmed that the US economy had entered into a recession in March 2001, almost two months before the Commerce Department issued its advance estimate of 2 per cent growth.

This history lesson has a simple message for investors: Advance GDP estimates are a rather unreliable gauge to assess the strength of the aggregate economy. They are especially useless around tipping points.

And by all accounts, we are close to one. Goldman Sachs currently estimates the chance of a new US recession at 40 per cent, while Societe Generale's economists believe the likelihood is as high as 65 per cent. According to the New York-based Economic Cycle Research Institute (Ecri), the odds are 100 per cent. The Ecri, which has a solid track record in predicting past recessions, has warned its clients that a new one is inevitable.

But if there is indeed a recession, how bad will it be? According to Mr Zach Pandl, a senior economist at Goldman Sachs, US housing, auto sales and investments in business structures - factories, hotels and shopping malls - have already fallen so much that scope for further declines in these activities may be limited.

So a new recession may not do colossal damage to total economic output. Mr Pandl's estimate is for a contraction of 1.4 per cent in US GDP, less than the 2.3 per cent shrinkage seen on average during recessions since World War II.

However, there is a flip side to the story. After almost four years of battling the 2008 financial crisis and its aftermath, the fiscal and monetary policy arsenal in the US is almost depleted. The Republicans won't let the Obama administration loosen its purse strings any further, while there is little more the US Federal Reserve can do short of raining money on people from helicopters.

Under these circumstances, climbing out of even a shallow hole may prove to be an onerous task for the economy.

'A US recession today would be painful,' Mr Pandl says. 'Given its high level, even a 'small' increase could take the unemployment rate to 11-12 per cent.'

Even a shallow US recession may have a deep impact on corporate profits and stock prices. 'If there is a recession, even a mild one, I would expect a substantial setback to corporate earnings,' notes Morgan Stanley's global developed market strategist Gerard Minack. 'To the extent corporates have maintained a tight cost base, there would be less-than-usual scope to cut costs in a downturn.'

The recession risk is quite real for the US economy. It will take more than an ebullient GDP estimate to make the danger go away.

andym@sph.com.sg

5 Ways to Retire on a Small Income

2011-10-31T07:14:00.000+08:00

We all want to be happy and comfortable in our golden years. To get there we focus on saving money every month, investing for the long term, and figuring out when we should retire.

A huge step in the right direction is to be financially free by the time we leave the workforce, and one of the quickest ways to get there is to make more money. However, asking for a raise or finding a more lucrative job are not strategies everyone can pursue. Luckily, there are many ways to prepare for a secure retirement without a large income. Here are five ways to improve your chances of having a comfortable retirement.

Focus on income. One of the main reasons we fear retirement is because of the lack of steady income. Most people in their working years attempt to increase their net worth, ignoring how that lump sum can be translated into a stream of income for the future. As a result, they have to deal with the emotional impact of always seeing their nest egg decrease as they withdraw from their savings in retirement. Instead, focus on setting up income streams for retirement.

Cut spending. One of the most efficient ways of reaching your retirement goals is to cut your expenses. When you are able to reduce how much you spend, you can not only save that extra money, but also learn that you need less to live a comfortable life. If you end up saving too much for retirement you can always inflate your lifestyle later.

Hang out with frugal people. No one wants to be called cheap. But what's deemed cheap in some social circles is admired in others. If you enjoy living frugally, then you will find it even more enjoyable meeting others who share your passion.

Learn to enjoy your hobby and not the buying process. Many people spend quite a bit of money on their hobbies, and they blame their passion for the increase in spending. Yet, I'm sure there are ways to enjoy the same hobby without buying all that stuff. Do you really need a different camera lens for every situation to enjoy photography? Is it a necessity to have the latest equipment to enjoy a sport? Learn to enjoy the hobby rather than the impulse spending. You might actually discover a whole new perspective towards your hobby.

Find a company you enjoy working at. Let's face it. Most people want to retire early. Yet, no one ever quits their job if they love what they are doing. Some people will tell you to find a job in an area that you are passionate about, but the company has to have the right culture too. It doesn't matter how much you love the line of work if your boss is always being unreasonable. Find a company where you love the people and culture, and you will naturally be more passionate about what you do. When you enjoy your work, you can work well past traditional retirement age and still be happy.

David Ning runs MoneyNing, a personal finance site aimed at helping others change their habits for a better financial future. He suggests that everyone to sign up for an online savings account to get more out of our hard earned money.

Demand for labour 'will fall sharply after festive season'

2011-10-29T01:15:00.001+08:00

By Magdalen Ng

Demand for labour is already slowing but the trend will intensify after the Christmas and Chinese New Year holidays, according to the Monetary Authority of Singapore (MAS) on Thursday.

The economic slowdown here and persistent uncertainties in the global economy are taking some of the heat out of the labour market.

Financial services and trade-related sectors - both sensitive to economic changes - have already been scaling back their hiring, with other sectors tipped to follow suit in the next few quarters.

The Electronics Leading Index indicator continues to show a sharp fall-off in final demand, signalling that job cuts will persist in the industry.

Why You Should Stop Trying to Beat the Market

2011-10-29T01:03:00.000+08:00

by Walter Updegrave

How much better will you do if you invest well instead of poorly (or earn the average)? -- James McGrath, San Marcos, Calif.

Considering all the attention investment pros (and financial magazines) lavish on picking the right stocks and funds, I can understand why you might think superior investing ranks above all else when it comes to a secure future and a comfortable retirement.

Savvy investing is certainly important — you don't want to blow your savings on lousy funds or ineffectual strategies. And you'll end up richer if you happen upon a winning investment. If you'd owned the Sequoia Fund for the past decade, for example, a $10,000 balance would have grown to more than $16,000 now, vs. $12,800 if you'd simply earned the market return.

But as a practical matter you can't know in advance which fund or stock will beat the market — in fact, over the past 15 years, only 55% of U.S. equity funds did so, according to Morningstar. Rather than pinning your hopes on higher returns, I'd say boosting your savings rate is a surer way to improve your retirement prospects.

To see what I mean, check out this example. Let's say you're 35 years old, earn $60,000 a year, and sock away 10% of your salary (including your company match) into a 401(k) that's already worth $75,000. And assume you're stashing your retirement moolah in a diversified portfolio of 60% stocks and 40% bonds.

You're doing a reasonable, though not spectacular, job of preparing for retirement. Your savings rate is decent, though it could be better. As for investing, you're hardly a slouch, but ideally you should be devoting more of your 401(k) to stocks.

The key is starting with an overall plan — that is, deciding on the appropriate asset allocation, or blend of stock and bond funds that makes sense given your age and stomach for risk.

Indeed, when the folks at T. Rowe Price ran the numbers on this saving and investing regimen, they projected that you'd have a 68% chance of accumulating enough money to retire in 30 years on 70% of your pre-retirement income and not deplete your funds until age 92.

Not bad. But if you could do just one thing to improve your outlook, what would it be? Save more or earn more?

You can't, of course, say you'd prefer an 8% annual return instead of 6% and turn a dial higher to get it. The investing world doesn't work that way. So to try to earn more you have to invest more aggressively.

In this example, both increasing your savings rate from 10% to 12% and shifting to a more growth-oriented portfolio that's 80% stocks and 20% bonds — an appropriate mix for a 35-year-old — will boost your chances of retirement success. But saving more has a larger effect than earning a higher return would.

In the real world you're not limited to one move. You can bump up the amount you save and improve a sub par investing strategy. Do both those things — which, ideally, you would — and you can feel even more confident about achieving a secure retirement.

In theory, later in your career, when you're more likely to have a large balance in your retirement accounts, a relatively modest increase in your rate of return could boost the size of your nest egg more than upping your savings rate would.

On a $500,000 portfolio, for example, an additional half percentage point of return would translate to an extra $2,500 a year, more than someone earning $100,000 would get by moving from a 10% to a 12% savings rate.

Trouble is, the more risk you take in pursuit of loftier gains, the more your returns will jump up and down from year to year, and the harder your portfolio will get hammered during market setbacks. Take a 55-year-old a decade from retirement — for that person, a pedal-to-the-metal approach is no help. Because you have less time to recover from a setback, it slightly cuts your chances of reaching your goals.

That said, you still have one way to effectively earn more on your portfolio — without ratcheting up risk: Pare investment fees.

Annual expenses for stock funds average 1.5%, while the yearly tab for bond funds comes in at roughly 1%. By opting for low-cost options like index funds and exchange-traded funds, which often charge less than 0.5% annually, you may be able to reduce your costs by anywhere from a half to a full percentage point a year. Over the course of a career, that can boost the eventual size of your nest egg a good 10% to 20%.

Finally, there's one more compelling reason not to rely on astute investing. Given the sluggish growth and onerous levels of government debt here and abroad, even the most savvy investors may have to settle for relatively modest returns. That could be a major problem if your retirement security hinges on racking up big gains. Boosting your savings rate is a surer way to increase the ultimate size of your portfolio.

So by all means, make sure you're investing as well as you can. If you really want to improve your prospects, though, save more.

The Economic Agony of Today’s Twenty-Somethings

2011-10-27T01:08:00.001+08:00

By Daniel Gross

Most of the coverage of today's economic difficulties focuses on older folks. How will the mid-career people who lost their jobs during the deep recession of 2008-2009 find new posts? Will the Baby Boomers, and whether they will be able to rely on Social Security and Medicare? What can be done to help homeowners and families caught up in the mortgage mess?

In a recent cover story in New York, Noreen Malone offers a sharply reported take on a demographic group that is often overlooked: twenty-somethings. As Malone and I discuss in the accompanying video, today's twentysomethings, while they may have fewer financial and familial obligations than their parents, and more time to prepare for a straightened future than the Baby Boomers, face their own unique challenges.

Here are some of the tough economic data points facing the "It Sucks to Be Us" generation:

Entering the workforce in a tough time has long-term impacts. Since the average workers get 70 percent of total raises in their first decade as a worker, "having stagnant or nonexistent wages during that period means you hit that springboard at a crawl," Malone writes. Seventeen years after entering the workforce, people who graduate college during a recession earn 10 percent less than those embarking on their careers during good economic towns. "In hard, paycheck-shrinking numbers, the salary lost over that stretch totals around $100,000."

Students today leave college with far more debt than they did in past years. The Class of 2009 had an average of $24,000 in student loans. "I almost don't even blink when someone says I have $100,000 in debt, just from undergraduate." According to one measure, "student loans have surpassed credit cards as the largest source of debt in the country."

Tough economic times mean twenty-somethings have a difficult time launching into independence — and that has an economic impact. They're more likely to rely on families and parents for support, thus cutting back on the old folks' ability to save, spend, and invest. " Thirty-nine percent of us in a 2010 National Journal poll were getting financial help from relatives, including a full quarter of those with full-time jobs," Malone writes.

The slow formation of households is holding back recovery in the housing market: "The median age of first marriages has crept up by about a year since 2006—a statistically huge increase—and the overall marriage rate is at an all-time low. The number of women between 20 and 34 rose by about a million between 2008 and 2010, but the number of children born to the group dropped by 200,000."

A college degree used to be insurance against a tough job market. According to the Bureau of Labor Statistics, for college graduates over the age of 25, the unemployment rate is about 4.5 percent. But for recent college grads, Malone says, the rate is closer to 14 percent.

5 Hedging Strategies for Do-It-Yourself Investors

2011-10-26T23:31:00.001+08:00

Hedging was once the exclusive domain of institutional, or at least extremely sophisticated investors. For years this exclusivity worked out fine for both individuals and the institutions; bull markets don't need hedging and the institutions liked to justify their existence by making trades only they understood. Now that the bull market is dead Jay Pestrichelli, author of the new book "Buy and Hedge: The 5 Iron Rules for Investing Over the Long Term" says it's time for the layman investor to control their risk, and possibly make some money, by deploying some of the tools of the hedge fund trade.

Here's insight on Pestrichelli's 5 Iron Rules.

1. Hedge Every Investment: Pestrichelli calls this the One Rule readers should take away from the book. No "buy and hold" forever; don't hang on to losers because they can't possibly go lower. If the last 10 years, a period during which Pestrichelli says "buy and hold has gotten its teeth kicked in," has taught us anything it's this: Until a stock hits zero it can always go lower. If you hedge yourself via puts or sell discipline you remove the chances of falling in love with a loser.

2. Know Your Risk Metrics: In short these metrics are Capital at Risk (CaR), volatility, implied leverage, and correlation. No, these aren't the kind of things you're going to read about in the business section of your local paper. Yes, they are critical tools for those who don't wish to fly blind with their life savings. Pestrichelli's book does a pretty good job of summarizing concepts I spent a decent amount of money studying in business school.

3. Smart Portfolio = Long-term Outlook + Diversification: Rather self explanatory.

4. Unleash Your Inner Guru: I can't say I'm on board with unleashing your inner guru. Even gurus don't want to be gurus. That said, the basic idea of doing your homework, understanding your investments, and having the confidence to act on your own opinions is solid. Spouting off on your opinion then refusing to acknowledge mistakes is not a solid approach. And, no, I'm not a guru.

5. Harvest Gains and Losses: Here's where the learning curve gets steep. Pestrichelli offers lessons on using options strategies to effectively take profits off without actually selling your winners. While the methods are somewhat vanilla by the mind-numbing standards of options trading, individuals are entering the deep end of the pool when they start dealing in puts and calls. Comparing options to health, life, and auto insurance, Pestrichelli points out that people make options trades everyday. His book just casts some light on the process.

Having done more than my share of hedging in my past life I can say that it's not for everyone. "Buy and Hedge" offers some terrific, surprisingly comprehensible techniques for controlling risk. That said, options trading is the deep end of the trading pool. The options traders I know are a bit like hardcore card sharps; they may rake in the occasional pot off one another but they make their real living off the greenhorns stumbling into markets they simply don't understand.

Despite this Pestrichell and co-author Wayne Ferbert's basic point is irrefutable: Passive buy and hold investing hasn't worked for years. The techniques described in Buy and Hedged aren't for everyone but the book raises alternative ideas for those looking for alternatives to being held captive by the market's constant to and fro.

How to Pay for Early Retirement

2011-10-26T23:30:00.000+08:00

by Linda Stern

The longer you work, the better, retirement experts will tell you. Plow on until you're 70 and you'll make more, have fewer years of retirement to fund, and collect a fatter Social Security check. But that's not always desirable, or possible.

People often retire in their early 60s because they can't get a job, they aren't healthy enough to work, or they're just sick of the 9-to-5 grind and want to begin the next part of their lives.

The question for them is how to pay for it. Early retirees can start collecting Social Security early, or defer their Social Security by using money from their 401(k) account or by buying an annuity.

The question is complex, and the wrong answer could really constrict your 80s and 90s. But it also seems like a question that should have a mathematical answer: Given enough data, shouldn't you be able to optimize your spending in your 60s to protect the cash flow you'll need for the decades you'll probably spend in retirement.

I asked David Hultstrom, a spreadsheet-loving financial adviser with Financial Architects in Woodstock, Georgia, to help me find the answer. Then I ran the question by a few other experts. Here's the latest, best advice on how to fund your 60s without impoverishing your 80s. There are, of course, some exceptions.

Spend your savings first. Your regular savings and investments, sitting in taxable accounts, are the most efficient place for a 60-something to find spending money, even though it might be difficult psychologically to take those withdrawals. You'll allow your tax-deferred savings as well as Social Security benefits to grow. And you'll be able to minimize your taxes by selling losing securities (and taking capital losses) to get spending money.

Then hit your tax-deferred accounts. This would include a traditional individual retirement account, rollover IRA and 401(k) plan. Every dollar you withdraw will be subject to income tax. So, if you are in a high tax bracket, you may want to switch this category with the next and pull enough money out of your Roth IRA to keep your overall taxes down. (Roth IRA withdrawals are not taxed in retirement.)

At 70, start your Social Security benefits. You may not be able to hold out until then, but deferring Social Security as long as possible does make sense — for a variety of reasons. Your benefit increases almost 8 percent a year for every year you defer it, and in this market it's hard to make that kind of return in any other instrument. Furthermore, Social Security is the rare retirement benefit that will be adjusted for inflation.

Finally, if you defer Social Security benefits until full retirement age — currently 66 — you'll be able to work around the edges and earn income without it reducing your benefits. The Government Accountability Office has determined that deferring Social Security benefits is a cheaper and more efficient way of getting a guaranteed source of income than buying an annuity.

Now for the exceptions: You may want to turn on that Social Security tap earlier if you have health problems and are fairly confident they will shorten your life expectancy. The break-even point for deferring Social Security until you are 66 is age 78, says Hultstrom. You may also opt to take benefits earlier if you're married and have a higher-earning spouse who is deferring benefits.

Buy an annuity. This is at the bottom of the list because giving up a large sum of money now to pay for a steady and increasing income stream is expensive. When Hultstrom compared a moderately priced inflation-adjusted immediate annuity to deferring Social Security, he found that the annuity buyer wouldn't break even until age 83 or 84. Even if the recipient lived to age 99, the annuity would still be more expensive than deferring Social Security. (The annuity he studied provided $1,400 in monthly income, indexed every year for inflation, for a 66-year-old man at a cost of $289,000 (available through the Vanguard Annuity Access platform).

The exceptions? Annuities work if you need more money every month than Social Security can provide and you aren't well-heeled enough to pay for that stream out of your investments. And some new annuity products aim to lower fees or add features that can make them more useful to investors. New York Life offers a new feature, called the "changing needs option" which would allow an annuity holder to take a larger monthly benefit in the first few years of the annuity, allowing the recipient to delay Social Security benefits. Then, when the Social Security benefits kicked in, the monthly annuity amount could be reduced. That may not be worth buying just to defer Social Security benefits but may make sense for a retiree who expects to supplement their Social Security with an annuity.

Use tools and advice. These are general rules of thumb, but every individual and couple faces a unique set of numbers and considerations. Some online tools, like the new Fidelity Income Strategy Evaluator, can bring you close to figuring out your own retirement income stream. But a good numbers-savvy, fee-only adviser (not someone who makes money selling insurance products) can help you figure out how to optimize your own 60s and, all those other retirement decades that may lie ahead.
Copyrighted, Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Mohamed A. El-Erian: America at Stall Speed?

2011-10-24T17:20:00.001+08:00

NEWPORT BEACH - Judging from the skittishness of both markets and 'consensus expectations,' the United States' economic prospects are confusing. One day, the country is on the brink of a double-dip recession; the next, it is on the verge of a turbo-charged recovery, powered by resilient consumers and US multinationals starting to deploy, at long last, their massive cash reserves. In the process, markets take investors on a wild rollercoaster ride, with the European crisis (riddled with even more confusion and volatility) serving to aggravate their queasiness.

This situation is both understandable and increasingly unsettling for America's well-being and that of the global economy. It reflects the impact of fundamental (and historic) economic and financial re-alignments, insufficient policy responses, and system-wide rigidities that frustrate structural change. As a result, there are now legitimate questions about the underlying functioning of the US economy and, therefore, its evolution in the months and years ahead.

One way to understand current conditions - and what is needed to improve them - is to consider two events that recently attracted considerable worldwide attention: the launch of Boeing's Dreamliner passenger jet and the tragic death of Apple's Steve Jobs.

Let us start with some simple aeronautic dynamics, using an analogy that my PIMCO colleague, Bill Gross, came up with to describe the economic risks facing the American economy. For the Dreamliner to take off, ascend, and maintain a steady altitude, it must do more than move forward. It has to move forward fast enough to exceed critical physical thresholds, which are significantly higher than those for most of Boeing's other (smaller) planes.

Failure would mean succumbing to a mid-air stall, with tepid forward motion giving way to a sudden loss of altitude. Unless we are convinced of the Dreamliner's ability to avoid stall speed, it makes no sense to talk about all the ways in which it will enhance the travel experience for millions of people around the world.

America's economy today risks stall speed. Specifically, the question is not whether it can grow, but whether it can grow fast enough to propel a large economy that, according to the US Federal Reserve, faces 'balance-sheet deleveraging, credit constraints, and household and business uncertainty about the economic outlook.' And, remember, it is just over a year since certain US officials were proclaiming the economy's 'summer of recovery' - a view underpinned by the erroneous belief that America was reaching 'escape velocity.'

Stall speed is a terrifying risk for an economy like that of the US, which desperately needs to grow robustly. Without rapid growth, there is no way to reverse persistently high and increasingly structural (and therefore protracted) unemployment; safely de-leverage over-indebted balance sheets; and prevent already-disturbing income and wealth inequalities from growing worse.

The private sector alone cannot and will not counter the risk of stall speed. What is desperately needed is better policymaking. Specifically, policymakers must be open and willing to understand the unusual challenges facing the US economy, react accordingly, and possess sufficiently potent policy instruments.

Unfortunately, this has been far from the case in America (and in Europe, where the situation is worse). Moreover, US policymakers in the last few weeks have been more interested in pointing fingers at Europe and China than in recognising and responding to the paradigm shifts that are at the root of the country's economic problems and mounting social challenges.

This is where the insights of Steve Jobs, one of the world's best innovators and entrepreneurs, come in. Jobs did more than navigate paradigm shifts; he essentially created them. He was a master at converting the complicated into the simple; and, rather than being paralyzed by complexity, he found new ways to deconstruct and overcome it. Teamwork was an obligation, not a choice. And he eschewed the search for the single 'big bang' in favor of aiming for multiple breakthroughs.

Underlying it all was a willingness to evolve - a drive for perfection through experimentation. Moreover, he excelled at selling to audiences worldwide both his vision and his strategy for realising it.

So far, America's economic policymakers have fallen short on all of these fronts. Rather than committing to a comprehensive set of urgently-needed reinforcing measures, they seem obsessed with the futile search for the one 'killer app' that will solve all of the country's economic problems. No surprise that they have yet to find it.

Teamwork has repeatedly fallen hostage to turf wars and political bickering. Little has been done to deconstruct structural complexity, let alone win sufficient public support for a medium-term vision, a credible implementation strategy, and a set of measures that is adequate to the task at hand.

The longer the policymaking impasse persists, the greater the stall-speed risk for an economy that already has an unemployment crisis, a large budget deficit, many underwater mortgages, and policy interest rates floored at zero. This is an atmosphere in which unhealthy balance sheets come under even greater pressure, and healthy investors refuse to engage. In the process, the risk of recession remains uncomfortably high, the unemployment crisis deepens, and inequities rise as already-stretched social safety nets prove even more porous.

Mohamed A. El-Erian is CEO and co-CIO of PIMCO, and author of When Markets Collide.

Occupy Wall Street: Who is the top 1% for income?

2011-10-21T00:21:00.003+08:00

Tami Luhby

Think it takes a million bucks to make it into the Top 1% of American taxpayers?

Think again. In 2009, it took just $343,927 to join that elite group, according to newly released statistics from the Internal Revenue Service.

Occupy Wall Street protesters have been railing against the Top 1%, trying to raise anger and awareness of the growing economic gap between the rich and everybody else in America.

But just who are these fortunate folks at the top of the income ladder?

Well, there were just under 1.4 million households that qualified for entry. They earned nearly 17% of the nation's income and paid roughly 37% of its income tax.

Collectively, their adjusted gross income was $1.3 trillion. And while $343,927 was the minimum AGI to be included, on average, Top 1-percenters made $960,000.

But the income threshold for this exclusive group changes every year, largely with the performance of the stock market, experts said.

Meet the Occupy Wall Street protesters

In 2007, when times were good on Wall Street, one needed to have an adjusted gross income of more than $424,000 to get into the highest rank. But the stock market decline in recent years has helped lower that bar back to a level not seen since 2002.

"The further up you go, the wider swings you see," said Pete Sepp, spokesman for the National Taxpayers Union. "They have a great deal of wealth sunk into the markets, which can vary quite widely."

While much of the wealthy's income comes from capital gains on investments, bonuses on the job can also give people the needed boost.

Just what jobs are those?

Many workers in the securities industry in New York likely qualify for the Top 1%.

These folks, many of whom work only blocks from where protesters are gathering in Zuccotti Park, made an average salary of just over $311,000 in 2009, according to the state Comptroller's Office. (This figure does not take into account certain income, losses and deductions that make up adjusted gross income.)

A separate study found that financial professionals made up about 14% of the top rank in 2005.

Executives, managers and supervisors working outside of finance accounted for 31%, the largest share, according to an analysis by Jon Bakija of Williams College, Adam Cole of the Treasury Department and Bradley Heim of Indiana University. Medical professionals came in at 15.7%, while lawyers made up 8.4%.

Over time, the Top 1% has claimed a bigger share of the income pie. In 2007, they earned 22.8% of the nation's income, more than double the amount in 1986, according to IRS data. The recession has since brought that slice down to just under 17% for 2009.

While those at the top have seen their incomes soar over time, middle-class incomes have stagnated.

"The higher up the income distribution you go, the more your income rose and the larger the share of total income gains went to your group," said Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center.

But as corporate profits and productivity have increased, workers aren't reaping the benefits, said Edward Wolff, a New York University economics professor who specializes in income inequality. That's helping spark the movement, which has spread across the country.

"There is a lot of anger and it's for a very good reason," Wolff said. "If all of the income gain goes to the top, there's not much left to go to the rest of the people." Correction: An earlier version of this story included an incorrect timeframe for IRS income data. The most recent figures from the IRS are for 2009.

Hedge funds suffer worst performance since 2008

2011-10-21T00:21:00.001+08:00

Hibah Yousuf

Feeling blue about the hit your portfolio took last quarter? You're not alone. Hedge funds also had a lousy third quarter, delivering one of the worst performances on record.

The summer's stomach-churning roller coaster ride throughout all markets , including stocks, bonds, commodities and currencies, triggered a loss of $85 billion in capital for the hedge fund industry during the three month period ended Sept. 30, according to industry tracker Hedge Fund Research.

The group's HFRI Fund Weighted Composite Index, a benchmark index for the hedge fund industry, dropped more than 6%, making it the worst quarter since the fourth quarter of 2008, and the fourth worst on record.

"The third quarter presented an extremely challenging performance environment, with asset volatility in many respects on par with financial crises in 2008 and 2009," said Kenneth Heinz, president of Chicago-based HFR.

The quarter's beating destroyed the gains logged by hedge funds during the first half of the year. On average, hedge funds are down 5.4% for the first nine months of the year, according to HFR's index.

Even some all-star managers like John Paulson are getting steamrolled.

Investor John Paulson: Alone at the bottom

The investment guru's primary fund, the Advantage Plus Fund, is down more than 30% in 2011. Those kind of losses can be pretty uncomfortable for a hedge fund manager who earned his fund billions when he bet against the housing bubble.

A spokesperson for Paulson & Co. declined to comment.

Despite the dismal performances, about 40% of hedge funds continued to draw in client money for a ninth straight quarter, albeit at a much slower pace. In total, the industry experienced net inflows of $8.7 billion during the third quarter, according to HFR.

During the first half of the year, when hedge fund assets shot up to new record levels above $2 trillion, the industry raked in about $30 billion each quarter.

"The hardest part of the third quarter was that everything was correlated--similar to what we saw in 2008, " said Christopher Zook, chief investment officer at CAZ Investments. "September was an especially painful month, when the only asset that rallied was U.S. government bonds. Even gold did poorly."

The third quarter is over. Good riddance!

Zook, who has about $150 million sloshing around in hedge funds, continued to add to his investments during the last three months, noting that a rocky performance isn't enjoyable, it's also expected from time to time.

He said he's "comfortable" adding to his firm's exposure to hedge funds, including Paulson's.

"[Paulson's] fund has been a wonderful investment over long period's of times, and even when he's underperformed in the past, he's addressed the issues," said Zook, who has been invested in Paulson's funds since 1994. "This time around, Paulson was simply too bullish."

As they attempt to recover from the quarter's wounds, Zook said hedge funds will fall into two camps. On one end, there will be fund that won't change a thing and hope to bounce back with the market, or continue to struggle with it.

On the other end, there will be those that will shift around their assets to protect themselves on downside, and in turn, give up some of the share on the upside.

As Wall St readies cuts, fears grow in luxury market

2011-10-20T19:43:00.001+08:00

By Phil Wahba and Jilian Mincer

REUTERS - New York luxury store owners and real estate agents are wondering whether they have to brace for some of Wall Street's pain.

With others likely to follow Goldman Sachs ' lead and slash compensation, Wall Street dealmakers, traders and other staff at banks and funds could cut back this holiday season.

That, along with the threat of layoffs, might spell shorter lines at luxury shops like Saks Fifth Avenue and will make finance industry types think twice before plunking down $200,000 to reserve a three-month summer rental for 2012.

"People do remember 2008," says Michael Pomerantz, president of financial advisers Pomerantz Financial Associates, which has Wall Street clients. "There's still so much fear, even among older traders and financial professionals, they're scared they'll get laid off."

When the financial markets seized up in 2008, luxury businesses got slammed. Saks, for example, saw double-digit sales declines and had to resort to deep discounts to clear inventory from its shelves.

Given that the New York area accounts for nearly a third of the nation's entire annual $65 billion luxury retail market, any blows here will have reverberations for the U.S. as a whole.

One associate at a top tier bank who declined to be identified, said he planned to spend less this year, regardless of how big his bonus ends up being, citing the threat of layoffs.

A number of major banks have announced job cuts in recent months, including Bank of America, JPMorgan Chase , UBS AG and Goldman.

A computer technician at another bank said he and his colleagues had low expectations for their year-end bonus. He said bonuses had already been slashed a few years back and there was now an expectation of a further reduction.

Even those who are still getting big bonuses may hesitate to flaunt their wealth in New York this year given the Occupy Wall Street protests have been growing from a camp set up near the New York Stock Exchange . A number of finance industry leaders have said they understand the anger of the protesters, many of whom are concerned about a lack of jobs and growing income inequality.

Goldman, which on Tuesday reported only its second quarterly loss as a public company, said it was setting aside 59 percent less money for overall compensation in the third quarter. During the first nine months of the year, Goldman set aside an average of $292,836 of pay per employee, down 21 percent from $370,706 for the same period last year.

Some other major banks have reported weak earnings, prompting Wall Street compensation consultant Alan Johnson to predict that bonuses overall may fall by 30 to 50 percent from last year.

Morgan Stanley Chief Financial Officer Ruth Porat said on Wednesday that the bank expects to save $1.4 billion over the next three years through a program that includes layoffs, pay cuts and other expense reductions.

The New York State Comptroller said last week that Wall Street cash bonuses are likely to drop for a second year. One in eight jobs in New York City is linked to the securities industry and the comptroller is expecting job cuts through 2012.

SPILLOVER

There are already some ominous signs in high-end real estate.

The market for apartments worth $4 million or more has become noticeably quieter in recent weeks, said Donna Olshan, president of Olshan Realty.

"This is the kind of market where the discretionary buyer might pause," she said. But more modestly priced apartments, like one-bedrooms for $600,000 or so are selling well, she added.

The pain may be worse in the Hamptons, a string of tony towns on Long Island where many rich New Yorkers have beach homes. The extent of the damage will not be known until early next year when more deals usually get done.

"We are heavily dependent on Wall Street," said Stuart Epstein, a managing director at Devlin McNiff Halstead Property in East Hampton.

For now, prospective buyers and renters are taking a 'wait-and-see' approach until they know how big their bonuses will be, he said.

Veteran caterer Peter Callahan, whose namesake company has catered many Wall Street events, said that so far this year business is up but he is still not sure how the year will end. Parties are less lavish nowadays because no one wants to look wasteful, least of all public companies, he said.

"That dancing in the end zone party is gone, and I don't see that coming back anytime soon," Callahan said.

Still, there are some positive signs.

In the past 10 days, U.S. stock prices have recovered a big chunk of the losses they suffered in recent months -- and luxury retail executives say that in New York, the Dow Jones industrial average can never be ignored as a proxy for consumer confidence among the well-heeled.

The sheer extent of the wealth in New York often acts as a buffer to economic blows. There are about 7,720 people in the area with a net worth of at least $30 million each, according to research firm Wealth-X.

DREAM CARS

Generally, small businesses that serve New York's affluent are not seeing an immediate pull back.

Upscale Manhattan travel agency Artisans of Leisure reports that business is strong, but that people are nonetheless being deliberate before they spend.

"People are really thinking hard about what they're purchasing and that what they're purchasing is special," said Ashley Isaacs Ganz, the agency's chief executive.

Businesses that serve seekers of luxury who don't necessarily want to make a large financial commitment are benefiting from such caution.

Gotham Dream Cars rents cars such as a Porsche 911 to a Rolls Royce for $600 to $2,200 a day and is doing great business, its founder and president Noah Lehmann-Haupt said.

"People realize the world isn't collapsing and they splurge and rent a car," said Lehmann-Haupt.

RESILIENT LUXURY

Some retailers, like Saks and luxury jewelry chain Tiffany & Co are particularly dependent on strong New York sales. Saks' Manhattan flagship store makes up more than 20 percent of company sales, while Tiffany up the street gets 8 percent from its famed store on Fifth Avenue. Representatives from the two companies declined to comment.

Earlier this week, consulting firm Bain & Co raised its luxury sales growth outlook for 2011, saying demand is stronger now than it was in spring.

And international tourists, particularly from China and Brazil, have been flocking to New York's high end stores and snapping up pied-a-terres since the recession, helping counter a slowdown in spending by Wall Street executive.

As it does every year, Neiman is betting that the rich will continue to splurge. The upscale department store on Tuesday presented its annual Christmas book, featuring items like a $45,000 ping pong table by Tom Burr, an 18-foot diameter yurt for $75,000 and a $420,000 international flower show tour for 10.

But while, luxury in New York has proven resilient, experts said an endless onslaught of scary headlines about layoffs and market plunges, could change that.

"It has a snowball effect on morale," says Jean-Marc Bellaiche, senior partner and managing director for the Boston Consulting Group.

(Reporting by Phil Wahba and Jilian Mincer. Edited by Martin Howell)

Know Yourself as an Investor

2011-10-20T01:38:00.000+08:00

Big swings in the stock market can be confusing for investors. Should you buy or sell? Or do nothing?

There's no right answer. It really depends on what kind of investor you are. When you know yourself as an investor, tumultuous times in the market can be easier to deal with.

To determine what type of investor you are, think about your personal limitations, as well as your strengths and weaknesses. Are you patient? Do you tend to get nervous when times are tough? How well do you handle risk? Do you like to take chances?

Depending on your answers, an investment adviser would decide that you are either a conservative, moderate, or aggressive investor. But those labels are too broad and don't specify how much risk you're willing to take.

Risk tolerance is hard to determine and different for each person. No one likes to lose money. But most people understand they have to accept some risk in exchange for having their investments go up over time. However, they may not understand it until they experience what it feels like when their investments lose value.

Figure out how you would react to market movements by answering this question: If you look at your investments this month and see they're worth 10 percent less than they were the month before, what would you do?

1. Sell everything right away.

2. Be concerned, but take no action and continue to monitor them.

3. Invest more money because it's a great buying opportunity.

If you pick the first response, you generally don't like to see big changes in the value of your investments. If you pick the second, you're calmer and would likely change your holdings only as necessary based on your investment plan, not market volatility. And if you picked number three, you're comfortable with swings in the market and are willing to take chances.

This question and others like it attempt to put you in the moment to identify your emotions and motivations. Through your responses, you'll have a better idea of how much risk you can handle.

Now that you have determined your risk tolerance, you can start creating an investment plan. Before doing that, you must understand what you're trying to accomplish. Think about where you are in your life when you're setting your goals. Everyone has to save for retirement. You might also want to buy a home, start a business, or put money aside for your child's college education.

Then you have to ask yourself how you can reach those goals. Is it important that you don't lose any money with your investments? How much do you need to make from your investments to achieve your goals? Your answers will help shape your investment plan.

If you want to minimize risk in your investments, your account will include more conservative items like money market funds or treasuries. If you want or need your investments to have the potential for larger increases, your account will include more aggressive items like growth and value stocks. If you're somewhere in between, you'd likely own a mix of conservative and growth-oriented investments.

You also have to identify what type of return you want to generate from your investments. Are you trying to keep pace with inflation? Or do you want something closer to the returns provided by the stock market? These answers will also help determine what types of investments are best for you.

Once you decide how comfortable you feel about taking risks and seeing swings in the market, identify your goals, and decide how you want to reach those goals, you can create an investment plan that suits your personality and needs. Then, when the stock market gets chaotic, you'll rest easier knowing that your plan reflects who you are as an investor.

Adam Bold is the founder of The Mutual Fund Store, which provides fee-only investment advice with locations coast to coast. He's also host of The Mutual Fund Show, a call-in radio program broadcast across the country. Bold is author of the book The Bold Truth about Investing (April 2009). Bold is Chief Investment Officer of The Mutual Fund Research Center, an SEC-registered investment adviser, which provides mutual fund and asset allocation recommendations, and research to stores in The Mutual Fund Store system.

I'm an accountant, I hate my job, but seriously, I wouldn’t know what else to do

2011-10-13T16:09:00.001+08:00

I was born to be a lot of things, but being an accountant isn't one of them. In my heart of hearts I have always known this, but for some stupid subconscious reason, I have always ignored it.

Why? Well...um...err...I didn’t know what else to do.

How many people faced with the same predicament of deciding on a profession upon graduating used “not really knowing what to do” as their guiding compass?

Blink. Ten years have passed and you’re left wondering, how did I get here? In this cubicle? Doing something I cannot stand (and I’m not even honestly good at), with people I quite frankly don’t really care about?

For me that was accounting, a profession that conjures numerous clichés, such as boring, bean counting, personality not needed, number crunching etc etc. These have now evolved and have been replaced by repetition, reconciliations, long hours, fudging figures, high turnover, Enron and even more reconciliations.

R-E-S-P-E-C-T

But please don’t get me wrong, I have the utmost respect, admiration and appreciation for accountants. I do. My closest friends are accountants, my mentors are accountants and my accountant is a damn good accountant. I have also been one for seven years in the financial services sector.

So for all those accountants stuck at work between 10pm and 3am in lieu of month-end – who’ve had to forcibly forego dinner, quality time with their family and friends, a favourite TV show and even a quick bathroom break, just so those books are closed to perfection – I sincerely salute you.

I didn’t resign because…

You might be left asking, “If you hate it so much, then why don’t you just leave?”

I’m the first person to berate myself for sticking with it for so long. It never helped that accounting, and the financial sector for that matter, pays so well and instantaneously blindsides with dollar signs. I was always caught up chasing the next pay cheque, hanging around a few more months for a bonus and salary hike, and holding my breath for my well-deserved promotion.

The result always afforded me the trips overseas, a new car, the latest gadgets, elevation up the clothing-label food chain, gambling in a few shares here and there, and even a deposit on an investment property. Important things in a twenty-something year-old’s life, right?

I still don’t know what to do

It sounds like I’m making excuses. Well I am. It’s hard to walk away. But hey, if it pays well and the bills get paid, shouldn’t that be enough? And shouldn’t I just be grateful to even have a job in this economic climate?

Yes it should, and yes I should. But what happens when the answer is no and no? What happens when the “I didn’t know what to do” escalates into “I still don’t know what to do” or “I don’t know what to do, but all I know is I don’t want to keep doing this”?

Sigh. It’s back to my cubicle for now, brushing these things aside and being thankful (half-heartedly) that I even have a cubicle to go to.

Best Jobs if You're Over 50

2011-10-13T10:34:00.001+08:00

By Donna Rosato and Tom Ziegler

Far from ready to call it quits but tired of toiling in the same field? Do you have a dream job you couldn't afford to take when you had kids in college or 20 years left on your mortgage?

A growing portion of Americans 50 and older are still in the workforce, but at this stage of your career you may be ready to switch into a job with shorter hours, less stress, or more social purpose, even if it means backing off your peak pay.

"Many people need to work five or 10 years longer, but they want to do something other than make money for someone else," says Mary Bleiberg, executive director at ReServe, which places seasoned professionals in nonprofit, education, and public sector jobs (reserveinc.org). Another good site for pre-retirement jobs is retiredbrains.com.

MONEY's top jobs for folks over 50 do well in satisfaction measures like stress, flexibility, and social meaning. None require advanced degrees — too high a hurdle late in your career — though some will be hard to break into without related industry experience (such as marketing or tech).

The job skills you honed over a lifetime may transfer, but as an older job hunter you need to work harder to prove your skills are up to date. Digital know-how and social media experience, for example, are essential in the nonprofit world, says Bleiberg.

Some second-act jobs are low level, which might feel like a comedown. But the top of the corporate ladder often comes with big headaches. After decades in your office chair, you've earned a break for your last act.

These top jobs score high for flexibility and social meaning, enjoy relatively low stress, and none require advanced degrees.

1. Grant Coordinator

Median pay: $47,800
Top pay: $61,900
10-year job growth: 12%
Total jobs: 10,000

The job: Marry your professional skills with a cause you believe in by writing and coordinating funding requests for a nonprofit, school or government agency.

More than 1.5 million organizations depend on grants to keep programs running, especially important in a sluggish economy. Many grant writers consult, giving you control over how much work you take on and when you do it.

How to switch: Demonstrate good writing skills and passion for the project. Find a workshop at grantwritingusa.com.

Quality of life ratings: Personal satisfaction: B
Benefit to society: A
Low stress: C
Flexibility: A

2. Personal Trainer

Median pay: $52,600
Top pay: $136,000
10-year job growth: 29%
Total jobs: 30,000

The job: Fitness-conscious baby boomers are paying pros to help with their workouts. And companies and communities need trainers for wellness programs.

How to switch: This job is best for a workout lover, but being in good physical shape is not enough. You'll need training and certification (find information at afaa.com and nasm.org). A background in a health field or competitive sports is helpful, too.

Quality of life ratings: Personal satisfaction: B
Benefit to society: A
Low stress: B
Flexibility: B

3. Energy Field Auditor

Median pay: $41,200
Top pay: $66,500
10-year job growth: 12%
Total jobs: 10,000

The job: Homeowners looking to cut their energy bills — and maybe even their carbon footprint — are hiring auditors to check the house for leaks and recommend improvements. You set your own hours for appointments, and you can feel good about making the world a greener place.

How to switch: Engineering or construction know-how is helpful but not essential. You'll need to take a six-week training course for state certification. Find out more at aeecenter.org.

Quality of life ratings:
Personal satisfaction: B
Benefit to society: B
Low stress: C
Flexibility: B

4. Online Content Marketing Writer

Median pay: $51,900
Top pay: $104,000
10-year job growth: 13%
Total jobs: 10,000

The job: As companies turn to social media and the Internet to promote their products and services, they need pros to edit and manage their digital communication materials. You'll work with marketing staff to ensure the content matches corporate goals. You can do project work or freelance, giving you lots of flexibility.

How to switch: It's best to have a background in marketing and writing experience. Courses and even certification in digital media marketing helps, too. Get info at emarketingassociation.com.

Quality of life ratings:
Personal satisfaction: B
Benefit to society: C
Low stress: C
Flexibility: B

5. Tutor

Median pay: $52,400
Top pay: $106,000
10-year job growth: 15%
Total jobs: 20,000

The job: Private tutoring outside the classroom — often one-on-one but also for groups — is in demand, thanks to parents who want to give their children an edge and nonprofit and city/state programs aimed at improving the academic performance and college readiness of disadvantaged youth. You can schedule sessions any time you want, and the job doesn't require as much training as teaching does.

How to switch: No special degree is required, but teaching experience is helpful. For more on training programs for career changers, go to reserveinc.org and encore.org.

Quality of life ratings:
Personal satisfaction: B
Benefit to society: A
Low stress: B
Flexibility: B

6. SEO Specialist

Median pay: $52,100
Top pay: $71,400
10-year job growth: 13%
Total jobs: 10,000

The job: There are roughly 250 million websites on the Internet and the most popular way to find them: Google. Competition for the number one spot in Google's search results is fierce, and a search engine optimization, or SEO, specialist knows how to hone a website's pages so they will land near the top. Increasingly, organizations are realizing the importance of SEO, making it one of tech's fastest-growing fields. Since the job is largely online-based, you can work from anywhere and create flexible hours.

How to switch: Search for "SEO training" on Google, and you'll find millions of offers from "certified" experts. A more credible route is to look for classes at your local community college to boost your knowledge and resume. Most importantly, read all you can about this constantly evolving profession on online forums such as forums.seochat.com.

Quality of life ratings:
Personal satisfaction: B
Benefit to society: C
Low stress: C
Flexibility: A

7. Pilates/Yoga Instructor

Median pay: $62,400
Top pay: $137,000
10-year job growth: 29%
Total jobs: 10,000

The job: Mind. Body. Spirit. Career. Pilates and Yoga instructors guide classes (or individuals in one-on-one sessions) through each discipline, making sure students learn their particular practice in a way that is challenging, yet safe and comfortable. If you're thinking about becoming an instructor, it's probably because you already love doing it and want to share your experience with others. Whether you're working with a school or teaching on your own, you can tailor your classes to fit your schedule.

How to switch: As both fields become more popular, demand is growing for instructors, but certification and training are crucial to prevent injuries. Both the Pilates Method Alliance and the Yoga Alliance recommend at least 200 hours of training. For more details, go to pilatesmethodalliance.org and yogaalliance.org.

Quality of life ratings:
Personal satisfaction: B
Benefit to society: B
Low stress: B
Flexibility: A

8. Marketing Representative

Median pay: $52,500
Top pay: $92,800
10-year job growth: 7%
Total jobs: 10,000

The job: As a marketing rep you are the face of the company. You spend the most time with the customers, and your job is to keep them informed, happy and hungry for more. That requires an exhaustive knowledge of the company's product or service, along with the enthusiasm to drive your message home. Since the bulk of your work is managing clients, you can usually set a flexible schedule that doesn't tie you to a desk.

How to switch: Find a company whose product or service you believe in — if you don't feel it, you can't pitch it. Learn everything there is to know about them, then use your gift of gab to pitch yourself to the hiring team. Learn more from the American Marketing Association: marketingpower.com. Or if you need more formal guidance, free online courses can be found at MIT: ocw.mit.edu.

Quality of life ratings:
Personal satisfaction: B
Benefit to society: B
Low stress: C
Flexibility: A

9. Technical Writer

Median pay: $68,100
Top pay: $95,600
10-year job growth: 18%
Total jobs: 50,000

The job: Ever wonder who wrote the manual that taught you how to program your DVR? Technical writers take complicated information — like which tiny button erases your entire video library — and put it into simple-to-understand language. Most positions are in information technology, science and engineering, but the work has expanded across a wider range of industries. The field has a solid growth rate and commands one of the higher salaries on our list. Many jobs are on a contractual basis, so you can set your own hours and workload.

How to switch: Strong writing skills are a must, and a background or degree in a technical field can only add to your credibility. As more technical writing moves online, knowledge of desktop publishing and graphics programs will also help boost your prospects. Check out the Society for Technical Communication's website for more information: stc.org.

Quality of life ratings:
Personal satisfaction: B
Benefit to society: C
Low stress: C
Flexibility: B

10. Patient/Health Educator

Median pay: $63,300
Top pay: $87,600
10-year job growth: 18%
Total jobs: 10,000

The job: Spreading the word of wellness is the main goal of a patient/health educator. From hospitals to schools to public and private organizations, the job covers health education from head to toe. You can teach kids about the importance of exercise, set up lunchtime health screenings at an office, or counsel patients about difficult lifestyle changes after a major operation. Like a doctor or nurse, you are a caregiver — and your gift is knowledge. And as prevention takes a greater role in health care, the need for educators is rapidly growing.

How to switch: Entry-level positions generally require a bachelor's degree in health education. Check out local schools for continuing education courses that can expand your knowledge. If you have the time, an internship or volunteer experience can help fill out your resume. Learn more at aahperd.org/aahe, the American Association for Health Education's website.

Quality of life ratings:
Personal satisfaction: B
Benefit to society: A
Low stress: C
Flexibility: B

Republicans increasing risk of recession: Geithner

2011-10-12T18:34:00.001+08:00

WASHINGTON (AFP) - US Treasury Secretary Timothy Geithner warned Republicans that they risk helping to tip the country into recession if they fail to back President Barack Obama's jobs bill late on Tuesday.

Speaking just before the Senate was expected to vote down the US$447 billion (S$574 billion) plan, Mr Geithner launched an uncharacteristically partisan attack on Mr Obama's political foes.

Asked during an interview with Bloomberg Television whether Republicans were raising the risk of another recession by standing in the way of the bill, Mr Geithner responded: 'Absolutely.' 'If Congress does not act, it will be because Republicans decided they did not want to do anything to help the economy,' he said.

'Growth will be weaker... people will be out of work. If the bill is not passed, he added, 'We will put off the important challenges.' 'That is not something we should do.' Mr Obama has spent weeks demanding that Congress pass a full version of a bill designed to boost growth, cut the unemployment rate of 9.1 per cent and shield the fragile US recovery from the threat of European debt contagion.

Repeat of 2008 credit crisis not likely: DBS economist

2011-10-12T18:33:00.002+08:00

By Robin Chan

The euro zone sovereign debt crisis is unlikely to lead to a credit crunch that saw trade collapse in Asia in 2008, said DBS economist David Carbon.

'Markets have had 18 months to figure out who they can trade with. So we are unlikely to have the same ferocious snap we did in 2008,' said Mr Carbon, managing director for currency and economic research at DBS.

He was speaking at a media briefing at DBS headquarters.

'Asia's not immune, but it's not going to be 2008 all over again.'

Soros warns euro crisis could destroy world financial system

2011-10-12T18:33:00.001+08:00

BERLIN (AFP) - Billionaire investor George Soros and some 100 former European dignitaries on Wednesday published an open letter warning that the euro zone debt crisis could bring down the global financial system.

'The euro is far from perfect,' they wrote in German business daily Handelsblatt. 'The current crisis has shown that.'

'But as a reaction to that, we need to revise the weaknesses in its make-up rather than allow the crisis to undermine, even destroy, the world's financial system,' they added.

The group, calling themselves 'concerned Europeans', appealed to governments to establish an institution that can provide liquidity to the whole euro zone, a strengthening of financial market oversight and a revised European Union (EU) growth strategy.

The letter was signed by top former politicians, such as ex-German finance minister Hans Eichel, former French foreign minister Bernard Kouchner and Pedro Solbes, who was once EU Economic and Monetary Affairs Commissioner.

Distinguished economists such as Mr Charles Goodhart from Britain and Mr Peter Bofinger from Germany also added their names to the appeal.

France and Germany have vowed to come up with a wide-ranging solution to the ongoing debt crisis by the end of the month but have kept mum on the details.

The euro zone power-brokers are working on four main issues - pumping more money into European banks; defining the way the European bailout fund should work; supporting the work of international auditors in Greece and toughening the EU's debt rules.

Later on Wednesday, European Commission President Jose Manuel Barroso was poised to issue hotly anticipated proposals on bank recapitalisation, seen as a key step in bolstering their defences against the debt crisis.