If you're careful with money, being married to someone who loves to fling open a wallet can be trying in the best of times. Source: Business and financial news - CNNMoney.com | 1 Jun 2009 | 4:00 am
Chinese banks' surge in lending is leading to excessive risk taking, says Fitch ratings agency. Source: BBC News | Business | World Edition | 21 May 2009 | 12:01 pm
Reuters - Fiat SpA is convinced it has more than a 50 percent chance of succeeding in its bid for Opel because it does not think the other contenders have the expertise to revive the car maker, an Italian newspaper said. Source: Yahoo! News: Business | 21 May 2009 | 11:59 am
Sony is to halve its 2,500-strong army of components and material suppliers in a “life-changing” effort to streamline its procurement network and slash costs by about 500 billion yen (£3.3 billion).
One of the biggest disappointments of the foreclosure prevention fight has been HOPE for Homeowners, a plan Congress passed in an attempt to help as many as 400,000 underwater, delinquent borrowers from going into foreclosure. Source: Business and financial news - CNNMoney.com | 21 May 2009 | 11:50 am
LONDON (Reuters) - Oil fell more than a dollar to below $61 a barrel on Thursday, after hitting a six-month high in the previous session on expectations of a rebound in the world economy.
These are some of the top analyst upgrades and positive research calls which we have seen from Wall Street early this Thursday morning:
Canadian Solar (CSIQ) Raised to Outperform at Oppenheimer.
Expedia (EXPE) Started as Buy at Soleil.
Freeport-McMoRan (FCX) Raised to Overweight at JPMorgan.
Juniper Networks (JNPR) Raised to Overweight at Barclays.
Kellogg (K) Started as Outperform at RBC.
Lincoln [...]
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LONDON (Reuters) - Ratings agency Standard & Poor's lowered its outlook on Britain to negative on Thursday, citing government debt that would be hard to rein in and political uncertainty about the policy response with an election looming.
U.S. stock futures slip Thursday, as Standard & Poor’s move to lower the credit-rating outlook on Britain raises fears that a downgrade of the U.S. government’s debt rating could be coming soon as well.
Crude-oil futures declined Thursday, after hitting a six-month high the previous day, as worries about the state of the economy in the U.S. and U.K. weighed on prices.
AFP - European stock markets slid Thursday after falls in Tokyo and overnight on Wall Street, while equities were also hit in London as Standard and Poor's warned it may downgrade Britain's debt ratings.
Stocks expected to move significantly in Thursday's trading include a number of major banks -- including Fifth Third, Huntington and Regions Financial -- as well as Intuit, Limited Brands, PetSmart, Stage Stores, Suntech, Synopsis and WellCare.
UK retail sales increased much more than expected in April, the latest official data shows, as consumer spending holds up. Source: BBC News | Business | World Edition | 21 May 2009 | 11:31 am
Reuters - Stock index futures fell on Thursday as doubts about a quick economic rebound fueled a global equity sell-off, while Britain's reduced rating outlook pointed to more fallout from the credit crisis.
NEW YORK (Reuters) - Stock index futures fell on Thursday as doubts about a quick economic rebound fueled a global equity sell-off, while Britain's reduced rating outlook pointed to more fallout from the credit crisis.
Reuters - Stock index futures fell on Thursday as doubts about a quick economic rebound fueled a global equity sell-off, while Britain's reduced rating outlook pointed to more fallout from the credit crisis.
John Pluthero, the chairman of Cable & Wireless's UK business, has raked in an £8.3 million bonus as a result of the group's controversial three-year long-term incentive plan (LTIP), it was announced this morning.
The White House is considering a powerful new agency to protect American consumers from rip-off personal finance products, as it steps up its overhaul of the country's patchwork of financial regulators.
U.S. stocks were set to open lower l Thursday, dragged by ongoing concerns about the nation's economic outlook Source: Business and financial news - CNNMoney.com | 21 May 2009 | 11:30 am
LONDON, May 21 (Reuters) - Workers at Europe's largest liquefied natural gas terminal voted to end an official strike over the use of foreign labour on Thursday, union officials said. Source: RSS feed - channel BNewsBusiness | 21 May 2009 | 11:25 am
European shares snap a five-session advance on Thursday, as comments from the U.S. Federal Reserve provide a reason for investors to reassess recent optimism over the economy.
Sterling tumbled as the outlook for the UK economy was thrown into doubt when the government's credit ratings were revised from stable to negative by Standard & Poor's over worries about the build-up of government debt Source: Financial Times - US homepage | 21 May 2009 | 11:14 am
Leading investor groups are calling for company directors in charge of pay policy to stand for re-election every year, as the City steps up its campaign to improve boardroom practice on remuneration.
MONTREAL, May 21 /PRNewswire/ - The market has been higher for the last eight weeks. Investors are betting on a turnaround in the US economy. Investors have been burned with blue Source: RSS feed - channel BNewsBusiness | 21 May 2009 | 11:08 am
Standard & Poor’s cuts credit outlook on the U.K. to negative from stable, saying that even if the country tightens its purse, the debt burden may match the country’s output.
A ratings agency revises down its outlook for UK public debt for the first time as figures show record government borrowing in April. Source: BBC News | Business | World Edition | 21 May 2009 | 11:03 am
For refinery outages in the new Reuters Oil Fundamentals Database see http://bond.views.session.rservices.com/CE/ or go to <OFD/INFO>. Source: RSS feed - channel BNewsBusiness | 21 May 2009 | 11:00 am
- Daily flights from New York set to begin in the fall (a) - - JetBlue's 2nd Jamaican destination - NEW YORK, May 21 /PRNewswire-FirstCall/ --... Source: RSS feed - channel BNewsBusiness | 21 May 2009 | 11:00 am
Use Simple Tips to Teach Money Management Skills CHICAGO, May 21 /PRNewswire/ -- With teens spending $125 billion each year, according to a study from research firm... Source: RSS feed - channel BNewsBusiness | 21 May 2009 | 11:00 am
Clinton Cards puts its Birthdays store chain into administration, putting more than 2,000 jobs at risk. Source: BBC News | Business | World Edition | 21 May 2009 | 10:59 am
NEW YORK (Reuters) - Bank of America Corp wants to pay back $45 billion in bail-out funds by the end of the year, accelerated by a program to raise capital, the Financial Times reported on its website late on Wednesday.
Hopes of a turnaround in the housing market were dented todat as new figures revealed that mortgage lending dropped by 9 per cent between March and April. Source: Latest Business News from Times Online | 21 May 2009 | 10:55 am
Markets worldwide fall after Federal Reserve minutes showed the central bank has lowered its forecast for US growth. Source: BBC News | Business | World Edition | 21 May 2009 | 10:54 am
AP - Global stock markets fell sharply Thursday as investor hopes of a quick economic rebound were diminished by a warning from the U.S. Federal Reserve that the U.S. economy, the world's largest, was likely to shrink by more than anticipated this year.
The U.S. auto industry's deep-seated problems make it easy for car dealers to focus on the negative. As if thousands of cars sitting unsold on lots and in showrooms across the country weren't enough, recently bankrupt Chrysler will cut 789 of its nearly 3,200 dealer relationships, and General Motors will end contracts with 2,600 franchises through 2010 in an effort to avoid Chapter 11. Source: Business and financial news - CNNMoney.com | 21 May 2009 | 10:41 am
It has begun to dawn on more and more large companies that high-priced goods are costing them sales during the recession. Maybe the only way for them to hold onto customers is to offer some products at remarkably low prices, prices as low as $1.
The benefit of $1 items is that it keeps consumers coming [...]
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Full-year profits at Kenyan telecoms firm Safaricom fall 23% due to the downturn, higher costs and tougher competition. Source: BBC News | Business | World Edition | 21 May 2009 | 10:23 am
The recovery of the Chinese economy always sounded too good to be true. Granted, the central government put $585 billion into helping bolster GDP. But, exports and manufacturing cannot do better without a recovery in Japan and in the West.
Credit Suisse analysts are seeing weakening of economic numbers out of China. According to Reuters, ” economic [...]
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Sony’s (SNE) plan to turn itself around is all about cutting costs and has nothing to do with building new products or restructuring the firm’s content operations.
Sony’s management laid out a program to cut its component suppliers by about half to 1,200. This action should save more than $5 billion in the current fiscal year.
According [...]
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Apple and Research in Motion were the big winners in the first quarter of 2009, according to a report on the mobile phone industry issued by Gartner on Wednesday Source: Business and financial news - CNNMoney.com | 21 May 2009 | 10:07 am
Mexico's economy shrank by 8.2% in the first three months of this as the global downturn hit demand for exports, figures show. Source: BBC News | Business | World Edition | 21 May 2009 | 9:54 am
Bank of America (BAC) is hinting strongly that it plans to pay back the US government the $45 billion that it owes by the end of this year. Bank stress tests showed that B of A needs to raise $34 billion. Somehow the financial firm believes that it can turn around and quickly pay off [...]
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Reuters - Former Federal Reserve Chairman Alan Greenspan said the U.S. economy and financial markets had improved but warned that banks faced a capital shortfall, which could stall lending and obstruct a recovery, Bloomberg reported on Thursday.
SINGAPORE (Reuters) - Former Federal Reserve Chairman Alan Greenspan said the U.S. economy and financial markets had improved but warned that banks faced a capital shortfall, which could stall lending and obstruct a recovery, Bloomberg reported on Thursday.
British stocks fall sharply , with banks and oil producers giving back some recent gains, as Standard & Poor's cuts its credit-rating outlook on the U.K.
Singapore's economy shrank by 14.6% in the first quarter of this year, less than previously estimated, latest figures show. Source: BBC News | Business | World Edition | 21 May 2009 | 9:36 am
No one in the US worried much when S&P downgraded the sovereign debt of The Ukraine or the Republic of Kazakhstan. Now, the trouble has moved much closer to home as the credit agency lowered its credit rating outlook for the UK from “stable” to “negative.” The agency is concerned about the increase in government debt [...]
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The FOMC minutes are like most other documents produced inside the government’s bureaucracy. The bulk of the information has been gathered long before the report reaches the public. In the case of the Fed’s minutes some of the data, particularly information on GDP, unemployment, and production, are several months old. The Fed feels the need [...]
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MILAN (Reuters) - The head of Fiat SpA said it had more than a 50 percent chance of succeeding in its bid for Opel, adding that the other contenders did not have the expertise to save the struggling car maker, according to a newspaper report.
The federal government will end up owning bits and pieces of businesses including banks, car companies and insurance firms as it puts money into industries weakened by the recession. The Achilles Heel of this investing strategy is that there is no central authority watching the “portfolio” and no publicly articulated statement about when the holdings [...]
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Pressure on the Chancellor to take more aggressive action to bolster government finances mounted today after public borrowing hit £8.5 billion and a leading rating agency threatened to downgrade its assessment of the country’s creditworthiness.
Retail sales rose 3 per cent in April against last year, the Office for National Statistics (ONS) said today. The rise, which was better than expected, has prompted optimism that the worst of the recession has passed for retailers. But analysts cautioned that the timing of Easter, which this year fell in April, has inflated the figures.
Daily Mail and General Trust reports a half-year loss of £239m after it is forced to write-down the value of the business. Source: BBC News | Business | World Edition | 21 May 2009 | 8:31 am
Reuters: Congress passed a bill to put restrictions on credit card companies.
Reuters: The Fed mulled increasing securities during its April meeting.
Reuters: Geithner said the US was making progress fighting the credit crisis.
Reuters: Banks expect a windfall of fees from new stock issues by companies taking advantage of markets.
Reuters: Bank of America (BAC) will seek to replay [...]
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The threat of a downgrade to Britain's credit rating by Standard & Poor's (S&P) severely dented the leading share index, already reeling from late falls on Wall Street after gloomy news on the US economy.
Tumbling advertising revenues cut pre-tax profits by almost a half at Daily Mail and General Trust (DMGT), the publisher of the two national titles and a raft of local papers, in the first half to March 29.
Markets in Asia were lower.
The Nikkei fell .9% to 9,284.
The Hang Seng fell 1.3% to 17,248.
The Shanghai Composite was down 1.5% to 2,611.
At the open in Europe, the FTSE fell 1.3% to 4,409. The Dax dropped 1.2% to 4,981 and the CAC fell 1.3% to 3,259.
Data from Reuters and MarketWatch.
Douglas A. McIntyre
Posted in International Markets [...]
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MELBOURNE - The Australian share market lost ground, weighed down by financials but with support returning to defensive stocks.
At 1615 AEST, the benchmark S&P/ASX200 was down 10.7 points, or 0.28 per cent, at 3,813.9, while the... Source: New Zealand Herald - Business | 21 May 2009 | 7:01 am
A shaky transition from CDs to digital downloads casts a shadow on the start of music retailers' big summer season.
Leave it to brash punk-pop icon Green Day to inject some much-needed life into the U.S. pop charts. The band's latest concept-driven collection for Reprise/Warner Bros., "21st Century Breakdown," which was released off-cycle on a Friday rather than the typical Tuesday, sold 214,000 copies through Sunday, according to Nielsen SoundScan.
Robert Kidder, the former chief executive of battery maker Duracell, will become chairman once the company completes the bankruptcy process and merges with Italian automaker Fiat.
Chrysler is not yet out of bankruptcy, but it already has a new boss lined up.
With few new rides and attractions, Southern California theme parks will be offering bargain prices to lure recession-weary vacationers.
A wooden roller coaster at Six Flags Magic Mountain will fire riders down a 100-foot drop. An exhibit at the San Diego Zoo will feature elephants, camels and 4-foot rodents in a new habitat the size of a soccer stadium. A musical comedy at Universal Studios Hollywood will star the Creature from the Black Lagoon.
The organizations are accused of keeping nearly all the donations raised in the name of police, firefighters and veterans.
As part of a sweeping nationwide crackdown on "fake charities," the Federal Trade Commission and state officials took actions that forced dozens of groups to shut down or stop making false appeals in the name of police, firefighters and veterans.
CEO Jim Buckmaster says he aims to block possible prosecution of the site by the state's attorney general. The company seeks a ruling that it is not liable for content posted by third parties.
Craigslist, the advertising website in hot water over classified listings for prostitution, is striking back at criminal investigators in South Carolina -- even as seven New Yorkers were indicted on charges of running a prostitution ring through the site.
The economy could begin to pull out of the recession later this year, but a full recovery could take as long as six years, says a forecast issued Wednesday by the Federal Reserve. Source: RSS feed - channel BNPaperBusiness | 21 May 2009 | 7:00 am
The country's export-reliant economy shrank at a record pace in the first quarter, but economists say production cuts and inventory reduction have set the stage for recovery.
Japan's export-addicted economy shrank during the first quarter at the fastest pace in more than 50 years. But the worst appears to be over, and many economists here say the economy is now beginning to grow.
Drops in manufacturing and construction lead the decline. Mexico seems headed for its biggest contraction since 1995. ... Source: RSS feed - channel BNPaperBusiness | 21 May 2009 | 7:00 am
Groups that own a certain percentage of a company's stock would be able to put their nominees on the annual proxy ballot. ... Source: RSS feed - channel BNPaperBusiness | 21 May 2009 | 7:00 am
The country's export-reliant economy shrank at a record pace in the first quarter, but economists say production cuts and inventory reduction have set the stage for recovery. ... Source: RSS feed - channel BNPaperBusiness | 21 May 2009 | 7:00 am
People who sank their savings into GM bonds can accept a deal that gives less value to individual bondholders than to other creditors, or risk getting nothing in Bankruptcy Court.
Dennis Buchholtz spent a lifetime in the automotive industry, working at companies that supplied parts to America's automakers. For more than three decades, he spent his days casting iron dies used to turn sheet metal into fenders, roofs and hoods.
Robert Kidder, the former chief executive of battery maker Duracell, will become chairman once the company completes the bankruptcy process and merges with Italian automaker Fiat. ... Source: RSS feed - channel BNPaperBusiness | 21 May 2009 | 7:00 am
Drops in manufacturing and construction lead the decline. Mexico seems headed for its biggest contraction since 1995.
Mexico's economy shrank 8.2% in the first quarter, even before accounting for the impact of the swine flu, and appears headed for its biggest contraction since the 1995 crisis that followed the devaluation of the peso.
The president, in a turnabout that reflects his vow to shun protectionism and his goals of rewarding strategic allies and confronting economic necessity, is pushing for passage of a deal by July 1.
A frequent critic of NAFTA and other trade pacts when he was on the campaign trail, President Obama is now throwing his support behind a trade deal with Panama, courting a potential backlash among his labor supporters.
With few new rides and attractions, Southern California theme parks will be offering bargain prices to lure recession-weary vacationers. ... Source: RSS feed - channel BNPaperBusiness | 21 May 2009 | 7:00 am
CEO Jim Buckmaster says he aims to block possible prosecution of the site by the state's attorney general. The company seeks a ruling that it is not liable for content posted by third parties. ... Source: RSS feed - channel BNPaperBusiness | 21 May 2009 | 7:00 am
The president, in a turnabout that reflects his vow to shun protectionism and his goals of rewarding strategic allies and confronting economic necessity, is pushing for passage of a deal by July 1. ... Source: RSS feed - channel BNPaperBusiness | 21 May 2009 | 7:00 am
A shaky transition from CDs to digital downloads casts a shadow on the start of music retailers' big summer season. ... Source: RSS feed - channel BNPaperBusiness | 21 May 2009 | 7:00 am
The organizations are accused of keeping nearly all the donations raised in the name of police, firefighters and veterans. ... Source: RSS feed - channel BNPaperBusiness | 21 May 2009 | 7:00 am
Shares in Auckland Airport closed down 3.6 per cent today after the company warned a market consensus of its retail revenue for 2010 was too high.
Rather than the consensus of about $104 million, a more likely retail revenue forecast... Source: New Zealand Herald - Business | 21 May 2009 | 6:32 am
Sony is to shrink its supplier network by half over the next two years to cut at least Y500bn in costs in response to the global slump in electronics sales Source: Financial Times - US homepage | 21 May 2009 | 5:46 am
The New Zealand dollar climbed back to its highest level against the greenback in more than a week today.
The NZ dollar rose to US61.13c on Wednesday night but then lost much of its gains as Wall Street turned negative on its close.
By... Source: New Zealand Herald - Business | 21 May 2009 | 5:36 am
US authorities said they arrested four men for planning a missile attack on planes at a military base in New York State and a bombing plot against a synagogue in New York City Source: Financial Times - US homepage | 21 May 2009 | 5:33 am
Pakistan's prime minister Yusuf Raza Gilani will seek at least $600m in emergency funds from donors to fund up to 2m internally displaced people from the embattled Swat valley – described by UN officials as one of the world's worst refugee crises Source: Financial Times - US homepage | 21 May 2009 | 4:25 am
If people had paid attention to veteran investor Jeremy Grantham over the past two years, their investment portfolios would be looking much better than they likely are. While many investors were caught up in bull-market euphoria in 2007, Grantham, who oversees $85 billion for Boston-based institutional money-management firm GMO, told anyone who would listen there was a global bubble: “It’s everywhere, in everything.” Then, in early March of this year, when the market looked its worst, he wrote that people needed to get over their fears and invest, because U.S. stocks were cheap and foreign stocks even cheaper.
Grantham’s disregard for the conventional wisdom has brought him grief at nearly every point of his 40-plus-year investing career. But more often than not, the often grumpy Grantham, 70, has been right over the long term. The irony of all his remarkable forecasting is that few ordinary investors can invest with him. The funds GMO runs are mostly geared toward institutions, such as pension funds or school endowments, although the Evergreen Asset Allocation fund invests exclusively in funds managed by GMO. GMO investors lost money last year because many of its funds dictate a substantial degree of stock holdings even when the boss is decrying the market. Still, GMO’s U.S. stock funds lost only about half what the S&P did during the crash, and some other GMO funds did much better.
Grantham, 70, has an opinion for everyone about the best investment strategies in these uncertain times. Sitting in his office lined with giant Buddhas and relics of civilizations long gone, Grantham talked to SmartMoney about the stock market and the current financial mess.
SmartMoney: In 2007 you were worried the global financial market could fall apart, and you said a market downturn was probably coming. Okay, say it: “I told you so.”
Jeremy Grantham: That seems so long ago. I felt like saying that a few months ago, but now onward and upward, and wait for the next unexpected twist.
SM: Why were you so certain things were going to get so ugly?
JG: There wasn’t a whole lot of doubt where I was coming from. I thought the fair value of the S&P was 925; the S&P went to 1500. And by 2006 the housing bubble was at a 100-year peak. This was the 32nd asset bubble that we’ve tracked, and all but the U.K. housing bubble have popped.
SM: Why didn’t you just put all the money in GMO’s funds into cash?
JG: Every quarter, we do our best to tell our clients the truth. We were comfortable with telling our clients there was a major bubble in every asset class, everywhere. Then they go to investment committees and decide what to do with their money. They don’t want to do anything that looks eccentric and costs them their jobs. It’s a miracle that any of our advice perks up the pipeline.
SM: Why did your own funds lose so much money when you were confident the market would fall apart?
JG: Most of our mandates require us to be nearly 100 percent invested. But even when you had to be at least 45 percent equity, then you couldn’t help but to go down. There was nowhere to hide. Everywhere and everything got hit.
SM: Yet now, for the first time in years, you like U.S. stocks.
JG: We think a fair price for the S&P 500 index is 900. By sheer divine intervention we bought into the market on Mar. 6, the day it hit the recent low of 666. It’s likely, but far from certain, that we’ll go back and make a new low. You aren’t going to get to buy at the absolute low unless you have a time machine.
SM: Anything else besides U.S. stocks?
JG: U.S. stocks were nicely cheap, and frankly, the rest of the world was even cheaper. In early March, when we bought, we invested only in stocks we thought would have a 10 to 14 percent average annual return after inflation. That’s magnificent. We haven’t seen anything like that in 20 years. It was somewhat disappointing that prices moved up so fast in just a couple of weeks. The odds are a bit more than 50-50 that we will go back and test that low.
SM: So you’ve made a quick buck. Now what?
JG: You have a set of possibilities. First, if the market nosedives, it’s easy: You buy. The second is confusing, when the market just goes sideways, between 700 and 800. The market is irritatingly cheap then, but not supercheap. The longer that goes on, the less probability we will set a new low, so we’ll ultimately put money each month into the market.
SM: What if stocks keep rallying?
JG: If the market goes higher, above 950, and then starts moving sideways, between 950 and 1050, we probably do very little. Then the market is moderately overpriced.
SM: Over the long haul, is there any particular industry or sector you like?
JG: The people who move quickly in this market can make money. The people who invest in energy alternatives will make more. Alternative energies and combating climate change are the single most important economic initiatives over the next 10 years—really over the next 50 years. It will be a very exciting next 50 years.
SM: That’s the future. But why did so many supposedly smart people miss this disaster over the past two years?
JG: The ultimate villain of this is the belief in rational expectations—that the market tends to be efficient. People who have anything to do with investing either believe it a bit or believe it a lot. There are only a few of us ornery disbelievers who don’t believe that the market is efficient at all.
SM: What’s wrong with believing that the market is efficient?
JG: If you believe in it, then you don’t see asset bubbles. And there’s nothing as dangerous as an asset bubble. If you even slightly believe in it, you believe in [former Federal Reserve Chairman] Alan Greenspan’s idea that markets can control themselves. You believe that you should buy and hold the market. You believe you should have a fixed asset mix and you should never change it, because why would you? The market is efficient! When you believe in market efficiency, it’s like being on the railroad watching the locomotive coming toward you. Then you just stand your ground just for the discipline of not moving. It’s ruinously expensive.
SM: Will we get out of this mess?
JG: The stimulus is so great in the United States, China and the United Kingdom, it will kick the economy up. GDP will go back positive for two to three quarters. They’ll assume everything is settled, that throwing money at it has worked. But the long-term imbalance between overproducers [like China] and overspenders [like the U.S.] will continue. It’ll be a multiyear drag on growth.
SM: We’re just throwing money at the problems?
JG: If the problem is that we consume too much and borrow too much, does it make sense to borrow more and spend more? It doesn’t make sense to solve alcoholism by giving an alcoholic a quart of whiskey, but everyone believes that we must stimulate. So that’s why we feel this is a temporary cure. This is like when you revive the drunk, he staggers down a few blocks, then falls down again.
SM: That does not sound promising.
JG: We’re not rich, and we’re undersaved and underpensioned. Those will be a real brake on economic growth. This will be a pretty long recovery period, longer than we’re used to, but hopefully not as long as Japan took. It will not be as long as the Depression, but it will be several years, and not just two. Lord knows we have had several fat years.
SM: Won’t our leaders help?
JG: President Obama is not doing the right thing. I admired his appointments in many areas, certainly in the environmental area. But then he got these tired old retreads from the financial area that notoriously didn’t blow a whistle over the last few years. They’ve all been Rubin-ized [influenced by former Treasury Secretary Robert Rubin].
SM: So why are these life-size Buddhas and other statues in your office?
JG: I’m a history freak. I find old civilizations fascinating. Great empires all rise and fall. It’s sad that we don’t know how the future will work out. A time machine would be a wonderful device, even if you couldn’t use it for investing.
Grantham’s Outlook
Jeremy Grantham’s firm, GMO, predicts long-term returns, adjusted for inflation, for a variety of assets. Here’s its prognosis for the next seven years.
U.S. stocks: GOOD GMO has recently warmed to homegrown stocks. It expects a nearly 9 percent average annual return, above the historic average.
International stocks: VERY GOOD GMO was bullish early in the decade, then turned sour. Now it expects a 10.7 percent average annual return for large foreign firms and12.7 percent for smaller ones.
U.S. government bonds: BAD Long-term bonds will average a tiny return of 0.5 percent a year.
Timber: FAIR Even though GMO expects a 6 percent average annual return, it thinks stocks are a better deal now.
Memorial Day is a time of remembrance for those who gave their lives in the name of their country—often on battlefields thousands of miles away from the towns they called home. These observances can be traced back over 140 years to the Civil War. Over time, however, the holiday has evolved for many Americans into a chance not only to honor fallen heroes, but also to pay respect more broadly to family members, friends and colleagues who have passed away.
In that spirit, SmartMoney presents this look at some prominent figures in the financial world who died over the past year. It has been, of course, a painful time for many due to the economy’s downturn. In some cases, the turmoil has been linked to tragedy, as when Freddie Mac’s acting chief financial officer, David B. Kellerman, was found dead earlier this year in an apparent suicide. The list of those who died includes prominent leaders and innovators in business and finance.
Here’s our review of some of the most notable deaths in business and finance over the past year.
Sir John Templeton
Investor, Philanthropist Died July 8, 2008, at age 95
Templeton, born in Tennessee, made his name on Wall Street as an early pioneer in the mutual fund business. He formed several funds, including the flagship Templeton Growth, which returned a whopping 14.5% a year between 1954 and 1992. He emphasized sober, deliberate value investing and diversification. Indeed, he was one of the first investors to incorporate foreign stocks into his portfolios. "Diversify. In stocks and bonds, as in much else, there is safety in numbers," he was fond of saying. He gave up his U.S. citizenship and made a controversial move to the Bahamas in 1968 to avoid taxes. From there, he sold his funds in 1992 and devoted himself to spiritual pursuits and writing about investing. A lifelong Presbyterian -- his deep religious beliefs were a big selling point with many American investors -- he consistently referred to his business as a ministry. He gave away much of his wealth to religious causes, leading the Queen of England to knight him in 1987. His foundation still doles out big awards to religious research.
“I’ve been thinking a lot about his work the past year,” says Don Phillips, managing director of Morningstar, especially about Templeton’s aversion to debt. “The kind of credit binge so many people went on was just anathema to his way of thinking.”
Betty James
President, James Industries Died Nov. 20, 2008, at age 90
In 1944, James thumbed through a dictionary to the word “slinky” and suggested it as a catchy name for the toy her husband, a naval engineer, had created out of tension springs. The first 400 Slinkys, priced at $1, sold out in 90 minutes during a 1945 demonstration on a slanted ramp at Gimbel's department store in Philadelphia. The couple formed James Industries around the toy. Betty took it over in 1960 and ran it until 1998, when it was sold. (It is now part of Poof-Slinky.) Though the original metal version now sells for $4 to $5, James was always mindful of price. "So many children can't have expensive toys, and I feel a real obligation to them,” she said in a 1996 interview. “I'm appalled when I go Christmas shopping and $60 to $80 for a toy is nothing. With 16 grandchildren you can go into the national debt." Slinky sales have now topped 300 million units.
Bill Seidman
Former chairman, FDIC Television commentator Died May 13, 2009, at age 88
Seidman steered the country through its last big financial crisis, the 1980s savings and loan debacle, and remained a trenchant voice in analyzing the current mess. Appointed to run the Federal Deposit Insurance Corporation in 1985, his stewardship through the S&L crisis stabilized the banking industry and established him as a champion of depositors' interests. His leadership of the Resolution Trust Corporation, formed to recoup the $200 billion in taxpayer losses, informed his plainspoken final act as a media commentator discussing today's financial crisis. "These things do go by," he said in a November address to the Securities Industry and Financial Markets Association, "but that's not to take away from the fact that this is the worst financial crisis since the Great Depression."
Jack Nash
President, Oppenheimer & Co. Founder, Odyssey Partners Died June 30, 2008, at age 79
Nash, who arrived in the United States after his family fled the Nazis in Germany, became a prominent investor over several decades on Wall Street. He began working for Oppenheimer in the 1950s and eventually became its chief executive officer and chairman as the company grew into a prominent mutual fund company. With partner Leon Levy he sold the company for $163 million and then the pair used $50 million of their own money to start Odyssey Partners, one of the first hedge funds. Odyssey had $3.3 billion under management when it closed in 1997. Nash had a unique outlook on investing. He said a long bet on bonds in the early 1980s, one of Odyssey’s most profitable decisions, was preceded by "a great deal of Sitzfleisch," a Yiddish idiom for being able to wait out the initial reaction to a well-considered decision. More recently, he was critical of the dangerous leverage levels being employed by some firms. "Many hedge fund managers don’t understand leverage today,” he said during an interview shortly before his death. “It’s very sweet on the way up. But not on the way down. It has got to be used carefully and strategically.”
Rocky Aoki
Founder, Benihana Died July 10, 2008, at age 69
Aoki, a colorful, high-living playboy restaurateur, introduced Americans to Japanese food. His Benihana chain brought theatrics to the table, as chefs flipped knives, slicing and dicing in front of diners seated at huge teppan-yaki grills. Aoki eventually resigned from the company in 1998 amid an investigation of his own investments. But the company continues to operate from its Miami headquarters with more than 5,000 employees and several other chains outside the core Benihana business. Throughout his life, Aoki demonstrated a daredevil streak, flying across the Atlantic Ocean in a hot air balloon and participating in the Cannonball Run, an underground cross-country race made famous by the film of the same name.
Irvine Robbins
Co-Founder, Baskin-Robbins Died May 5, 2008, at age 90
Robbins helped build the eponymous ice cream empire famous for its 31 flavors that now has 6,000 outlets in 35 countries. Robbins was the son of a Tacoma, Wash., dairyman and nephew of a Seattle ice cream parlor operator. After serving in the military during World War II he cashed out an insurance policy he got as a bar mitzvah present, according to the New York Times, and opened his first store in Glendale, Calif. Later he partnered with his brother-in-law Burton Baskin. Robbins injected a sense of fun and whimsy into the business as the pair created unique flavors. The arrival of the Dodgers in Los Angeles in 1958 was met with a new flavor, Baseball Nut. It included raspberries for the umpires. Robbins stayed involved with the company after it was sold to United Fruit Co. in 1967 for an estimated $12 million. He retired in 1978. The company is now owned by Dunkin' Brands.
Kenneth Macke
Former chairman, Dayton Hudson (forerunner of Target) Died June 28, 2008, at age 69
Macke joined Dayton Hudson as a management trainee in 1961 and left as its chief executive officer 33 years later. Under his leadership, Minneapolis-based Dayton became one of the five largest retailers in the United States. His career took off when he was put in charge of Dayton’s Target division. When he took over there were 49 Target stores. By the time he was promoted to run the whole company there were 137, according to the New York Times. (The company was renamed Target in 1999. There are now over 1,600 stores.) In 1987, Macke successfully fended off a $6 billion hostile takeover attempt by lobbying the Minnesota legislature to support an antitakeover law that prevented the breakup of newly acquired companies in the state for five years. "My dad absolutely loved working on Target and walking the aisles 'undercover' at every opportunity," his son, Jeff Macke, a CNBC commentator, said last year.
George Keller
Former CEO, Chevron Died Oct. 17, 2008, at age 84
Keller was an old-school oilman. In 1984, as chairman of Standard Oil Company of California, he oversaw a $13.3 billion merger with Gulf Oil, then one of the largest deals on record and the catalyst for the formation of Chevron. It was his last-minute decision to bump the offer from $79 a share to $80 that tipped scales to SoCal and away from fellow mogul T. Boone Pickens. Keller pioneered American oil's moves in hostile territories during the Cold War – Chevron did business in Angola and was one of the first multinationals to move into the Soviet Union. Its Tengiz oilfield in Kazakhstan remains the company's biggest single oil property. He retired in 1989.
Helen Galland
Former president, Bonwit Teller Sept. 1, 2008 at age 83
Galland started as a hat buyer in the tony department store, and was a senior vice president by the time she left in 1975 to run Wamsutta, the textile company, which she did for five years. She returned to Bonwit in 1980 as president, one of the few women at that time to rise to such a level, and brought some of Bonwit’s prestige back after the brand slumped in the late 1970s. She left and formed Helen Galland Associates, a marketing firm. Bonwit Teller closed in 1990.
Jack Dreyfus
Founder, Dreyfus Fund Died March 27, 2009, at age 95
Dreyfus, "the Lion on Wall Street," shook up the financial world in 1957 when he reached out with direct marketing to attract investors in the Dreyfus Fund, making mutual fund investments accessible to small investors. He pioneered aggressive trading techniques that are now commonplace, including rapid changes in positions during volatile markets. The fund returned 604% from 1953 to 1964 under his leadership, nearly twice the Dow Jones Industrial Average's gain of 346%. He sold the fund in 1970 and turned his attention to publicizing the anti-epilepsy drug Dilantin, which he credited with curing his severe depression. One Dreyfus ad could serve as well for its founder's epitaph: "Here's a man who brought Wall Street closer to Main Street."
“Bringing funds to the masses was a radical idea that permanently altered the investment landscape,” says Phillips.
We're talking about U.S. Treasury securities, not housing. At the end of 2008, risk-averse investors poured into Treasuries, driving down yields to the lowest levels in decades. The 30-year Treasury bond fetched less than 3%, and short-term T-bills carried yields of zero.
Since then, the economy has shown signs of bottoming, the credit markets are functioning more normally, and the stock market has roared back from its March lows. Treasuries now are in a bear market, while bullish enthusiasm has taken hold in other parts of the credit market, including corporate bonds, municipals and mortgage securities, all of which had fallen from favor late last year. The 30-year Treasury, for instance, has risen to a yield of 4.10% from 2.82% at the end of 2008, cutting its price by 20%.
Barron's called a top in Treasuries and a bottom in the rest of the bond market in an early 2009 cover story ("Get Out Now!" Jan. 5). We weren't alone in recognizing some of the nutty year-end developments. Warren Buffett highlighted the sale in late 2008 by his Berkshire Hathaway of a Treasury bill for a negative yield. Buffett wrote in Berkshire's annual letter in February that when "the financial history of this decade is written...the Treasury-bond bubble of late 2008" may rank up there with the housing bubble of the early to middle part of the decade. - How does the market look now? Treasuries still look unappealing for several reasons. Yields are very low by historical standards, the government is issuing huge amounts of debt to fund record budget deficits, and the massive federal stimulus program ultimately may lead to much higher inflation.
"There are better values elsewhere among high-quality bonds," says Steve Rodosky, an executive vice president at Pimco, which runs the giant Pimco Total Return fund (PTTAX), the country's largest bond fund; it's besting its peers again this year, with a 4.8% return so far in 2009. Pimco's chief investment officer, Mohamed El-Erian, was blunt at year's end, saying, "Get out of Treasuries. They're very, very expensive."
While holders of Treasuries ultimately will get their money back, prices could fall sharply in the interim, and repayment could be in greatly depreciated dollars. Treasury yields may rise further in the coming year, meaning that prices will fall as the economy strengthens. The yield on the 30-year bond could top 5% and the 10-year note could rise to more than 4%, from a current 3.15%.
IF THE BOND-MARKET THEME of 2008 was a flight to quality, this year it has been flight from quality, as lower-grade, more speculative securities generally have generated the best returns. Returns on junk debt and lower-grade municipals have topped 20%, while the rise in government-bond yields has become a full-blown global phenomenon.
Even after rallying in recent months, the corporate-bond market looks attractive (please see story, "Corporate Bonds Are Back"). The average junk bond in the Merrill Lynch high-yield index has fallen to a still-lofty 15% yield, from 19.5% at year's end, while more highly rated corporates -- those with triple-B ratings -- yield around 8%, a comfortable four percentage points above long-term Treasury rates.
The municipal-bond market also has advanced in 2009, with the yield on top-grade long-term securities falling to about 4.5%, from 5.25%, while rates on lower-rated securities like tobacco-revenue bonds and hospital debt, which topped 10% at year's end, have dropped more than a percentage point.
High-grade, 30-year munis now look reasonable. At the end of last year, top-grade 30-year munis carried double the yields of 30-year Treasuries, an off-the-charts relationship. Now, the 4.5% yield on triple-A-rated long-term bonds is slightly higher than the yield on the 30-year Treasury.
That spread remains generous by historical standards. It is hard to get too enthusiastic about intermediate-term bonds with maturities of less than 10 years; they're yielding 3% or less. Lower-grade munis could have more room to run.
The muni market could benefit if President Barack Obama succeeds in lifting the top marginal income-tax rate to 39.6% from the current 35%, because that would boost the appeal of tax-exempt interest income. State and local finances, however, are a mess throughout the country -- particularly in California -- due to a weak economy and the unwillingness of politicians to tackle the ballooning cost of pensions and health care for government workers.
It's a tale of two markets in the mortgage-backed sector. There isn't much appeal in government-backed Ginnie Maes -- or in Freddie Mac and Fannie Mae securities, which carry an implicit federal backing. These securities yield just 4%. That means funds like the big Vanguard GNMA (VFIIX), now carrying a 4.3% yield, could have disappointing returns.
The riskier -- and more attractive -- part of the market is the so-called non-agency sector of home- and commercial-mortgage securities. These yields still can top 10%. Funds with exposure to the non-agency mortgage market include TCW Total Return (TGMNX), which has a current yield of 10%.
AMID THE DEBATE ABOUT THE direction of Treasury rates, one thing is clear: The recent rise in rates has merely brought the 10-year Treasury yield back where it stood in June 2003, when the prior, multidecade low in rates was reached.
"Bear Market in Treasuries Begins" was the title of a report last week from Morgan Stanley economists Richard Berner and David Greenlaw, who wrote about the "main culprit: a changing balance between credit supply and demand that is boosting real rates."
The Morgan Stanley duo thinks that Treasury rates aren't apt to shoot up anytime soon, because so-called core inflation, which excludes food and energy costs, is likely to remain around 1% for the time being and because "the economy is turning slowly." Fresh concerns about the economy prompted a 4% selloff in the stock market last week, and a rally in the Treasury market, which tends to move inversely to stocks.
Looking out a few years, Berner believes that the 10-year Treasury could hit 5.5% as investors seek a real, or inflation-adjusted, return of 3.5%, relative to what may be 2% inflation. It's no secret that the U.S. budget deficit is exploding this year from the combination of weak tax receipts and sharply increased spending. The Obama administration recently increased its deficit projection for the current fiscal year ending in September to $1.84 trillion, from the $1.75 trillion estimate made in February, and lifted its 2010 deficit estimate to $1.26 trillion, from $1.17 trillion. That compares with a $458 billion gap last year.
THE RESULT IS A LARGE INCREASE in the issuance of government bonds. Total sales of government securities with maturities of two years or longer are expected to hit about $2.1 trillion in the current calendar year, up from $880 billion in 2008, according to analysts at Barclays Capital. Net sales -- issuance minus maturing debt -- could hit $1.55 trillion, up from $332 billion last year. The growth in bond supply is particularly pronounced in seven-year, 10-year and 30-year maturities. One sign of trouble was the poor reception in a recent sale by the government of 30-year bonds.
The government-bond glut is hardly confined to America. Combined issuance in the U.S., Europe, Japan, Canada and Australia could come to $4.2 trillion this year, according to British financial historian and author Niall Ferguson. Net government-bond sales relative to gross domestic product will be particularly high in the U.K., at 17.9% -- well above the lofty 12.7% here.
The U.S. Federal Reserve is trying to sop up part of the bond deluge with a program to buy $300 billion of government debt through the end of September. It has already purchased more than $100 billion. The Fed also has a program to buy $1.25 trillion of agency mortgage securities as part of an effort to depress mortgage rates, now averaging around 5%.
The Fed may succeed in artificially depressing Treasury rates for the time being, but the Fed program will end eventually, removing a key piece of support for the market. The Fed could get stuck with sizable losses if rates rise, since its holdings of bonds and mortgage securities, now $1 trillion, could double by the end of 2009. If rates rise one percentage point, the Fed could suffer $140 billion in losses, calculates Sean Kelleher, a partner at JGC Management, a New Jersey investment firm.
OVERSEAS DEMAND, PARTICULARLY from central banks, has supported the Treasury market in recent years, but that buying appears to be waning. China, for instance, sees sharply slowing growth in its foreign-currency reserves this year due to weakening exports, a development that reduces the country's demand for Treasuries. Chinese officials also are worried about the country's $1 trillion-plus holdings in Treasuries and other U.S. debt because of the risk of a weakening dollar and higher inflation.
One way to bet against the Treasury market is to buy the ProShares UltraShort Lehman 20+ Year Treasury ETF (TBT), which is designed to rise at twice the daily decline in the prices of in long-term Treasuries. This exchange-traded fund changes hands at around $50 a share, up from $40 at year's end.
Treasury inflation-protected securities, or TIPS, appear to be a better bet than regular Treasuries, but they're not the bargain they were at the end of last year. The 10-year TIPS yield 1.62%, and the 20-year TIPS, just 2.25%.
In addition to this real yield, investors' principal is indexed to U.S. inflation. If inflation runs at 2.5%, the 10-year TIPS will return 4.12% (the real yield plus inflation), and the 20-year TIPS will return 4.75%. The yield gap between the TIPS and ordinary Treasuries is called the break-even rate. That's the inflation rate that would result in similar yields on the two securities. The 10-year break-even rate is now about 1.5% (the 3.12% yield on regular Treasuries minus 1.62%), which is below the historical average of two points, but above the break-even yield of 0.20% at 2008's end, when TIPS were very attractive relative to ordinary Treasuries as investors figured there might be deflation.
TIPS ARE STILL GOOD, BECAUSE they protect bond investors from what they fear most: inflation. Investors can play TIPS through the Vanguard Inflation-Protected Securities fund (VIPSX), or an exchange-traded fund, the iShares Barclays US Treasury Inflation Protected Securities fund (TIP).
The muni market has rallied sharply since March, helped by a new government program that allows state and local governments to sell taxable bonds for infrastructure and other needs while getting a federal subsidy for part of the interest expense.
Since March, some $9 billion of the Build America Bonds, or BABs, have been sold, including big deals from California and the New Jersey Turnpike Authority. BABs appeal to bond issuers because the all-in interest costs on the BABs now are lower than the cost of tax-exempt bonds after the federal interest subsidy of 35%. Estimates are that $50 billion to $100 billion of BABs may be sold this year, accounting for perhaps 25% of total muni issuance. The Obama-initiated program is due to last through 2010.
CALIFORNIA'S BABS THAT ARE DUE in 2034 and 2039 now yield about 7.5%, versus a 5.5% yield on the state's long-term tax-exempt bonds sold in March. The all-in cost to California for the BABs is roughly 4.9% (7.5% times 0.65), below the cost of tax-exempt financing. The Golden State's general-obligation bonds carry some of the highest yields among state GO debt, due to the state's huge deficit, recently estimated at $15 billion, and an economic mess evident in a jobless rate of 11%.
Other high-yielding munis include so-called tobacco revenue bonds, which were sold by states and backed by payments made by cigarette companies under the Master Settlement Agreement in 1998. A long-term issue from Buckeye Tobacco, issued by Ohio, yields nearly 10%, and carries barely investment-grade bond ratings of Baa3 from Moody's.
The Build America Bonds program has bolstered munis by diverting new supply into the taxable market. Traditional buyers of corporate debt have bought BABs because yields are high relative to corporate issues with similar credit ratings.
There also has been a record inflow to muni mutual funds so far this year, with $4 billion to $5 billion a month entering open-ended funds.
The situation in the bond market isn't as extreme as it was at the end of 2008. Still, investors ought to avoid Treasuries, buy corporates and high-yielding mortgage securities -- and consider municipals.
Data Coming: Jobless claims, Leading Index due out.
The Lowdown
Renewed concern over the economy has left traders in sell mode.
Stocks looked to open lower Thursday, as Wall Street remained in a funk on bearish comments from the Federal Reserve. Shortly before 6:45 a.m., Dow, Nasdaq and S&P 500 futures traded below fair value.
Market sentiment remained bleak after the release of the minutes of the April meeting of the Federal Open Market Committee, which suggested unemployment could get worse (close to 10%) before it gets better.
In finance, Bank of America (BAC) is boosting its capital levels -- a hint that the firm could be seeking to repay $45 billion in government loans taken out during the Troubled Asset Relief Program, The Financial Times reported. BofA, which is on pace to raise $35 billion by September, is among several banks interested in paying back the TARP funds. TARP facilitated emergency lending to and from banks, but accepting money from the program almost meant acquiescing to demands on the company's reserves.
Former Federal Reserve Chairman Alan Greenspan said the larger financial industry is operating well under its optimal reserve level, Bloomberg reported.
"There is still a very large unfunded capital requirement in the commercial banking system in the United States and that’s got to be funded," Greenspan said, according to Bloomberg.
Meanwhile, the government prepared additional bailout funds for GMAC. The auto finance firm is set to receive an additional $7.5 billion in bailout money, The Detroit News reported.
World markets were mostly lower. In Asia, Japan's Nikkei fell 0.9%, while Hong Kong's Hang Seng slipped 1.6%. In Europe, the U.K.'s FTSE stood down 0.3% in midday trading.
On the Nymex, energy prices took a step back. By 6:23 a.m., crude traded down $1.21 at $60.83 a barrel.
Corporate News
Sony (SNE) plans to cut the number of suppliers it deals with in half in an effort to costs, the Associated Press reported. The move is intended to save Sony $5.3 billion, or 20% of its 2008 outlays.
Novartis (NVS) said a new pulmonary drug works substantially better at restoring lung function in patients with Smoker's Lung than two existing medicines, Reuters reported. The compound, known as QAB149, outperformed formoterol, which is marketed under several brands owned by Novartis, Schering (SGP) and AstraZeneca (AZN), and tiotropium, which is marketed by Pfizer (PFE) and Boehringer Ingelheim.
The Economy
The weekly jobless claims report for last week is scheduled to be released at 8:30 a.m. by the Labor Department. In the prior week, claims came in at 637,000. Economists predict the number people seeking unemployment benefits for the first time will have slipped to 625,000.
The April reading of the Leading Index is scheduled to be released at 10 a.m. by the Conference Board. In March, the index fell 0.3%. For April, economists expect a 0.8% increase.
The May reading of the Philadephia Federal Reserve's diffusion index of current business activity is scheduled to be released at 10 a.m. In April, the index stood at a reading of -24.4. For May, economists predict a reading of -18.0.
Think carefully on this: Are you more or less happy today than a year ago? It might seem an absurd question. In America as in much of the world, stock and house prices have plunged over the past year and jobs have grown scarcer. Yet 35% of people surveyed in mid-April described themselves as “very happy.” That’s the same percent as a year earlier.
The pollster, Harris Interactive, draws a tempting but wrong conclusion from the results. “Money and Happiness Really May Not Be Tied Together” reads the title of a report issued Friday. Don’t suggest that to a jobless parent collecting the last of their unemployment checks as their health insurance lapses and their mortgage payments back up.
There’s an important relationship between wealth and cheer, but it’s tricky. In 1972 economist Richard Easterlin, then a professor at the University of Pennsylvania, reported an odd finding from happiness studies compiled from 19 countries since World War II. Within single countries, the rich are generally happier than the poor -- little surprise. But as a whole, rich countries aren’t much happier than poor ones, at least among countries with enough income to meet basic needs. Moreover, as a country’s overall wealth increases, its average level of happiness does not.
The Easterlin paradox has since defined the direction of happiness economics, a chipper-sounding but contentious branch of the dismal science. Researchers have a couple of explanations. One holds that people care more about relative wealth than absolute wealth. For suburbanites, whose success is put on naked display for the neighbors, household income of $150,000, triple the U.S. average, seems meager if the Joneses make $400,000. That would explain why poor countries are as happy as rich ones (so long as they aren’t subjected to too many images of them, perhaps).
Another theory holds that people adjust their ambitions with remarkable speed following improvements in economic circumstances, as in the case of the lottery winner who develops a taste for exotic cars. This “hedonic treadmill” helps explain why more gross domestic product per head doesn’t necessarily bring more smiles per head.
Some economists insist the Easterlin paradox is a flawed finding, and that changes in absolute wealth indeed drive happiness, but with diminishing returns. Politics threatens to creep into the research. If relative income influences happiness more than absolute income, the Dutch might be sensible for forfeiting half their pay to the state in exchange for universal healthcare, pensions, daycare, textbooks, vacation funds and more. If not, low taxes and few social programs are better.
Assuming relative wealth is at least a significant determinant of happiness, America’s “very happy” 35% might be poorer than a year ago, but no worse off than their neighbors. After all, few investment classes and vocations have been spared a downturn. If you’re not already a member of this fortunate bunch, ponder people who’ve got it worse, which, perversely, might make you feel better. Average income in America was $38,615 in 2007. SmartMoney’s marketers tell me readers of this column likely make well more. Average net worth for American households led by persons age 45 to 54 is about $94,000. If you’ve got more, great. If not, think about what you haven’t lost: That figure is down 45% since 2004.
Even if you don’t stack up well on U.S. measures, consider how things look for some peer nations about now. U.S. government debt will soon pass 80% of GDP, but Italy and Greece already owe more than GDP and Japan owes almost double. America is borrowing like mad at the moment, so its net government bond sales will total 12.7% of GDP this year. Britain’s will total 17.9%, reports Barron’s. America’s economy is shrinking, but starting with last year’s downturn and running through 2013, it’s expected to grow by 0.7% a year after inflation, according to the Economist Intelligence Unit. The economies of Japan, Germany, Italy and the U.K. are expected to shrink over the same period.
Things are grim all around. So try your best to have a happy Memorial Day weekend, relatively speaking.
A migrant-driven boost for the New Zealand property market is being tipped by economists studying new visitor arrival numbers released this morning.
Statistics New Zealand released immigration and visitor data showing permanent... Source: New Zealand Herald - Business | 21 May 2009 | 3:13 am
NEW YORK (Reuters) - Regions Financial Corp priced a stock offering and Fifth Third Bancorp announced plans to follow suit on Wednesday, the eighth and ninth of the 10 large U.S. banks ordered by federal regulators to bolster their finances to announce capital-raising plans.
Power generators are being told to put electricity price rises on hold until a review of their charging system and structure is completed in September.
The generators have been accused by the Commerce Commission of gouging more... Source: New Zealand Herald - Business | 21 May 2009 | 3:00 am
Moving comedian Jay Leno to prime time is the single biggest priority for NBC Universal, its chief executive said as he signalled that this would be the first of several changes to the network's relationship with its affiliates Source: Financial Times - US homepage | 21 May 2009 | 2:34 am
Telecom claims independent testing of its new mobile network gives it the speed edge over rival Vodafone.
Speaking at the press launch of its device and pricing plan lineup, Telecom chief executive Paul Reynolds said British consultancy... Source: New Zealand Herald - Business | 21 May 2009 | 2:30 am
IRIS KiwiSaver, which was set up by four unions, is to be wound up and Gareth Morgan KiwiSaver (GMK) will market a product to union members instead.
The deal is being touted as the first step of an expected consolidation in the... Source: New Zealand Herald - Business | 21 May 2009 | 2:30 am
NEW YORK (Reuters) - Regulators have questioned former Lehman Brothers Holdings executives over their marketing of auction-rate securities, the Wall Street Journal reported, citing people with knowledge of the matter.
Japan's economy contracted at the fastest pace since 1955 as exports plunged, companies slashed production and families spent less.
Japan's real gross domestic product, or the total value of the nation's goods and services, shrank... Source: New Zealand Herald - Business | 21 May 2009 | 2:00 am
As the Blue Chip property investment group ran short of cash it got staff and relatives to sign up for apartments, including a "Ronald Marks" - an alias for founder Mark Bryers.
The High Court has heard from a former employee,... Source: New Zealand Herald - Business | 21 May 2009 | 2:00 am
Reuters - Regulators have questioned former Lehman Brothers Holdings executives over their marketing of auction-rate securities, the Wall Street Journal reported, citing people with knowledge of the matter.
AP - Clothing and personal care products retailer Limited Brands Inc. posted a surprise first-quarter profit on Wednesday, as its cost-cutting efforts offset lower sales.
Barack Obama will seek to wrestle back control of his counter-terrorism policy after suffering a serious setback in his efforts to close the Guantánamo Bay prison Source: Financial Times - US homepage | 20 May 2009 | 11:40 pm
Reuters - Bank of America Corp wants to pay back $45 billion in bail-out funds by the end of the year, accelerated by a program to raise capital, the Financial Times reported on its website late on Wednesday.
The US dollar fell to its lowest level of the year as Tim Geithner hailed signs of healing in financial markets and minutes showed the Federal Reserve saw indications of economic stabilisation at its April policy meeting Source: Financial Times - US homepage | 20 May 2009 | 11:24 pm
-- Imagine this whole darned economic crisis, or at least a major strand of it, started at a pink hotel in Boca Raton. A bunch of bankers from JPMorgan met there in 1994 to consider the future, and decided credit derivatives were it. Gillian Tett, the Financial Times writer and author of Fool's Gold, says the rest is history, miserable history.
-- How much would you pay to keep your job? Margaret Schultz works as a management consultant with General Motors dealerships. In December, she learned that her position had been given to her former manager, whose own gig had been cut. There was still a job for her -- three hours away from her husband and two young kids. Now she's staying in the new town three days a week, where she rents an apartment for $350 a month.
That is the cost of the meal deal formerly known as Arby's 5 for $5 where you pick five items from a small menu for a fixed price. The Northgate Arby's restaurant in Seattle is now offering the same menu at 5 for $7.25.
This is one of many little things Ive seen creeping up in price and so I feel you guys continue to be right that deflation is the least of our fears.
Target, the US discount retailer, underlined how far it has slipped behind its larger rival Wal-Mart in the recessionary economy, which has fuelled its fierce proxy battle over board seats with Bill Ackman, the activist investor Source: Financial Times - US homepage | 20 May 2009 | 10:58 pm
Can you think of anyone less qualified to make assertions on pay, and economic recovery than Kenneth Lewis? Yes, Big Bird is a good answer, it's true. In some ways we are quite surprised to see that Ken is making waves. The man is quite lucky still to be working so it is hard to imagine why he would rock the boat. And yet:
Bank of America Corp Chief Executive Kenneth Lewis, whose bank sold $13.47 billion of common stock this month, on Wednesday said the worst of the economic downturn has likely passed and that conditions will not worsen as much as feared.
"We are on the cusp of what will turn out to be a slow but sustainable economic recovery," Lewis said at a conference in London. "There will continue to be a lot of pain ... but I think the worst is most likely behind us." He projected modest U.S. and European economic growth in the second half of 2009.
Lewis, whose bank bought Merrill Lynch & Co on January 1, also said corporate and investment banking pay practices must be "reformed," with pay being tied to performance and banks being able to "claw back" pay from people who took on too much risk.
WASHINGTON (Reuters) - The Federal Reserve said on Wednesday it saw modest improvements in the U.S. economy last month, but it still saw big risks and left open the possibility of increasing its purchases of mortgage-related and government debt to keep credit flowing and spur recovery.
Shares in Auckland Airport fell 5 per cent in early trading after the company warned a market consensus of its retail revenue for 2010 was too high.
Rather than the consensus of about $104 million, a more likely retail revenue... Source: New Zealand Herald - Business | 20 May 2009 | 10:35 pm
Google has considered buying a newspaper or using its charitable arm to support news businesses seeking non-profit status, but is now unlikely to pursue either option, Eric Schmidt, chairman and chief executive, told the Financial Times Source: Financial Times - US homepage | 20 May 2009 | 10:30 pm
Bank of America wants to pay back $45bn in bail-out funds by the end of the year, in a faster-than-expected move made possible by an accelerated programme to raise capital Source: Financial Times - US homepage | 20 May 2009 | 10:30 pm
AP - How far the Dow Jones industrial average has fallen or advanced each trading day since Lehman Brothers Holdings Inc. filed for Chapter 11 bankruptcy protection on Sept. 15. Since Lehman's fall, which touched off a paralysis of the credit markets and deepened the recession, the stock market has gone through an extended period of volatility that subsided during December but that has returned in 2009. The numbers are the closing levels for the Dow: Source: Yahoo! News: Stock Markets News | 20 May 2009 | 10:29 pm
Reuters - The Federal Reserve said on Wednesday it saw modest improvements in the U.S. economy last month, but it still saw big risks and left open the possibility of increasing its purchases of mortgage-related and government debt to keep credit flowing and spur recovery.
AP - President Barack Obama said homeowners facing foreclosure would have a second chance under a measure he signed into law on Wednesday, but he added consumers still must live within their means.
AP - Wall Street gave up a big early advance to finish moderately lower Wednesday, led by a sharp decline in banks stocks, after the Federal Reserve reduced its economic outlook for 2009. Source: Yahoo! News: Stock Markets News | 20 May 2009 | 10:11 pm
NEW YORK (Reuters) - A judge declined on Wednesday to postpone Chrysler's bankruptcy to allow a district court to hear arguments about whether the U.S. government exceeded its authority in the reorganization of the automaker.
AP - The head of the Securities and Exchange Commission is objecting to a plan being weighed by the Obama administration to create a new financial watchdog for consumers that would assume oversight of mutual funds. Source: Yahoo! News: Stock Markets News | 20 May 2009 | 9:45 pm
Today I learned to say acetonitrile, courtesy of chemist Derek Lowe. On his blog, In the Pipeline, Lowe has been covering a global shortage of acetonitrile, a solvent that chemists and pharmaceutical researchers depend on for cleaning their machines.
Lowe explains that acetonitrile is a byproduct of acrylonitrile, which is used to make industrial resins and plastics -- everything from Legos and cell phones to car dashboards. With the global slump, and especially the slump in the auto industry, companies stopped making acrylonitrile. Which meant they also stopped making its byproducts. And that's how the chemists found themselves without their favorite solvent.
It didn't help that China halted production as part of clearing the air before the 2008 Olympics. Lowe says a few suppliers have tried to pick up the slack, and you can see them hawking their wares on his post from January. But for the situation to get better fast, he says, car makers have to get back in gear.
1 drink short of Bank of Amerillwide necessitating a stomach pump, but no matter. Better late than never, right-o, BAC shareholders? (And for all you naysayers out there-- this has nothing to do with him getting flack over Countrywide and Merrill which, we'll say it again, were brilliant acquisitions whose genius is yet to be revealed but will one day be understood, the same day you'll eat your words!)
Bank of America Corp. Chief Executive Officer Kenneth Lewis expects more mergers among U.S. banks as the economy stabilizes, and said his bank won't be among the participants.
"Merger activity will pick up for others," Lewis said in a speech in London today. "At Bank of America, we've got enough on our hands right now."
Lewis, who spent more than $120 billion on acquisitions since becoming CEO in 2001, is still trying to quell investor doubts about his most recent purchases, which led to his ouster as chairman last month. The Charlotte, North Carolina-based bank bought home lender Countrywide Financial Corp. last July and brokerage Merrill Lynch & Co. in January as the financial industry was teetering near collapse.
The recession and credit crunch left the U.S. banking system with too much capacity, making absorption of weaker banks by stronger ones inevitable, Lewis said. Consolidation stalled over the past year as "severe market stress and disruptions made pricing difficult," he said.
Bloomberg - May 20 (Bloomberg) -- The Obama administration may call for
stripping the Securities and Exchange Commission of some of its
powers under a regulatory reorganization that could be unveiled
as soon as next week, people familiar with the matter said. Source: Yahoo! News: Stock Markets News | 20 May 2009 | 8:36 pm
Nothing is fucked people. Nothing. Nothing at all. Green shoots are made thick oak. Cats have filed for voluntary separations from dogs and are no longer living together. Britney will retire from creating... anything. Including children. The Flu is cured. So is cancer. Just relax, will you?
Lawmakers in Washington are increasingly optimistic that the prospect of economic Armageddon is behind them.
Despite rising unemployment and continued dismal news in the housing market, which instigated the financial crisis, there's been a definite shift in the Beltway's economic mood.
"We're headed toward the bottom," said Rep. Paul Hodes (D-N.H.), who expects continued uncertainty in the economy but sees a recovery on the horizon.
"It will be a very slow, gradual recovery," he said. "But it's like falling off a cliff. It's the place where the cliff hits the beach, that kind of end of collapse."
...where your battered and crushed body will be gently nestled in a bloody bed of sand, quietly caressing you before the crabs begin to pick at your lips and the seagulls your eyes. How very beautifully peacefully consoling. Hey, how about you raise my taxes now?
And lots of 'em, it seems! [via AdamsOptions]
Dennis Kneale: Macke let's start with you...Patty Daum is talking about how the credit markets tonight are really thawing tonight...and her sources tell her it's going to be helping the stock market. What do you think of that?
Jeff Macke: I have no idea Dennis...I'm going to talk to you like a child...if you understand what I'm saying, just say 'yeah.'
DK: Okay, yeah.
JM: Yeah...see...you're what happens when you're trying to talk to car people at like half an hour ago...I dismissed these people as idiots YEARS AGO. And not that I finally try and engage them, they have no idea what I'm talking about.
Apparently, the women who can't even remember to bring her ID to court is a dangerous and crafty agent of intrigue prone to flight at any moment.
Laura Pendergest-Holt, the Stanford Financial Group Co. executive indicted for obstructing a U.S. regulator's probe into an alleged $8 billion fraud, is a flight risk requiring electronic monitoring, U.S. prosecutors say.
Pendergest-Holt, chief investment officer for one of three R. Allen Stanford-led businesses sued by the U.S. Securities and Exchange Commission for misleading investors, pleaded innocent to the criminal charges on May 14. Freed on a $300,000 bond, she is wearing an electronic-monitoring ankle bracelet her lawyers say is unnecessary. Prosecutors disagree.
It's for charity, so we can't make too much fun, but we can make a little. The RFK Center for Justice and Human Rights is holding its annual fund raiser and lots of celebrities have generously offered themselves for up for bidding on the auction block, sort of, though it kind of just sounds like you're forking over money for the privilege of tagging along as they do whatever it is they'd do on any other day.* Like Ben Affleck, who invites you to come watch him get drunk at Fenway, or Jim Cramer, who's offering a once in a lifetime opportunity to behold as he throws a chair. That's right, for an estimated $5,000 (so far only $1,600 has been bid), you and three friends can attend a taping of Mad Money (tickets to which are typically free). JC not the CNBC personality who tickles your fancy? For at least six g's you can accompany Charlie Gasparino as he chases down a story at San Pietro (pumping Jimmy Cayne for hot gossip in the men's room likely to be included!) and for a minimum bid of ten-large, you could be telling your friends about the time you served as Dennis Kneale's fluffer while he surfed for Asian porn between Power Lunch commercial breaks. Other actual items up for grabs include: a 20-minute phone conversation with Suze Orman (ask her to elaborate on this) and a tour of CNBC.
Reuters - Shareholders would have greater power to nominate corporate directors, a process now tightly controlled by company management, under a proposal issued by the U.S. Securities and Exchange Commission on Wednesday. Source: Yahoo! News: Business | 20 May 2009 | 6:50 pm
Reuters - Shareholders would have greater power to nominate corporate directors, a process now tightly controlled by company management, under a proposal issued by the U.S. Securities and Exchange Commission on Wednesday. Source: Yahoo! News: Stock Markets News | 20 May 2009 | 6:50 pm
AP - Federal regulators on Wednesday proposed making it easier for shareholders to nominate directors for ballots of public companies, a change that could give shareholders more say over compensation packages for executives and risk controls. Source: Yahoo! News: Stock Markets News | 20 May 2009 | 6:15 pm
Our relationship with risk-taking is a schizophrenic one. Bold actions taken, even foolishly, yield bright accolades for winners, enduring damnation for losers. Qui audet adipiscitur, after all. Phrased another way: One may dare, but one must win.
On reflection, David Redmond probably shouldn't have gone back to the office after a fateful boozy lunch last year that lasted three and a half hours.
The commodities trader arrived back at his desk at Morgan Stanley in London at 4.41pm on 6 February and through the fug proceeded to gamble $10m (£5.1m) in a frantic series of trades. It very nearly went down as the most expensive lunch in history. In the sober light of the following day, he managed to trade his way out of the position without telling anyone and avoided making any losses. But it wasn't enough to save his neck.
The Financial Services Authority today banned Redmond from working in the City for at least two years for concealing his trading position from bosses and leaving the bank exposed to significant risk. Margaret Cole, the director of enforcement at the City watchdog, said his actions had "showed a lack of honesty and integrity".
Who among us doubts that, had Redmond come out +20% on the positions, his name would endure in the office forever, emblazoned on brass plaque under the hermetically sealed, bulletproof-plexi case holding the actual glass he drank from that faithful afternoon?
Bridget Walsh has been listening to lawmakers say that the new credit card bill moving through Congress might mean higher annual fees and interest rates for consumers, but that people can shop around for better deals -- the market will make sure they have choices.
She writes:
I keep hearing that part of your FICO score depends on how long you keep a credit card along with how well you pay your bills and how many inquiries into your credit you have. So if cards that I have had for a long time (with no balance) now impose annual fees, it seems that either I will have to suck up and pay the fees or risk lowering my FICO score by closing that account and shopping around for better deals. Even though I have 3 cards with no balance and no annual fee, I might be tempted to close one or more accounts to keep from paying fees and thereby lower my score even more by reducing my credit line.
FICO scores, which banks and other lenders use to consider how risky a borrower you are, weigh five major categories, Cunningham says.
1) Paying your bills on time -- 35 percent of your FICO score.
2) Ratio of credit available to credit used -- 30 percent.
3) Longevity of credit accounts -- 15 percent.
4) Applications for new credit -- 10 percent.
5) Using a range of credit, from fixed payments like a house note to open-ended payments like credit cards -- 10 percent.
Canceling a credit card would nick your points in the second and third categories. If you close an account, you obviously affect its longevity -- bad for that portion.
If you close an account worth $5,000, Cunningham says, that means you have less overall credit available, which would affect the ratio of credit available to credit used.
So yes, closing accounts and applying for new ones threaten your FICO score.
What's the optimum ratio of credit available to credit used? "I don't want to see anyone use more than 30 percent of their available credit," Cunningham says. "That makes you look as though you don't have any cash and you're desperate for credit."
And a note to people like me who have cards but almost never use them: Take those cards out and buy a little something, Cunningham says. Pay them off at the end of the month, but do use them. "New credit is hard to come by these days," she says. "You want to keep all of your existing lines of credit. All in the world you represent to a credit card company with your unused card is risk -- because you could go out tonight and spend it all."
The problem with one trick ponies is that they get old quickly. It appears that the present administration's one trick pony is short-term gains at the expense of long-term credibility. So, we should barely be surprised when, true to form, precisely the investors needed to get the PPIP program off the ground are savaged from the bully pulpit and bullied by a natty puppet.
Hedge fund manager George Schultze says he may avoid lending to any more unionized companies after being burned by President Barack Obama in Chrysler LLC's bankruptcy.
Obama put Chrysler under court protection on April 30 after lenders balked at a proposal giving them about 29 cents on the dollar for their $6.9 billion in debt. The investors said the president's plan favored a union retiree medical fund whose claims ranked behind them for repayment. It was offered a 55 percent equity stake in the automaker.
Pacific Investment Management Co., Barclays Capital and Fridson Investment Advisors have joined Schultze Asset Management LLC in saying lenders may be unwilling to back unionized companies with underfunded pension and medical obligations, such as airlines and auto-industry suppliers, because Chrysler's creditors failed to block Obama's move. The reluctance may put additional pressure on borrowers seeking capital in the worst financial crisis since the Great Depression.
"Lenders will have to figure out how to price this risk," Schultze, 39, said in a telephone interview from his office in Purchase, New York. "The obvious one is: Don't lend to a company with big legacy liabilities or demand a much higher rate of interest because you may be leapfrogged in a bankruptcy."
Since we have debunked Capitalism, we are sure that would never happen.
There are some good signs in the banking sector: credit markets are thawing further and some banks are racing to pay back their bailout funds. But where's consumer lending? Jeremy Hobson reports. Source: Marketplace | 20 May 2009 | 5:00 pm
Washington is gearing up for a fight over who should regulate our financial system and what steps to take to protect the public from future financial disasters. Steve Henn reports. Source: Marketplace | 20 May 2009 | 5:00 pm
Congress is debating how to pay for a health care overhaul and what form a new system will take. Lawmakers are trying to find a middle ground, but commentator Robert Reich says a lot may be lost in the process. Source: Marketplace | 20 May 2009 | 5:00 pm
A House committee is weighing legislation to slash greenhouse gases. The centerpiece of the strategy will be a 'Cap and Trade' system. Sustainability reporter Sarah Gardner breaks down how it'll work with Kai Ryssdal. Source: Marketplace | 20 May 2009 | 5:00 pm
Gregg Steinhafel, chairman and CEO of Target Corp., talks with Kai Ryssdal about the company's strategy for weathering the recession and expanding its place in the retail market. Source: Marketplace | 20 May 2009 | 4:54 pm
Each year millions of high school students take SAT preparation courses. But a new report says those programs do little to improve scores. Tamara Keith reports. Source: Marketplace | 20 May 2009 | 4:49 pm
California voters rejected a slew of propositions meant to close the Golden State's budget deficit. With so many state and municipal workers, California's like the General Motors of states. But is it too big to fail? Stacey Vanek-Smith reports. Source: Marketplace | 20 May 2009 | 4:49 pm
You know how there are those people that will turn blue or suffer for weeks before they will step foot in a doctor's office? Well, now there are more them. That's according to this survey from the American Academy of Family Physicians. More than half the docs reported that they are seeing fewer patients come in.
The real sad number that caught my eye in here -- 60% of doctors had "seen more health problems caused by their patients forgoing needed preventive care."
If you need some incentive to go to the doctor apparently you'll be spared a couple minutes of Muzak and bad magazines. The wait time is down.
Last night I took my family to party that held at the offices of an advertising agency. Color filled the walls, toys overflowed on desks and shelving, and the main space was open, with vibrant individual work areas arranged at angles around the room. One conference room was called the ‘Imaginarium’. It had comfortable seating and one whole wall made of material that could be written on like a white board. There were signs everywhere for a staff party day - hula skirt optional.
Our reaction went like this:
Me: Wow, what a fun place to work!
My Kids: Wow, I want to work here. You get to play all day!
My Husband: Wow, how do they get any work done?
I suspect that in between games of shuffleboard and basketball they get a little work done. I’m sure they don’t spend the entire day sitting on the ‘comfie’ furniture watching TV on the big screen. And I know the environment must make them effective or else their offices would look the way so many other companies’ lifeless cube farms do.
My husband works in manufacturing, which is a little lower on the creativity continuum. His team is all about the numbers. But they also need to come up with creative solutions to creating greater efficiency and cutting costs and making sure nobody loses a finger in the machinery. So maybe a little color would help them too.
Not all of us can do our jobs in such an exciting environment full time, but I think a little ‘Imaginarium’ could go a long way in a lot of industries.
What do you think? Are creative work spaces only for creatives?
In Bethlehem, Pennsylvania, a stalled hotel. Kim Shively
Kim Shively writes from Kutztown, Pennsylvania:
I am attaching three photos I took this morning, which seem to epitomize the history of the American economy over the last century. One picture features a photo of a half-finished hotel set against the backdrop of the old Bethlehem Steel Factory in Bethlehem, PA. Of course, Bethlehem Steel represents the manufacturing might of the United States for much of the 20th century. It was the second largest steel producer in the U.S. before its final closing in 1995, brought to its knees largely by cheaper steel imported from places like Russia and China. Still, much of the steel in the buildings in Manhattan, for example, was manufactured here, and of course, it was a major employer for the entire Lehigh Valley region.
But the casino's opening. Kim Shively
The hotel was under construction until September 2008, when the economic fiasco that struck the world brought the hotel construction to a halt. The developer is waiting for funds from the new Sands Casino that is opening this Friday here in Bethlehem in order to complete the hotel. The casino complex -- with shopping, restaurants and of course gambling -- is a much anticipated business that many have seen as the economic salvation of Bethlehem after the steel plant shut-down and the ensuing economic decline of the area. To me, though, this represents the great economic shift in recent American history -- from manufacturing useful material to extracting money from a service that produces nothing of value to anyone except profits to the corporate owners of the casinos and tax revenues for the city. Is this the 21st-century economic model for our country? I find it rather sad.
An economy built on coal. Kim Shively
I included a third photo, of a train running in front of the rusting blast furnaces of the old mill. The train is hauling car after car of coal, which is, of course, the other great dying economic foundation of the Pennsylvania economy. These images capture an economic shift that I find both breathtaking and heartbreaking.
A little over a decade ago, investing meant calling your broker on the telephone and ordering a trade. Online investing changed all that. Now, all you have to do is place an order, click a button, and wait for it to be executed.
Low commissions, linked accounts, and easy navigation have made it easy to invest online. The real trick is choosing the right online broker for your investment style. Hidden fees, complicated pricing structures, and a wild variety of offerings can make choosing an online broker a difficult process. In this article, we will try to make the selection process easier. That way, you can start investing online with confidence, and let the market—not your online broker—be the only system to take your money away.
What is an Online Broker?
An online broker provides a trading platform through which you buy and sell stocks, funds, bonds, and other investments. You can track your investments’ performances, your portfolio’s success, and market news. You can also do simple research on potential investments. Some platforms offer perks like analyst reports, forums, educational panels, and other types of research. Online brokers generally take smaller commissions than full-service brokers. Most online brokers don’t offer investment advice.
1. Understand that you’re probably not linked directly to the market through your home computer. A click of the mouse does not instantly execute trades. Similarly, your online broker may not offer real-time prices—check to see if they do. 2. Check your online broker’s site to see how they get the best price for investors. Most will tell you. 3. Does your online broker charge high fees for market, limit, and stop loss orders? Some do. Check their website. 4. What are the online broker’s privacy and security policies? Some use your name for mailing lists or promotional purposes, even for third-party companies. Make sure you are comfortable with this before signing up. 5. Is your online broker legitimate? Your local securities division will be able to verify the broker’s registration status and disciplinary history. You can find your nearest regulator here.
How to Choose an Online Broker
Many online brokerages are designed with a certain niche in mind. For example, Vanguard targets mutual fund investors. TD Ameritrade markets towards older investors. ING ShareBuilder is set up for casual investors. OptionsXpress puts forth special consideration for options and futures traders. Spare yourself future headaches by matching your own needs with your broker’s specialties before investing your money.
New Investors
If you’re new to investing, consider a full-service discounter, like Charles Schwab or Fidelity. The personal advice offered by full-service brokers will help you gain confidence in the market. Such brokers help you pick a stock, plan your taxes, plan a long-term portfolio, and allocate your assets. The downside: You pay for the better service with higher commissions.
Passive Investors
Passive or small-time investors—those with little cash to put into the market—might consider deep discounters with no account minimums, like ING ShareBuilder. If ShareBuilder’s limitations on active trading prove too stifling, deep discounters like Scottrade only require $500 minimums while offering low trade commissions. If you’re into funds, Vanguard is one of the top index fund suppliers on the market, and definitely worth considering as a first choice for passive investing.
Long-Term Investors
If you’re conservative with your money, or just want to feel like it’s in safe hands, fund specialists like Vanguard, Fidelity and T. Rowe Price might fit your needs. Their fee structures are set up to encourage buy-and-hold behavior while discouraging active trading. Moreover, their interfaces are set up to help you follow your investments’ long-term behavior and plan for retirement.
Active Investors
If you’re an independent investor focused on short-term trades, you don’t want to pay high commissions. Discount brokers like TradeKing and Scottrade offer low commissions and quick order execution. ING ShareBuilder, on the other hand, charges an extra fee for executing trades that don’t fit their preset schedule, making it a poor choice for active investors.
Day Traders
Day traders need streaming live quotes, lightning-speed execution, low commissions, and advanced trading tools. Because their needs are so specialized, they usually use specialized brokers (such as Interactive Brokers), which aren’t covered in this article. Note that the SEC classifies most day traders as “pattern day traders,” and requires them to keep a minimum account balance of $25,000. Find out more about day trading brokers here.
What do you want to invest in?
Online broker commissions and fees can vary wildly for the following common investments:
If you know where you want to put your money, research the fees for the investments you want. Make sure commissions and fees are acceptable before investing your money. Note that advertised low commissions might not apply to options, limit orders, or phone/fax trades.
Other Considerations
No matter what kind of investor you are, take a moment to consider an emergency situation. If the site loads slowly during peak trading times, does that affect you? Do you need to execute trades by phone or fax? Will you ever need to contact a live person?
What to Look For When You Choose an Online Broker
Dividend reinvestment plans (DRIPS). These allow you to automatically reinvest dividends into stock, avoiding brokerage fees while building up your shares. Read more about DRIPS here.
Low commissions. Broker commissions vary wildly. Scottrade charges $7 for stock trades, while Vanguard, traditionally a fund company, charges $25/trade. Low/high commissions alone don’t tell the whole story—companies with low commissions may charge hidden fees, while those with high commissions offer other perks that make up for the high trade price—but they should be one of the first things you consider in selecting an online broker.
Fees. Fees, especially when they’re hidden, work against you. Yet all brokerages charge them—they have to make their money somehow. Vanguard, for example, charges a $30 annual maintenance fee. E*Trade charges $40/quarter ($160/year!) if you don’t meet certain conditions. ING ShareBuilder charges a $25 inactivity fee. Most brokerages charge fees to transfer money out, close IRAs, and for special requests, like paper statements, stock certificates, etc. Others charge higher fees for limit orders. Fees will eat into your precious investment fund. Understand how they work before selecting an online broker.
Account minimums. Some brokerages offer rock-bottom commissions—if you keep a $10,000, $25,000, or even $100,000 minimum account balance. Yet they advertise these commissions in a way that makes you think they’re for everyone, even small-time investors. Look at the asterisks and fine print before falling for clever marketing speak. And look out for fees if your account falls below the minimum balance.
If you do have a pile of cash to send your online broker, see what kinds of perks you can get before signing up. Oftentimes, you can get better interest rates, banking packages, and lower fees as well as low commissions. Most full-service brokers offer discounted wrap accounts when you hold a high account minimum. With a wrap account, you pay a quarterly flat fee that covers commission and other expenses.
Reputation. What is the broker’s reputation? Scour the Web to find out. Start with ratings sites like JD Power, Epinions.com, or forums like HotStockMarket. Magazines, including Kiplinger’s and Barron’s, put out annual “best brokerages” articles. Check for fraud at consumer advocacy sites like Ripoffreport or lawyer sites like Stockbroker-fraud. Also ask your friends, family, and colleagues for their opinions on brokers.
Level of service. Online brokers charge different rates for phone orders and broker-assisted orders. Moreover, brokers invest varying amounts of energy into customer service. Schwab and Fidelity, for example, offer hand-holding as part of their business model. Zecco and E*Trade, on the other hand, are notoriously difficult to get a hold of. TradeKing, a deep discounter, also offers great customer service and exceptionally cheap broker-assisted orders.
At minimum, look for reasonable level of customer service, including instant messaging, fast phone responses, and accurate responses (see the Kiplinger’s review linked at the bottom of this article for a more thorough evaluation of each broker).
Promotions: Online brokers are in a competitive industry. They try to snag your business by offering promotions. Many major brokers are running promotions at time of writing. For example, TD Ameritrade is offering 30 days of free trading. E*Trade is touting 99-cent futures. Zecco gives you ten free stock trades per month, while Scottrade and TradeKing will cover some of your transfer fees.
Reviews of Popular Online Brokers
To help you get started, we reviewed 10 popular online brokers. Most allow multiple types of accounts, including individual accounts, IRAs, business accounts, and trust accounts. They also generally allow for stock, ETF, option, margin, bond, and mutual fund trading. We didn’t review tools in detail—all of the online brokerages offer at least a basic research and tool set—but noted when tools were either exceptional or lacking. We noted exceptions below. Promotions are from time of writing.
E*TRADE
Perks: International stock exchange in six countries (Canada, Germany, France, Japan, Hong Kong, and the UK). You can trade on a wide range of futures, as well. Wide range of educational articles, panels, and other resources. Large selection of no-load, no fee mutual funds (more than 7,000). Excellent research tools. Good selection of bonds. Drawbacks: $40/quarter account maintenance fee if you don’t meet certain conditions. Marginal customer service. Promotions: 99-cent futures trades; $1 bond trades.
Commissions/Fees Stock/options trades: $12.99/trade. Tiered pricing. Broker-assisted orders: Vary by product. Margins: 3.99%-6.99% Hidden fees? Account service fees of $40/quarter if you don’t meet their requirements to waive the fee:
Minimum deposit Brokerage accounts: See $40 fee information above. Independent checking account or money market account: $1,000, or they charge you $10/month Max-rate checking account: $5,000, or they charge you $15/month Banking options: Checking accounts, money market accounts, Platinum Visa card.
Customer Service:Marginal. No instant messaging available.
Perks: Intuitive website. Canadian trading platform. Chinese language version of the site. Good research tools. Drawbacks: Active/high volume traders may find tools and trading options limited. Promotions: They cover up to $100 in transfer fees if you switch to their service.
Perks: Simple, no-frills setup. Seems to target older investors. No minimum deposit required to open an account. Free dividend reinvestments. No tiered fees. Excellent research tools. Drawbacks: Expensive margin rates. Mixed reviews on website speed and customer service response. Promotions: 1 month of free trades + $100 cash.
Commissions/Fees Stock/options trades: Stock $9.99; options $9.99 + $0.75 per contract. No tiered fees. Broker-assisted orders: $44.99 Margins: -1.50%-1.25% Hidden fees? $2 paper statement fee has caught some users by surprise.
Customer Service: Mixed reviews.
Find more details here.
Zecco
Perks: “Zecco” comes from “zero cost commission,” and that’s what customers can get if they keep a minimum of $25,000 or 25 trades/month in their accounts. Free dividend reinvestment. Social networking component. Drawbacks: Site and certain transaction times can be slow. No CDs on offer. Hidden fees. Cash/money market interest relatively low. Average research tools. Promotions:10 free stock trades/month.
Commissions/Fees Stock/options trades: $4.50 stocks; $4.50 + $0.50 for options. 10 free stock trades/month with $25,000 minimum balance or 25 trades/month. Forex trading available. Social networking component. Broker-assisted orders: $19.99 Margins: 4.7%-7.4% Hidden fees? No load mutual funds are $10 (many other providers offer them for free). IRA accounts have an annual fee of $30. Same fee applies to canceled IRAs. More fees.
Minimum deposit Brokerage accounts: None, unless you want those 10 free trades/month. $500 minimum to receive interest (currently 0.01%-0.87%, depending on the product). Banking options: 4% money market account.
Perks: Unbeatable for no-load mutual funds and low-cost index funds. Excellent customer service. Very stable company. Dividend reinvestment. Drawbacks: Not good for active or aggressive traders. Hidden fees if you don’t have an elite account or trade a mutual fund too early. Prior approval needed for options and margins. Limited options for investors with minimal funds. Research tools aren’t the best. Promotions: None.
Commissions/Fees Stock/options trades: $25 or $0.025 per share, whichever is greater. Tiered pricing.
Broker-assisted orders: $45 + $0.05 per share. Margins: 0.25%-1.25% Interest/return on cash: Rates vary by product. Hidden fees? $30 annual maintenance fee (free if you have one of three elite accounts). A 1% redemption fee applies to no transaction fee shares held less than 180 days, with a minimum fee of $50 and a maximum fee of $250.
Minimum deposit
$3,000 for nonretirement no-fee mutual funds; $1,000 for IRAs and other account types. Banking options: Checking account and Visa debit card for people with an Advantage account (you need to be a member of certain programs to get this account).
Customer Service: Excellent.
Find more details here.
ING ShareBuilder
Perks: No minimum investment or money market account deposit. Easy interface. Free dividend reinvestment. Good for casual investors. No monthly fees for basic account. Links up with ING’s extensive range of banking services. Dividend reinvestment. Drawbacks: Restrictive trading schedule. Lots of hidden fees. Limited tools. Mutual funds are limited and rather expensive. Real-time trading costs more. Service reported to be slow at times. Forget trying to research anything on this site. Promotions: Free one-month trial; buy stocks for $4 with automatic investing
Commissions/Fees Stock/options trades: $4 per investment; options: $9.95 + $1.50 per contract. Tiered pricing with monthly plans. Trades must be executed on a predetermined schedule, otherwise, increased charges apply. Broker-assisted orders: Not available. Margins: 4.5%-7.5% Hidden fees? $19.95 for the redemption or exchange of shares of ING Funds that are held less than 90 days. $25 charge if you don’t log into your account for three years. Purchasing stock in real-time or outside of the given schedule costs $9.95 (instead of $4). Surcharge of 15 cents for each additional share over 1,000 shares.
Minimum deposit: None. Banking options: Credit card, checking/savings account, and other services available through ING bank.
Customer Service:Marginal.
Perks: Big, established company with physical locations. Great portal-like homepage, with breaking news, advice, blogs, etc. Free one-on-one consultations. Lots of hands-on help. Offers life insurance. Excellent research tools. Very good customer service. Lots of personal assistance available. Offers HSAs. Good access to foreign markets. More than 40,000 bonds available. One-second trade execution guarantee. Drawbacks: High fees. Expensive if you don’t have at least $25,000 in household assets and execute 36+ trades/year. Hidden fees. Not ideal for active/day traders. Promotions: None.
Commissions/Fees Stock/options trades: $19.95 stocks; $19.95 + $0.75 options. Tiered pricing. Broker-assisted orders: $55 + 14 cents/share above 100 shares Margins: 3.75% – 8.575% Hidden fees? $12 annual fee for noncore Fidelity funds under $2,000. $50 to close certain IRAs and HSAs. $25 annual fee for SIMPLE IRAs. $48 annual fee for Fidelity HSAs.
Perks: Lots of advice on the website. Big company with physical locations. Full-service discounter, like Fidelity. Good access to foreign markets. Good selection of bonds. Drawbacks: High fees. It can take a long time to put money into an account. Promotions: None.
Commissions/Fees Stock/options trades: $12.95 for first 1,000 shares stock + 1.5 cents/share over 1,000; $8.95 + $0.75/contract options Broker-assisted orders: $37.95 Margins: 6%-8.5% Hidden fees? $5/month for failing to maintain minimums for certain accounts. Confusing set of special service fees.
Minimum deposit Brokerage accounts:$1,000 Banking options: Checking/1.75% APY savings accounts and credit cards through Charles Schwab Bank.
Customer Service: Very good; however, no instant messaging option available.
Perks: Free broker-assisted trades. Good choice for futures and options traders. We could only find one hidden fee. No minimums for brokerage accounts. Drawbacks: No online bill pay or debit cards available. Complicated pricing structure (though this does compensate for lack of hidden fees). Different levels of trading need to be authorized by the company. No CDs. Promotions: None.
Commissions/Fees Stock/options trades: $9.95 for first 1,000 shares (+ 1 cent/share thereafter) stocks (9+ trades/quarter required, otherwise trades costs $14.95); options range from $12.95-$30.00. Tiered pricing. Broker-assisted orders: Free Margins: 4%-6.25% Hidden fees? $50 IRA termination fee.
Minimum deposit Brokerage accounts: None. Margin accounts: $2,000 Banking options: Electronic transfer, but no checking/savings or debit cards.
Perks: Excellent customer service. Social networking component. Good range of calculators and tools. Cheap broker-assisted orders. Drawbacks: No interest on cash. Expensive banking products. Promotions: They’ll cover transfer fees up to $150.
Commissions/Fees Stock/options trades: Stocks $4.95/share + $0.015 /share over 1,000 shares; options $4.96 + $0.015/share over 1000 shares, $1.50 per contract or $14.95 minimum. Broker-assisted orders: Same price as stocks. Margins: 4.5%-6.5% Hidden fees? $50 IRA termination fee.
Minimum deposit: None. Banking options: Checking account and debit card. ATM withdrawals cost $1/each; $50-$75 annual fee on checking accounts.
Kraft is the latest of a slew of companies to give away free products, namely, Oscar Meyer wieners. To get your hands on the Oscar Meyers, enter your email address on this page, then enter your first name, last name, and mailing address to get a coupon in the mail. You’ll supposedly receive your coupon in 4-6 weeks.
I say “supposedly” because I have signed up for free promotions just like this one several times and never received anything. Months ago, I applied for a free bottle of Suave and free razors, and never received coupons for either. I’m unsettled to know that those companies now have all my mailing information, and apparently lied or flaked out on their giveaways.
The companies should issue a disclaimer: Enter at your own risk. You may or may not receive your free schwag.
Anyone else had trouble with this kind of thing?
Microsoft may be getting ready to unveil Kumo, its new search engine, at next week’s All Things D conference in California. PC World reports:
(Leaked Kumo screenshots)…show a three-column search results page featuring useful tools like related searches, a single-session search history for quick backtracking, and a set of search categories that relate directly to your query. Searches for a musical artist, for example, would bring up search categories like song lyrics, tickets, albums and the artist’s biography, while searching for a product would bring up categories for images, reviews and manuals.
Kumo’s search categories that relate directly to your query sound a lot like semantic search to me–the ability for a computer to understand exactly what you are looking for based on your natural language query. Last year, Microsoft bought the semantic search engine Powerset, and Redmond has likely incorporated Powerset’s capabilities into Kumo. In March, Google unveiled its own semantic capabilities for search, and last week, the much anticipated semantic “answer machine” Wolfram Alpha debuted. Wolfram Alpha is geared towards fact-based information and not indexing Web pages like Google or Live Search, but it shows that semantic capability is becoming the next major leap forward in search and for computers in general. No one has quite mastered semantic search yet, but they’re getting closer.
Ian Paul, who wrote the PC World article, ends it with this statement:
…will Kumo fly up the search market charts or end up going bing, bong, splat?
So far, every Microsoft search product has hit the ground…and stayed there. Unless Kumo does something really special to outclass both Google’s updated engine and Wolphram Alpha, the same thing will happen again.
Sir John Templeton
Betty James
Bill Seidman
Jack Nash
Rocky Aoki
Irvine Robbins
Kenneth Macke
George Keller
Helen Galland
Jack Dreyfus
