JYOT JOURNAL

2011-05-18T16:21:00.001-07:00

2011-05-09T08:27:00.001-07:00

Your Personal CFO link http://ping.fm/Tzrje

2011-05-09T08:25:00.001-07:00

Please take a second to like our Facebook fan page Your Personal CFO. We will be giving leads and tips on how to save on expenses, lower taxes, job openings, and special events updates within Southern California. Feel free to promote your own site and events.

2011-05-05T10:31:00.001-07:00

A firm foundation of knowledge is a constant source of strenght.

2011-04-25T09:41:00.001-07:00

If something you thought to be true wasn't true, when would you want to know about it? Call 909 614 4100

2011-04-22T14:11:00.001-07:00

Opportunities...only here http://ping.fm/dfXR1

2011-04-21T14:44:00.001-07:00

If given a choice, do you want most of your money to be..100% taxable, capital gains taxable or tax-free,learn make better financial decisions call (909) 548 7444

2011-04-21T11:36:00.001-07:00

Learn to earn http://ping.fm/uJKuK

2011-04-20T10:34:00.001-07:00

Call 909-54807444 NOW to get the lowest rate on your health insurance. If you did not get that plan from us then you are probably paying too much.

2011-04-19T14:16:00.001-07:00

How many opportunities have passed you by...simply because you weren't aware of them? Call Jyot (909) 548-7444

2011-04-19T14:13:00.001-07:00

If you haven't compared your monthly insurance payments from us, then you are probably paying too much!!! We have the most affordable plans
in the market today. Only Jyot can obscenely lower your rates. Call us at (909) 548-7444.

2011-04-14T13:13:00.001-07:00

If given a choice, do you want most of your money to be.....100% taxable, capital gains taxable or tax-free?

2011-04-11T10:14:00.001-07:00

There may be an opportunity infront of you...You just don't see it.

How can you say YES or NO to ideas that you don't even know exist?

2011-04-07T09:16:00.001-07:00

We are never really happy until we try to brighten the lives of others. "Helen Keller"

2011-03-31T09:15:00.001-07:00

Health Insurance and Retiring Early http://ping.fm/Z05uw

2011-03-28T10:29:00.001-07:00

Our hearts have an endless supply of love and support to share. Please be generous! Stuart Kaplowitz

2011-03-28T09:51:00.001-07:00

http://ping.fm/eYCmO

2011-03-24T22:47:00.001-07:00

http://ping.fm/BTWfO

2011-03-24T22:43:00.001-07:00

The sky's the limit when we set our sights high.

2011-03-23T19:32:00.001-07:00

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2011-03-21T20:44:00.001-07:00

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2011-03-16T13:37:00.001-07:00

Everything we put into our bodies matters. When we put in food, we get energy. When we put in love and support, we nurture the heart as well. "Stuart Kaplowitz"

2011-03-14T20:18:00.001-07:00

When nothing seems to help, I go and look at a stonecutter hammering away at his rock perhaps a hundred times without as much as a crack showing in it. Yet at the hundred and first blow it will split in it. Yet at the hundred and first blow it will split in two, and I know it was not that blow that did-it—but all that had gone before. “Jacob Iris”

2011-03-11T23:10:00.001-08:00

The difference between a successful person and others is not a lack of strength, not a lack of knowledge, but rather in a lack of will. “Vincent T. Lombardi”

2011-03-10T20:23:00.001-08:00

You can only make others better by being good yourself. “Hugh R. Hanels”

2011-03-09T07:43:00.001-08:00

http://ping.fm/5YTY0

2011-03-09T07:42:00.001-08:00

Vision is the art of seeing the invisible. “Jonathan Swift”

2011-03-07T22:10:00.001-08:00

Call 909-548-7444 http://ping.fm/enBj6

2011-03-07T20:12:00.001-08:00

The secret of happiness is not in doing what one likes, but in liking what one does. “James M. Barrie”

2011-03-05T08:53:00.001-08:00

He who believes is strong; he who doubts is weak. Strong convictions precede great actions. “J.F. Clarke”

2011-03-03T21:25:00.001-08:00

http://ping.fm/kujDX

2011-03-03T20:51:00.001-08:00

Well done is better than well said. “Ben Franklin”

2011-03-02T15:01:00.001-08:00

The difference between failure and success is doing a thing nearly right and doing a thing exactly right. "Edward Simmons"

2011-03-01T23:11:00.001-08:00

Yesterday is a cancelled check; tomorrow is a promissory note; today is the only cash you have—so spend it wisely. “Kay Lyons”

2011-02-28T20:18:00.001-08:00

“I put all my genius into my life; I put only my talent into my works.”

2011-02-24T20:02:00.001-08:00

3. When nothing seems to help, I go and look at a stonecutter hammering away at his rock perhaps a hundred times without as much as a crack showing in it. Yet at the hundred and first blow it will split in it. Yet at the hundred and first blow it will split in two, and I know it was not that blow that did-it—but all that had gone before. “Jacob Iris”

2011-02-22T16:54:00.001-08:00

To succeed is nothing-it's an accident. But to feel no doubts about oneself is something very different: it is character. "Marie Leneru"

2011-02-14T10:49:00.001-08:00

Happy Valentine's to everyone! What are you and your partner doing this special day of Love? Why not call Jyot Financial at (909)5487444 and look for Gurdayal to learn more about how to keep yourself free from Debts. This is a perfect gift for your partner in Life.

2011-02-11T11:44:00.001-08:00

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2011-02-09T14:49:00.001-08:00

We all need help. When it comes to financial indecisiveness, you need an expert to help you with big decisions. A Personal CFO is what you need?

2011-02-02T11:32:00.001-08:00

http://ping.fm/NwyRa?id=1700700041

2011-02-02T11:22:00.001-08:00

"I do the best I know how, the very best I can; and I mean to keep on doing it to the end. If the end brings me out all right, what is said against me will not amount to anything. If the end brings me our wll wrong, ten angels swearing I was right would make no difference", Abraham Lincoln.

2011-01-25T09:40:00.001-08:00

Good Morning !!! How do we say good morning in different languages..In spanish its Buenos Dias, In Filipino its Magandang Umaga, In Punjabi its Sat SwiAkal. What's your's?... Lets all learn each other's language.

2011-01-20T10:32:00.001-08:00

Thought for the Day: Do not follow where the path may Lead.

Go instead where there is no path and leave a trail.

2010-12-16T13:07:00.001-08:00

http://ping.fm/1LoW0

2010-07-16T13:54:00.001-07:00

Interesting and informative video on the cost of raising a child - http://bit.ly/bdeVbL

2010-07-15T13:26:00.001-07:00

Visit this website for important and useful information on health insurance - http://bit.ly/9RbBLF

2010-07-09T12:57:00.001-07:00

Important information on Long Term Care presented in less than 10 minutes - http://bit.ly/dr9i2U

2010-07-08T13:20:00.001-07:00

Have you been wondering about Critical Illness Insurance? Watch this informative video - http://bit.ly/aNMmWE

2010-07-02T13:36:00.001-07:00

Life Insurance as an Investment: Have you been wondering about it? NBC News explains it thoroughly in this video - http://bit.ly/aCtXpE

2010-06-30T15:46:00.001-07:00

Educate yourself on Deductibles and Coinsurances by way of this cute and informative video! - http://bit.ly/cYktdr

2010-06-28T15:44:00.001-07:00

What are HMOs and PPOs? Find out from this amusing and informative video - http://bit.ly/dnbkWQ

2010-06-23T12:24:00.001-07:00

Learn valuable information about Health Savings Accounts through this quick and entertaining YouTube video - http://bit.ly/ayhAmq

2010-06-21T14:51:00.001-07:00

Learn more about Health Insurance and Prescription Drugs through this amusing and informative video - http://bit.ly/bp0rOX

2010-06-08T11:04:00.001-07:00

Want to learn more about health insurance? Visit this informative website - http://bit.ly/9q7Msg

2010-06-03T12:06:00.001-07:00

Useful information for small business owners - Health Care Reform: What to Expect - http://bit.ly/dmPzHB

2010-05-07T13:24:00.001-07:00

It's been a while. I haven't checked my profile. I'm trying to be more active from now on.

Do your employees hate you? That’s just bad business

2009-08-17T12:26:00.000-07:00

Tough-talking Yahoo CEO Carol Bartz sure knows how to get the media’s attention. Virtually every quip she’s ever uttered — including her famous “Tell me why I shouldn’t fire the whole lot of you” line — has been happily devoured and dissected by reporters looking for juicy quotes.

It makes for a great story, but you’ve got to wonder what it’s like to work for her.

A recent article from Entrepreneur.com suggests that bosses like Bartz might want to lighten up — not just because it’s good for office morale, but it may also boost their company’s bottom line.

Writes author Nancy Mann Jackson:

“Quite simply, if employees like and respect you, they’re more invested in your company and interested in its success. They’re willing to work harder and give more. But if they don’t care about you, they don’t care about your company.”

Not exactly rocket-science, but it’s an idea worth considering, especially in today’s morale-crushing economic times. Since the recession kicked into high gear last year, there’s been no shortage of reports warning about undermotivated, overworked employees struggling to keep up with growing workloads while worrying about losing their jobs.

But forward-looking leaders would do well to nurture office relationships, particularly during tough times.

“This is when managers typically go into ‘avoidance mode,’ and as a result productivity goes down and morale goes down,” said Mark Murphy, CEO of Leadership IQ, in an interview with Reuters.

The better approach, he says, is to give employees a sense of purpose. Just don’t fall into a coddling trap. In research to be published in his forthcoming book, Hundred Percenters: Challenge your employees to give it their all and they’ll give you even more, Murphy found that most employees would prefer a boss that pushes them to achieve their full potential instead of one whose sole concern is making them happy.

Maybe Bartz is on to something…

How Can I Keep More of My Mutual Fund Profits?

2009-08-12T09:17:00.000-07:00

Provisions in the tax law allow you to pay lower capital gains taxes on the sale of assets held more than one year. The maximum long-term capital gains tax rate is currently 15% (0% for individuals in the 10% and 15% tax brackets). Short-term gains — those resulting from the sale of assets held for one year or less — are still taxed at your highest marginal income tax rate.

This means that if you’ve been buying shares in a stock or mutual funds over the years and are considering selling part of your holdings, your tax liability could be significantly affected by the timing of your sale.

The main pitfall for most investors is the IRS “first-in, first-out” policy. Simply stated, this means the IRS assumes that the first shares you sell are the first shares you purchased. Thus, the first shares in become the first shares out. As a result, if the value of your shares has appreciated, more of the money you receive from the sale will be considered to be taxable as a capital gain.

Fortunately, there is an alternative. When you place a sell order, instruct your broker or mutual fund transfer agent to sell those shares that you purchased for the highest amount of money. This will reduce the percentage of the proceeds of the sale that can be considered capital gain and are therefore taxable.

In order for this strategy to work, you must specify exactly which shares you are selling and when they were originally purchased. Ask your broker to send you a transaction confirmation that identifies by purchase date the shares you want to trade. This will enable you to reduce your taxable gain and maximize your deductible losses when you fill out your tax return.

In some cases, you may be better off selling the first shares you purchased, even if this results in a larger gain. If the first shares are subject to the 15 percent long-term capital gains rate, but the recently purchased shares are subject to the higher short-term rate, the correct choice may not be obvious. Always consult a tax professional.

Some transfer agents for no-load mutual funds will not go through the trouble of isolating the shares you want to sell by purchase date. This doesn’t necessarily mean you are stuck with the first-in, first-out computation.

By carefully reviewing your brokerage statements, you can determine which shares you paid the most for. You can then specify exactly which shares you’d like to sell. A word to the wise: Make this request in writing. If the IRS calls the transaction into question, the burden of proof is on you.

Finally, the IRS also allows you to calculate your tax basis by taking the average cost of all your shares. On an appreciating asset, this will result in a lower tax liability than the first-in, first-out rule would dictate. Be aware, though, that if you elect to average, you must continue to average for any subsequent sales.

Using either system, you may end up with a lower tax liability from the sale of your shares than the IRS would assume using the first-in, first-out rule.

The value of stocks and mutual funds fluctuates so that shares, when sold, may be worth more or less than their original cost.

Mutual funds are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

What Tax-Advantaged Alternatives Do I Have?

2009-08-12T08:30:00.000-07:00

A strong savings program is essential for any sound financial strategy.

We take Benjamin Franklin’s saying to heart, “A penny saved is a penny earned,” and we save our spare cash in savings accounts and certificates of deposit.

Investors who’ve accumulated an adequate cash reserve are to be commended. But as strange as it sounds, it is possible to save too much. Although this may not sound like much of a problem, it can be if you save too much of what you should be investing.

You see, many investors simply put their savings into the most convenient and secure financial instrument they can find. Often, that turns out to be certificates of deposit (CDs). The benefits of CDs are that they are FDIC insured (up to $250,000 per depositor, per institution)* and generally provide a fixed rate of return.

Unfortunately, placing all your savings in taxable instruments like certificates of deposit can create quite an income tax bill.

In an effort to ensure security, some investors inadvertently produce a liability. It’s a bit like turning on all the taps in your house just to make certain the water’s still running. Sure, you’ll know that the water’s still running, but a lot of it will go down the drain.
The solution is simply to turn off some of the taps.

A number of very secure financial instruments enable you to defer or eliminate income taxes. By shifting part of your cash reserves to some of these instruments, you can keep more of your money working for you, and turn off the taps that hamper your money’s growth.

You can consider a number of tax-advantaged investments for at least a portion of your savings portfolio.

One possibility is a fixed-annuity contract. A fixed annuity is a retirement vehicle that can help you meet the challenges of tax planning, retirement planning, and investment planning. Fixed-annuity contracts accumulate interest at a competitive rate. And the interest on an annuity contract is usually not taxable until it is withdrawn. Most annuities have surrender charges that are assessed in the early years of the contract if the contract owner surrenders the annuity before the insurance company has had the opportunity to recover the cost of issuing the contract. Also, withdrawals made from an annuity prior to age 59½ may be subject to a 10 percent federal income tax penalty. The guarantees of fixed annuity contracts are contingent on the claims-paying ability of the issuing insurance company.

Another tax-exempt investment vehicle is a municipal bond. Municipal bonds are issued by state and local governments and are generally free of federal income tax. In addition, they may be free of state and local taxes for investors who reside in the areas in which they are issued.

Municipal bonds can be purchased individually, through a mutual fund, or as part of a unit investment trust. You must select bonds carefully to ensure a worthwhile tax savings. Because municipal bonds tend to have lower yields than other bonds, the tax benefits tend to accrue to individuals with the highest tax burdens. If you sell a municipal bond at a profit, you could incur capital gains taxes. Some municipal bond interest could be subject to the federal alternative minimum tax. The principal value of bonds may fluctuate with market conditions. Bonds redeemed prior to maturity may be worth more or less than their original cost. Investments seeking to achieve higher yields also involve a higher degree of risk. Bonds mutual funds are subject to the same inflation, interest-rate, and credit risks associated with their underlying bonds. As interest rates rise, bond prices typically fall, which can adversely affect a bond mutual fund's performance.

A number of other tax-advantaged investments are available. Consult with your financial professional to determine which types of tax-advantaged investments may be appropriate for you.

Mutual funds are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

*The $250,000 FDIC deposit insurance coverage limit is temporary and is scheduled to revert back to the $100,000 limit after December 31, 2009.

What Tax Deductions Are Still Available to Me?

2009-08-11T15:47:00.000-07:00

Tax reform measures are enacted frequently by Congress, which makes it hard for U.S. taxpayers to know which deductions are currently available to help lower their tax liability. In fact, the head of the IRS once said that millions of taxpayers overpay their taxes every year because they overlook one of the many key tax deductions that are available to them.1

One of the most overlooked deductions is state and local sales taxes.2

Taxpayers may be able to take deductions for student-loan interest, out-of-pocket charitable contributions, moving expenses to take a first job, the child care tax credit, new points on home refinancing, health insurance premiums, home mortgage interest, tax-preparation services, and contributions to a traditional IRA.

Of course, some tax deductions disappear as adjusted gross income increases. And some deductions are subject to sunset provisions, which your tax professional can help you navigate.

Another key deduction is unreimbursed medical and dental expenses. For medical and dental bills paid during the past year that weren’t covered by insurance, a household may be able to deduct the amount that is greater than 7.5% of its adjusted gross income when calculating income taxes.

Remember that you may only deduct medical and dental expenses to the extent that they exceed 7.5% of your adjusted gross income and were not reimbursed by your insurance company or employer.

In addition to medical and dental expenses, certain miscellaneous expenses — primarily unreimbursed employee business expenses — can be written off if they exceed 2% of adjusted gross income. Some of the expenses that qualify for this deduction are union dues, small tools, uniforms, employment agency fees, home-office expenses, tax preparation fees, safe-deposit box fees, and investment expenses. Your tax advisor will be able to tell you exactly what’s deductible for you.

The end of the year is the time to take one last good look to determine whether you qualify for a tax credit or deduction or whether you’re close to the cutoff point.

If you’re not close, you may opt to postpone incurring some medical or other expenses until the following year, when you may be able to deduct them.

On the other hand, if you’re only a little short of the threshold amount, you may want to incur additional expenses in the current tax year.

With a little preparation and some help from a qualified tax professional, you may be able to lower your income taxes this year. You just have to plan ahead.

1–2) Kiplinger.com, December 2008

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

How Can I Benefit from Tax-Advantaged Investments?

2009-08-11T14:47:00.000-07:00

For many people, tax-advantaged investing is an excellent way to reduce their taxes. And while many of the traditional tax-advantaged strategies have been eliminated, there are still alternatives left that can help you reduce your taxes. Some are described below.

Real Estate Partnerships

Two of the most common types of real estate partnerships are low-income housing and historic rehabilitation. The federal government grants tax credits to those who construct or rehabilitate low-income housing or who invest in the rehabilitation or preservation of historic structures.

Participating in a real estate partnership has many advantages. Besides being considered socially responsible investments, these partnerships may provide opportunities for tax-advantaged income and long-term capital appreciation.

The tax credits generated by these partnerships can be used to offset your income tax liability on a dollar-for-dollar basis. This can make them much more valuable than tax deductions, which help reduce your taxable income, not the tax you pay. These credits are subject to certain limitations, and the rehabilitation tax credit begins to phase out for taxpayers with adjusted gross incomes (AGI) greater than $200,000 and is completely phased out when AGI reaches $250,000.

Oil and Gas Partnerships

Energy partnerships can provide shelter through tax deductions taken at the partnership level. These include deductions for intangible drilling costs, depreciation, and depletion.

The deductions may be limited; check with a tax advisor to see whether you could benefit from oil and gas partnerships.

Suitability

There are risks associated with investing in partnerships. Key among these is that they are long-term investments with an indefinite holding period with no, or very limited, liquidity. There is typically no current market for the units/shares, and a future market may or may not be available. If a market becomes available, it may result in a deep discount from the original price. At redemption, the investor may receive back less than the original investment. The investment sponsor is responsible for carrying out the business plan, and thus the success or failure of the venture is dependent on the investment sponsor. There are no assurances that the stated investment objectives will be reached. This type of investment is considered speculative. You want to ensure that the investment is not disproportionate in relation to your overall portfolio and that it is consistent with your investment objectives and overall financial situation. In order to invest, you will need to meet specific income and net worth suitability standards, which vary by state. These standards, along with the risks and other information concerning the partnership, are set forth in the prospectus, which can be obtained from your financial professional. Please consider the investment objectives, risks, charges, and expenses carefully before investing. Be sure to read the prospectus carefully before deciding whether to invest.

The alternative minimum tax is another concern. Make sure to consult an advisor to evaluate your exposure to the AMT.

As long as they are suitable for your situation, these tax-advantaged investing strategies can be one way to help reduce your income tax liability. A financial professional can help you determine whether such investments would be an appropriate strategy for you.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

When Must Taxes Be Paid on IRA and Employer-Sponsored Retirement Funds?

2009-08-10T16:46:00.000-07:00

Traditional IRAs and most employer-sponsored retirement plans are tax-deferred accounts, which means they are typically funded with pre-tax or tax-deductible dollars. As a result, taxes are not payable until funds are withdrawn, generally in retirement.

Withdrawals from tax-deferred accounts are subject to income tax at your current tax rate. In addition, withdrawals taken prior to age 59½ are subject to a 10% federal income tax penalty.

If you made nondeductible contributions to a traditional IRA, you have what is called a “cost basis” in the IRA. Your cost basis is the total of the nondeductible contributions to the IRA minus any previous withdrawals or distributions of nondeductible contributions. The recovery of this basis is not seen as taxable income.

Exceptions are the Roth IRA and the Roth 401(k) and Roth 403(b). Roth accounts are funded with after-tax dollars; thus qualified distributions (after age 59½and the account has been held for at least five years) are free of federal income tax.

Traditional IRAs, most employer-sponsored retirement plans, and Roth 401(k) and 403(b) plans are subject to annual required minimum distributions (RMDs) that must begin after the account owner reaches age 70½ (no later than April 1 of the year after the year in which the owner reaches age 70½).* Failure to take RMDs triggers a 50% federal income tax penalty on the amount that should have been withdrawn. Roth IRAs are exempt from RMDs.

When you begin taking distributions from your retirement accounts, make sure to note any required beginning dates and the appropriate distribution amount in order to avoid unnecessary penalties.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

*The Worker, Retiree, and Employer Recovery Act of 2008 suspends required minimum distributions for the 2009 tax year.

What Are the Tax Benefits of Charitable Trusts?

2009-08-10T15:46:00.000-07:00

Americans give freely to support the causes they value, from churches, education, and the arts to medical research. Fortunately, current tax laws encourage and even reward philanthropy. Beyond the basic tax deductions for charitable giving, setting up one or both of the following types of trusts could provide financial advantages in addition to the personal satisfaction that comes from giving.

Charitable Remainder Trust

When money, securities, property, or other assets are placed in a properly structured charitable remainder trust, the donor or a beneficiary receives income for a specific term or for life. When the trust expires, the designated charity receives the assets that remain.

For the donor, there are several potential tax benefits: (1) Assets placed in the trust may be partially deductible for income tax purposes. (2) At death, trust assets are not subject to estate taxes because they are no longer part of the donor’s taxable estate. (3) Any appreciated assets in the trust are also exempt from current capital gains tax.

Charitable Lead Trust

A charitable lead trust is an estate conservation tool that uses the donor’s assets to provide income for a charity during the donor’s lifetime and then transfers the remaining assets to the donor’s heirs when he or she dies. This type of trust could potentially reduce the estate tax due upon death, most notably on highly appreciated assets, because they are not subject to current capital gains tax.

Keep in mind that donations to both types of charitable trusts are irrevocable. This means that the assets cannot be withdrawn once the trust is formed. Also bear in mind that not all charitable organizations are able to use all possible gifts. It is prudent to check first. The type of organization selected can also affect the tax benefits that may be received.

When structured properly, these tools could possibly be used to benefit the charities of your choice and also help to reduce your tax obligations at the same time.

The use of trusts involves a complex web of tax rules and regulations. You should consider the counsel of an experienced estate planning professional and your legal and tax advisors before implementing such strategies.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

How Can I Better Manage My Short-Term Cash?

2009-08-07T15:18:00.000-07:00

For the vast majority of people, it is essential to keep a portion of their assets in liquid form in order to meet monthly commitments.

For example, most families have to meet their mortgage or rent payments, grocery, utility, and transportation bills out of their monthly paychecks. There are a host of other expenses that arise from month to month, such as auto insurance, that help keep the pressure on the family cash flow.

If people are fortunate enough to have anything left over once all the expenses have been met, then they can worry about saving or investing for the future.

The paychecks that you deposit in your checking account, which seem to swiftly disappear as you pay monthly expenses, constitute a portion of your short-term cash. The money is no sooner in your bank account than it flows out again as payment for goods and services.

However, because the money that we use to meet our monthly expenses is so liquid, there is a tendency to simply look at it as a method of payment. We often leave more than we need in our checking accounts, gaining little or no interest until we need it for a future expense.

By actively managing the short-term cash that passes through your hands, you can provide a means of saving for the future. You can use this money to increase your net worth with little or no additional risk to your principal.

Short-term investment instruments, such as Treasury bills, certificates of deposit, and money market mutual funds, can provide you with the liquidity needed to meet expected and unexpected expenses and to increase your short-term investment income.

There are numerous alternatives available to enable you to get your short-term cash working for you. The key to successfully managing your short-term cash lies in understanding the alternatives and choosing the one most appropriate to your particular needs and circumstances.

Treasury bills are backed by the full faith and credit of the U.S. government as to the timely payment of principal and interest. Bank CDs are insured up to $250,000 by the FDIC.*

Money market funds are neither insured nor guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although money market funds seek to preserve the value of your investment at $1 per share, it is possible to lose money by investing in money market funds.

Mutual funds are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

*The $250,000 FDIC deposit insurance coverage limit is temporary and is scheduled to revert back to the $100,000 liimit after December 31, 2013.

What Advantages Does a Biweekly Mortgage Offer?

2009-08-07T08:54:00.000-07:00

One of the most precious assets that you are likely to possess as you progress through life is your home. Owning their own homes is something that most Americans strive for.

Unfortunately, for the vast majority of people, one of the major drawbacks in owning a home is the long-term mortgage that must be paid off. Mortgages often stretch out 30 years with interest and principal repayments.

Most mortgage repayments are made on a monthly basis. However, arranging to make payments biweekly can have a dramatic effect on the amount of money you have to pay and the time frame before it is all paid off.

Under a biweekly mortgage, instead of making the payments once a month, you make half the payment every two weeks. If your mortgage is $1,000 per month, under a biweekly system it would be $500 every two weeks.

You make 26 payments per year, which is the equivalent of 13 monthly payments rather than 12. The extra payment should be taken directly off the principal, reducing the payment schedule accordingly.

The effect of biweekly mortgage payments can be dramatic. For example, if you currently have a $150,000 loan at 8 percent fixed interest, you will have paid approximately $396,233 at the end of 30 years.

However, if you use a biweekly payment system, you will pay $331,859 and have it completely paid off in 21.6 years. You save $64,374 and pay the loan off 8.4 years earlier!

The savings you realize using a biweekly payment schedule can save you nearly half of what it cost to buy the house in the first place.

An increasing number of mortgage companies are now offering a biweekly payment option. It is even possible to convert your current monthly payments into a biweekly schedule.

Some companies will attempt to charge you to refinance the loan. However, this is not always the case and shopping around can save you money in refinancing charges.

Be wary of independent companies offering to do this for you for a fee — you can do it for yourself for free.

You should receive professional financial advice when considering switching to a biweekly mortgage payment schedule.

What About Financial Aid for College?

2009-08-06T20:16:00.000-07:00

Is the financial aid game worth playing? There’s a tremendous amount of paperwork involved. The rules are obscure and often don’t seem to make sense. And it takes time.

But make no mistake, the game is definitely worth playing. Financial aid can be a valuable source of funds to help finance your child’s college education.

And you don’t necessarily have to be “poor” to qualify. In some circumstances, families with incomes of $75,000 or more can qualify.

U.S. Government Grants

The federal government provides student aid through a variety of programs. The most prominent of these are Pell Grants and Federal Supplemental Educational Opportunity Grants (FSEOGs).

Pell Grants are administered by the U.S. government. They are awarded on the basis of college costs and a financial aid eligibility index. The eligibility index takes into account factors such as family income and assets, family size, and the number of college students in the family.

By law, Pell Grants can provide up to $4,731 per student in the 2008-2009 award year.¹Due to financial constraints, however, Pell Grants generally don’t exceed $2,900 per year. Students must reapply every year to receive aid.

Most colleges will not process applications for Stafford loans until needy students have applied for Pell Grants. Students with Pell Grants also receive priority consideration for FSEOGs.

Students who can demonstrate severe financial need may also receive a Federal Supplemental Educational Opportunity Grant. FSEOGs award up to $4,000 per year per student.

State Grants

Many states offer grant programs as well. Each state’s grant program is different, but they do tend to award grants exclusively to state residents who are planning to attend an in-state school. Many give special preference to students planning to attend a state school.

College Grants

Finally, many colleges and universities offer specialized grant programs. This is particularly true of older schools with many alumni and large endowments. These grants are usually based on need or scholastic ability. Consult the college or university’s financial aid office for full details.

How Does Inflation Affect Me?

2009-08-06T07:15:00.000-07:00

Are you saving for retirement? For your children’s education? For any other long-term goal? If so, you’ll want to know about a sometimes subtle, yet very real threat to your savings: inflation.

Inflation is the increase in the price of products over time. Inflation rates have fluctuated over the years. Sometimes inflation runs high, and other times it is hardly noticeable. The short-term changes aren’t the real issue. The real issue is the effects of long-term inflation.

Over the long term, inflation erodes the purchasing power of your income and wealth. That means that even as you save and invest, your accumulated wealth buys less and less, just with the mere passage of time. And those who put off saving and investing will be even deeper in the hole.

What Can You Do About Inflation?

The effects of inflation can’t be denied — yet there are ways to fight them.

Historically, one of the best ways has been to utilize growth-oriented alternatives. Stocks, stock mutual funds, variable annuities, and variable universal life insurance may be options to consider. These alternatives provide the potential for returns that exceed inflation over the long term.

Growth-oriented alternatives carry more risk than other types of investments. Over the long term, however, they may help you stave off the effects of inflation and realize your financial goals.

As you focus on growth, remember that prudent investing calls for diversification. Don’t risk all your wealth in aggressive investments. Consider other alternatives to balance your portfolio, and choose all your investments with an eye toward your tolerance for investment risk.

The return and principal value of stocks and stock mutual funds fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost.

There are contract limitations, fees, and charges associated with variable annuities, which can include mortality and expense risk charges, sales and surrender charges, administrative fees, and charges for optional benefits. Withdrawals reduce annuity contract benefits and values. Variable annuities are not guaranteed by the FDIC or any other government agency; they are not deposits of, nor are they guaranteed or endorsed by, any bank or savings association. Withdrawals of annuity earnings are taxed as ordinary income and may be subject to surrender charges plus a 10 percent federal income tax penalty if made prior to age 59-1/2. Any guarantees are contingent on the claims-paying ability of the issuing company. The investment return and principal value of an investment option are not guaranteed. Because variable annuity subaccounts fluctuate with changes in market conditions, the principal may be worth more or less than the original amount invested when the annuity is surrendered.

The cash value of a variable universal life insurance policy is not guaranteed. The investment return and principal value of the variable subaccounts will fluctuate. Your cash value, and perhaps the death benefit, will be determined by the performance of the chosen subaccounts. Withdrawals may be subject to surrender charges and are taxable if you withdraw more than your basis in the policy. Policy loans or withdrawals will reduce the policy’s cash value and death benefit , and may require additional premium payments to keep the policy in force.

Mutual funds, variable annuities, and variable universal life insurance are sold only by prospectus. Please consider the investment objectives, risks, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the investment company, can be obtained from your financial professional. Be sure to read the prospectus carefully before deciding whether to invest.

What Is a Bond?

2009-08-05T18:14:00.001-07:00

When you invest in bonds, you are investing in the debt of a government entity or a corporation. A bond is simply evidence of a debt and represents a long-term IOU.

Bonds are issued by federal, state, and local governments; agencies of the U.S. government; and corporations. By selling debt with a promise to pay it back with interest, the issuing agency can raise capital to finance its operations.

The issuing company or government entity will outline how much money it would like to borrow, for what length of time, and the interest it is willing to pay. Investors who buy bonds are lending their money to the issuer and thus become the issuer’s creditors. Bonds are sold at “par” or “face” value, which is the price at which the bond is issued, usually in denominations of $1,000.

By purchasing a bond, you are lending the debtor money. In exchange, you receive a note stating the amount loaned, the interest rate (the “coupon” or “coupon rate”), how often the interest will be paid, and the term of the loan.

The principal (the amount initially paid for the bond) must be repaid on the stipulated maturity date. Before that date, you (as lender) receive regular interest, usually every six months. The interest payments on a bond are usually fixed.

Before 1983, bondholders would receive coupons that they would clip and mail in semi-annually to receive the interest payments. Presently, all bonds are issed electronically in book-entry form only.

If you are considering buying a bond, remember that the market value of a bond is at risk when interest rates fluctuate. As interest rates rise, the value of existing bonds typically falls because the interest rate on new bonds would be higher. The opposite can also happen as well. Of course, this phenomenon applies only if you decide to sell a bond before it reaches maturity. If you hold a bond to maturity, you will receive the interest payments due (barring default) plus your original principal. Additional considerations are a bond’s maturity date and credit quality. Investments seeking to achieve higher yields also involve a higher degree of risk.

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What Are Dividends?

2009-08-05T07:13:00.000-07:00

When considering the profit they make on stocks, many investors assess the gains they have obtained based on the appreciation of the stock on the open market or the gains they obtained after selling the stock for more than the original purchase price. However, it’s also wise to include the income acquired from stock dividends, if any.

Dividends are taxable payments to shareholders from a company’s earnings. These payments generally come from retail profits and tend to be distributed in the form of cash or stock. They are usually paid quarterly, and the amount is determined by the company’s board of directors.

Dividends are most often quoted by the dollar amount each share receives, put simply, the dividends per share. They can also be stated in terms of a percent of the current market price, designated as a dividend yield. The dividend yield is the annual dividend income per share divided by the current stock price.

Many mature, profitable companies offer regular dividends to shareholders. However, if a company experiences losses during the year or needs any earnings to be reinvested back into the business, it’s always possible that it could decide to suspend dividends. It’s important to remember that a company can decide to increase, decrease, or stop paying dividends at any time.

Rather than pay dividends to shareholders, many companies with current high growth rates choose to reinvest their earnings back into their businesses. On the other hand, some stable companies that haven’t experienced much growth might pay dividends to provide an incentive for investors to purchase their stock.

Before 2003, dividends were taxed at ordinary income tax rates reaching as high as 35%. But as a result of changes to the tax law, corporate dividends are currently taxed at a maximum rate of 15%; this lower rate will expire at the end of 2010 unless Congress acts to extend it. Because payouts have become more attractive to shareholders, many companies with high growth rates are offering dividends.

When investing in the stock market, it’s important to remember that the return and principal value of stocks fluctuate with changes in market conditions. Shares, when sold, may be worth more or less than their original cost.

What Are the Tax Benefits of Charitable Trusts?

2009-08-04T15:19:00.000-07:00

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What Is the Estate Tax?

2009-08-04T09:15:00.000-07:00

The estate tax is a tax on property that transfers to others upon your death. Estate taxes are due on the total value of your estate — your home, stocks, bonds, life insurance, and other assets of value. Everything you own, whatever the form of ownership, regardless of whether the assets have been through probate, is subject to estate taxes.

Also referred to as the “death tax,” the estate tax was first enacted in this country with the Stamp Act of 1797 to help pay for naval rearmament. After several repeals and reinstatements, the Revenue Act of 1917 put the current estate tax into place. Despite its long history, this tax remains controversial.

By working in much the same way as marginal income tax brackets, estate taxes claim a graduated percentage of the total value of your estate. For estates of greater value, the percentage amount due in taxes is generally higher.

The IRS calculates the estate tax due on your gross taxable estate by adding the value of your assets and then subtracting any applicable exemptions.

The most common exception to the federal estate tax is the unlimited marital deduction. The government exempts all transfers of wealth between a husband and wife from federal estate and gift taxes, regardless of the size of the estate. Of course, the surviving spouse must be a U.S. citizen to qualify for this exemption. When the surviving spouse dies, the estate will be subject to estate taxes and, unless the appropriate preparations have been made, only the surviving spouse’s applicable credit can be used. Other exemptions include mortgage and other debt, administration expenses of the estate, and losses during estate administration.

The Economic Growth and Tax Relief Reconciliation Act of 2001 made sweeping changes to the federal estate tax. It established a schedule that loweredthe top estate tax rate and raised the applicable credit amount gradually over several years. In 2010, the federal estate tax is scheduled to be repealed. However, because of the tax law’s sunset provision, the federal estate tax will return in 2011 at its previous maximum level unless Congress votes to permanently repeal the tax. (See the table for applicable credit amounts and top estate tax rates.)

Check with your tax advisor to be sure that your estate is protected as much as possible from estate taxes upon your death.

The information in this article is not intended to be tax or legal advice, and it may not be relied on for the purpose of avoiding any federal tax penalties. You are encouraged to seek tax or legal advice from an independent professional advisor.

Psychologists repudiate gay-to-straight therapy

2009-08-03T11:45:00.000-07:00

NEW YORK — The American Psychological Association declared Wednesday that mental health professionals should not tell gay clients they can become straight through therapy or other treatments.

In a resolution adopted by the APA's governing council, and in an accompanying report, the association issued its most comprehensive repudiation of "reparative therapy" — a concept espoused by a small but persistent group of therapists, often allied with religious conservatives, who maintain gays can change.

No solid evidence exists that such change is likely, says the resolution, adopted by a 125-4 vote. The APA said some research suggests that efforts to produce change could be harmful, inducing depression and suicidal tendencies.

Instead of seeking such change, the APA urged therapists to consider multiple options — that could range from celibacy to switching churches — for helping clients live spiritually rewarding lives in instances where their sexual orientation and religious faith conflict.
The APA had criticized reparative therapy in the past, but a six-member task force added weight to this position by examining 83 studies on sexual orientation change conducted since 1960. Its report was endorsed by the APA's governing council in Toronto, where the 150,000-member association's annual meeting is being held this weekend.

The report breaks new ground in its detailed and nuanced assessment of how therapists should deal with gay clients struggling to remain loyal to a religious faith that disapproves of homosexuality.

Judith Glassgold, a Highland Park, N.J., psychologist who chaired the task force, said she hoped the document could help calm the polarized debate between religious conservatives who believe in the possibility of changing sexual orientation and the many mental health professionals who reject that option.

"Both sides have to educate themselves better," Glassgold said in an interview. "The religious psychotherapists have to open up their eyes to the potential positive aspects of being gay or lesbian. Secular therapists have to recognize that some people will choose their faith over their sexuality."

In dealing with gay clients from conservative faiths, says the report, therapists should be "very cautious" about suggesting treatments aimed at altering their same-sex attractions.
"Practitioners can assist clients through therapies that do not attempt to change sexual orientation, but rather involve acceptance, support and identity exploration and development without imposing a specific identity outcome," the report says.

"We have to challenge people to be creative," said Glassgold.

She suggested that devout clients could focus on overarching aspects of religion such as hope and forgiveness to transcend negative beliefs about homosexuality, and either remain part of their original faith within its limits — for example, by embracing celibacy — or find a faith that welcomes gays.

"There's no evidence to say that change therapies work, but these vulnerable people are tempted to try them, and when they don't work, they feel doubly terrified," Glassgold said. "You should be honest with people and say, 'This is not likely to change your sexual orientation, but we can help explore what options you have.'"

One of the largest organizations promoting the possibility of changing sexual orientation is Exodus International, a network of ministries whose core message is "Freedom from homosexuality through the power of Jesus Christ."

Its president, Alan Chambers, describes himself as someone who "overcame unwanted same-sex attraction." He and other evangelicals met with APA representatives after the task force formed in 2007, and he expressed satisfaction with parts of the report that emerged.
"It's a positive step — simply respecting someone's faith is a huge leap in the right direction," Chambers said. "But I'd go further. Don't deny the possibility that someone's feelings might change."
An evangelical psychologist, Mark Yarhouse of Regent University, praised the APA report for urging a creative approach to gay clients' religious beliefs but — like Chambers — disagreed with its skepticism about changing sexual orientation.

Yarhouse and a colleague, Professor Stanton Jones of Wheaton College, will be releasing findings at the APA meeting Friday from their six-year study of people who went through Exodus programs. More than half of 61 subjects either converted to heterosexuality or "disidentified" with homosexuality while embracing chastity, their study said.
To Jones and Yarhouse, their findings prove change is possible for some people, and on average the attempt to change will not be harmful.

The APA task force took as a starting point the belief that homosexuality is a normal variant of human sexuality, not a disorder, and that it nonetheless remains stigmatized in ways that can have negative consequences.

The report said the subgroup of gays interested in changing their sexual orientation has evolved over the decades and now is comprised mostly of well-educated white men whose religion is an important part of their lives and who participate in conservative faiths that frown on homosexuality.
"Religious faith and psychology do not have to be seen as being opposed to each other," the report says, endorsing approaches "that integrate concepts from the psychology of religion and the modern psychology of sexual orientation."

Perry Halkitis, a New York University psychologist who chairs the APA committee dealing with gay and lesbian issues, praised the report for its balance.

"Anyone who makes decisions based on good science will be satisfied," he said. "As a clinician, you have to deal with the whole person, and for some people, faith is a very important aspect of who they are."

The report also addressed the issue of whether adolescents should be subjected to therapy aimed at altering their sexual orientation. Any such approach should "maximize self-determination" and be undertaken only with the youth's consent, the report said.
Wayne Besen, a gay-rights activist who has sought to discredit the so-called "ex-gay" movement, welcomed the APA findings.

"Ex-gay therapy is a profound travesty that has led to pointless tragedies, and we are pleased that the APA has addressed this psychological scourge," Besen said.

Wall Street rises on recovery optimism, Ford sales

2009-08-03T09:40:00.001-07:00

NEW YORK (Reuters) - U.S. stocks rose on Monday after data showed the manufacturing sector shrunk at a slower pace in July, while rising commodity prices boosted natural resource stocks.

The sharp advance briefly pushed the broader S&P 500 Index .SPX to its highest level in nine months, above the psychologically important 1,000 level.

Ford Motor Co's (F.N) July sales jumped 2 percent, adding to the positive tone.

According to the Institute for Supply Management, its index of national factory activity rose to 48.9 in July from 44.8 in June. A Reuters survey of economists had forecast 46.2.

"The ISM data adds to the building case that the economy has stabilized and that it is going to grow this quarter. I imagine it will embolden the case of the bulls," said Jim Awad, managing director at Zephyr Management in New York.

The Dow Jones industrial average .DJI rose 81.70 points, or 0.89 percent, to 9,253.31. The Standard & Poor's 500 Index .SPX gained 9.80 points, or 0.99 percent, to 997.28. The Nasdaq Composite Index .IXIC shot up 15.06 points, or 0.76 percent, to 1,993.56.

The S&P 500 is now up 47.4 percent since hitting a 12-year low on March 9.

Among natural resource stocks, shares of aluminum producer Alcoa Inc (AA.N) jumped 6 percent to $12.46, while miner Freeport-McMoran Inc (FCX.N) shot up 7.7 percent. The S&P materials index .GSPM.N was up 2.8 percent.

Ford shares rose 7.1 percent to $8.54. The company is among the primary beneficiaries of the federal government's "Cash for Clunkers" incentive program that took effect on July 24.

The Senate on Monday was due to vote on extending the program to stimulate auto sales after the U.S. House approved $2 billion for it on top of an initial $1 billion in June.

3M Co (MMM.N) shares rose 2 percent to $71.95 after Goldman Sachs upgraded the Dow component to "buy" from "neutral.

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Moody's cuts Energy Future Holdings, warns on debt

2009-07-31T16:20:00.000-07:00

Moody's Investors Service on Monday cut its ratings on Energy Future Holdings to a deeply speculative grade and warned the company will likely need to restructure its $44 billion debt load.

Energy Future Holdings, formerly known as TXU Corp, is struggling with its debt after being taken private in the largest leveraged buyout in U.S. history in 2007 by private equity firms Kohlberg Kravis Roberts & Co KKR.UL and Texas Pacific Group TPG.UL.

"The capital structure is untenable and will likely prompt the company to pursue some form of restructuring activity," Moody's said in a statement.

"These actions are likely to address the company's liquidity profile and its substantial maturities upcoming in 2014," Moody's said.

Energy Future Holdings has around $23 billion of debt maturing in 2014, Moody's said.

Moody's cut Energy Future Holdings' corporate family rating one step to Caa1, seven steps below investment grade and a deeply speculative grade. The outlook is negative, indicating an additional cut may be likely in the coming 12-to-18 months.

A distressed debt exchange, in which bondholders swap debt for new cash, debt or equity at less than the debt's par value is deemed a default by rating agencies.

UPDATE 2-More than 6,000 GM hourly workers leave automaker

2009-07-31T10:11:00.000-07:00

* 66,000 U.S. hourly workers leave GM since 2006

* GM aims to reduce hourly workforce further in 2009

* GM also cutting white-collar workers, executives (Adds bullet points, details on GM plans to reduce jobs)

DETROIT, Aug 3 (Reuters) - More than 6,000 U.S. hourly workers have left General Motors Co [GM.UL] under the automaker's latest buyout program intended to make it a leaner company after its emergence from bankruptcy.

GM, which exited bankruptcy on July 10 by selling most of its assets to a group funded by the U.S. Treasury, said the latest round of buyouts has brought the total number of its U.S. factory workers to 48,000.

GM has said it aims to reduce its U.S. hourly employment to about 40,500 by the end of 2009, through layoffs and other measures.

The cuts add to the thousands lost in the downturn for U.S. automakers that began in 2005 and forced both GM and Chrysler Group LLC to restructure under Chapter 11 bankruptcy protection.

Since 2006, about 66,000 U.S. hourly workers -- more than half of its factory workforce -- have left GM through buyouts and retirement packages as the automaker scrambled to reduce costs in the face of slowing sales and mounting losses.

The company also plans to cut its white-collar workforce more than 20 percent, or 6,000 jobs, this year. Executive ranks will be cut 35 percent.

GM lost $31 billion in 2008, taking its total losses to $82 billion in the last four years. It lost its ranking as the top global automaker by vehicle sales worldwide in 2008 when it was outsold by Toyota Motor Corp (7203.T).

"One of the very tough, but necessary actions to position the company for long-term viability and success is to reduce our total U.S. workforce, both hourly and salaried employees," said Diana Tremblay, GM vice president of labor relations.

Most of the hourly workers left the company on Aug. 1, GM said.

GM is also scheduled to report its U.S. auto sales for July later on Monday. Analysts expect the automaker to post a double-digit decrease in sales from a year ago, although the U.S. government's trade-in incentives likely limited the pace of the decline.

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U.S. data push Europe stocks to 9-mth closing high

2009-07-30T11:35:00.000-07:00

European shares closed at their highest level in nine months on Monday as better-than-expected July U.S. manufacturing data boosted markets.

The pan-European FTSEurofirst 300 .FTEU3 index of top shares closed up 1.4 percent at 941.93 points after touching 947.01, the highest level since early November.

The Institute for Supply Management said its index of national factory activity rose to 48.9 in July from 44.8 in June. The median forecast of 72 economists surveyed by Reuters was for a reading of 46.2. [ID:nN03439889]

"The ISM data was certainly higher than the consensus numbers and was at the top end of the range. It is a good number; actually the significance of the 50 level being the cut off between expansion and contraction is overplayed," said Jim Wood-Smith, head of research at Williams de Broe.

"Numbers in the high 40s are normally consistent with GDP growth. It is confirmation, that at least for the time being, we have seen the worst of the recession," he said.

Banking stocks added the most points to the index. HSBC (HSBA.L) gained 4.9 percent after it reported a pretax profit above analysts forecasts. [ID:nL3661800]

Barclays (BARC.L) was 6.7 percent higher, rallying after an opening fall as the British bank posted first-half reported profits which Caznove said were "in line with consensus but arguably better underlying given larger than expected loss on fair value of own debt." [ID:nL3593368]

Among other banks UniCredit (CRDI.MI), BNP Paribas (BNPP.PA), Credit Suisse (CSGN.VX) and UBS (UBSN.VX) were up 0.1-2.7 percent.

COMMODS GAIN

Commodity stocks gained as crude CLc1 rose 2.8 percent and copper MCU3=LX rose 4.1 percent.

Energy stocks BG Group (BG.L), BP (BP.L) and Royal Dutch Shell (RDSa.L) were up 0.7-3.5 percent, while miners Antofagasta (ANTO.L), Eurasian Natural Resources Corporation (ENRC.L) and Xstrata (XTA.L) gained 5.3-7.1 percent.

"There seems to be no change to the optimistic mood at the moment. Rather than being concerned about the rally running out of steam, there is more a worry of missing the boat as the market powers ever higher," said Philip Gillett, a trader at IG Index.

The market also got a lift from positive figures. Purchasing managers' data showed British manufacturing activity grew last month for the first time since March 2008, benefiting from the fastest flow of new orders since November 2007. [ID:nL3668821]

And surveys showed Chinese factory growth accelerating in July, thanks to a revived domestic economy and slight pick-up in demand for its exports. The China purchasing managers index from brokerage CLSA hit a one-year high. [ID:nPEK360544]

Looking at the downside, defensive stocks weighed. Drugmakers took the most points off the index with Roche (ROG.VX) and Novartis (NOVN.VX) down 1.8 percent and 1 percent, respectively.

Across Europe, Britain's FTSE 100 .FTSE index closed at 4,682.46 points, its highest closing level since early October 2008. Earlier in the session, it hit a fresh intraday peak above the 4,700, its highest level since the collapse of Lehman Brothers in October 2008.

Germany's DAX .GDAXI was 1.8 percent higher and France's CAC 40 .FCHI was up 1.5 percent. (Additional reporting by Jon Hopkins; Atul Prakash; Editing by Rupert Winchester)

YouGov says FY trading in line with mkt view

2009-07-30T09:33:00.000-07:00

(Reuters) - Online market research agency YouGov Plc (YOU.L) said on Monday full-year trading was in line with current market view and that its cost saving measures should help improving the underlying profit in the next financial year.

The company said all its geographies performed as expected in the last six months, including the recently acquired Clear Horizons business in the United States.

However, the company said it expected tough market conditions to continue at least until the end of 2009.

In April, the company had said it decided to scale back investment in non-core activities and reduce costs in areas which were not generating expected revenue growth, to cut annual operating cost base by about 2.5 million pounds.

The company, which provides research for Time Warner's (TWX.N) CNN, Google (GOOG.O) and Kellogg (K.N), said it continued to have a strong balance sheet and was cash generative.

Shares of the company were up 7.7 percent at 56 pence by 4:08 a.m. EDT on the London Stock Exchange.

Economic oil spill on the horizon?

2009-07-29T11:27:00.000-07:00

NEW YORK (CNNMoney.com) -- Oil prices are on the march again, rising above $71 a barrel Monday for the first time in more than a month.

The good news is that increased optimism about an economic recovery is one big factor behind the jump in crude prices. The bad news is that if oil prices continue to rise, we may have to kiss those recovery hopes goodbye.

While there appear to be many signs that the economy is stabilizing, there has yet to be a pickup in consumer spending.

Many are still nervous about the economy, and the memory of last summer's $4 a gallon gas and $140 a barrel oil is still fresh in the minds of most people.

So the last thing that consumers need are more worries about rising costs at the pump and how expensive it's going to be to keep their homes warm this winter.

Robert Dye, senior economist with PNC Financial Services in Pittsburgh, said that oil prices between $60 and $70 a barrel are consistent with his belief that the recession should end sometime during this quarter and that the nation's gross domestic product could actually grow on an annualized pace in the fourth quarter.

But Dye said that if oil prices continue to remain higher than $70 for an indefinite period, that could be a problem.

"Oil above $70 could exert downward pressure on GDP, and if we get into the $80 to $90 range, I do think we run the risk of this very fragile recovery stalling out," he said.

Talkback: Are rising oil and gas prices affecting your spending habits? And are you worried that energy prices will get back near last year's record levels? Leave your comments at the bottom of this story.

Gas prices have taken a turn up as of late as well. The average price of a gallon of regular unleaded gas inched up to about $2.55 a gallon, according to the AAA's latest daily report Monday. That marked the 13th consecutive increase. Prices are up nearly a dime during that span.

Keith Hembre, chief economist for First American Funds in Minneapolis, said that these increases could cause consumers to pull back on other purchases. He estimates that for every penny increase in gas prices, consumers are collectively likely to spend $1.25 billion less on other discretionary items.

So the most recent rise in gas prices could mean that $12.5 billion spent on gas won't be spent elsewhere. To be sure, that's not a huge amount. But if energy prices keep rising, it will add up.

"It's cliche, but rising oil and gas prices are like a tax on consumers," Hembre said. "These increases probably won't be catastrophic and cause a major downturn in spending, but it's another factor that's likely to weigh on the pace of the recovery."

Four Passengers Injured in Plane Turbulence Remain in Serious Condition

2009-07-29T10:31:00.000-07:00

Four passengers critically injured when a Continental Airlines plane hit turbulence on its way to Houston from Brazil remain in serious condition in a Miami hospital but are expected to survive, according to officials with Miami-Dade Fire Rescue.

Continental flight diverted to Miami because of injuries caused by turbulence.
Another 22 people who were injured and treated at the scene are in stable condition. By late this morning, most of the passengers had cleared customs in Miami and were set to resume travel to Houston.

Continental Airlines flight 128 was flying from Rio de Janeiro to Houston Intercontinental Airport when it hit a pocket of turbulence and had to make an emergency landing at Miami International Airport.

Things are looking up … sort of

2009-07-28T11:25:00.000-07:00

Small business owners say they’re more confident about the economy, but they’re still plagued by worries about paying their bills and slumping cash flow, new research from Discover Financial Services shows.

Their optimism is a bit of a head-scratcher, especially considering the slew of discouraging news the survey uncovers. Some highlights:

* nearly 70 percent of small biz owners say their take-home pay has taken a hit in recent months.

* more than half say they’ve held off on bill payment because of cash flow issues in the past 3 months.

* almost 60 percent rate the economy as “poor”, and half of them said it was getting worse.

So why the optimism?

Ryan Scully, director of Discover’s business credit card, offers some context. For starters, he says the uptick in the confidence level is incremental (and a long way off its high way back in March 2007). And although only about a third of business owners think the economy is getting better, that’s up significantly from 16 percent in March.

“So we can’t say exactly what is fueling their confidence, but not all of the news they’ve been hearing is bad,” Scully told Reuters.

Interestingly, the survey found that business owners are shying away from traditional borrowing practices such as applying for a loan or getting a line of credit, possibly in favor of funding from friends and family, Scully said.

Healthcare, green tech brighten dim U.S. jobs picture

2009-07-27T11:24:00.000-07:00

LOS ANGELES (Reuters) - Healthcare and clean energy rank as bright spots in a bleak U.S. jobs market and both stand to generate even more employment under plans put forward by President Barack Obama.

The health industry, bolstered by the demands of an aging population and supplied by new technologies, has added jobs despite the recession and is destined for further expansion should Obama make good on his promise of affordable medical care for millions of uninsured Americans.

The mix of jobs is likely to shift as preventive medicine gets more emphasis, record-keeping functions are modernized and fewer diagnostic tests are ordered, economists say.

"Green" tech, propelled by efforts to cut carbon emissions blamed for global warming, will benefit from an economic stimulus package enacted this year and a climate change bill making its way through Congress.

Healthcare and the environment were singled out in a report this month by Obama's Council of Economic Advisers as two sectors projected to be major U.S. job engines over the next several years.

Investments in the two areas "are laying the foundation for long-term economic growth," said Heather Boushey, an economist with the Center for American Progress.

STRONG ECONOMIC MEDICINE

Healthcare has grown 3.7 percent since the recession began in December 2007, while the labor force as a whole declined 4.7 percent, said Heidi Shierholz, an Economic Policy Institute economist, citing U.S. Labor Department data.

One reason that medicine has held its own during the recession is that nearly 60 percent of all healthcare costs are covered by the public sector, including programs like Medicaid and Medicare, helping insulate the industry from hard times, said labor professor Eileen Appelbaum of Rutgers University.

"People think we have a private health system in this country, but more than half is publicly financed," she said.

Budget strains are starting to take their toll on healthcare jobs in many states, she said. But the Labor Department projects that U.S. healthcare employment will grow 20 percent above 2006 levels by 2016, even without Obama's proposed overhaul.

Government forecasts for clean energy and green technology jobs as a whole are harder to come by.

Economists from the University of Massachusetts and the Center for American Progress concluded in a study last month that the economic stimulus and the climate-change bills would generate $150 billion a year in clean-energy investments, netting 1.7 million new jobs annually.

GOING FOR GREEN

Most of those gains would come from retrofits of homes and other buildings to improve energy efficiency and insulation. Other high-growth areas cited in the report included renewable energy sources such as wind and solar energy expanded public transportation and construction of a highly efficient new electric distribution network, known as the smart grid.

Credit losses, low deal volumes to hurt U.S. BDCs

2009-07-27T09:24:00.000-07:00

BANGALORE (Reuters) - U.S. business development companies (BDCs) like American Capital Ltd (ACAS.O) and Allied Capital (ALD.N), which lend to small and mid-size businesses, may report yet another dismal quarter hurt by sinking deal volumes and higher credit losses.

Total middle-market deal volume was about $410 million in the quarter ended June 30, well below the $2.1 billion in the year-ago period and the near-term peak of $13.04 billion in the second quarter of 2007.

"Volume levels for middle market and larger transactions remained extremely low for the second quarter," Wells Fargo Securities analyst Jim Shanahan said in a research note.

BDCs like American Capital, Allied Capital, Ares Capital (ARCC.O), Apollo Investment (AINV.O), PennantPark Investment Corp (PNNT.O) and Fifth Street Finance Corp (FSC.N) make private-equity investments by lending to small companies and acquiring venture-capital stakes.

Deal volumes would have been extremely light in the second quarter as very few companies have capital to deploy, Stifel Nicolaus analyst Greg Mason said.

However, Wells Fargo's Shanahan said, "It does appear that volume levels have found a floor near current levels, although we do not envision a drastic improvement until economic conditions improve."

Another cause of worry for the BDCs are soaring credit losses stemming from their investment portfolio.

"Credit is going to be the wildcard. That is the biggest data point we will look for direction from here on now," Keefe, Bruyette & Woods analyst Sanjay Sakhrani said.

"I think they (credit losses) are going to go up," analyst Mason said, adding, "The question will be by what magnitude or how quickly are the portfolios deteriorating from the income standpoint."

COVENANT WOES

Some BDCs have also been battling with terms attached to their credit facilities and are in negotiations for waiver with their lenders.

"I think that American Capital and Allied in particular will be overshadowed by the debt agreements that they need to put in place with their lenders as that's all what matters right now," Stifel's Mason said.

Quarterly results will separate winners -- which were more conservatively managed during the peak of the credit boom -- distinctly from others, analysts said.

American Capital, which was removed from the Standard & Poor's 500 index .SPX in February, has defaulted on $2.3 billion of unsecured credit arrangements as of March 31 and auditors included a going-concern opinion on its financial statements.

Washington-based Allied Capital, which in May posted its fifth quarterly loss in a row, is also battered by frozen credit markets and is also in default on debt.

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U.S. Stocks Drop as Microsoft, Amazon.com Fall; Exxon Advances

2009-07-24T10:25:00.000-07:00

July 24 (Bloomberg) -- U.S. stocks fell from the highest levels of 2009 as Microsoft Corp. and Amazon.com Inc. posted disappointing results, while rebounding oil and natural gas drove up energy companies.

Microsoft declined 9 percent, the most since January, on lower profit and sales than analysts estimated. Amazon.com slumped 8.6 percent following price cuts that caused the online retailer’s revenue to miss projections. Exxon Mobil Corp. and ConocoPhillips gained as fuel prices headed toward their highs of the day.

The Standard & Poor’s 500 Index dropped 0.4 percent to 972.76 at 1 p.m. in New York after losing as much as 1.1 percent. The Dow Jones Industrial Average fell 26.98 points, or 0.3 percent, to 9,042.31. U.S. stocks surged yesterday, sending the Dow above 9,000 for the first time since January.

“At these levels in the market, there’s not a lot of room for error,” said Mark Freeman, who helps manage $7.5 billion at Westwood Management Corp. in Dallas. “Anything that deviates brings about a reevaluation by the market.”

Microsoft and Amazon.com’s worse-than-estimated results followed two weeks of earnings reports that beat projections. Among S&P 500 companies that posted second-quarter results through yesterday, 74 percent exceeded the average analyst forecast, according to data compiled by Bloomberg. That would be the highest rate for a full quarter on record, Bloomberg data going back to 1993 show. More than 300 S&P 500 companies have yet to report for the period.

Windows Demand Waning

Microsoft, the biggest software maker, fell 9 percent to $23.26 after a 29 percent drop in fiscal fourth-quarter earnings and posted sales that missed analysts’ estimates, a sign that demand for Windows and Office software is still declining. Per- share profit excluding some items was 36 cents, missing the average forecast by 2.4 percent.

Technology shares in the S&P 500 fell 1.4 percent, the most among 10 industries, a day after rising to the highest level since September on EBay Inc.’s better-than-estimated earnings. MEMC Electronic Materials Inc., the maker of silicon wafers for solar modules, lost 11 percent to $18.53. Its second-quarter profit declined 96 percent on low prices and weak demand.

Amazon.com lost 8.6 percent, the most since November, to $85.77. The world’s largest Internet retailer has sought to ward off competitors by cutting prices and adding products, such as laptops and outdoor equipment. Its low prices and free-shipping offers have started to eat into profit, said Aaron Kessler, an analyst at Kaufman Brothers LP. Sales of $4.65 billion were 1 percent less than analysts estimated on average.

Reversing Its Decline

American Express rose 0.4 percent to $29.57 after falling as much as 4.6 percent, which helped drive down the Dow average. The credit-card issuer reported second-quarter sales of $6.09 billion, or 1.4 percent less than analysts projected. Net income from continuing operations decreased 48 percent to $342 million.

Stock-index futures advanced earlier after Europe’s economy moved closer to recovery as the manufacturing and service industries contracted at the slowest rate since August and German business confidence climbed to a nine-month high. Later, a Reuters/University of Michigan index showed confidence among U.S. consumers fell in July for the first time in five months as mounting unemployment and stagnant wages shook households.

Losses in the stock market were diminished as energy companies rebounded from their lows of the day. Crude oil for September delivery added 0.2 percent to $67.30 in New York after falling 1 percent. Natural gas futures expiring next month climbed 3.1 percent to $3.66 per million British thermal units.

‘Ships Will Sink’

Exxon added 0.4 percent to $71.88. ConocoPhillips rose 1.6 percent to $44.71.

Yesterday, the S&P 500 climbed to the highest level since President Barack Obama was elected on Nov. 4 and the Nasdaq Composite Index advanced for the 12th straight day, its longest winning streak since 1992. Following the rally, S&P 500 companies traded for 16.2 times operating earnings from the past year, the most expensive since September.

“Investors have gotten the market ahead of itself,” said Andrew Seibert, who manages about $400 million at Pittsburgh- based Nextier Wealth Management. “You have to be very cautious. This tide may raise all ships initially, but some ships will sink because they can’t follow through on the exuberance.”

Chubb Corp., the insurer of high-end homes and corporate boards, advanced 6.5 percent to $45.36, leading an industry rally. Second-quarter profit at Chubb beat analysts’ estimates and the company raised its 2009 forecast.

Black & Decker jumped 10 percent to $37.14. The largest maker of hand tools posted second-quarter profit of 63 cents a share, beating the average analyst estimate by 74 percent.

Sepracor Inc., the maker of the top-selling sleep drug Lunesta, advanced 4.1 percent to $16.46 after increased its profit forecast for the current fiscal year to a range of $2.55 to $2.90 a share, exceeding the $2.52 average analyst estimate in a Bloomberg survey.

SunPower Corp. rallied 24 percent to $30.80 after the second-biggest U.S. solar-cell maker reported an unexpected quarterly profit and boosted its sales forecast for the year.

Volkswagen Approves Porsche Merger Plan, Qatar Stake

2009-07-23T09:38:00.001-07:00

July 23 (Bloomberg) -- Volkswagen AG agreed to combine with Porsche SE after the departure of the sports-car maker’s Chief Executive Officer Wendelin Wiedeking capped a 4-year-long feud for control of the two German manufacturers.

An integration of Volkswagen with the 911 sports-car maker will benefit both automakers in the global market, VW Chief Executive Officer Martin Winterkorn said in Stuttgart, Germany. A Qatar fund will acquire 17 percent of VW, becoming the third- largest investor in the Wolfsburg-based company.

Volkswagen and Porsche, which said on May 6 that they were in talks to merge, were at loggerheads about ways to cut Porsche’s 10 billion euros ($12.8 billion) of debt. Wiedeking agreed today to step down after 16 years as CEO. Porsche, controlled by the Piech and Porsche families, owns about 51 percent in VW, Europe’s No. 1 carmaker, while the German state of Lower Saxony is the second-largest shareholder with a 20 percent stake.

“They have been doing a lot of projects together, it’s a good move for both,” said Arndt Ellinghorst, an analyst at Credit Suisse Group AG in London. Also, “they are bringing together the two companies that started together.”

Wiedeking choked up after being greeted by resounding applause and horns from hundreds of workers that had gathered in the rain at Porsche’s main Stuttgart plant. He told workers that he had come to the conclusion over the weekend that it was time for him to leave and outlined plans to donate half of his 50 million-euro severance pay to a foundation for Porsche workers.

‘Damn Hard Speech’

“You make the speech damn hard,” he said. “Without you, I wouldn’t have been anything.”

Michael Macht, who will succeed Wiedeking as head of Porsche’s carmaking operations, vowed to continue the strategy established under Wiedeking while family owner Wolfgang Porsche was holding back tears as he ended his address and hugged Wiedeking several times.

Porsche’s headquarters will remain in Stuttgart, Lower Saxony Prime Minister Christian Wulff said after a meeting of VW’s supervisory board. Qatar will be a “reliable” shareholder, he said. The carmakers will work on details of the integration in the next three weeks, Winterkorn said.

Qatar will receive the 17 percent VW stake as part of a transaction with Porsche to take over options that can be converted into VW shares, a person familiar with the situation said earlier. The Persian Gulf state will at the same time provide a 750 million-euro loan to Porsche, said the person, who asked not to be named because the discussions are private.

Porsche’s Transformation

Wiedeking had opposed selling Porsche’s automotive unit to VW. Almost bankrupt when he took over as CEO in August 1993, Wiedeking transformed Porsche into the automaker with the highest profit margins for the industry. In 2005, he began using cash from the luxury-vehicle business to acquire shares of VW, a company that builds more cars in a week than Porsche does in a year.

The David-bests-Goliath tactics worked until Wiedeking’s efforts to topple power structures at VW failed and the economic crisis thinned profits and spooked banks. When debt spiraled out of control, he was forced turn to the company’s family owners, the Piechs and Porsches, for capital and to court Qatar for an investment. A spokesman at the Qatar Investment Authority declined to comment when reached by Bloomberg today.

Wiedeking’s departure was announced after a meeting of Porsche’s supervisory board. At the same gathering, directors supported Porsche’s plan for a capital increase of at least 5 billion euros.

Wiedeking’s Successor

Macht, head of production, was named to run Porsche’s operating unit. The 48-year-old Macht joined Porsche in 1990 and became an executive board member in 1998. Macht graduated from the Stuttgart Technical College in 1986 with a degree in mechanical engineering. Thomas Edig, board member in charge of human resources, will become Macht’s deputy.

When Wiedeking took the helm in 1993, Porsche posted a net loss of 122 million euros on sales of 978 million euros. Last year, profit was 6.29 billion euros, boosted by gains from the VW options, while sales reached 7.47 billion euros, compared with 113.8 billion at Volkswagen.

Porsche, which has made more money on every car it sells than any other automaker since at least 2002, generated an operating margin of 13 percent last year, compared with 1.5 percent at BMW AG and VW’s 5.9 percent, data compiled by Bloomberg show.

Japanese Tactics

Wiedeking streamlined production with the help of experts from Toyota Motor Corp. to have components delivered on time and in the order of assembly. He focused Porsche on the iconic 911 sports car and then added the Boxster roadster in 1996 and Cayenne sport-utility vehicle in 2002 to broaden the brand’s appeal. The costs were kept low by outsourcing Boxster production to Valmet Corp. in Finland and partnering with Volkswagen on development and parts for the Cayenne.

Wiedeking was “the best manager”, said Kevin, a 17-year-old trainee at Porsche’s main plant in Stuttgart. “He lived for Porsche” and his departure marks “a black day.”

US existing home sales rise in sign housing healing

2009-07-23T09:37:00.001-07:00

WASHINGTON (Reuters) - U.S. existing home sales notched their third monthly rise in June in a sign the housing industry was slowly healing, but new jobless claims rose last week in a move distorted by unusual seasonal layoffs.

U.S. stocks pushed sharply higher on the home sales data, with the Dow Jones industrial average adding over 100 points as investors took heart that a turn in the housing market would underwrite a broader economic recovery this year.

The National Association of Realtors said on Thursday that sales in June rose 3.6 percent to an annual rate of 4.89 million units, from a downwardly revised 4.72 million pace in May. Last month's reading compared with forecasts for a 4.84 million unit annual pace.

The NAR said it was the first time the industry had experienced three straight months of gain since early 2004, providing hope the higher data indicate an underlying trend.

"Overall, the news is positive. We have increasing home sales for the third straight month, declining inventory and although prices fell, they declined at a less steep pace," Lawrence Yun, NAR chief economist, told a press conference.

"The housing market is healing after four years of recession," he said.

The inventory of existing homes for sale declined 0.7 percent to 3.82 million in June. The median national home price fell 15.4 percent to $181,800 from the same period a year ago. But this was up 4.0 percent compared with the month before and the highest reading since October.

"The months supply of home for resale is coming down and home prices are falling at a slower pace overall providing more evidence that the housing market is stabilizing," said Torsten Slok, a senior economist at Deutsche Bank in New York.

NAR's Yun said that the inventory of previously owned homes for sale represented 9.4 months' supply at the current pace of sales, down from 9.8 months' in May.

This was still above the historic average of six months' supply, which Yun said was consistent with a national price appreciation of around 4.0 percent. Seven to eight months' supply would be consistent with no change in median prices, he said.

In a separate release on Thursday, the U.S. Labor Department said that seasonally adjusted initial claims rose 30,000 to 554,000 in the week ended July 18, which was roughly in line with analyst forecasts.

But a department official noted that the data in July was being distorted by an unusual pattern of seasonal layoffs, that he expects will fade in the next week or so.

The Labor official said there were more layoffs than anticipated based on past experience in adjusted claims in the automotive sector and elsewhere in manufacturing, following two weeks when there had been fewer layoffs.

So-called continued claims of people still on jobless aid after an initial week of benefits fell by 88,000 to 6.225 million in the week ended July 11, the latest for which data is available. Analysts had expected continued claims to be 6.32 million.

The 'seasonal factors' the department uses to adjust the data to provide a better sense of the underlying trends had expected a large decrease in initial claims. Actual claims fell by less than expected, in part because they had risen by less than anticipated in the previous two weeks, and this amplified the rise.

In another gauge of labor market health, the 4-week moving average for new claims fell to 566,000 from 585,000 the previous week. This measure is closely watched because it is supposed to iron out weekly volatility. It has now fallen for four straight weeks.

"Right now it is difficult to say until we are out of this four-week period in July where things really are, but my gut feeling is things are improving but not at a rapid pace," said Rudy Narvas, a senior analyst at 4cast ltd in New York.

Inside the Meltdown: Financial Ruin and the Race to Contain It

2009-07-21T12:04:00.000-07:00

A year ago it would have been hard to imagine a book about the Federal Reserve and Treasury Department making it onto people’s must-read summer reading lists. But the financial calamities of last autumn put the global economy on the brink of disaster and led to continuing fiscal woes. Understanding what happened has become vitally important not just for bankers and economists, but for everyone affected by the fallout, which means ... well, just about everyone.

For all of us then, David Wessel’s new book “In Fed We Trust” is essential, lucid — and, it turns out, riveting — reading.

In these pages Mr. Wessel, the economics editor of The Wall Street Journal, chronicles how the Fed chairman Ben S. Bernanke, with Henry M. Paulson Jr., then the Treasury secretary, and a small group of associates, frantically worked to shore up the United States economy, capturing how this handful of people — “overwhelmed, exhausted, beseeched, besieged, constantly second-guessed” — tried to catch and stabilize one toppling fiscal domino after the next.

In this volume Mr. Wessel uses his narrative gifts and a plethora of sources to give readers a vivid, highly immediate sense of what transpired in last-minute, high-pressure, seat-of-their-pants meetings in Washington and New York while placing these events in a broader historical context. He examines the Fed’s increasingly important (and increasingly debated) role as an economic first responder, looks at how personality and personal philosophy can inform policy making and offers a concise explication of the causes of what he calls “The Great Panic.”

At the same time Mr. Wessel assesses the efficacy of Fed and Treasury moves — which, in the heat of battle, were often improvised and contradictory — and offers a telling analysis of decisions made on critical matters like the implosion and rescue of Bear Stearns in March 2008, the failure of Lehman Brothers in September 2008 (after the Fed and Treasury Department declined to commit public funds to support the institution), the bailout of A.I.G., and Congressional passage in October of a $700 billion economic bailout package.

His overall assessment: “Every time officials at the Treasury or the Fed thought they finally had gotten ahead of the Great Panic, they turned out to be insufficiently pessimistic. This would be a distinguishing characteristic of this chapter in American economic history: even when officials thought they were planning for the worst-case scenario, they weren’t.”

Three policy makers in particular receive low scores from Mr. Wessel. He argues that Mr. Paulson’s abrupt changes of course and failure to understand “the theater” of crisis management hurt his credibility and undermined public confidence. He says that President George W. Bush was “largely a spectator” to “the biggest threat to American prosperity in a generation” possibly because he knew how unpopular he was and figured “he would make Paulson’s job tougher if he appeared to be calling the shots” or because the Bush White House, “stumbling through its last few months, was simply exhausted and understaffed.” And he takes the former Fed chairman Alan Greenspan to task for allowing economic conditions to develop that fueled the credit crisis in the first place.

Mr. Wessel argues that the Greenspan Fed “kept interest rates too low for too long,” missed warning signs that subprime mortgages were a growing problem and was reluctant to use its powers to restrain subprime lending. He adds that the former Fed chairman, revered during his tenure as an economic wise man, made the incorrect assumption that a national decline in house prices was extremely unlikely and “put too much faith in markets,” failing to use the Fed’s “regulatory clout and rhetoric to restrain the shortsighted, excessively ebullient players in financial markets and to at least try to resist the worst of the abuses in the subprime lending market.”

Mr. Greenspan’s successor, Mr. Bernanke, along with Mr. Paulson and Timothy F. Geithner, then the president of the Federal Reserve Bank of New York (and now President Obama’s Treasury secretary), Mr. Wessel says, all “had a gut sense that the U.S. economy was overdue for a financial crisis of some sort” before the catastrophic events of last fall, but “no one at the Fed” rang “the gong and warned investors, lenders, business executives, and consumers that years of easy credit even for risky borrowers, placid markets, and shared optimism were unsustainable.”

While Mr. Wessel suggests that Mr. Bernanke was initially timid in his response to brewing problems, he gives the Fed chief credit for being “creative and bold” once he realized the risks, pushing “the Fed to places it had never gone before or at least to places it hadn’t visited since the Great Depression.” A conscientious student of that calamity, Mr. Bernanke was determined, Mr. Wessel writes, that “he would not go down in history as the chairman of the Federal Reserve who dithered and delayed during a financial panic that threatened American prosperity,” and he “adopted a new mantra: whatever it takes.”

In this book Mr. Geithner emerges as a usually cool deliberator, admired by his colleagues at the Fed for his “capacity to size up a situation and lay out options coherently and calmly.” His experience dealing with the United States government’s response to the Mexican and Asian financial crises of the 1990s, Mr. Wessel writes, taught him “a lot about crisis management and an enduring lesson: smart people solve crises one at a time and worry about dealing with unintended consequences tomorrow.”

As for Mr. Paulson, Mr. Wessel describes him as “a deal maker”: “Like many on Wall Street, he could shout ‘No! No!’ before, citing changed circumstances, abruptly saying ‘Yes!’ The approach provided flexibility in negotiating the best business deal; it didn’t build lasting credibility in Washington.” In contrast, Mr. Wessel says, Mr. Geithner understood “that a tough bargaining stance in a room full of investment bankers made sense, but that the press, the markets, and foreign officials abroad couldn’t distinguish a bargaining position from a policy position.”

In Mr. Wessel’s view the collapse of Lehman Brothers on Sept. 14 “caused — or coincided with — so much financial turmoil in large part because of the lack of a consistent story.” It was unclear whether the government let Lehman fall “to teach Wall Street a lesson” about moral hazard or whether it was “legally powerless to save it.” It was unclear whether the earlier rescue of Bear Stearns was a one-time thing and whether the government would intervene to save other major financial firms teetering on the brink.

Mr. Wessel quotes Alan Blinder, a Princeton economist and former Fed vice chairman: “People in the market often say they can make money under any set of rules, as long as they know what they are. Coming just six months after Bear’s rescue, the Lehman decision tossed the presumed rulebook out the window. If Bear was too big to fail, how could Lehman, at twice its size, not be? If Bear was too entangled to fail, why was Lehman not? After Lehman went over the cliff, no financial institution seemed safe. So lending froze, and the economy sank like a stone. It was a colossal error, and many people said so at the time.”

Although an enormous amount of recent attention has been understandably focused on why the government let Lehman Brothers go under, an equal amount of attention might understandably be focused on why Lehman — and other firms like Bear Stearns and A.I.G. — were ever allowed to engage in the sort of reckless, illogical, self-destructive gambling that turned them from Wall Street behemoths into combustible houses of cards in the first place.

Why, in an increasingly interconnected and globalized world where financial woes can spread virally like swine flu, was there so little regulation of derivatives, the complex financial instruments that the financier Felix Rohatyn once described as “financial hydrogen bombs”? Why was there so little oversight of the rating agencies that drastically underrated the risk of such flammable, infectious products? Why did the top management of these companies overleverage their firms, why did they willfully ignore the warnings of experts, and why did they fail to take quick, corrective action when the dangers their companies faced became self-evident?

Such questions are all raised and italicized by “A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers” by Lawrence G. McDonald, a former vice president of that firm, with an assist from the writer Patrick Robinson. Mr. McDonald approaches the story not as a journalist but as a former employee, a member of a group of dissidents who believed that Richard S. Fuld Jr., the company’s chairman and chief executive, and its president, Joseph M. Gregory, were leading Lehman off a cliff.

Mr. Fuld and Mr. Gregory, Mr. McDonald contends, ignored the warnings of three of the company’s “cleverest financial brains”: “Mike Gelband, our global head of fixed income, Alex Kirk, global head of distressed trading research and sales, and Larry McCarthy, head of distressed-bond trading.”

“Each and every one of them laid it out, from way back in 2005,” Mr. McDonald writes, “that the real estate market was living on borrowed time and that Lehman Brothers was headed directly for the biggest subprime iceberg ever seen, and with the wrong men on the bridge. Dick and Joe turned their backs all three times. It was probably the worst triple since St. Peter denied Christ.”

Mr. McDonald depicts Mr. Fuld and Mr. Gregory as out of touch and in denial: arrogant, reckless, eager to embrace “risk, more risk, and if necessary bigger risks” in pursuit of short-term profits, willing to borrow more and more money (on the way to leveraging the firm to “44 times our value”) in order to buy commercial and residential real estate at the top of the market, even though one of his lieutenants had warned in 2005 that the housing market was on steroids and headed for serious trouble.

At times Mr. McDonald’s rage or Mr. Robinson’s penchant for melodrama leads to some hyperbolic writing. Mr. Fuld, for instance, comes across as a sort of Lord Voldemort, a “strange wraithlike presence,” an “oddball demigod who ruled everyone’s lives.”

Over all, however, Mr. McDonald’s book gives the reader a visceral sense of what it was like to work at Lehman Brothers and the fateful decisions and events that led to the company’s death spiral — decisions that turned the once-proud firm into a grim illustration, in the words of one of the author’s colleagues, of the “colossal failure of common sense.”

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AIG plans public offering of life insurance unit

2009-07-17T11:39:00.000-07:00

Despite rumors it may be for sale, American International Group announced it is accelerating steps to position its American Life Insurance Co. as an independent entity, seeking an initial public offering and public listing.

In March, the insurer said it would spin off ALICO, with its board of directors and management team separate from the one at AIG.

In a statement, AIG Chairman and CEO Edward Liddy noted that the separation of ALICO from the parent insurer could help the company repay billions it has received in federal loans and investments resulting from the company’s failing operation.

“We continue to consider all strategic options through a robust, structured and disciplined process,” Liddy said. “At this stage, we expect that a public offering for ALICO will be beneficial to all stakeholders, including U.S. taxpayers, policyholders, employees and distribution partners.”

AIG’s announcement comes amidst published reports that the insurer is continuing talks with MetLife regarding the sale of the life insurance unit. New York-based MetLife, recently announced plans to realign its institutional and individual businesses, as well as its Auto & Home unit, under one organization.

ALICO operates in 45 countries with 19 million customers, with more than 40,000 agents and distribution partners and assets under management of more than $89 billion, according to AIG.

“[This] announcement represents a roadmap for our independence,” Rodney O. Martin Jr., chairman and CEO of ALICO, said. “Our ability to weather current economic conditions across all of our markets demonstrates the strength of our operations, diversification of our platform, confidence of our customers and support of our distribution partners.”

Madonna Tour Set Collapses, Killing One

2009-07-16T11:15:00.002-07:00

At least one person is dead and seven injured after a portion of Madonna's "Sticky and Sweet" stage set collapsed Thursday in Marseilles France, according to French police.

"I am devastated to have just received this tragic news," the singer said in a statement Thursday through her spokesperson Liz Rosenberg. "My prayers go out to those who were injured and their families along with my deepest sympathy to all those affected by this heartbreaking news."

The accident occurred during construction of the stage for Madonna's show at the Velodrome Stadium at 5:15 p.m. local time (11:15 a.m. EST) when the roof accidentally fell in.

Police and fire officials closed the stadium to try rescue those still trapped and the concert has been cancelled.

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Microsoft Retail Stores to Open Near Apple Stores

2009-07-16T11:15:00.001-07:00

Microsoft looks to force more retail competition with Apple

Two of the most recognizable brands in the computer world are Apple and Microsoft. The rivalry between the two firms goes back to the foundations of both companies and the current crop of commercials both firms are airing each attack the other.

Microsoft is taking the fight to venues other than TV with the announcement that new retail stores are coming and some of them will be in close proximity to Apple stores. The announcement came during a keynote speech at the Microsoft Worldwide Partner Conference 2009 that was held on July 15. Microsoft COO Kevin Tuner said during the keynote that the company would be opening retail stores to take advantage of customer demand for products at the retail level.

A Microsoft Spokesperson wrote in a blog post, "As we progress on our retail strategy there will be scenarios where we have stores in proximity to Apple. We are on track to open stores in the Fall timeframe. Beyond that we have no additional details to share."

Turner is particularly well suited to the task of setting up a Microsoft retail presence. He comes from Wal-Mart stores where he started as a cashier and worked his way up to CEO of Sam's Club stores. Microsoft has also hired David Porter in the last few months, another retail focused executive.

When Porter was hired Microsoft said, "Defining the time frame, locations and specifics for planned Microsoft-branded retail stores will be Porter's first order of business. The purpose of opening these stores is to create deeper engagement with consumers and continue to learn first-hand about what they want and how they buy."

EWeek quotes Turner from the WPC 2009 event saying, "And we're going to showcase this opportunity of Windows simplicity, choice, value, and partners. And stay tuned, because we're going to have some retail stores opened up that are opened up right next door to Apple stores this fall. Stay tuned, just stay tuned. "

"Every single thing we learn in those Microsoft stores that we put on the street we're going to share that openly and transparently with all of our retail partners so that they can do the exact same thing. And we're going to get that customer feedback directly. We're in the game for the long-term here. And I know something about retail, and we've hired and incredible team to do an incredible job on retail."

Turner also spoke at the conference about the Laptop Hunter retail ads that the company has been running. He pointed out that the ads are unscripted and are working. Evidence that the ads are putting pressure on Apple according to Turner came in the form of a phone call.

Turner says that Microsoft received a call from Apple legal saying, "Hey, you need to stop running those ads, we lowered our prices.' They took like $100 off or something. It was the greatest single phone call in the history that I've ever taken in business. I did cartwheels down the hallway. At first I said, 'Is this a joke? Who are you?' Not understanding what an opportunity. And so we're just going to keep running them and running them and running them."

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Symptoms Of Alzheimer's May Come In Your 50s

2009-07-16T11:14:00.001-07:00

July 16, 2009—

For people with a common genetic variation, researchers have discovered signs of the possible onset of Alzheimer's before a patient would be clinically diagnosed by a doctor.

In people with the ApoE4 gene variation, one previously implicated as affecting the likelihood of Alzheimer's, researchers have been able to pinpoint some signs of memory loss beginning in the person's mid- to late-50s -- without the patient having full-blown Alzheimer's disease or dementia.

"[One could argue] we really captured for the first time the onset of Alzheimer's disease," explained Dr. Richard Caselli, a neurologist at the Mayo Clinic in Scottsdale, Ariz.

"What's passing as normal aging itself correlates with the most common genetic risk factor for Alzheimer's disease," he said, adding that the symptoms are noticeable in a clinical setting, but not in everyday life.

"It's not the sort of thing that you can look at somebody or they can look at themselves and know."

Researchers caution that when in interpreting the findings, one should keep in mind that people who had shown some memory loss were still functioning normally and having the gene did not impair anyone at an earlier age.

For the study, researchers followed and looked at data for 815 subjects, 317 of whom had the ApoE4 variant. They administered a variety of neuropsychological tests to the patients and found that memory was affected in some patients with the ApoE4 gene as they reached their late 50s and into their 60s.

The study results are published in the most recent issue of the New England Journal of Medicine.

"You can start to see cognitive impairment, memory decline, in ApoE4 carriers early, although they're not clinically diagnosed with dementia or mild cognitive impairment," said Rudy Tanzi, director of the genetics and aging unit at Massachusetts General Hospital. "I think it's important that this study has elegantly confirmed what many of us have been dancing around for years."

But researchers caution that ApoE4 is not a gene that by itself determines the fate of a person's brain.

"ApoE4 is not sufficient to give you the disease. It works together with not only your lifestyle and environmental factors&but it works together with other genetic factors, some of which confirm risk&but some of which confirm protection," said Tanzi.

Dr. Richard Lipton, professor and vice chair of neurology at the Albert Einstein College of Medicine concurred.

"Not everyone who carries the E4 gene develops Alzheimer's disease," he wrote in an e-mail to ABC News. "We have 100-year-olds in one of our studies who carry the gene and have no evidence of memory decline. And not everyone who develops Alzheimer's disease has an E4 gene; only about half of people who develop Alzheimer's disease carry an E4 gene."

Genetic Testing for an Alzheimer's Future?

While another Alzheimer's study published in the most recent New England Journal issue found patients who underwent testing for the ApoE4 gene and received counseling handled it well, researchers generally advised against getting such a genetic test.

"I do not recommend that people go out and have this test," said Caselli. "I think it's an important tool for research right now, but as of this moment there isn't any routine benefit people would get from this information.

"There's many different considerations&unless there's a compelling reason a person should know [such as research], then no, I would not recommend that people go out and get this test."

Caselli noted that a number of problems could arise from getting the test, in the forms of employer discrimination, insurance discrimination, and children who might learn of an increased risk to themselves.

"I argue that until we have the entire set of genetic risk factors for Alzheimer's∧ look a them as a group, in the end you're cumulative risk involves hundreds, if not thousands of risk factors," said Tanzi, whose own research has focused on finding all of the genes connected with Alzheimer's.

He notes, however, that a study such as this could be easily misinterpreted.

"You don't want to risk that kind of discrimination when it's not really warranted. It's not warranted," Tanzi said. "Just because you carry an E4, you're not cognitively different from anyone else. Importantly, there's no correlation between ApoE4 and intellectual achievement.

"There is no effect on E4 as measure by your occupation or educational success or outcomes. It's just saying the disease is starting before you see symptoms, but it's pretty close to when the symptoms occur."

The Next Step

Caselli said one effect of this study is that it adds to the knowledge that Alzheimer's might affect the elderly, but does not begin then.

"The age group that we're talking about is pre-retirement," he said.

While people may typically think of Alzheiemr's as an "old person's disease," he said, "actually, the earliest stages of it happen where we're still employed.

"It's important to keep in mind that this could start to have an effect on people in very intellectually demanding jobs as they age, as they try to remain employed."

Most research going on, Caselli said, is targeted at people who are much older. He believes that as we move towards experimental trials for prevention, "we really have to shift the spotlight to a younger age."

But while the disease might have its roots in that age group, he said, it does not generally have its symptoms then.

"I'm hoping that we don't generate a lot of panic in a lot of people in this age group," said Caselli.

"The dangerous way to look at it is to say people who carry E4 are cognitively deficient, even earlier in life," said Tanzi. "You don't want to invite discrimination when they're in the prime of their lives, when they're just fine."

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All feared dead as Iranian airliner crashes with 168 aboard

2009-07-15T10:14:00.000-07:00

Witnesses say the Russian-built plane was on fire when it hit the ground, 16 minutes after departing Tehran, bound for Armenia.

By Borzou Daragahi
8:28 AM PDT, July 15, 2009

Reporting from Beirut -- A flaming commercial airliner carrying 168 people crashed in northwestern Iran today and all on board were believed to be dead, witnesses and state media reported.

Caspian Airways Flight 7908, headed from Tehran to the Armenian capital of Yerevan, crashed minutes before noon in the Takestan region of Iran's Qazvin province, media reported.

Video footage of the crash site broadcast on state television showed a huge crevice created by the plane, a Russian-built TU-154 that appeared to have splintered on impact.

"Evidence shows that the plane has broken into pieces and all the passengers on board are feared dead," Gen. Massoud Jafari-Nasab told the official Islamic Republic News Agency.

The flight crashed 16 minutes after departure, Jafari-Nasab told the semi-official Fars news agency. Reza Jafarzadeh, spokesman for the state aviation company, told Iranian television that 153 passengers and 15 crew members were aboard.

Witnesses told the Iranian news agency the plane was on fire as it hit the ground.

"Its wheels were out and there was fire coming from the lower parts," Abul-Fazel Idaji told Fars. "Moments later the plane hit the ground and broke into pieces."

Among those presumed dead were 10 members of the Iranian national youth judo squad traveling to Yerevan for a summer training camp.

"We need to investigate all the factors contributing to the incident before giving further details on how the incident took place and making an expert comment," Jafarzadeh said.

Iran's Armenian ethnic minority has strengthened its ties to neighboring Armenia in recent years. Tehran and Yerevan have strong commercial and political ties.

Armenian President Serzh Sargsyan cut short a trip to the provinces and returned to the capital as the crash was announced on public television. Yerevan's civil aviation department set up a headquarters to begin a probe of the crash, the organization's leader, Nelly Cherchinyan, told the Mediamax news agency.

In Yerevan, the deputy head of the Armenian civil aviation organization told reporters the pilot attempted an emergency landing after an engine caught fire.

But an unnamed airline representatives told Armenian television that officials were still trying to assess the cause of the crash and sort out the names and nationalities of the passengers.

"The information regarding citizenship is being clarified with the help of border guards in Tehran," the representative said. "There is nothing [to report] on the reasons [for the crash], nothing; no theories, no statements."

Caspian, a 16-year-old commercial airline, operates within Iran and to Syria, Turkey, Ukraine, the United Arab Emirates and Armenia, using Russian-made Tupolev jets that many Iranians fear are prone to malfunction.

Experts described the TU-154 plane as the Russian equivalent of the Boeing 727. The U.S. has long maintained sanctions on the sale of commercial aircraft and plane parts to Iran, a posture that many Iranians say puts the lives of ordinary travelers at risk.

GETTING PERSONAL: UBS Tax Case A Ride For Account Holders

2009-07-13T11:10:00.000-07:00

NEW YORK (Dow Jones)--It's a roller coaster ride for Americans with Swiss bank accounts who are caught up in the tax evasion case against UBS AG.

Depending on what they have already told the Internal Revenue Service about their accounts, individuals are mostly at ease or deeply nervous about the prospect of civil and criminal penalties.

And, many are turning to tax advisers for help decoding the latest developments in a case that has taken dramatic turns in recent days.

Over the weekend, the U.S. Justice Department, the Swiss government and UBS revealed they are in talks to settle the case and asked a federal court in Miami to delay a highly anticipated hearing set for Monday. This followed a week of high-profile maneuvers by UBS and the Swiss government.

"It is King Kong versus Godzilla and they decided to take a time out," says Bryan Skarlatos, a partner at New York law firm Kostelanetz & Fink.

The IRS crackdown, months-long, has targeted people who hold U.S. securities in offshore accounts but don't declare the accounts or pay taxes on income from the securities.

Scott D. Michel, an attorney at Caplin & Drysdale in Washington, D.C., says many clients are trying to sort through all the back and forth. The message to be taken from the most recent news, he adds: Any account holder who hasn't already come forward under a voluntary disclosure program at the IRS should do so immediately. The program, which has attracted many individuals since the tax evasion case began months ago, can offer participants leniency.

If UBS discloses names and information as part of a settlement, the IRS will "generally not accept a voluntary disclosure from anyone on that list," says Michel.

Further, he adds, a settlement in this case "could come any day and be accompanied by disclosure." So, unless the IRS gives everyone until Sept. 23, the expiration date for a settlement initiative now in place, the window for voluntary disclosures may be closing fast for many.

Skarlatos says that, generally, account holders who have already made a clean breast to the IRS are sleeping soundly; others, who haven't yet come forward, are on tenterhooks.

Most people with UBS accounts are very concerned, Skarlatos adds, while those with other Swiss bank accounts are less worried because they figure they still have time to come in even after the UBS case settles.

"It is interesting to see how people handle the risks involved," says Skarlatos. "Some can live with the uncertainty and others get very, very scared."

In February, the DOJ sued UBS for access to some 52,000 accounts belonging to its U.S. clients, widening a probe that initially had targeted an estimated 19,000 accounts.

A day earlier, the agency announced a settlement with UBS in which the bank agreed to pay $780 million in fines and give names and account information for a group of clients to avoid prosecution. Swiss authorities said that group numbers between 250 and 300 clients.

Last week, some tax attorney predicted federal prosecutors would take a hard line at the (now delayed) hearing on Monday. The U.S. is likely to make it clear it expects UBS to comply with the summons, they said, and is prepared to lower the boom on the company if it doesn't.

Indeed, the Justice Department in court papers on Sunday said if the court orders UBS to comply but the bank doesn't, it would ask the court to declare UBS in contempt and to impose unspecified sanctions, The Wall Street Journal reported.

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Facebook Said to Get $6.5 Billion Valuation for Employee Shares

2009-07-13T11:08:00.000-07:00

July 13 (Bloomberg) -- Facebook Inc.’s employees that plan to sell their stock under an agreement with Digital Sky Technologies will receive $14.77 a share, putting the company’s value at $6.5 billion, according to a person familiar with the matter.

Digital Sky Technologies will buy as much as $100 million of Facebook common stock from eligible current and former employees, said the person, who declined to be identified because the matter is confidential.

Digital Sky Technologies, a Russian investment firm, made a $200 million investment in Facebook in May, valuing the Palo Alto, California-based company at $10 billion. That investment consisted of preferred shares. Employees typically hold common shares, rather than preferred stock.

“This is recognition of Facebook’s growth and progress towards making the world more open and connected,” Facebook Chief Executive Officer Mark Zuckerberg said in an e-mailed statement.

AIG bonuses: $235 million to go

2009-07-10T11:39:00.000-07:00

Troubled insurer AIG has asked the government's 'pay czar' to review hundreds of millions more in bonus payments to employees of its most crippled division.

NEW YORK (CNNMoney.com) -- Bailed-out insurer AIG again found itself in the crosshairs of bonus rage on Friday over its plans to pay $2.4 million in executive bonuses next week.

But the larger issue is how AIG will deal with its obligation to pay roughly $235 million still owed to employees of its crippled financial products division.

The contentious issue of the bonuses resurfaced late Thursday after The Washington Post reported that AIG was seeking the government's consent to make a scheduled performance bonus payment of $2.4 million to 43 of its top-ranking executives.

But there's still the $235 million in retention bonuses owed to about 400 employees of AIG's Financial Products (FP) division that the company has to deal with. Public furor erupted in March when it was revealed that AIG had paid out $165 million of retention bonuses to those employees.

AIG put the issue before Kenneth Feinberg, the Obama administration's pay czar. Feinberg is tasked with reviewing bonuses and retirement packages for the 100 highest-paid executives at AIG (AIG, Fortune 500), Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), General Motors, GMAC, Chrysler and the now defunct Chrysler Financial.

A source close to the matter said Feinberg will be reviewing both the $2.4 million, as well as the much more controversial $235 million that is scheduled to be paid out to AIG-FP employees next year.

AIG-FP is the division that wrote insurance contracts on shaky derivatives that were at the root of the company's near-collapse. In September, the government bailed out AIG with funds now worth up to $182 billion.

The $165 million of bonus payments in March was the second installment of a larger, $454 million retention plan for the FP employees. The first -- $50 million -- was made in 2008, before the company was bailed out by the government.

After the uproar in March, FP employees returned about a third of their bonuses, and a dozen workers resigned. The reaction from the public and Congress consumed AIG, Treasury and Federal Reserve officials, and called into question what to do with the last payment that is scheduled to go out in 2010.

Feinberg only has to review payments that were contracted beginning in 2009, so the $235 million in FP payments -- contracted in 2008 -- do not officially fall under his purview. Still, a source close to the matter said that AIG wants Feinberg to take a look at those bonuses to make sure the government is completely comfortable with the company's compensation plan.

Feinberg was also asked to review the $2.4 million in performance bonuses set to be paid out to 43 of AIG's top executives. That is part of a larger bonus pool of $121 million, the vast majority of which was paid out in March to the company's most senior executives.

But with pressure mounting from Congress and the Obama administration, AIG restructured its bonus payments for the top 50 executives. The top seven AIG executives opted to forgo their bonuses. The other 43, set to receive $9.6 million in March, took home only half -- $4.8 million -- in March, and are set to receive $2.4 million July 15 and another $2.4 million Sept. 15.

Experts say asking Feinberg to review the bonuses takes the pressure off of AIG and turns Feinberg into a punching bag for criticism. Outgoing AIG Chief Executive Edward Liddy has said on many occasions that the public outrage about the bonuses has limited the company's ability to move forward with its plan to repay the government.

"If you have the government OK the plan, it makes AIG look less like they're flushing taxpayer money down the toilet," said Julie Grandstaff, managing director of insurance consultant StanCorp Investment Advisers. "There's no way the poor guy who is reviewing all of this can win."

A Treasury spokesman would not comment directly on AIG's bonuses, but suggested Feinberg can review those payments and the FP bonuses if he chooses, even though they were contracted in 2008, saying, "Mr. Feinberg has broad authority to make sure that compensation at those [seven] firms strikes an appropriate balance."

"Companies will need to convince Mr. Feinberg that they have struck the right balance to discourage excessive risk taking and reward performance for their top executives," the spokesman added.

AIG declined to comment for this article.

Prof. Elizabeth Warren, chair of the Congressional Oversight Panel created to oversee the bailout, told CNNMoney.com that AIG's lack of comment spoke to a larger disconnect between the insurer and the American public.

"If they're not commenting, that makes me very nervous, because what I would like to hear is 'no, that report is a mistake,'" Warren said. "Taxpayers are under enormous stress. There's going to be trouble over this."

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Just the facts on life insurance

2009-07-09T09:19:00.000-07:00

When buying insurance, you can be overwhelmed by an information avalanche. To protect your future from poor choices today, organize your insurance search by reaching back to grade school and employing the use of the 5 W's: Who? What? Where? When? Why? and How much?

Who?

The classic argument to avoid life insurance runs, "If I die, why do I need money?" You don't -- but your family, your business or your favorite charity might. So anyone with dependents, human or otherwise, might need life insurance.

Of course, if you don't need to protect anyone else, insurance is not a wise way to spend money.

According to Steve Kramer, who has served on the members' insurance and benefits committee of the California Society of Certified Public Accountants for 27 years, this group not needing insurance includes people who have raised and educated children now living independently, folks who have accumulated sufficient assets to support a surviving spouse and the single elderly (and not-so-elderly) population.

What?

People approach life insurance with predisposed notions, says Rory Roniger, CLU, ChFC, head of the financial services arm of the Eustis Insurance Group in Metairie, La.

"They might be oriented to term insurance, yet don't have a good argument as to why," he says.

"Any kind of insurance is a contract with requirements on both sides," says Dave Evans, CFP. "Unfortunately, too many people think life insurance is a commodity, like going to the grocery store and picking up a piece of fruit to judge."

"Term" insurance forms the base of every life insurance policy. Think of it as renting a safety net: The owner pays a fixed premium toward a concrete payoff over a specific time. If you die during this period, the insurance company pays the promised amount. When the policy reaches its deadline, the coverage vanishes.

Lawrence Wentz, who owns the Kindt, Kaye and Wentz agency near Philadelphia, says that contracts aren't that cut and dry. Many companies sell term policies that guarantee a rate for only 10 years of the protection. A few providers guarantee just a year at the starter rate.

After the secured period ends, the company can charge one of several rates filed with the state insurance commissions.

Speaking of rates, start by assuming the initial quoted rate for your age and life circumstances is too low.

"I've placed people of all age ranges, and not many get this thoroughbred rate after the physical exam and application submission," Wentz says.

The good news: Changing health status during your term limits doesn't affect premiums or payoff. The rub comes when that contract ends. Many companies allow you to buy another policy, but at higher rates to balance your changed health status.

Some insurers offer convertible policies that allow a return client to take out another policy at the rate of a healthy person, but you pay a higher premium for the privilege.

Insurance companies also offer three variations of permanent life insurance -- that is, insurance that covers you for your entire life.

Whole life offers term insurance's set payoff for a set premium, except this policy doesn't come with an ending date. You'll pay the premium for the rest of your life, unless you decide to cash in and receive the cash value as a lump sum.

According to the Life and Health Insurance Foundation for Education, "the cash value of a policy is different from the policy's face amount. The face amount is the money that will be paid at death or policy maturity. Cash value is the amount available if you surrender a policy before its maturity or your death."

With universal life, the insurance company separates the investment and death benefit portions, socking your investment dollars into its choice of bonds, mortgages and money market funds. Then your investment fund pays for the cost of the set death benefit. And, according to LIFE, no matter how badly the investments pan out, the insurance company guarantees you a minimum return.

You, as the policyholder, can change the premiums and death benefits to suit your current budget, so this appeals to younger crowds.

Finally, if you buy variable life, the death benefit payoff depends on your success in picking investment opportunities with the money (although the insurance company does cough up a guaranteed minimum death benefit at your death if you screw up too badly). These policies must be registered with the U.S. Securities and Exchange Commission.

According to Wentz, most Americans need a combination of these products to adequately protect their assets.

Where?

Approximately 90 percent of life insurance is sold at the kitchen table; a growing 7 percent to 10 percent is sold over the Internet, according to AccuQuote's statistics. In either case, caution should prevail.

"This is not something you want to screw up and leave someone in the lurch," Evans says.

First, do you buy through an independent agent or company representative? Independents contend that company representatives find motivation in the month's sales contest to win a Caribbean cruise.

Calling the company directly also may add to your responsibilities, notes Cheryl Gentry, vice president of individual marketing support at American United Life Insurance Company in Indianapolis.

"You usually get a reduced cost in that product because you're asked to orchestrate the medical exam, follow up with filings and handle your own account," she says. AUL works through agents.

Agents, whether company-specific or lone rangers, should provide customer service that walks you through annual statements, untangles premium payment issues and interprets fine print. Good agents can find companies that do things like interpret high blood pressure or cholesterol history in laxer terms, or use unisex weight tables, which are kinder to heavier women.

Commodity-minded citizens -- usually the same crowd that prefers online discount stock brokerages -- tend to like the Internet's no-nonsense quoting capability.

If you take this route, be careful. If you buy the wrong plan or choose the wrong company, you probably won't realize the mistake for 20 years.

"In the end, consumers should buy their insurance from whomever gives the best advice," says Byron Udell, founder and CEO of AccuQuote.

When?

If you buy a term policy, there's no penalty to committing today. Just as homeowners refinance mortgages at lower interest rates, life insurance policyholders can cancel a policy at any time to replace it with a less expensive equivalent -- providing their health remains stable, of course.

Why?
Life insurance provides instant liquidity to meet the obligations that become due upon your death. It's a pool of money to complete what you can't finish. It's also not taxable income, Evans notes.

Of course, don't make it your sole investment strategy. Other vehicles' returns beat permanent insurance products hands down, according to Wentz.

"The old story is to buy term and invest the rest. And that's fine if you immediately put that extra money into an investment vehicle, but it does take discipline to do that," he warns. "If you don't, check universal or whole life."

How much?

When pondering coverage, buyers first should inventory their assets: job insurance perks, Social Security benefits, IRA accumulations, stocks, bonds and savings accounts.

Then consider factors, such as how many people work in your household and if your need is temporary or permanent. For instance, do you want your spouse to stop working to care for the children?

"We don't want to think about these objectives because it's unpleasant for ourselves. It's easier to flip on a computer, say I need $250,000 and discover it costs X amount per month," Evans says.

Many buyers arrive at coverage numbers using the popular formula of four times their annual current salary. Wrong.

"Too frequently people go into this half cocked with numbers they literally pull out of the sky," says Roniger. "Taking a simple multiple of your current earnings is so nonspecific, it doesn't add up."

He urges clients to rely on a capital assessment to determine coverage need.

"I typically tell people during the accumulation phase of their financial life that now is the time you can start cutting back on life insurance. Instead, build up your capacity to self-insure. Otherwise, here I am five years down the road with pay raises, and I'm still using a multiplier of four times whatever my income is. I'm basically buying more life insurance than I need."

For a gut check, ask yourself Udell's favorite question: "If I wrote you a check today for the amount on your insurance policy, would you work for me for the rest of your life at no pay?"

Next, is the price you pay reasonable? Insurance companies use life expectancy tables and risk classes to determine rates, then factor in underwriting costs. They consider mortality rates over time, so isolated events, such as the Sept. 11 attacks, don't significantly impact rates.

Today, Internet speed means companies compete on rates by the minute, so overall life insurance rates have plummeted nearly 60 percent from their costs just seven years ago, Udell reports. Yet a 40-year-old in good health seeking a 20-year term policy can find quotes ranging from $27 to $189.

"The middle of the pack is almost double what you need to be paying, and believe me, plenty of companies in this level sell tons of life insurance," Udell says.

However, a few extra bucks for an A-plus-rated firm makes sense, agents say. Niceties like convertibility and quick claims processing stack up, too. In other words, cheapest isn't the only consideration.

"Anything within $30 to $50 annually isn't worth the savings to deal with a crappy company," Udell says.

"People often say, 'When I buy life insurance I'm betting against myself.' That's the worst expression I've ever heard," Evans says. "When you purchase insurance, you're betting you'll live but providing an assurance in case you're wrong."

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U.S. seeks 145-year sentence for NY lawyer

2009-07-08T11:18:00.000-07:00

NEW YORK (Reuters) - U.S. prosecutors on Wednesday asked a judge to sentence high-profile New York lawyer and admitted fraudster Marc Dreier to 145 years imprisonment or a term that ensures he spends the rest of his life in prison.

Dreier, 59, pleaded guilty in May to running a $400 million investment fraud involving fake promissory notes and he was released into house arrest until his sentencing on July 13.

While the size of the fraud is dwarfed by comparison with the estimated $65 billion disgraced financier Bernard Madoff admitted to swindling, prosecutors asked for a similar term of incarceration, the highest allowed by sentencing guidelines. Madoff, 71, was sentenced to 150 years in prison on June 29.

In a memorandum to U.S. District Court Judge Jed Rakoff, prosecutors wrote that Harvard and Yale educated Dreier, despite his advantages "decided to seek vast personal riches and prestige through a life of fraud and through dishonor to his profession."

The memorandum concluded that "a reasonable sentence in this case would be the guidelines' sentence of 145 years, or alternatively, a term of years that would assure that Dreier will remain in prison for life and forcefully promote general deterrence."

Dreier's lawyer Gerald Shargel suggested the judge give his client between 10 years and one month and 12 years and seven months in prison as an appropriate sentence.

Dreier is "profoundly remorseful" and has done what he can to make amends for his crimes, Shargel said in his sentencing memorandum.

Dreier, himself, wrote Judge Rakoff, telling him, "There is no excuse whatsoever for what I have done." He added that he expected and deserved a significant prison sentence.

"For me, the punishment that I receive from this court will only be part of my sentence," he wrote. "I have already been disgraced beyond anything I could ever have imagined.

"Despite whatever good I once accomplished in my life, and what I had hoped to accomplish, I will always be remembered as a thief," Dreier wrote.

Registered Representative and securities offered through ING Financial Partners Member SIPC

14726 Ramona Ave. # 410, Chino, CA 91710

Jyot Insurance & Financial Services, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc.

Why DoJ Won't Get You a Verizon iPhone

2009-07-07T10:32:00.000-07:00

News that the Justice Dept. has launched an antitrust investigation into wireless phone carriers probing, among other things, whether handset exclusivity arrangements violate antitrust laws, has again raised hope that AT&T’s exclusive grip on the iPhone may soon be broken. It’s not going to happen, nor will T-Mobile have to share the Android G1 and myTouch handsets or Sprint the Palm Pre.

I’ve written before about the problem of technological exclusivity, which can make contractual exclusives largely irrelevant. Pressure, or a suit, from Justice might force the mega-carriers to play more nicely with an assortment of small rural carriers who get frozen out by exclusivity deals, but it’s not going to do much to affect relations among the majors, unless the government plans to take the dubious and unlikely step of getting into the business of engineering handsets.

The problem is that the four big U.S. carriers use two incompatible technologies on a hodgepodge of frequencies. For a phone to work on a given networks, three conditions all have to be met: The phone must be authenticated on the network, it must have the right kind of radios, and the radios must operate at the right frequencies. Sprint and Verizon use both 2G and 3G versions of the CDMA2000 technology developed by Qualcomm. AT&T and T-Mobile use GSM standards developed by the 3rd Generation Partnership Program (3GPP) and the European Telecommunications Standards Institute. And no two carriers using the same technology share all of the same frequencies.

The bottom line is that 3G handsets made for AT&T, inlcuding the iPhone, will generally work in 2G mode on the T-Mobile network but not in 3G, and vice-versa, because of the frequency differences. Most European handsets will also have difficulty using 3G in the U.S. For example, the U.S. version of Nokia's E71 smartphone, the E71x is designed for the AT&T network and has 850 and 1900 MHz 3G radios. The European version is designed for 3G at the European standard of 2100 MHz. The iPhone does 3G at 850 and 1900 MHz for AT&T and 2100 for the rest of the world.

Things are a bit better in CDMA-land. Verizon phones will generally work--from a purely technical point of view--on the Sprint network. 1900 MHz-only Sprint phones will work on the Verizon network, but may get poor coverage in some places where a Verizon handset will do fine. The Palm Pre is an exclusive on Sprint but there's no technical reason why it won't work on Verizon--it has both 1900 Mhz and 800 MHz 3G radios.

In general, it's much easier to re-engineer a phone to run on different frequencies than it is to make it work on a different technology. A version of the iPhone that would work on Verizon or Sprint does not seem likely any time soon, no matter what Justice does. But Palm is making a GSM version of the Pre that will show up in Europe by the endof the year, and could come to the U.S. on AT&T or T-Mobile, more likely the former.

There are a handful of phones that offer both CDMA and GSM technology, most notably the BlackBerry Storm (Verizon), 8830 Global (Verizon and Sprint), and the forthcoming Tour (Verizon and Sprint). But the dual technology adds significant cost and also requires complicated business arrangments for roaming. I expect these dual-mode phones will continue to be niche products aimed primarily at corporate buyers.

How to salvage your retirement

2009-07-06T10:48:00.000-07:00

The good news and bad news about your nest egg: You can find ways to make it last, but it’s not going to be pretty.

I’m retired and have lost a third of my savings and a third of my monthly income. I don’t have earnings, so I can’t add new money to my retirement portfolio. I also don’t have enough time to wait for a market recovery to recoup my losses. What can a retiree in my position do? - B.P. Ocala, Fla.

I’m not going to sugarcoat my answer. Fact is, you and other retirees who have seen the value of their retirement portfolios decline substantially over the past year are in a tough position.

The problem comes down to this: The double-whammy of investment losses and withdrawals from your nest egg to pay living expenses dramatically increase your chances of running through your retirement savings prematurely, which is something you obviously want to avoid.

The good news is that there are some moves you can take to reduce your odds of outliving your savings. The bad news is that those moves aren’t very appealing.

To put it bluntly, to assure that you don’t run out of money before you run out of time, you may very well have to scale back the retirement lifestyle you had envisioned, at least temporarily.

In this column, I’ll explain what retirees and people on the verge of retirement who have suffered sizable losses in their portfolios need to do to salvage their retirement. Indeed, even people who haven’t incurred big losses may also want to read on so they’ll know what to do should they find themselves in that position later on.

But before I get to what you should do, I want to point out that many people facing this problem may be focusing their attention in the wrong place. Since it was the huge drop in stock prices that decimated their portfolios and put them into this financial bind in the first place, many retirees have naturally assumed that the answer to their problems lies in changing their investing strategy.

Toward that end, many people have moved much, if not all, of their investment stash to “safe” alternatives such as stable-value funds, money-market accounts and CDs in an attempt to staunch the bleeding in their retirement portfolios.

Revisiting your investing strategy is certainly appropriate given what’s been going on in the financial markets lately ( although as I’ve noted before, plowing all or nearly all of your retirement savings into low-yielding secure options can backfire over the long run.)

But you really need to concentrate your attention on withdrawals. Specifically, you must figure out how much you can reasonably pull from your retirement accounts each year given their current value without draining them prematurely.

And as unpleasant as the prospect may be, you may very well have to withdraw less than you had planned – perhaps much less – in order to have a realistic shot at making your savings last throughout retirement.

Here’s why.

A variety of studies have demonstrated that if you limit the amount you withdraw in the first year of retirement to 4% or so of your portfolio’s value and then increase that amount each year for inflation to maintain your purchasing power, you’ll have roughly a 90% chance of your money lasting at least 30 years.

But those odds decline dramatically if you sustain big investment losses early in retirement. For example, recent research by investment firm T. Rowe Price shows that if a retirement portfolio invested 55% in stocks and 45% in bonds looses 20% the first year of retirement, your odds of being able to pull an inflation-adjusted 4% of the portfolio’s original value each year drop from 90% to about 60%.

And if the portfolio takes a 30% hit, the odds drop to about 40%. The reason is that the combination of steep losses and withdrawals so depletes your capital that your portfolio can’t fully recover even after the market rebounds.

Which means that if you want to reduce the odds of your savings running dry too soon after a major setback, you really have little choice other than to reduce the amount you withdraw from your savings.

The question is how much should you cut back?

It’s hard to give a definitive answer because the right withdrawal amount depends on a variety of factors, including how large a loss you’ve experienced, how quickly you expect the market to recover, how many years you want your money to last and how much assurance you need that it will last that long.

But T. Rowe’s research suggests that the cutbacks may have to be substantial. Indeed, if your portfolio’s balance has dropped by 20% to 30% and you want a 90% chance that your savings will support you for at least another 30 years, you should probably scale back your withdrawals to about 4% of your portfolio’s new reduced balance – that is, it’s value after the losses.

Let’s say, for example, that going into retirement you had a portfolio worth $1 million from which you had planned to withdraw 4%, or $40,000. But if your portfolio declined in value by 20% to $800,000, instead of withdrawing $40,000, you would instead withdraw $32,000, or 4% of your portfolio’s reduced balance of $800,000. And if your portfolio dropped 30% to $700,000, you would withdraw just $28,000.

You could pull out a bit more – $35,000 and $30,000, respectively in the example above – but then you would have to forego increasing your withdrawal for inflation the first five or six years of retirement. Either way, we’re talking a big reduction from your planned $40,000 initial withdrawal.

Of course, you don’t want to be making cutbacks for your situation based on one hypothetical scenario. If you’re well into retirement, for example, you don’t need your savings to last 30 years. So you may not have to reduce your withdrawals nearly as much. The same goes if your retirement investments haven’t taken a very big hit.

So how can you tell out how much you may need to trim withdrawals given your age, the beating your portfolio has taken and the level of assurance you want that you won’t outlive your savings?

One option is to go to an online tool like T. Rowe Price’s Retirement Income Calculator. You plug in such information as the current value of your savings, how your money is invested and the amount you plan to withdraw, and you’ll get an instant evaluation of whether your savings will last as long as you’d like. You can then see how your prospects change by lowering your withdrawals.

Or you can have a financial adviser run the numbers for you. Any competent adviser should be able to do that, but you want to be careful you don’t end up with someone who sees this analysis as an opportunity to sell you high-priced investments you don’t need. (For the names of reputable advisers, you can click here and here.)

Of course, determining how much you can reasonably withdraw from your savings is one thing. Living on that amount is another. I’m sure that to do so many retirees will have to make painful adjustments to their lifestyles. And some people may simply may not be able to get by on significantly smaller withdrawals.

So I’m not suggesting this will be easy. But whether it’s cutting discretionary spending whenever possible, working part-time, downsizing or taking out a reverse mortgage or even reducing withdrawals by a smaller amount than suggested, you do what people have always done in difficult situations: you make the compromises you can.

It’s possible this retrenchment will be only temporary. Depending on the losses you sustained, how quickly the economy and the financial markets recover and how robust that recovery is, you may be able to boost withdrawals later on so that you can once again live the retirement you envisioned.

For now, though, it’s crucial that retirees and near-retirees do the sort of analysis I’ve described ASAP. Because if you simply pull money from your savings based on the income you would like to have versus the withdrawals your portfolio can actually support over the long term, you may find yourself in even bigger hole later on, recovery or no.

Registered Representative and securities offered through ING Financial Partners Member SIPC

14726 Ramona Ave. # 410, Chino, CA 91710

Jyot Insurance & Financial Services, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc.

What Advantages Does a Biweekly Mortgage Offer?

2009-07-02T10:03:00.000-07:00

One of the most precious assets that you are likely to possess as you progress through life is your home. Owning their own homes is something that most Americans strive for.

Unfortunately, for the vast majority of people, one of the major drawbacks in owning a home is the long-term mortgage that must be paid off. Mortgages often stretch out 30 years with interest and principal repayments.

Most mortgage repayments are made on a monthly basis. However, arranging to make payments biweekly can have a dramatic effect on the amount of money you have to pay and the time frame before it is all paid off.

Under a biweekly mortgage, instead of making the payments once a month, you make half the payment every two weeks. If your mortgage is $1,000 per month, under a biweekly system it would be $500 every two weeks.

You make 26 payments per year, which is the equivalent of 13 monthly payments rather than 12. The extra payment should be taken directly off the principal, reducing the payment schedule accordingly.

The effect of biweekly mortgage payments can be dramatic. For example, if you currently have a $150,000 loan at 8 percent fixed interest, you will have paid approximately $396,233 at the end of 30 years.

However, if you use a biweekly payment system, you will pay $331,859 and have it completely paid off in 21.6 years. You save $64,374 and pay the loan off 8.4 years earlier!

The savings you realize using a biweekly payment schedule can save you nearly half of what it cost to buy the house in the first place.

An increasing number of mortgage companies are now offering a biweekly payment option. It is even possible to convert your current monthly payments into a biweekly schedule.

Some companies will attempt to charge you to refinance the loan. However, this is not always the case and shopping around can save you money in refinancing charges.

Be wary of independent companies offering to do this for you for a fee — you can do it for yourself for free.

You should receive professional financial advice when considering switching to a biweekly mortgage payment schedule.

Registered Representative and securities offered through ING Financial Partners Member SIPC

14726 Ramona Ave. # 410, Chino, CA 91710

Jyot Insurance & Financial Services, Inc. is not a subsidiary of nor controlled by ING Financial Partners, Inc.

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