Stock Market Turns Up Its Nose at PIIGS' Woes
By THE ASSOCIATED PRESS
Published: February 18, 2010
Filed at 4:15 p.m. ET
BOSTON (AP) -- Greece is a bit player in the global markets. But you've got a recipe for trouble when you add Greece's debt mess to the fiscal failings of the nations known collectively as the PIIGS.
Audrey Kaplan, lead manager of the $704 million Federated InterContinental Fund, tries to keep Greece's small size in mind as she considers the fear that the PIIGS -- Portugal, Ireland, Italy, Greece and Spain -- are sowing in global markets.
For starters, Kaplan notes that the combined market value of a dozen commonly traded Greek stocks is less than half that of Citigroup. And Greece's population of 11 million is less than one-third of California's.
''Perhaps everyone should relax a little bit,'' she says.
Still, Greece matters. That's because the risk of a government default has drawn fresh attention to less-urgent debt troubles elsewhere on the continent -- problems which could balloon if investors anxious over Greece's troubles also flee the other PIIGS countries, raising their borrowing costs.
''The contagion risk is really the issue, rather than Greece itself,'' says Kaplan, whose 20-year career included a stint in Tokyo as an Asian credit crisis unfolded in 1997.
The PIIGS all share slow economies and big deficits. The fear is that those four nations and the 12 other European Union members could see confidence drop in their common currency, the euro. The EU also could be divided by friction over possible single-country bailouts, hurting Europe's economic prospects broadly.
A Greek tragedy isn't yet at hand, but global markets have seen plenty of drama this month. Recent revelations about Greek's economic mismanagement and even faked statistics helped trigger a 4 percent decline in major U.S. market indexes over a weeklong stretch. Markets reversed course and erased the loss after European Union leaders responded with a vague pledge to bail Greece out if needed. Meanwhile, the euro sank to nine-month lows.
If it seems remote to U.S. investors who like to go global, it's not entirely so. About 300 U.S. mutual funds hold more than 5 percent of their portfolios in stocks or bonds from the PIIGS countries, according to a screen by Morningstar Inc.
Kaplan's large-cap fund has no stakes in Portugal, Ireland and Greece, and a minuscule amount in Spain. About 10 percent of its holdings are in Italy, where Kaplan sees lesser debt risks than in the other four.
She's been a manager since 2004 at Federated InterContinental (RIMAX), which ranks among the top 15 percent of its peers based on performance over the past 5- and 10-year periods. Kaplan also helps oversee strategy for Federated's total $2 billion in international stocks.
Here are excerpts from an interview with Kaplan on Greece's debt troubles and the markets' reaction:
------------
Q: Where are the biggest risks in Europe?
A: Greece and Portugal. It's due to government balance sheet mismanagement that has gone on for decades. In the same way that American consumers were spending more than they were saving, the government was doing it in Greece. We've known for a long time about chronic tax evasion among the self-employed in Greece, and about overstaffing and overcompensation among Greek public sector employees. Portugal has many of the same problems.
Q: The government deficit in Greece is 12.7 percent of the nation's annual economic output. That's not much bigger than the U.S. deficit compared with our own gross domestic product. So why are investors so much more worried about Greece's fiscal health?
A: We have the dollar, which remains the reserve currency of the world. And for any number of others reasons -- including our size and stability over time -- markets aren't as worried now about the U.S. deficit.
Q: Where do you put the chances that Greece might be forced out of the European Union if it doesn't get a handle on its debt?
A: Less than 5 percent. It took decades to create the EU, and it's still solid. If Greece were to leave, it would be a bit comparable to California pulling out of the United States because of that state's current budget problems.
Q: Why did the EU signal it would back Greek's debt? When the EU was founded, didn't it adopt a no-bailout policy?
A: The EU nations understand the risks. They can choose to assume the debt commitments of member states to keep the risk from spreading to other countries. Greece's government ministers want to solve this on their own. But to keep the fear from spreading, they're saying they would go against the Maastricht Treaty (the 1992 agreement that established the EU) if necessary.
Q: With Greece and the other PIIGs countries, we're talking about government debt, not corporate debt. Might stocks within those countries be insulated from problems their governments are having?
A: Research shows that's unlikely. If you put two well-diversified international portfolios together, you can expect to see most of the differences in returns result from how each portfolio allocates its holdings among countries, rather than from selection of stocks within those countries. So country selection is the most important factor.
Q: Your fund can buy stocks around the world. How can you gauge risks within countries broadly, and individual companies?
A: Our fund generally holds 150 to 200 stocks, because we recognize there's always a risk of default. We've now got more than 200, so if one stock tanks, the impact on the portfolio overall will be minimal. We're obviously screening out all the indicators we can. But if there's a company intent on misleading investors, then you want to be prepared, and have the proper risk controls in the portfolio.
Q: Which countries offer the best opportunities now for U.S. investors?
A: There are plenty of countries with healthy government finances and good growth prospects. My current favorites include China, South Korea, Norway, Denmark and Switzerland.
http://www.nytimes.com/aponline/2010/02/18/business/AP-US-Of-Mutual-Interest-Greek-Lesson.html?_r=1
Saturday, 20 February 2010
Is it possible to have this level of understanding of the stock market?
Is it possible to "figure out" the stock market like geniuses in movies?
The movie "Vitus" features a child-genius that simply understands the stock market and invests about 350,000 dollars of his Grandpa’s money (with his permission) and turns it into over 5 million in a couple days. Is it possible to have this level of understanding of the stock market?----
Unless you are pump & dumping then its not possible to turn 350k into 5 million in a few days unless you are manipulating the market (which is illegal)
If you wanted to turn 350k into 5 million in a few days, what i would recommend is buying a very thinly traded stock (like 25k shares per day) with a low price that has options to trade. Say the stock costs 5$ per share. Then you would buy maybe 3500 7.50 call options of the same month and that would cost about 122k if your average price was 35 cents. Then once you have the options the price of the stock will rise because people will notice the buying. Then you use the other 225K you have in your account to start buying the stock. You will be able to buy about 45k shares. Now the only problem is you have to hope some computer monitored software program in some hedgefund isnt scanning stocks looking for a pattern like this cause they will know what you are doing and sell into you and sell into you hard. They will put up a short sale wall at 5.50 or 6 dollars and keep dropping the price 10 cents every few minutes, never letting the stock get up to 7.50 and before you know it, this hedge fund has pushed the stock down to 3 bucks per share and you got a margin call.
So is it possible? yes. Is it possible that 1 person can see what you are doing and block you from doing it. YES. The guys with the billion dollar funds are the ones that control the markets which is why you can be the smartest guy in the world and if you are underfunded you cant beat the market with strategys, only with luck.
You really need to have at least a few million to start if you want to pull some kind of strategy like that off.
----
No. The stock market is very intricate and very volatile. A single event can have a tremendous (and unforeseeable) impact on the stock market (wars, a positive/negative announcement by a prominent economic figurehead, etc.). There is no way for people to truly know what will happen.
Investors who make large amounts of dollars playing the stock markets are able to do so because they spend hours upon hours studying various stocks and analyzing growth patterns to determine which stock they should invest in. However, even these people do not claim to have figured out the stock market. You ask any investor, no matter how successful, and they’ll tell you that at one point or another they have lost a sizeable amount of money. The “trick” to their success is knowing stuff like what the company they invested in is going through, if there will be a change in leadership, if the company is doing something different, etc. and then deciding whether or not to hold on to the stock based on that information.
The stock market is really interesting, and I could write a lot about it on here. Each person has their way of playing the stock market, so each person will have a different answer as to how you should go about it. If you’re thinking about getting started, I hear a good place to go to is the Motley Fool; they seem to have good tips and advice.
http://investing.hirby.com/is-it-possible-to-figure-out-the-stock-market-like-geniuses-in-movies/
Be transparent and give the public the facts. The public can make the judgement
Saturday February 20, 2010
Lim: Zahrain would have ruined ‘perfect record’ in stamping out graft
GEORGE TOWN: Chief Minister Lim Guan Eng said Bayan Baru MP Datuk Seri Zahrain Mohd Hashim could have ruined Penang’s “perfect record” in stamping out corruption.
Lim claimed that if the state had gone ahead and approved Zahrain’s request to award a Bukit Jambul Country Club tender to a RM2 private company, it would have become a case for the Malaysian Anti-Corrup-tion Commission (MACC).
“The state did not approve Zahrain’s request to give the tender to this company which was set up just two months before the tender was opened.
“In fact, I believe this company was set up for the sole intention of bidding for this tender.”
He said that since Pakatan Rakyat took over Penang two years ago, there had not been any cases of corruption involving state leaders.
“Of course, we have had reports lodged against us at the MACC, but these reek of lies and a political agenda and none has been found to be true by the commission,” Lim told reporters after attending Pengkalan Kota assemblyman Lau Keng Ee’s Chinese New Year open house at the Gat Lebuh Macallum flats yesterday.
Lim repeated his claim that Zahrain was disappointed when his request was rejected, which then led to his subsequent outbursts against Lim and later, his resignation from PKR.
“We can lose 10 million Zahrains but I will not jeopardise the interest of 1.5 million Penangites,” Lim said.
Zahrain has consistently denied these claims, citing dissatisfaction with Lim’s leadership of Penang as the main reason for quitting PKR.
http://thestar.com.my/news/story.asp?file=/2010/2/20/nation/5713157&sec=nation
Lim: Zahrain would have ruined ‘perfect record’ in stamping out graft
GEORGE TOWN: Chief Minister Lim Guan Eng said Bayan Baru MP Datuk Seri Zahrain Mohd Hashim could have ruined Penang’s “perfect record” in stamping out corruption.
Lim claimed that if the state had gone ahead and approved Zahrain’s request to award a Bukit Jambul Country Club tender to a RM2 private company, it would have become a case for the Malaysian Anti-Corrup-tion Commission (MACC).
“The state did not approve Zahrain’s request to give the tender to this company which was set up just two months before the tender was opened.
“In fact, I believe this company was set up for the sole intention of bidding for this tender.”
He said that since Pakatan Rakyat took over Penang two years ago, there had not been any cases of corruption involving state leaders.
“Of course, we have had reports lodged against us at the MACC, but these reek of lies and a political agenda and none has been found to be true by the commission,” Lim told reporters after attending Pengkalan Kota assemblyman Lau Keng Ee’s Chinese New Year open house at the Gat Lebuh Macallum flats yesterday.
Lim repeated his claim that Zahrain was disappointed when his request was rejected, which then led to his subsequent outbursts against Lim and later, his resignation from PKR.
“We can lose 10 million Zahrains but I will not jeopardise the interest of 1.5 million Penangites,” Lim said.
Zahrain has consistently denied these claims, citing dissatisfaction with Lim’s leadership of Penang as the main reason for quitting PKR.
http://thestar.com.my/news/story.asp?file=/2010/2/20/nation/5713157&sec=nation
Malaysia must catch up to gain high-income status
Saturday February 20, 2010
Malaysia must catch up to gain high-income status
WITH 2020 only a decade away, Malaysia has a lot of catching up to do if it is to become a high-income economy.
This was the message conveyed by several prominent speakers at the recent 1Malaysia Economic Conference in Kuala Lumpur.
Malaysia’s new economic model, which will be the backbone of the 10th and 11th Malaysia Plans, is expected to accelerate the country’s progress into the next decade to ensure the success of Vision 2020.
According to the World Bank, a high-income economy is one with a gross national income per capita of US$12,000 and above.
Datuk Noriyah Ahmad, director-general of the Economic Planning Unit in the Prime Minister’s Department, said Malaysia recorded relatively slower economic growth from 2000 to 2008 compared with the 1990–1997 period.
“The country’s gross domestic product growth from 2000 to 2008 averaged around 5.5% compared with 9.1% from 1990 to 1997.
“Malaysia has not caught up with the high-income economies and if the trend continues, we may be overtaken by other rapidly developing economies,” she said.In addition, the country’s private investments also need to be revitalised as savings exceed investment by a significant amount largely due to a collapse in private investment.
“Our workforce today is also relatively unskilled with 80% educated up to Sijil Pelajaran Malaysia level or its equivalent, and only 25% of Malaysian jobs are in the higher skill category,” she said.
Noriyah said Malaysia still had a long journey ahead as its gross national product (GNP) per capita stood at US$6,686 in 2007 and was projected to hit US$15,340 in 2020, only marginally above the minimum GNP benchmark of US$14,818 for high-income countries.Going forward, she said the Government has taken new steps in development planning, with the introduction of a two-year rolling plan under the 10th Malaysia Plan (10MP).
“Other measures in the 10MP will come from the private sector which is expected to be the engine of growth.
“We have come a long way from being an agro-based to a service and manufacturing-oriented economy. But this model is already outdated, hence the new approach under the 10MP,” she said.
On a short-term perspective, Universiti Sains Malaysia pro-chancellor Tan Sri Dr Lin See-Yan said there were several areas that needed to be addressed.“Wide-ranging private business initiatives are needed to lead sustainable recovery and not direct consumption. Unlike China, our consumers favour spending once permanent income is forthcoming. Business confidence must be nurtured where stimulus is still needed until recovery is secured,” he said.
He said the Government’s role remained to facilitate the continuing flow of private investments, where priority is to bring about demand, a visionary transportation infrastructure and modern utilities to support new growth areas.
“There is a talent war out there. The global market for talent is highly competitive,” he said, adding that the new green agenda also needed urgent attention as well.“Being green or environmentally friendly is not an option. We have to re-invent and expand green stimulus elements that include energy efficiency and renewables, mass transit, smart electricity grid, finance and reforestation,” he said.
From a private sector perspective, Association for Shopping Complex and High-Rise Management president Joyce Yap expects the new economic model to further promote the retail industry.
“The retail industry is the second largest contributor to tourism expenditure and supports 204,000 employees.
“Thus, it is important to continue developing Malaysia as a prominent shopping destination in this region; to be comparable with countries like Singapore and Hong Kong,” she said.
Yap recommended that the Government crafts consistent and long-term policies to encourage domestic spending and market Malaysia abroad.
http://biz.thestar.com.my/news/story.asp?file=/2010/2/20/business/5662945&sec=business
'There are now good long-term opportunities'
'There are now good long-term opportunities'
Q&A: Navneet Munot, Chief Investment Officer, SBI Mutual Fund
Chandan Kishore Kant / Mumbai February 12, 2010, 0:02 IST
Navneet MunotNavneet Munot, chief investment officer, SBI Mutual Fund, manages around Rs 37,000 crore in assets, half of it equity. He spoke to Chandan Kishore Kant on the outlook for the stock market this year, the sectors he likes and his expectation from the Union Budget. Edited excerpts:
The other big event will be the Union Budget, where we expect some part of the stimulus to be withdrawn. The market is looking at that fear as well.
But, of course, it will be done gradually, as there is a need to balance fiscal consolidation and keeping the recovery process undisturbed. Disinvestment could be another big theme.
http://www.business-standard.com/india/news/%5Ctherenow-good-long-term-opportunities%5C/385412/
Q&A: Navneet Munot, Chief Investment Officer, SBI Mutual Fund
Chandan Kishore Kant / Mumbai February 12, 2010, 0:02 IST
Navneet MunotNavneet Munot, chief investment officer, SBI Mutual Fund, manages around Rs 37,000 crore in assets, half of it equity. He spoke to Chandan Kishore Kant on the outlook for the stock market this year, the sectors he likes and his expectation from the Union Budget. Edited excerpts:
How do you view the recent correction in equity markets?
The recent fall is on the back of weak global cues. There are fears related to sovereign balance sheets of countries such as Greece and Spain. The recovery in global markets was primarily due to policy stimulus and a large part of the leverage that is in private balance sheets as well as balance sheets of the household sector. This has been shifted to sovereign balance sheets, which is one concern that market participants have. These fears have materialised in the past couple of days and impacted our markets.The other big event will be the Union Budget, where we expect some part of the stimulus to be withdrawn. The market is looking at that fear as well.
Will last fortnight’s volatility continue for long?
The volatility was driven largely by global factors, not domestic ones. This uncertainty will probably continue for some more time. The Europe factor may weigh on market sentiment before we see a final resolution.What are your expectations from the Budget?
There’s a realisation within the government that there is a need to go back to fiscal consolidation and, at the same time, continue some stimulus till we see private investments and private consumption gather steam. We can expect an increase in excise duties on some items and in the service tax rate. Some of the fiscal measures in the last Budget might be withdrawn.But, of course, it will be done gradually, as there is a need to balance fiscal consolidation and keeping the recovery process undisturbed. Disinvestment could be another big theme.
If all of this comes true, how will the markets behave?
Overall, the economy is doing well. Corporate earnings are expected to grow 18-20 per cent and valuations are fair. The equity markets will reflect earnings growth further next year. Our belief is that from here on, markets should consolidate at these levels. We have seen an expansion in multiples. With the correction we have seen in recent days, the shares are fairly valued and I do not think valuations are stretched now. There is value in some pockets of the market.In this situation, what will be your investment strategy?
Broadly, our focus will be on individual stock-picking. That’s what we believe in, generating high alpha for the next year or so. The market is expected to consolidate and may gradually move upwards. Year 2010 will be one of consolidation. We are not that benchmark-driven. The whole idea is to find good companies which can generate good wealth over time. So, we focus more on bottom-up stock-picking rather than broader sectoral calls.Which sectors are you bullish on?
Infrastructure and domestic consumption are two broad themes. In sectors such as IT (information technology) and healthcare, there are good companies trading at reasonable valuations.What is your cash level?
Between 2 per cent and 7 per cent, which means we are more than 90 per cent invested.But, at times when we see less opportunities, we might increase our cash levels. As of now, that's not the view. After this correction, there are good opportunities for the long-term.
Don't you see redemption pressure?
No. We believe that mutual funds will start receiving inflows from retail investors in the next few months. Though there have been outflows from equity schemes, I guess the trend will change in the next month or two and we will see inflows.http://www.business-standard.com/india/news/%5Ctherenow-good-long-term-opportunities%5C/385412/
Friday, 12 February 2010
Growth Stocks and the Defensive Investor
The term 'growth stock' is applied to one which has increased its per-share earnings in the past at well above the rate for common stocks generally and is expected to continue to do so in the future.
Some authorities would say that a true growth stock should be expected at least to double its per-share earnings in 10 years, that is, to increase them at a compound annual rate of over 7.1%.
Obviously stocks of this kind are attractive to buy and to own, provided the price paid is not excessive.
The problem lies there, of course, since growth stocks have long sold at high prices in relation to current earnings and at much higher multiples of their average profits over a past period. This has introduced a speculative element of considerable weight in the growth stock picture and has made successful operations in this field a far from simple matter.
In the past, the "best of common stocks" actually lost 50% of its market price in a 6 months' market decline.
Other growth stocks have been even more vulnerable to adverse development; in some cases not only has the price fallen back but the earnings as well, thus causing a double discomfiture for those who owned them.
For example, a particular stock price advanced 5 times (from $5 to $256 i.e 50x) as fast as the profits (from 40 cents to $3.91 per share i.e. 10x); this is characteristic of popular common stocks. Two years later, the earnings had dropped off by nearly 50% and the price by 80%.
For growth stocks, wonders can be accomplished with
But the average investor can no more expect to accomplish this. In contrast, Benjamin Graham think that the group of large companies that are
Ref:
Intelligent Investor
by Benjamin Graham
Some authorities would say that a true growth stock should be expected at least to double its per-share earnings in 10 years, that is, to increase them at a compound annual rate of over 7.1%.
Obviously stocks of this kind are attractive to buy and to own, provided the price paid is not excessive.
The problem lies there, of course, since growth stocks have long sold at high prices in relation to current earnings and at much higher multiples of their average profits over a past period. This has introduced a speculative element of considerable weight in the growth stock picture and has made successful operations in this field a far from simple matter.
In the past, the "best of common stocks" actually lost 50% of its market price in a 6 months' market decline.
Other growth stocks have been even more vulnerable to adverse development; in some cases not only has the price fallen back but the earnings as well, thus causing a double discomfiture for those who owned them.
For example, a particular stock price advanced 5 times (from $5 to $256 i.e 50x) as fast as the profits (from 40 cents to $3.91 per share i.e. 10x); this is characteristic of popular common stocks. Two years later, the earnings had dropped off by nearly 50% and the price by 80%.
For growth stocks, wonders can be accomplished with
- the right individual selections,
- bought at the right levels, and
- later sold after a huge rise and
- before the probable decline.
But the average investor can no more expect to accomplish this. In contrast, Benjamin Graham think that the group of large companies that are
- relatively unpopular and
- therefore obtainable at reasonable earnings multipliers,
- offers a sound if unspectacular area of choice by the general public.
Ref:
Intelligent Investor
by Benjamin Graham
Individual investor should focus on absolute returns from their investment.
The fund manager tends to benchmark the return of the fund to an index. However, for the individual investor, it is better to focus on absolute return on their investment. Their first priority, of course, is not to lose money.
It is not difficult for the average investor to get a modest absolute return from the stock market consistently over a long period. Through careful selection of only a few stocks, this is easily achievable.
However, the investors, with better knowledge, skills and the willingness to spend time doing the homework, can hope to better this modest absolute rate of return consistently over a long period.
The returns are volatile over the short term. However, over the long term, the returns will reflect the fundamentals of the invested companies. Adopting the simple strategy of investing in good quality companies bought at bargain or reasonable price, the absolute returns over the long term should predictably and hopefully be positive.
Those with the ability to sense or value the overall market can employ tactical dynamic rebalancing in their portfolio management. They can allocate a bigger percentage to equity when the reward/risk ratio is more favourable during the depth of the bear market and by investing less into equity when the reward/risk ratio is less favourable during the height of the bull market. This strategy reduces the risk of big losses during a bear market. Implementing this strategy will be challenging and can only benefit those with good rational understanding of the valuation of the overall market.
Why do people lose money in the stock market?
Graham defined investment thus: "An INVESTMENT OPERATION is one which, upon THOROUGH ANALYSIS, promises SAFETY OF PRINCIPAL and a SATISFACTORY RETURN. Operations NOT meeting these requirements are speculative."
Maybe these people are gambling or speculating rather than investing. Perhaps, they thought they are investing when in fact, by Graham's definition, they are gambling or speculating.
(Absolute return, Relative return, Short term, Long term)
It is not difficult for the average investor to get a modest absolute return from the stock market consistently over a long period. Through careful selection of only a few stocks, this is easily achievable.
However, the investors, with better knowledge, skills and the willingness to spend time doing the homework, can hope to better this modest absolute rate of return consistently over a long period.
The returns are volatile over the short term. However, over the long term, the returns will reflect the fundamentals of the invested companies. Adopting the simple strategy of investing in good quality companies bought at bargain or reasonable price, the absolute returns over the long term should predictably and hopefully be positive.
Those with the ability to sense or value the overall market can employ tactical dynamic rebalancing in their portfolio management. They can allocate a bigger percentage to equity when the reward/risk ratio is more favourable during the depth of the bear market and by investing less into equity when the reward/risk ratio is less favourable during the height of the bull market. This strategy reduces the risk of big losses during a bear market. Implementing this strategy will be challenging and can only benefit those with good rational understanding of the valuation of the overall market.
Why do people lose money in the stock market?
Graham defined investment thus: "An INVESTMENT OPERATION is one which, upon THOROUGH ANALYSIS, promises SAFETY OF PRINCIPAL and a SATISFACTORY RETURN. Operations NOT meeting these requirements are speculative."
Maybe these people are gambling or speculating rather than investing. Perhaps, they thought they are investing when in fact, by Graham's definition, they are gambling or speculating.
(Absolute return, Relative return, Short term, Long term)
Greek crisis: the eurozone in numbers
Greek crisis: the eurozone in numbers
 |
1) Eurozone debt shares and spreads over German bonds.
http://www.telegraph.co.uk/finance/economics/7206100/Greek-crisis-the-eurozone-in-numbers.html
Greek crisis: Q&A
Greek crisis: Q&A
As EU leaders meet in Brussels today to find a solution to Greece's debt crisis, here's an explanation of the problems facing them.
Published: 7:34AM GMT 11 Feb 2010
Q How much scope does the European Union have to help Greece?
A It's complicated. The EU is bound by its own treaty, which has no clear procedure for bailing out a eurozone economy. The EU should be able to come up with a legal justification but the process could be time-consuming and complex and none of the potential options will be popular with member states not in crisis. It may need to use a variety of available options.
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Greek crisis: the eurozone in numbers
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Britain may be forced to bail out Greece
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*
Germany backs Greek bail-out
Q Can't the EU just lend Greece the money it needs?
A Things are not that easy. EU law says the union "shall not be liable for or assume the commitments of central governments" unless in the joint execution of a specific project. Attention has turned to Article 122 of the EU treaty which lets the EU help a member state threatened by "exceptional circumstances beyond its control". Greece's poor fiscal record makes it difficult to argue this case, but blaming international speculators could provide cover for such a move.
Other routes could include defining aid as coming from individual member states or for EU governments to buy Greek bonds and justify this action by telling taxpayers the purchase is an investment, not a bail-out.
Q What are the other options available to the EU?
A Greece is waiting on €18.1bn (£16bn) of structural funds earmarked under the 2007-2013 EU budget. The European Commission could decide to pay these funds early, as it did with €7bn for central and eastern European members last year.
The European Investment Bank, which is owned by EU governments, could borrow money in the market relatively cheaply to buy Greek bonds, though this option would probably need agreement from EU finance ministers. The EU might also issue common bonds with Greece taking a share of the proceeds, lowering its borrowing costs. However, the idea of EU common bonds has received little support in the past.
Q Isn't this what the International Monetary Fund is for?
A The IMF is already advising Greece on how to handle its fiscal crisis but requesting IMF financial support for Greece would be unpopular among other European states and a huge embarrassment to the EU.
IMF assistance could come in the form of precautionary funding, possibly including EU support, for Greece to tap if necessary to soothe market nerves. The IMF might also make available its Flexible Credit Line, which was set up for emerging markets to tap during the crisis. However, Greece's poor record would probably bar it from using this fund, which is intended for economies with strong fundamentals facing short-term problems.
The EU is more likely to ask the IMF to monitor and report on Greece's performance against its promises to provide reassurance for investors.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7207492/Greek-crisis-QandA.html
As EU leaders meet in Brussels today to find a solution to Greece's debt crisis, here's an explanation of the problems facing them.
Published: 7:34AM GMT 11 Feb 2010
Q How much scope does the European Union have to help Greece?
A It's complicated. The EU is bound by its own treaty, which has no clear procedure for bailing out a eurozone economy. The EU should be able to come up with a legal justification but the process could be time-consuming and complex and none of the potential options will be popular with member states not in crisis. It may need to use a variety of available options.
Related Articles
*
Britain should join euro despite Greece crisis, says Mandelson
*
Markets fragile as confusion hits Greek rescue
*
Greek crisis: the eurozone in numbers
*
Britain may be forced to bail out Greece
*
Keeping the pound saved us from Greece's fate
*
Germany backs Greek bail-out
Q Can't the EU just lend Greece the money it needs?
A Things are not that easy. EU law says the union "shall not be liable for or assume the commitments of central governments" unless in the joint execution of a specific project. Attention has turned to Article 122 of the EU treaty which lets the EU help a member state threatened by "exceptional circumstances beyond its control". Greece's poor fiscal record makes it difficult to argue this case, but blaming international speculators could provide cover for such a move.
Other routes could include defining aid as coming from individual member states or for EU governments to buy Greek bonds and justify this action by telling taxpayers the purchase is an investment, not a bail-out.
Q What are the other options available to the EU?
A Greece is waiting on €18.1bn (£16bn) of structural funds earmarked under the 2007-2013 EU budget. The European Commission could decide to pay these funds early, as it did with €7bn for central and eastern European members last year.
The European Investment Bank, which is owned by EU governments, could borrow money in the market relatively cheaply to buy Greek bonds, though this option would probably need agreement from EU finance ministers. The EU might also issue common bonds with Greece taking a share of the proceeds, lowering its borrowing costs. However, the idea of EU common bonds has received little support in the past.
Q Isn't this what the International Monetary Fund is for?
A The IMF is already advising Greece on how to handle its fiscal crisis but requesting IMF financial support for Greece would be unpopular among other European states and a huge embarrassment to the EU.
IMF assistance could come in the form of precautionary funding, possibly including EU support, for Greece to tap if necessary to soothe market nerves. The IMF might also make available its Flexible Credit Line, which was set up for emerging markets to tap during the crisis. However, Greece's poor record would probably bar it from using this fund, which is intended for economies with strong fundamentals facing short-term problems.
The EU is more likely to ask the IMF to monitor and report on Greece's performance against its promises to provide reassurance for investors.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7207492/Greek-crisis-QandA.html
Thursday, 11 February 2010
Tasek proposes 63c cash distribution for every share
Tasek proposes 63c cash distribution for every share
Written by Joseph Chin
Tuesday, 09 February 2010 19:13
KUALA LUMPUR: TASEK CORPORATION BHD [] has proposed to distribute 63 sen cash for every share held after it announced its earnings of RM16.24 million for the fourth quarter ended Dec 31, 2009.
It said on Tuesday, Feb 9 that net profit fell 22.7% from RM21.02 million a year while revenue declined 14.7% from RM143.25 million to RM122.07 million. Earnings per share were 8.75 sen versus 11.35 sen.
It proposed a final gross dividend of 10 sen per share, special gross dividend of 20 sen per shares and capital repayment of 33 sen cash.
Under the proposed capital repayment, the par value of the shares and preference shares would be reduced from RM1 to 67 sen per share.
"Subsequent to the proposed capital repayment, the resultant shares in Tasek of 67 sen each will be consolidated into RM1 per Tasek share on the basis of 1.49 shares of 67 sen each in Tasek into one share of RM1 each in Tasek," it said.
Tasek said the proposals were consistent with the objectives of Tasek's capital management framework which includes returning cash in excess of Tasek's requirement to shareholders to reflect the continuous effort of Tasek to achieve an efficient capital structure and to reward its shareholders for their continuous support of Tasek.
The decision was made after taking into consideration Tasek's level of cash, business prospects, projected levels of capital expenditure and other investment plans and current and expected obligations.
"Tasek believes that this is an opportune time to implement the proposals in tandem with its increased balance sheet strength and operational improvements," it said.
The group had not equity accounted its associates' results following the company's intention to dispose of the company's equity investment in the associates arising from a proposal from an existing shareholder to buy the said equity investment.
http://www.theedgemalaysia.com/business-news/159435-tasek-proposes-63c-cash-distribution-for-every-share.html
Written by Joseph Chin
Tuesday, 09 February 2010 19:13
KUALA LUMPUR: TASEK CORPORATION BHD [] has proposed to distribute 63 sen cash for every share held after it announced its earnings of RM16.24 million for the fourth quarter ended Dec 31, 2009.
It said on Tuesday, Feb 9 that net profit fell 22.7% from RM21.02 million a year while revenue declined 14.7% from RM143.25 million to RM122.07 million. Earnings per share were 8.75 sen versus 11.35 sen.
It proposed a final gross dividend of 10 sen per share, special gross dividend of 20 sen per shares and capital repayment of 33 sen cash.
Under the proposed capital repayment, the par value of the shares and preference shares would be reduced from RM1 to 67 sen per share.
"Subsequent to the proposed capital repayment, the resultant shares in Tasek of 67 sen each will be consolidated into RM1 per Tasek share on the basis of 1.49 shares of 67 sen each in Tasek into one share of RM1 each in Tasek," it said.
Tasek said the proposals were consistent with the objectives of Tasek's capital management framework which includes returning cash in excess of Tasek's requirement to shareholders to reflect the continuous effort of Tasek to achieve an efficient capital structure and to reward its shareholders for their continuous support of Tasek.
The decision was made after taking into consideration Tasek's level of cash, business prospects, projected levels of capital expenditure and other investment plans and current and expected obligations.
"Tasek believes that this is an opportune time to implement the proposals in tandem with its increased balance sheet strength and operational improvements," it said.
On the financial performance, it said the lower earnings were due to lower sales volume resulting from the contraction in demand for local cement and ready-mix concrete.
The group had not equity accounted its associates' results following the company's intention to dispose of the company's equity investment in the associates arising from a proposal from an existing shareholder to buy the said equity investment.
http://www.theedgemalaysia.com/business-news/159435-tasek-proposes-63c-cash-distribution-for-every-share.html
Ekuinas targets IRR of 12%
Ekuinas targets IRR of 12%
Written by The Edge Financial Daily
Tuesday, 09 February 2010 12:29
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KUALA LUMPUR: Ekuiti Nasional Bhd (Ekuinas) has set a minimum target financial return of 12% in internal rate of return (IRR) on its investment portfolio and targets to achieve 20% IRR.
Its chief executive officer Datuk Abdul Rahman Ahmad said on Tuesday, Feb 9 the investments would be in six areas --
He said Ekuinas' objective equitable Bumiputra economic participation within the Malaysian economy, which shall measured by four dimensions -- enhancing equity ownership, growing a pool of qualified management, increasing employments and creating value for Bumiputra supply chain partners.
"It is critical that Ekuinas be commercially driven as we strongly believe only with viable and profitable investments can Ekuinas achieve its social objectives sustainably," he said.
Abdul Rahman said in terms of direct investment, Ekuinas shall seek buy-out transactions with an investment size of at least RM30 million and a meaningful stake of no less than 20% to enable Ekuinas to be an active shareholder that derives value creation.
Written by The Edge Financial Daily
Tuesday, 09 February 2010 12:29
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KUALA LUMPUR: Ekuiti Nasional Bhd (Ekuinas) has set a minimum target financial return of 12% in internal rate of return (IRR) on its investment portfolio and targets to achieve 20% IRR.
Its chief executive officer Datuk Abdul Rahman Ahmad said on Tuesday, Feb 9 the investments would be in six areas --
- education,
- oil and gas,
- healthcare,
- services,
- retail and leisure,
- fast moving consumer goods, including food and beverage.
He said Ekuinas' objective equitable Bumiputra economic participation within the Malaysian economy, which shall measured by four dimensions -- enhancing equity ownership, growing a pool of qualified management, increasing employments and creating value for Bumiputra supply chain partners.
"It is critical that Ekuinas be commercially driven as we strongly believe only with viable and profitable investments can Ekuinas achieve its social objectives sustainably," he said.
Abdul Rahman said in terms of direct investment, Ekuinas shall seek buy-out transactions with an investment size of at least RM30 million and a meaningful stake of no less than 20% to enable Ekuinas to be an active shareholder that derives value creation.
| http://www.theedgemalaysia.com/business-news/159403-ekuinas-to-reveal-1st-direct-investment-by-end-feb.html |
Maybank 2Q net profit up 35.3% to RM993.5m
Maybank 2Q net profit up 35.3% to RM993.5m
Written by Yong Yen Nie
Tuesday, 09 February 2010 18:35
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KUALA LUMPUR: MALAYAN BANKING BHD [] posted a strong second quarter net profit of RM993.50 million, up 35.3% from the RM734.56 million a year ago on improved loan volume and it declared an interim dividend of 11 sen per share.
Revenue was marginally lower by 1.22% at RM4.67 billion from RM4.73 billion a year ago. Earnings per share were 14.04 sen compared with 13.35 sen, the bank said in a statement issued on Tuesday, Feb 9.
According to its financial statements, the higher earnings were due to
For the six months, Maybank's net profit rose 43.5pct to a record of RM1.88 billion underpinned by higher revenue of RM9.23 billion from RM8.46 billion a year earlier.
Commenting on the half year financial results, Maybank president and chief executive officer Datuk Seri Abdul Wahid Omar said the banking group was especially pleased with the performance seen at its international operations, particularly Singapore and Indonesia.
"We have set our sights for more dynamic growth in the years ahead and are confident of exceeding our key targets set for the year," he said.
http://www.theedgemalaysia.com/business-news/159434-flash-maybank-2q-net-profit-up-353-to-rm9935m.html
Written by Yong Yen Nie
Tuesday, 09 February 2010 18:35
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KUALA LUMPUR: MALAYAN BANKING BHD [] posted a strong second quarter net profit of RM993.50 million, up 35.3% from the RM734.56 million a year ago on improved loan volume and it declared an interim dividend of 11 sen per share.
Revenue was marginally lower by 1.22% at RM4.67 billion from RM4.73 billion a year ago. Earnings per share were 14.04 sen compared with 13.35 sen, the bank said in a statement issued on Tuesday, Feb 9.
According to its financial statements, the higher earnings were due to
- higher non-interest income (RM1.22 billion vs RM832.18 million a year ago),
- lower allowances for losses on loans, advances and financing (RM243.55 million vs RM321.1 million) and
- lower impairment losses on securities, net (RM9.83 million vs RM22.56 million).
For the six months, Maybank's net profit rose 43.5pct to a record of RM1.88 billion underpinned by higher revenue of RM9.23 billion from RM8.46 billion a year earlier.
Commenting on the half year financial results, Maybank president and chief executive officer Datuk Seri Abdul Wahid Omar said the banking group was especially pleased with the performance seen at its international operations, particularly Singapore and Indonesia.
"We have set our sights for more dynamic growth in the years ahead and are confident of exceeding our key targets set for the year," he said.
http://www.theedgemalaysia.com/business-news/159434-flash-maybank-2q-net-profit-up-353-to-rm9935m.html
Guinness Anchor 2Q net profit up 26.4% at RM43.82m
Guinness Anchor 2Q net profit up 26.4% at RM43.82m
Written by Joseph Chin
Tuesday, 09 February 2010 18:22
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KUALA LUMPUR: GUINNESS ANCHOR BHD []'s second quarter net profit rose 26.4% to RM43.82 million from RM34.67 million a year ago and it expects a better year ahead for its brands.
It said on Tuesday, Feb 9 revenue rose 15.1% to RM378.13 million from RM328.52 million. Earnings per share were 14.5 sen versus 11.48 sen. It declared an interim dividend of 10 sen per share.
For the first half, net profit was RM70.56 million, down 14% from RM82 million in the previous corresponding period. Revenue was also lower at RM679.1 million versus RM694.32 million.
http://www.theedgemalaysia.com/business-news/159433-guinness-anchor-2q-net-profit-up-264-at-rm4382m.html
Written by Joseph Chin
Tuesday, 09 February 2010 18:22
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KUALA LUMPUR: GUINNESS ANCHOR BHD []'s second quarter net profit rose 26.4% to RM43.82 million from RM34.67 million a year ago and it expects a better year ahead for its brands.
It said on Tuesday, Feb 9 revenue rose 15.1% to RM378.13 million from RM328.52 million. Earnings per share were 14.5 sen versus 11.48 sen. It declared an interim dividend of 10 sen per share.
For the first half, net profit was RM70.56 million, down 14% from RM82 million in the previous corresponding period. Revenue was also lower at RM679.1 million versus RM694.32 million.
http://www.theedgemalaysia.com/business-news/159433-guinness-anchor-2q-net-profit-up-264-at-rm4382m.html
F&N 1Q net profit up 53% to RM77m
F&N 1Q net profit up 53% to RM77m
Written by Joseph Chin
Tuesday, 09 February 2010 18:08
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KUALA LUMPUR: Fraser & Neave Holdings Bhd posted net profit of RM77.74 million in the first quarter ended Dec 31, 2009 underpinned by its soft drinks division and dairies division.
It said on Tuesday, Feb 9 that operating profit surpassed RM100 million for the first time. Operating profit rose 37% to RM106 million from RM73.84 million while revenue rose 6% to RM992 million from RM940.39 million. Earnings per share were 21.8 sen versus 14.3 sen.
Chief executive officer Tan Ang Meng said: "The admirable results were driven by both the soft drinks and dairies divisions which performed well ahead of our internal targets. Despite the absence of a festive season during 1Q, the soft drinks division registered record volume while revenue improved 12%, with 100PLUS and Coca-Cola chalking up double-digit growth of 17% and 11% respectively.”
“The dairies division also put up a strong performance with revenue increased by eight per cent. Both Malaysia and Thailand domestic sales registered encouraging volume growth. Improved trade channel management in Malaysia and significant progress in exports to the Indochina market also contributed to the better performance.”
He said the glass division revenue contracted 11% due to lower sales volume in Thailand and China. However Malaysia and Vietnam operations continued to register positive growth.
On the outlook for the coming financial year, Tan said, "Economic recovery in the core markets of Malaysia and Thailand is expected to translate into stronger consumer demand for F&N products. However prices of key raw materials such as milk powder, sugar and aluminium have increased sharply and could negatively impact profit margins.”
http://www.theedgemalaysia.com/business-news/159430-fan-1q-net-profit-up-53-to-rm77m.html
Written by Joseph Chin
Tuesday, 09 February 2010 18:08
Bookmark and Share
KUALA LUMPUR: Fraser & Neave Holdings Bhd posted net profit of RM77.74 million in the first quarter ended Dec 31, 2009 underpinned by its soft drinks division and dairies division.
It said on Tuesday, Feb 9 that operating profit surpassed RM100 million for the first time. Operating profit rose 37% to RM106 million from RM73.84 million while revenue rose 6% to RM992 million from RM940.39 million. Earnings per share were 21.8 sen versus 14.3 sen.
Chief executive officer Tan Ang Meng said: "The admirable results were driven by both the soft drinks and dairies divisions which performed well ahead of our internal targets. Despite the absence of a festive season during 1Q, the soft drinks division registered record volume while revenue improved 12%, with 100PLUS and Coca-Cola chalking up double-digit growth of 17% and 11% respectively.”
“The dairies division also put up a strong performance with revenue increased by eight per cent. Both Malaysia and Thailand domestic sales registered encouraging volume growth. Improved trade channel management in Malaysia and significant progress in exports to the Indochina market also contributed to the better performance.”
He said the glass division revenue contracted 11% due to lower sales volume in Thailand and China. However Malaysia and Vietnam operations continued to register positive growth.
On the outlook for the coming financial year, Tan said, "Economic recovery in the core markets of Malaysia and Thailand is expected to translate into stronger consumer demand for F&N products. However prices of key raw materials such as milk powder, sugar and aluminium have increased sharply and could negatively impact profit margins.”
http://www.theedgemalaysia.com/business-news/159430-fan-1q-net-profit-up-53-to-rm77m.html
Will you run out of money?
The Basics
Will you run out of money?
This may come as a shock: The amount you can spend in retirement each year, without running out of money, is far less than most people think -- no more than 3% to 4% of your savings a year.
By Liz Pulliam Weston
It's no secret that most Americans aren't saving enough for retirement. What's less discussed is the yawning chasm between what most workers think they'll need and the amount of money actually needed to produce an income that will last 30 or more years.
Consider these findings from a recent retirement confidence survey by the Employee Benefit Research Institute:
* 84% of workers say they're confident they'll have enough money to cover basic expenses in retirement, and 75% believe they'll be able to manage their money well enough not to outlive their funds.
* But less than one-third of those surveyed had actually tried to calculate how much they'll need. Only 26% of younger workers and 33% of those aged 40-59 had tried to do the math.
* Only 23% of those aged 40 to 59, and 17% of those over 60, said they have saved $100,000 or more for retirement, while 13% of those aged 40 to 59, and 11% of those over 60, say they have saved nothing at all for retirement.
Financial planners call this the "sustainable rate of withdrawal." And what it means to you and me is that we'll need a nest egg of at least $1 million to get just $40,000 in annual income.
1) die quickly or
2) be a little bit lucky with your investments.
The table below shows the maximum withdrawal rate over various time periods and confidence levels.
Retirement withdrawal rates
Payout Period 10 Yrs 20 Yrs 30 Yrs 40 Yrs
100% Safe 8.84% 5.16% 4.26% 4.08%
98% Safe 9.00% 5.32% 4.40% 4.12%
95% Safe 9.27% 5.51% 4.52% 4.25%
90% Safe 9.78% 5.70% 4.71% 4.56%
Source: Retire Early
While they provide an interesting illustration, the numbers in the table are way too precise. The more you know about retirement income calculations, the more you'll realize how fraught with uncertainty the whole field is.
Until the mid-1990s, calculating sustainable withdrawal rates was pretty much a guessing game. Many planners simply picked a figure somewhere below the expected rate of return on a portfolio. If the planner figured the client would earn an 11% average annual return -- about the norm for a stock portfolio -- he would subtract a 3% or so inflation rate and allow an 8% annual withdrawal rate, or perhaps slightly less if he were a conservative type.
That seemed a little too off-the-cuff for Bill Bengen, a financial planner in El Cajon, Calif. Bengen knew that there was no such thing as an "average" market, and suspected that withdrawal rates that seemed reasonable when based on averages would turn out to be too high when faced with real market conditions.
Bengen's research, using model portfolios and subjecting them to historic market conditions, proved his suspicions to be correct.
(Bengen also found that having a portfolio that was too heavily weighted in bonds was worse than one that went overboard with stocks. Bengen helped reinforce the idea that even risk-averse retirees should have at least 50% of their money in stocks in order to get enough long-term growth to overcome inflation and other portfolio-killers.)
Mutual fund giant T. Rowe Price later added to our understanding of sustainable withdrawal rates. T. Rowe demonstrated that too-high withdrawal rates early in retirement -- especially in bad markets -- could cause a retiree to run out of money decades too soon.
For example, many retirees might need more money in the early years as they travel, indulge expensive hobbies or share their largesse with their children. At least half continue to save money in the early years, as well.
In the middle years, retirees may need less income as their wanderlust is sated and their health declines somewhat, leaving them less interested in leaving home. Spending might soar again in the last years, thanks to long-term care needs.
Finally, there's the issue of expected returns. Obviously, no one can predict what the Dow will do next, and our historical context for guessing is pretty short -- the modern market is less than 100 years old, after all.
* Don't fail to plan. You can -- and should -- use retirement calculators like those included in Quicken or Money to give you a rough idea of how much you may need. People who have a plan for investing, and who stick to it, will be better off than those who leave their retirements to fate.
* Don't underestimate the importance of guaranteed income. Pensions and Social Security can reduce, perhaps significantly, how much you may need to save. Although traditional pensions are getting rarer and Social Security benefits may get trimmed, these sources will still exist for many workers. Others may be able to guarantee an income stream by using some of their retirement funds to buy an immediate annuity.
* Don't despair. I've previously mentioned Ralph Warner's excellent Nolo Press book, "Get a Life: You don't need $1 million to retire well." Even if you can't save enough, you can help ensure a happy retirement by tending your health, your family, your relationships and your hobbies. Warner's research shows these factors are at least as important as money in determining how content you'll be in retirement.
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
http://moneycentral.msn.com/content/Retirementandwills/Retireinstyle/P34815.asp
http://socialize.morningstar.com/NewSocialize/forums/p/167544/167544.aspx#PageIndex=1
Will you run out of money?
This may come as a shock: The amount you can spend in retirement each year, without running out of money, is far less than most people think -- no more than 3% to 4% of your savings a year.
By Liz Pulliam Weston
It's no secret that most Americans aren't saving enough for retirement. What's less discussed is the yawning chasm between what most workers think they'll need and the amount of money actually needed to produce an income that will last 30 or more years.
Consider these findings from a recent retirement confidence survey by the Employee Benefit Research Institute:
* 84% of workers say they're confident they'll have enough money to cover basic expenses in retirement, and 75% believe they'll be able to manage their money well enough not to outlive their funds.
* But less than one-third of those surveyed had actually tried to calculate how much they'll need. Only 26% of younger workers and 33% of those aged 40-59 had tried to do the math.
* Only 23% of those aged 40 to 59, and 17% of those over 60, said they have saved $100,000 or more for retirement, while 13% of those aged 40 to 59, and 11% of those over 60, say they have saved nothing at all for retirement.
The crux of the problem is that the amount of money you can spend each year without running out of money is far less than most people think: no more than 3% to 4% a year.
Financial planners call this the "sustainable rate of withdrawal." And what it means to you and me is that we'll need a nest egg of at least $1 million to get just $40,000 in annual income.
A field fraught with uncertainty
Before you despair and cash out your retirement funds, however, it's important to know that these calculations assume you want to be nearly 100% certain of having enough money to last your lifetime. It's possible to take a higher percentage of income and still not run out, but you'll need to either1) die quickly or
2) be a little bit lucky with your investments.
The table below shows the maximum withdrawal rate over various time periods and confidence levels.
Retirement withdrawal rates
Payout Period 10 Yrs 20 Yrs 30 Yrs 40 Yrs
100% Safe 8.84% 5.16% 4.26% 4.08%
98% Safe 9.00% 5.32% 4.40% 4.12%
95% Safe 9.27% 5.51% 4.52% 4.25%
90% Safe 9.78% 5.70% 4.71% 4.56%
Source: Retire Early
While they provide an interesting illustration, the numbers in the table are way too precise. The more you know about retirement income calculations, the more you'll realize how fraught with uncertainty the whole field is.
Until the mid-1990s, calculating sustainable withdrawal rates was pretty much a guessing game. Many planners simply picked a figure somewhere below the expected rate of return on a portfolio. If the planner figured the client would earn an 11% average annual return -- about the norm for a stock portfolio -- he would subtract a 3% or so inflation rate and allow an 8% annual withdrawal rate, or perhaps slightly less if he were a conservative type.
That seemed a little too off-the-cuff for Bill Bengen, a financial planner in El Cajon, Calif. Bengen knew that there was no such thing as an "average" market, and suspected that withdrawal rates that seemed reasonable when based on averages would turn out to be too high when faced with real market conditions.
Bengen's research, using model portfolios and subjecting them to historic market conditions, proved his suspicions to be correct.
Run out of money in 20 years?
Depending on the portfolio's mix of stocks and bonds, Bengen found that even a 5% withdrawal rate -- adjusted each subsequent year for the inflation rate -- could cause someone to run out of money in 20 years. A 3% withdrawal rate from a balanced portfolio almost never did. His influential findings were published in a four-part series for the Journal of Financial Planning starting in 1994.(Bengen also found that having a portfolio that was too heavily weighted in bonds was worse than one that went overboard with stocks. Bengen helped reinforce the idea that even risk-averse retirees should have at least 50% of their money in stocks in order to get enough long-term growth to overcome inflation and other portfolio-killers.)
Mutual fund giant T. Rowe Price later added to our understanding of sustainable withdrawal rates. T. Rowe demonstrated that too-high withdrawal rates early in retirement -- especially in bad markets -- could cause a retiree to run out of money decades too soon.
Need for income changes
Assuming consistent returns wasn't the only blunder planners made. More financial advisers now realize that spending patterns in retirement may not be constant, either. Instead of needing a steady income throughout, income needs might spike, decline or take a U-shape.For example, many retirees might need more money in the early years as they travel, indulge expensive hobbies or share their largesse with their children. At least half continue to save money in the early years, as well.
In the middle years, retirees may need less income as their wanderlust is sated and their health declines somewhat, leaving them less interested in leaving home. Spending might soar again in the last years, thanks to long-term care needs.
The longer you live, the more money you'll need
Then, of course, there are all the uncertainties of life expectancy. Once many planners figured their clients would die by age 85. Today, planning until age 95 or 100 -- or even later -- is becoming more common. Of course, the longer you live and spend in retirement, the more money you'll need.Finally, there's the issue of expected returns. Obviously, no one can predict what the Dow will do next, and our historical context for guessing is pretty short -- the modern market is less than 100 years old, after all.
With all the unknowns, there's simply no way to say definitely how much you'll need to save or how long that money will last you. That doesn't mean you're helpless, however:
* Don't fail to plan. You can -- and should -- use retirement calculators like those included in Quicken or Money to give you a rough idea of how much you may need. People who have a plan for investing, and who stick to it, will be better off than those who leave their retirements to fate.
* Don't underestimate the importance of guaranteed income. Pensions and Social Security can reduce, perhaps significantly, how much you may need to save. Although traditional pensions are getting rarer and Social Security benefits may get trimmed, these sources will still exist for many workers. Others may be able to guarantee an income stream by using some of their retirement funds to buy an immediate annuity.
* Don't despair. I've previously mentioned Ralph Warner's excellent Nolo Press book, "Get a Life: You don't need $1 million to retire well." Even if you can't save enough, you can help ensure a happy retirement by tending your health, your family, your relationships and your hobbies. Warner's research shows these factors are at least as important as money in determining how content you'll be in retirement.
Liz Pulliam Weston's column appears every Monday and Thursday, exclusively on MSN Money. She also answers reader questions in the Your Money message board.
http://moneycentral.msn.com/content/Retirementandwills/Retireinstyle/P34815.asp
http://socialize.morningstar.com/NewSocialize/forums/p/167544/167544.aspx#PageIndex=1
There is no one way to pick stocks. Every stock strategy is a 'best guess' of how to invest.
Stock Picking 101
The Marketer's Manifesto
It’s time for fund managers to “return to their natural stock-picking tendencies,” said Citigroup chief global equity strategist Robert Buckland. “Just when the bear market (and subsequent rebound) has bullied us all into being very macro is the time when a good contrarian should be moving micro.” Over the last few years, the financial advisory business has been playing it close to the vest to protect as much of their clients’ investments as possible. They’re hesitant to move away from safe options because everyone is fearful of market fluctuations these days. However, some analysts say it’s precisely this strategy that’s holding us back. Stock picking is slowly but surely coming back into favor again, offering higher yields and better deals for people who know when to get in and when to get out.
Investors who are interested in stock picking have many different places to learn financial secrets, tips and trends. According to Forbes Magazine, some of these personal financial advisor “hot spots” include
ClearStation (www.clearstation.etrade.com),
MSN Money (www.moneycentral.com/investor),
Marketocracy (www.marketocracy.com),
Reuters Investor (www.reuters.com/investing),
MarketHistory (www.markethistory.com),
Morningstar (www.morningstar.com),
Sector Updates (www.sectorupdates.com),
Stock Fetcher (www.stockfetcher.com),
Stock Selector (www.stockselector.com),
ValuEngine (www.valuengine.com) and
Wall Street Transcript (www.twst.com).
There are many different types of stock picking strategies. Some of the most common include
Fundamental Analysis,
Qualitative Analysis,
Value Investing,
Growth Investing,
GARP Investing,
Income Investing,
CAN SLIM,
Dogs of the Dow and
Technical Analysis.
While there is limited space to delve deeply into these complex strategies here, more information can be found at Investopedia (www.investopedia.com/university/stockpicking/stockpicking1.asp). Even when consumers learn financial investment techniques, there is no guarantee, however. According to Investopedia: “The bottom line is that there is no one way to pick stocks. Better to think of every stock strategy as nothing more than an application of a theory; a ‘best guess’ of how to invest.”
Stock picking can be done by individuals or by professionals. Top financial advisors work to assist clients in selecting a winning stock portfolio. While these individuals are undoubtedly more experienced in watching economic market fluctuations, they are still human and ultimately fallible. One should not simply entrust an enormous sum of money with a financial advisor, without looking over the periodic statements and watching the DOW/NASDAQ activity. All investing is a gamble, so expectations should be clear when getting started. Perhaps the best advice is still “don’t put all of your eggs in one basket!”
Beth Kaminski is the co-author of Curing Your Anxiety And Panic Attacks which detailed anxiety or panic attacks as well as tips on the various anxiety attack medication available at anxietydisordercure.com.
http://www.supermoneymaking.info/home-business-ideas/stock-picking-101-2/4787
The Marketer's Manifesto
It’s time for fund managers to “return to their natural stock-picking tendencies,” said Citigroup chief global equity strategist Robert Buckland. “Just when the bear market (and subsequent rebound) has bullied us all into being very macro is the time when a good contrarian should be moving micro.” Over the last few years, the financial advisory business has been playing it close to the vest to protect as much of their clients’ investments as possible. They’re hesitant to move away from safe options because everyone is fearful of market fluctuations these days. However, some analysts say it’s precisely this strategy that’s holding us back. Stock picking is slowly but surely coming back into favor again, offering higher yields and better deals for people who know when to get in and when to get out.
Investors who are interested in stock picking have many different places to learn financial secrets, tips and trends. According to Forbes Magazine, some of these personal financial advisor “hot spots” include
ClearStation (www.clearstation.etrade.com),
MSN Money (www.moneycentral.com/investor),
Marketocracy (www.marketocracy.com),
Reuters Investor (www.reuters.com/investing),
MarketHistory (www.markethistory.com),
Morningstar (www.morningstar.com),
Sector Updates (www.sectorupdates.com),
Stock Fetcher (www.stockfetcher.com),
Stock Selector (www.stockselector.com),
ValuEngine (www.valuengine.com) and
Wall Street Transcript (www.twst.com).
Over time, the consumers who watch market activity will begin to develop a fundamental understanding of the markets.
There are many different types of stock picking strategies. Some of the most common include
Fundamental Analysis,
Qualitative Analysis,
Value Investing,
Growth Investing,
GARP Investing,
Income Investing,
CAN SLIM,
Dogs of the Dow and
Technical Analysis.
While there is limited space to delve deeply into these complex strategies here, more information can be found at Investopedia (www.investopedia.com/university/stockpicking/stockpicking1.asp). Even when consumers learn financial investment techniques, there is no guarantee, however. According to Investopedia: “The bottom line is that there is no one way to pick stocks. Better to think of every stock strategy as nothing more than an application of a theory; a ‘best guess’ of how to invest.”
Stock picking can be done by individuals or by professionals. Top financial advisors work to assist clients in selecting a winning stock portfolio. While these individuals are undoubtedly more experienced in watching economic market fluctuations, they are still human and ultimately fallible. One should not simply entrust an enormous sum of money with a financial advisor, without looking over the periodic statements and watching the DOW/NASDAQ activity. All investing is a gamble, so expectations should be clear when getting started. Perhaps the best advice is still “don’t put all of your eggs in one basket!”
Beth Kaminski is the co-author of Curing Your Anxiety And Panic Attacks which detailed anxiety or panic attacks as well as tips on the various anxiety attack medication available at anxietydisordercure.com.
http://www.supermoneymaking.info/home-business-ideas/stock-picking-101-2/4787
Market PE of KLSE 10.2.2010
http://spreadsheets.google.com/pub?key=tqTRwLLBhkoRtg4BhuybqMA&output=html
10.2.2010
KLCI at 1246.17
Market PE of KLSE = 18.8
Market DY = 3.03%
10.2.2010
KLCI at 1246.17
Market PE of KLSE = 18.8
Market DY = 3.03%
Wednesday, 10 February 2010
Warren Buffett's Long-term timing of the market and the Rational Investing Model
I recently posted:
Rob Bennett said...
This is Rob Bennett, author of the Google Knol on "Why Buy-and-Hold Investing Can Never Work." Thanks for sharing some of the ideas set forth in the Knol with your readers, BullBear. If you or others have questions, I'm happy to help out to the extent that I am able. Rob
My comments:
Thanks Rob for allowing me to share your article in my blog.
Buy and hold strategy is safe for selected stocks. Those using this strategy should be stock pickers; having only good quality companies in their portfolios and only buying them when their prices are obviously at bargain or fair prices. Over the short term, the returns will be volatile, but over the long-term the returns on these investments will be predictably positive reflecting their fundamentals.
Though incorporating a long-term market timing based on valuation of the market may increase returns, like any market timing strategy, it may also impacts negatively on the returns too.
However, there are the very few periods when market timing can be usefully employed with a high degree of confidence and conviction. Those with a good understanding of the valuation of the stock market can employ this infrequently to their benefit when the valuations of the markets are obvious at the extremes. Warren Buffett had done this on a few occasions in his very long investing lifetime. In other periods (the majority of the time), buy and hold for the long term is safe and it works (my personal testimony), but for selected stocks only bought at bargain or fair prices.
Investors would be impressed that Warren Buffett did make adjustments to his allocations to equities at certain periods during his long investing career. These adjustments were based on valuations of the stocks and the market. There were periods his exposure to equities were low when he felt the market was overpriced. At one stage, he returned cash to all his investors as he could find no value in equities to justify continuing investing their money in stocks. And there were the few occasions when Warren Buffett saw deep values in stocks and invested heavily, usually at the bottom of bear markets. Yet, these were the times when other investors were most fearful.
What Warren Buffett did was essentially quite close to what Rob Bennett has written:
The Rational Investing Model encourages investors to take price (valuations) into consideration when setting their stock allocations.
Though we often hear only his "buy and hold forever" mantra, Warren Buffet has in fact been cleverly employing the equivalent of THE RATIONAL INVESTING MODEL, incorporating long-term market timing based on valuation of the market in his allocation of his money to stocks.
The links below documented these actions by Warren Buffett:
Also read:
http://knol.google.com/k/why-buy-and-hold-investing-can-never-work#
http://www.getrichslowly.org/forum/viewtopic.php?f=2&t=4882
http://arichlife.passionsaving.com/2010/02/08/get-rich-slowly-forum-discusses-how-buy-and-hold-caused-the-economic-crisis/
http://www.retireearlyhomepage.com/bennett.html
and this:
A Better Approach to Investing from Rob Bennett of A Rich Life
I'd like to introduce you to a very solid approach to investing from Rob Bennett, author of A Rich Life. His investment approach has been given many names (the one I use for it is dynamic asset allocation). The principles are sound and over the long run, it will serve to reduce overall risk in your portfolio while providing more than adequate returns when compared to static or strategic asset allocation methods. To learn more, read on...
http://www.wealthuncomplicated.com/wealthuncomplicated/2009/05/a-better-approach-to-investing-from-rob-bennett.html
New Investing Idea: The Rational Investing Model is the alternative to the Buy-and-Hold Investing Model
and pleasantly received a reply from the author of the above article:Rob Bennett said...
This is Rob Bennett, author of the Google Knol on "Why Buy-and-Hold Investing Can Never Work." Thanks for sharing some of the ideas set forth in the Knol with your readers, BullBear. If you or others have questions, I'm happy to help out to the extent that I am able. Rob
My comments:
Thanks Rob for allowing me to share your article in my blog.
Buy and hold strategy is safe for selected stocks. Those using this strategy should be stock pickers; having only good quality companies in their portfolios and only buying them when their prices are obviously at bargain or fair prices. Over the short term, the returns will be volatile, but over the long-term the returns on these investments will be predictably positive reflecting their fundamentals.
Though incorporating a long-term market timing based on valuation of the market may increase returns, like any market timing strategy, it may also impacts negatively on the returns too.
However, there are the very few periods when market timing can be usefully employed with a high degree of confidence and conviction. Those with a good understanding of the valuation of the stock market can employ this infrequently to their benefit when the valuations of the markets are obvious at the extremes. Warren Buffett had done this on a few occasions in his very long investing lifetime. In other periods (the majority of the time), buy and hold for the long term is safe and it works (my personal testimony), but for selected stocks only bought at bargain or fair prices.
Investors would be impressed that Warren Buffett did make adjustments to his allocations to equities at certain periods during his long investing career. These adjustments were based on valuations of the stocks and the market. There were periods his exposure to equities were low when he felt the market was overpriced. At one stage, he returned cash to all his investors as he could find no value in equities to justify continuing investing their money in stocks. And there were the few occasions when Warren Buffett saw deep values in stocks and invested heavily, usually at the bottom of bear markets. Yet, these were the times when other investors were most fearful.
What Warren Buffett did was essentially quite close to what Rob Bennett has written:
The Rational Investing Model encourages investors to take price (valuations) into consideration when setting their stock allocations.
Though we often hear only his "buy and hold forever" mantra, Warren Buffet has in fact been cleverly employing the equivalent of THE RATIONAL INVESTING MODEL, incorporating long-term market timing based on valuation of the market in his allocation of his money to stocks.
The links below documented these actions by Warren Buffett:
*****Warren Buffett's commonsense approach to valuing the stock market
Buffett's success in gauging market conditions and profiting from them
Buffett: Keeping abreast of market conditions
*****Buffett's Shrinking Portfolio of the 1980s (1)
*****Buffett's shrinking portfolio of the 1980s (2)
Also read:
http://knol.google.com/k/why-buy-and-hold-investing-can-never-work#
http://www.getrichslowly.org/forum/viewtopic.php?f=2&t=4882
http://arichlife.passionsaving.com/2010/02/08/get-rich-slowly-forum-discusses-how-buy-and-hold-caused-the-economic-crisis/
http://www.retireearlyhomepage.com/bennett.html
and this:
A Better Approach to Investing from Rob Bennett of A Rich Life
I'd like to introduce you to a very solid approach to investing from Rob Bennett, author of A Rich Life. His investment approach has been given many names (the one I use for it is dynamic asset allocation). The principles are sound and over the long run, it will serve to reduce overall risk in your portfolio while providing more than adequate returns when compared to static or strategic asset allocation methods. To learn more, read on...
http://www.wealthuncomplicated.com/wealthuncomplicated/2009/05/a-better-approach-to-investing-from-rob-bennett.html
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