Quick look (March 2010 - May 2010)

A quick look at Boustead REIT (21.5.2010) 
http://spreadsheets.google.com/pub?key=tKnEhhfZARfg2PKULQChzvg&output=html


A quick look at PIE (21.5.2010)
http://spreadsheets.google.com/pub?key=tq1EvTiySP56hi-KpJakRsg&output=html


A quick look at Tower REIT (21.5.2010)
http://spreadsheets.google.com/pub?key=t2EIJILWu2WYMERzHSB0qEQ&output=html


A quick look at Apex Healthcare (21.5.2010)
http://spreadsheets.google.com/pub?key=t2jxPH-ilAzT814kpPY0n2w&output=html


A quick look at Amway (21.5.2010) 
http://spreadsheets.google.com/pub?key=tlimjjhbm3T8mnyglBWVagA&output=html


A quick look at Kossan (21.5.2010) 
http://spreadsheets.google.com/pub?key=tOMR-3_0XEDLwnGGLwwcqrA&output=html


A quick look at UMW (21.5.2010)
http://spreadsheets.google.com/pub?key=tQhf3FL0inyTABbF4g8_jdw&output=html


A quick look at Mieco (19.5.2010) 
http://spreadsheets.google.com/pub?key=tz7RWE_u6IqoXzZIK5kBx9A&output=html


A quick look at Berkshire Hathaway (18.5.2010) 
http://spreadsheets.google.com/pub?key=t9N2GnBsVP0AVw8rAIxfDsw&output=html


A quick look at Xidelang (18.5.2010) 
http://spreadsheets.google.com/pub?key=tEtEdBnT28KID_KqaDJqu3g&output=html


A quick look at Maybulk (18.5.2010) 
http://spreadsheets.google.com/pub?key=t_FY7rgxhGIW7AtIVKbgRig&output=html


A quick look at Dutch Lady (18.5.2010) 
http://spreadsheets.google.com/pub?key=tSZUfBh6sqlDuzF6mlZwd1w&output=html


A quick look at United Plantations (18.5.2010) 
http://spreadsheets.google.com/pub?key=tYSv8r0V5jZUslGQTEGKyYQ&output=html


A quick look at Malaysian Banking Stocks (16.5.2010) 
http://spreadsheets.google.com/pub?key=t3v2VY0rD9DcGSjmVkAV-gQ&output=html


A quick look at BIMB (15.5.2010) 
http://spreadsheets.google.com/pub?key=t3svj1f7qc6pJcqKn-FNG6A&output=html


A quick look at Affin Holdings (15.5.2010) 
http://spreadsheets.google.com/pub?key=thaNOxyHlsOChhginG8Bq2Q&output=html


A quick look at Alliance Financial Group (15.5.2010)
http://spreadsheets.google.com/pub?key=txT0pF1TSK-OQtTDi3QdDdw&output=html


A quick look at Hong Leong Bank (15.5.2010) 
http://spreadsheets.google.com/pub?key=tycFD1BTkA-RNW-zclpXrIw&output=html


A quick look at Eon Capital (15.5.2010) 
http://spreadsheets.google.com/pub?key=tSgfLNvcIzSMhLmOD_nYDcQ&output=html


A quick look at CIMB (15.5.2010)
http://spreadsheets.google.com/pub?key=tKdR1ezq71j9tVJQn-ldfKw&output=html


A quick look at Public Bank Berhad (15.5.2010) 
http://spreadsheets.google.com/pub?key=t9xRo-1yCJCfmo6KL-IIg3Q&output=html


A quick look at AMMB (14.5.2010) 
http://spreadsheets.google.com/pub?key=tXOX1kGVsK5WyU4E0z2xZdg&output=html


A quick look at IOI Corp (14.5.2010) 
http://spreadsheets.google.com/pub?key=tb5g_wc85QNAyl7rEqUx7Ng&output=html


A quick look at Green Packet (14.5.2010) 
http://spreadsheets.google.com/pub?key=tV-54uu4_jzVGfNlURI6rhg&output=html


A quick look at Transmile (14.5.2010) 
http://spreadsheets.google.com/pub?key=t3UYetvUUuc1vbXWvCaAOTw&output=html


A quick look at Maybank (13.5.2010) 
http://spreadsheets.google.com/pub?key=tfMoQtAgU30SEiVrx-hXdHw&output=html


A quick look at JTI (13.5.2010) 
http://spreadsheets.google.com/pub?key=tOLRl0VcERSZUqz0FX99q3g&output=html


A quick look at Berjaya Sports Toto (13.5.2010) 
http://spreadsheets.google.com/pub?key=tar1l7PRo-VcfUWjN2NE-1Q&output=html


A quick look at Dialog (12.5.2010) 
http://spreadsheets.google.com/pub?key=tYLLOQgmBsAJYTQNRLcGRIA&output=html


A quick look at White Horse Bhd (12.5.2010)
http://spreadsheets.google.com/pub?key=tShHrZib6ybW69B8h8EjONQ&output=html


A quick look at Tien Wah Press (12.5.2010) 
http://spreadsheets.google.com/pub?key=tEWwIR3DX9yyeHyBhASJBhg&output=html


A quick look at Apex Healthcare (12.5.2010) 
http://spreadsheets.google.com/pub?key=tkkevAQFvRaUZTdTV-F__DQ&output=html


A quick look at Shell (11.5.2010) 
http://spreadsheets.google.com/pub?key=tuQ5isf0V_9SOSKAgBWlIiA&output=html


A quick look at Hartalega (11.5.2010) 
http://spreadsheets.google.com/pub?key=tQyfFDm87g4Zw0aazeJJ1ew&output=html


A quick look at Petronas Gas (11.5.2010) 
http://spreadsheets.google.com/pub?key=tFknuWgtf7GqSvQDRjS5aig&output=html


A quick look at Latexx (8.5.2010) 
http://spreadsheets.google.com/pub?key=tMGIE1j8l7f8e27I8inQUig&output=html


A quick look at Kossan (8.5.2010) 
http://spreadsheets.google.com/pub?key=ttaoTf7WwIlRuWyNhWEz7xg&output=html


A quick look at Adventa (8.5.2010) 
http://spreadsheets.google.com/pub?key=tpg78jjich_9vs6GZN8r5KA&output=html


A quick look at Hartalega (8.5.2010) 
http://spreadsheets.google.com/pub?key=tT2IXHGPpvc86Obf9tr25aQ&output=html


A quick look at Top Glove (8.5.2010) 
http://spreadsheets.google.com/pub?key=tZlHVEhyDcVlmKxE5_V4reQ&output=html


A quick look at CSC Steel (7.5.2010) 
http://spreadsheets.google.com/pub?key=tdSgsmFJYX6roa6GAAjnlBg&output=html


A quick look at Pintaras Jaya (7.5.2010) 
http://spreadsheets.google.com/pub?key=tuEWCudGrYd-gYKpjeFknvg&output=html


A quick look at Guinness (7.5.2010) 
http://spreadsheets.google.com/pub?key=tP_TV-Arxg9uwwrvWyZ_kvw&output=html


A quick look at F & N (6.5.2010) 
http://spreadsheets.google.com/pub?key=tGDNB7GiYxmXFXxqJEqY49A&output=html


A quick look at Yee Lee (5.5.2010) 
http://spreadsheets.google.com/pub?key=t110lp_dYviKliqIsIUOsLw&output=html


A quick look at 3A Resources (5.5.2010)
http://spreadsheets.google.com/pub?key=tcpHxcoccuKHRFO8To1fewQ&output=html


A quick look at Hing Yiap (4.5.2010) 
http://spreadsheets.google.com/pub?key=tsNT3xhHVKW3w4UCexYEeHw&output=html


A quick look at KNM (4.5.2010) 
http://spreadsheets.google.com/pub?key=tcCGJ_jnIm-UI-eucHCcPlA&output=html


A quick look at Integrax (4.5.2010) 
http://spreadsheets.google.com/pub?key=t8WcTpUdhaSg_cm5MvKQYLQ&output=html


A quick look at Genting Berhad (3.5.2010) 
http://spreadsheets.google.com/pub?key=tn_N2jnN3rN857OjJ3soAyA&output=html


A quick look at Daibochi (3.5.2010) 
http://spreadsheets.google.com/pub?key=tiRMwQJfZ-5eKyfTy1bPXWw&output=html


A quick look at Latexx (3.5.2010) 
http://spreadsheets.google.com/pub?key=tECNeQDUY1U6NYZKZZlixQQ&output=html


A quick look at GENM (2.5.2010) 
http://spreadsheets.google.com/pub?key=tp5o0Wh0t3M0rC_NfN1I6Ag&output=html


A quick look at Proton (2.5.2010) 
http://spreadsheets.google.com/pub?key=tD9LN07eCpTS6nveY5Sgy4A&output=html


A quick look at F & N (2.5.2010)
http://spreadsheets.google.com/pub?key=tyqRmMbLVEXV80BN2RNGD-Q&output=html


A quick look at UMW (2.5.2010) 
http://spreadsheets.google.com/pub?key=tzdm-V8ZSvV8pv_fn-UQOlg&output=html


A quick look at Padini (1.5.2010) 
http://spreadsheets.google.com/pub?key=tWJgoo7xN96USdF9uQ0QAPA&output=html


A quick look at Nam Fatt - PN 17 (1.5.2010) 
http://spreadsheets.google.com/pub?key=tAskkNgs3uU8eyk_WrTFcSw&output=html


A quick look at Parkson (30.4.2010) 
http://spreadsheets.google.com/pub?key=t89GdOvB0Z7c0P09gMecXmg&output=html


A quick look at Dutch Lady (30.4.2010) 
http://spreadsheets.google.com/pub?key=teeozl-_jloC9wXtgg35Puw&output=html


A quick look at TMC Life (29.4.2010)
http://spreadsheets.google.com/pub?key=tZErp0UQF1zpu_9EEqrifSQ&output=html


A quick look at Notion Vtec (30.4.2010) 
http://spreadsheets.google.com/pub?key=th-zb5N9aeSPqWRxjfjDsnA&output=html


A quick look at DXN (30.4.2010) 
http://spreadsheets.google.com/pub?key=tNWqXrnJuK8PSKHQj0su_UA&output=html


A quick look at KPJ (30.4.2010) 
http://spreadsheets.google.com/pub?key=topP51LjhiJSMZi6ki0eWQA&output=html


A quick look at Chin Teck Plantations (30.4.2010)
http://spreadsheets.google.com/pub?key=ts2ELx0y0T1PyujEygq8qNA&output=html


A quick look at Unisem (29.4.2010)
http://spreadsheets.google.com/pub?key=tBPdagB5NlJavnA0VzMF6Kw&output=html


A quick look at Freight Management (28.4.2010) 
http://spreadsheets.google.com/pub?key=tCRbHcnPniv_YU0cQTJLvgw&output=html


A quick look at Atlan (28.4.2010)
http://spreadsheets.google.com/pub?key=tqMv2y-w4tYkHR6wBdGCCqQ&output=html


A quick look at Ann Joo (28.4.2010) 
http://spreadsheets.google.com/pub?key=tAl_uXD1Wi7vxL30pvwOiLA&output=html


A quick look at Hartalega (26.4.2010) 
http://spreadsheets.google.com/pub?key=t1RgI9NIq_v_mXN5GGkePwA&output=html


A quick look at PPB (26.4.2010)
http://spreadsheets.google.com/pub?key=tE0GXuaeXQQUaFfmQdemCXg&output=html


A quick look at Pantech (26.4.2010)
http://spreadsheets.google.com/pub?key=t3zI0ldlAvJCuRJQIBPSJ9g&output=html


A quick look at KSL (25.4.2010)
http://spreadsheets.google.com/pub?key=tCChV0H1jrV_V_XdHm3mjgA&output=html


A quick look at Ajiya (24.4.2010)
http://spreadsheets.google.com/pub?key=tD3AF4z8Z_78wCEiKBcca6Q&output=html


A quick look at QL (22.4.2010) 
http://spreadsheets.google.com/pub?key=tAbsXJFFkFhyH8UpFrR-Gpw&output=html


A quick look at MYEG (22.4.2010) 
http://spreadsheets.google.com/pub?key=tdVSwe6o2iz4DJ2U8bjPxqg&output=html


A quick look at Nestle (21.4.2010)
http://spreadsheets.google.com/pub?key=tSYotvXtbcoj2isROy_VY_g&output=html

A quick look at C.I. Holdings (21.4.2010) 
http://spreadsheets.google.com/pub?key=t-txsPY_B8VmtaJsbgEzXXg&output=html

A quick look at KAF (21.4.2010) 
http://spreadsheets.google.com/pub?key=tt-FqSCZJ3t_dmBwyJhwEwQ&output=html

A quick look at Tenaga (20.4.2010)
http://spreadsheets.google.com/pub?key=ti4gKGN8X2mWhDORvdhN2Tw&output=html

A quick look at Supermax (19.4.2010) Q1 2010
http://spreadsheets.google.com/pub?key=telQsoPdo0K4BY0D2VQg_1Q&output=html

A quick look at LTKM (18.4.2010) 
http://spreadsheets.google.com/pub?key=ta9iC4u-l3laEWMXfyC27aA&output=html

A quick look at XINGQUAN (29.3.2010) 
http://spreadsheets.google.com/pub?key=tQ54VqUumqozmI_Y_SSAQKQ&output=html

A quick look at KGB. (29.3.2010)
http://spreadsheets.google.com/pub?key=tHqBfx2E03AKh6UHmeay3aw&output=html
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A quick look at Boustead REIT (21.5.2010)

A quick look at Boustead REIT (21.5.2010)
http://spreadsheets.google.com/pub?key=tKnEhhfZARfg2PKULQChzvg&output=html

Asset Allocation: Invest wisely to get your money's worth

Invest wisely to get your money’s worth

Comment     Mail to friend ET Bureau; Prashant Mahesh & Nikhil Walavalkar In the uncertain world of finance, we know that systematic investment and sticking to your asset allocation hold the key to success. But wealth management experts use asset allocation strategies not only to create wealth, but also to protect it during volatile times.  It is not the maximisation of returns, but optimisation of returns that becomes the goal of money managers. Asset allocation strategy has to be reviewed continuously.  This process plays a key role in determining the risk and return from your portfolio. Broadly speaking, the portfolio’s asset mix should reflect your risk taking capacities and goals. Wealth managers use different strategies of building asset allocations and we outline some of them and examine their basic management approaches.

Strategic Asset Allocation

Comment     Mail to friend Strategic allocation is typically the first stage in the investment process. Based on the investor’s long-term objectives, an initial portfolio is build. It is the backbone of any investment strategy. This often forms the basic framework of an investor’s portfolio. This is a proportional combination of assets based on expected rates of return for each asset class. For example, if stocks have historically given a return of 12% per year and bonds have returned 6% per year, a mix of 50% stocks and 50% bonds would be expected to return 9% per year. Strategic asset allocation generally implies a buy-and-hold strategy. “Strategic asset allocation defines the boundary of risk, and it is these boundaries that help control portfolio risk,” said AV Srikanth, executive director, Anand Rathi Wealth Managers.

Constant-Weighting Asset Allocation

Comment     Mail to friend Strategic asset allocation has its drawbacks as it entails a buy-and-hold strategy even if a change in the value of assets causes a drift from the initially established policy mix. This has driven the wealth managers to resort to the constant weighting asset allocation. This strategy helps you to continuously rebalance your portfolio. For example, if gold was declining in value, you would purchase more of it to maintain its weightage and if its value increased you would sell it. There are no hard-and-fast rules for the timing of portfolio rebalancing under strategic or constant-weighting asset allocation. Most wealth managers are of the opinion that the portfolio should be rebalanced to its original mix when any asset class moves more than 5-7% from its original value.

Tactical Asset Allocation

Comment     Mail to friend Over the long run, a strategic asset allocation strategy may seem relatively rigid. There are investors who constantly want to seek returns out of market opportunities that arise.  Hence, investment managers find it necessary to go in for short term tactical calls. Such tactical calls create room for capitalisng on unusual or exceptional investment opportunities. This is like timing the market to participate in the fluctuations and volatility that arise due to market conditions. “While a strategic asset allocation is revisited once in six months, tactical asset allocations are visited every month,” said Hrishikesh Parandekar, CEO, Karvy Private Wealth. Tactical calls are on an ongoing basis. For example, shifting a part of the portfolio from large cap stocks to mid cap stocks to take advantage of the environment is a tactical call.  “We restrict our tactical calls around 10% of the total portfolio and rest of the money is strictly governed by strategic allocation,” said a wealth advisor with a foreign wealth manager. Tactical allocations being opportunistic in nature, wealth managers prefer to maintain clear time-based and value-based entry and exit points to ensure better risk management.

Guided and optimised allocation

Comment     Mail to friend This can be seen as the advanced version of tactical asset allocation. When tactical asset allocation aims to take advantage of temporary situations in the market, the concept of guided and optimised allocation believes in squeezing the last drop out at all times. By very nature, it is meant for a bit aggressive investor. Here 75% of the clients’ portfolio could follow the original asset allocation, while 25% of the portfolio will explore opportunities where there could be chances of making higher return. So, investing in gold futures for a quick buck, or short-term corporate deposits offering higher rate of interest and such other opportunities remains on investors’ lookout. Here you must continuously stay tuned with the financial markets. The strategy further demands you to take into account transaction costs as the investors turn hyper active in search of higher returns

Dynamic Asset Allocation

Comment     Mail to friend For aggressive investors who want to ride momentum at times, managers recommend dynamic asset allocation. So, if the stock market is showing weakness, you sell anticipating a further fall. If it is going up, you buy anticipating a further rise.  Here you constantly adjust the mix of assets as markets rise and fall. This is the opposite of constant-weighting strategy. As the entire portfolio is available for action, amateur investors may turn hyper active. Especially in the high volatile times, acting on all types of information can lead to high transaction costs. Also, the tax treatment of the returns turns to disadvantages if you churn your portfolio too much. In times of high volatility, when the markets may not move up or down much, dynamic asset allocation is not advisable for naैंve investors. Depending on the type of investor you are, asset allocation could be active or passive. However investors should choose one keeping in mind their age, long term goals and risk taking capacity in mind.

http://economictimes.indiatimes.com/quickiearticleshow/5951589.cms

How to generate passive income to meet financial goals

Generate passive income to meet financial goals

Ever wondered how your colleague at work, who earns the same salary as you, has bought a BMW while you are still driving your five-year-old Honda City? Chances are your colleague has utilised his or her existing salary smartly to generate passive sources of income, on the back of which the car has been bought.

By generating passive income you can achieve financial freedom and flexibility through the creation of alternative sources of income that can complement your salary income.

People rarely achieve their financial goals and dreams only on the back of their salaries. One needs alternative sources of income that can increase one’s wealth and consumption capabilities. Here we share with you some tips on how to generate passive income.


What is passive income?

The salary you get from work is a direct result of your efforts at work, during your active working life. Passive income, on the other hand, is income that you can generate without having to directly work for it.

For instance, if you invest a part of your salary into instruments that will earn income for you without you spending any time on it, you can create passive sources of investment income for yourself. Apart from the act of investment, you are not directly doing any active work to generate investment income.

In effect, your money works for you to earn more money for no incremental effort on your part. Over time, if you have invested smartly, you can have enough money through these passive sources to make a down payment on an apartment or buy that dream car.

Even if you start small, the idea is that you should start creating passive income for your self. Through the sheer power of compounding of capital, small savings today can grow into a large amount within just a short period of 4-5 years.


When can I start earning passive income?

You can start as early as today! All you need is a regular source of salary income and the discipline of setting aside a part of this salary, even if it is a small amount, towards investment purposes before you start spending your money on your lifestyle or your living costs.

This of course might not always be easy, and depends upon the state of your personal finances and your family situation.

Also, if you are just starting out your career, you might not have the flexibility to invest immediately. To add to these is the peer pressure to spend money on items of conspicuous consumption like the latest mobile phone or a cutting edge flat screen LCD TV.


When can I start earning passive income?

The choice whether to invest or not is of course yours, but please bear in mind the tradeoff in the long term - you can either consume today, or save up to consume for later.

If, however, you are in your middle age, you might not be left with much of a choice and your key goal should be to use as much of your income as possible from your remaining peak earning years to create a source of passive income, which is often the only source of funds for most people during retirement.


What is the tax impact of passive income?

Like your salary income, any passive income that you generate will also create a tax liability for you. Depending upon the source of the income there might be different tax treatment applied. For instance, dividends from equity instruments such as stocks or equity mutual funds are tax free in the hands of the investor.

However, dividends distributed by a debt or a liquid fund will be subject to a dividend distribution tax paid out by the fund.

Further, the tax treatment also depends upon the time duration that you hold an asset or an investment. If you make a gain on a capital market investment, but hold it for less than 12 months, short-term capital gains tax rules will apply.


What is the tax impact of passive income?

If you hold the investment for more than 12 months then long-term capital gains tax rates will be applicable. Similarly, for property the holding period that determines a short or long-term capital gain is whether you have owned the asset for more or less than 3 years.

The tax rates for capital gains vary by the type of investment in question. Sometimes you might also be able to use losses from your investments to offset your taxes from other sources of income.

Whatever be the source of your passive income, you will need to declare it in your annual tax return, and pay taxes on it according to the existing tax rates and rules.


http://economictimes.indiatimes.com/quickiearticleshow/5956325.cms

How to make the most of this market correction

Markets going through a correction phase

Vikas Agarwal, ET Bureau



The equity markets, globally, are going through a correction phase at the moment. The financial crisis in the Euro region is the main reason behind this sharp correction in the global stock markets. Some of the Euro zone countries have mounted a high sovereign debt. These countries are finding it difficult to repay the loan and can't take independent monetary policy actions due to their partnerships in the common currency - the Euro.

On the other hand, the domestic markets have also corrected by almost 10 percent over the last few weeks, even though there are no fundamental issues with the domestic economy or business houses. This indicates the domestic markets have a sound foundation and they will be among the first markets globally to recover from this downtrend.

Investments in equity more attractive

Therefore, investments in equity in the domestic markets have become more attractive at the lower levels. Usually, when one talks of investments in equity or equity-based instruments, many still think of it like a bet. In fact, equity-based instruments should be part of every investor's investment portfolio. However, the percentage of allocation towards equity and debtbased instruments should depend on the risk profile of the investor.

Although debt instruments are considered relatively safe options, there is a hierarchy of risk even among debt instruments. An investor has to look at the trade-off between risk, return and liquidity while taking an investment decision. Since the markets have corrected significantly, investors can look at a slightly higher allocation towards equity-based instruments.

Here's how you can change your portfolio composition:

Fresh investments in equity

One simple method is fresh investments in equitybased investment instruments. For example, you can make investments in stocks or mutual funds. Investors with a low risk profile can look at subscribing to some of the IPOs of public sector companies which are expected to be launched in the next few months.

The government is disinvesting in several public sector companies to raise funds to partially fund the fiscal deficit. These stocks are usually considered safe investment options as these companies have a solid business model and the backing of the government. And on the other hand, you get the flavour of investing in equity as well.

Shift some debt to equity

You can also look at diverting some short-term debt investments to equity-based mutual funds. However, since the market conditions are a bit uncertain at the moment, you should assume a medium to long-term horizon for your investments in equity-based instruments. However, it is important for investors to invest only their risk capital in equitybased instruments at this point in time.

You can also look at converting your debt-based mutual funds to equitybased funds. Since the interest rates are expected to go up, the existing debt instruments will lose some of their face value. Since the equity markets are going through a correction phase, it is a good idea to convert a part of your debt-based investments to equity-based investments.




http://economictimes.indiatimes.com/quickiearticleshow/5964177.cms

Rebound staves off the GFC Mark II

Rebound staves off the GFC Mark II

TIM COLEBATCH AND RICHARD WILLINGHAM
May 22, 2010

THE biggest fall on global financial markets since the panic of 2008 halted suddenly in Australia yesterday, raising hopes that markets might avoid a second catastrophic meltdown.

After a month of almost unbroken falls - more like free-fall over the past week - share prices and the Australian dollar rebounded strongly during yesterday's trading after opening sharply lower.

In a roller-coaster day on the markets, the dollar fell, rose and fell again. Its journey took it from US80.73¢ in early trading to US83.65¢, then back to US82.69¢ by the evening.

On the stockmarket, the benchmark S&P/ASX200 index began 2.5 per cent down after Wall Street overnight suffered its biggest fall for more than a year, widely attributed to fears of a slump in Europe and a slowdown in China. But, unexpectedly, it began creeping back up, then the creep became a bound, and it ended up just 0.25 per cent lower at 4305.4.

But even after yesterday's bounce, it was a week that took us back to the panic of October 2008. Stock prices fell 6.6 per cent, wiping $90 billion off the market's value. The dollar plunged 7.3 per cent against the US dollar, and only slightly less on the Reserve Bank's broader index.

Analysts said the Aussie could drop below US80¢ next week if the market retreat continued but its long-term prospects were positive.

''We still think it can head lower from here,'' said Westpac currency strategist Jonathan Cavenagh. ''We think it can head into the 70s.''

Yesterday's rally was fuelled by a market rumour that the Reserve Bank was buying the currency. But the Reserve refused to confirm or deny this, and some suggested it was a correction after the rapid sell-off of recent days. But as analysts tried to make sense of it all, opinions differed not only on where the market will go next, but on what is driving the global retreat of investors away from stocks and risk and into the safety of bonds and the US dollar.

Trillions of dollars have been pulled out of stock markets the world over. Wall Street's benchmark index, the S&P500, fell 7.4 per cent in the past week. In Britain, the FTSE index was down 6.6 per cent, the same as Australia's, while Japan's Nikkei index fell 4.1 per cent.

Shadow treasurer Joe Hockey yesterday blamed the plunge partly on the government's proposed resource rent tax on mining. But Prime Minister Kevin Rudd emphasised the global falls, attributing them to ''a genuine crisis of confidence in Europe''.


In their gloom, the markets have ignored very strong growth figures and forecasts from Asia and the US. China's 12 per cent growth in the year to March has now been topped by Singapore (15.5 per cent) and Taiwan (13.3 per cent). In the US, the Fed is forecasting growth this year to be in the range of 3.2 to 3.7 per cent.

The 11 per cent plunge in the Australian dollar from its peak of US93.41¢ in mid-April will be good for the slow lane of our two-speed economy. For local manufacturers, tourism operators and farmers, it makes exporting more viable and profitable.

But imports will become more expensive, at least for the middlemen, and anyone travelling overseas will need more money.

The proposed resources tax appears to have been at most a marginal influence. The plunge in Australian stock prices over the past month has been similar to the fall in stock prices in the US.

Source: The Age

http://www.smh.com.au/business/rebound-staves-off-the-gfc-mark-ii-20100521-w231.html

Should you panic? Advice for mum and dad investors

Should you panic?
RICHARD WEBB
May 23, 2010

IT WAS like someone rang a bell. Just before 11am on Friday the waves of panic selling that had been demolishing Australian share prices dried up and bargain hunters came out of the woodwork.

Stocks did an abrupt about-face and, after being 3 per cent down in early trade, clawed their way back to be almost level by Friday's close. You could hear the sighs of relief all the way along Collins Street.

These days, financial markets recover almost as quickly as they fall, and local shares, even after Friday's intra-day recovery, remain 15 per cent or so below their April highs. They are sitting at historically cheap valuations.

So what should mum and dad investors do?

• Jump into the sharemarket, buying with their ears pinned back to ride a swift market recovery? 
• Should they loosen off their share load on expectation of more falls to come as we head into ''Global Financial Crisis II - Europe falters''? 
• Or should they simply sit tight and ride out the volatility until things become a little clearer?

The answer is, of course, none of these. Shares are for the medium to long term and you should not try to second-guess short-term market moves. Traders don't often get it right and they do this for a living.

If you are looking to buy, then look to the long term. It should also be a long-term view that governs your decision to sell, rather than panic over the market falling for a few weeks.

As Austock senior adviser Michael Heffernan puts it, the problem is that once panic prevails, logic goes out the window.

''This is not September/October 2008, but the sharemarket is driven by fundamentals and sentiment, and sentiment is the predominant driver at the moment,'' Mr Heffernan says. ''Cooler heads might perceive we have reached a low point but the market has a mind of its own at the moment and it will defy rationality.''

He says that if you have a portfolio of solid, dividend-paying, blue-chip shares and are risk averse, then ''I would recommend you ride this out and just wait and see.

''If you are looking to buy, and I generally like to buy when the market is going up rather than trying to pick a bottom, I wouldn't be necessarily going head over heels into any sector just yet, but I would suggest you look at the banks, major retailers and mid caps. I would wait until after the election before getting back into the big resources stocks or Telstra, though.''

Pengana Emerging Companies fund manger Ed Prendergast agrees on the mixed market sentiment.

''It's murky at the moment and at times like this it's dangerous to be too definitive.

China may be slowing, Greece is clearly an issue and the resource super profits tax is adding fuel to the fire in our market, but it's hard to see this escalating into another GFC - I would be totally surprised by that,'' Mr Prendergast says.

''At the moment it feels like a lot of people trying to get out of a burning cinema and they are all trying to squeeze through the one door - but if you are taking a medium-term view you shouldn't be fazed too much by the short-term volatility; nothing has changed for many Australian companies but their share price.''

So if Mr Prendergast's mum wanted to invest in shares right now, what would he recommend? ''I would still say she should buy but not invest all of her money in one day - I would say some now, some in three weeks' time and some three weeks after that. That way you've got more time to assess the risks.''

Sean Conlan, senior adviser with Macquarie Private Wealth, says the recent selling in the market was almost entirely driven by foreign investors taking profits - which is also why he believes the Australian dollar took such a pounding as they moved their money out of the country.

''There has been a lot of offshore money parked in Australia as it was considered a safe haven through the global financial crisis and as a bet on China,'' he says.

''But triggered by the announcement of the resource super profits tax, these major overseas funds all decided to take their profits and get out - it's not really been panic selling but a reweighting by foreign investors.''

Mr Conlan says local shares are now cheap, trading at a forward price-earnings ratio of 12.8 times, against the local market's long-term average of 14.6 times.

''It's going to be volatile going forward for a while but there is an opportunity to take advantage of the current value showing in the market.''

The confidence crunch

Why is it so?



■Greece and Portugal sovereign debt concerns: will the $US1 trillion German-backed Greek rescue package work?

■Tighter banking legislation in the US approved on Thursday in response to the subprime debacle: will it constrain the US banking system?

■US economic recovery worries: is employment growth petering out?

■Criminal action against Goldman Sachs: fears over the implications.

■Economic tightening in China: has it gone too far given that property prices in Beijing have fallen 20 per cent and what does this mean for commodity prices long-term?

■Resources tax: what does it mean for our best-performing industry?

■The ash cloud over Europe and the oil spill off the US: both have had major negative economic and environmental implications.

Source: The Age

http://www.smh.com.au/business/should-you-panic-20100522-w2t1.html

A quick look at PIE (21.1.2010)

A quick look at PIE (21.1.2010)
http://spreadsheets.google.com/pub?key=tq1EvTiySP56hi-KpJakRsg&output=html

A quick look at Tower REIT (21.5.2010)

A quick look at Tower REIT (21.5.2010)
http://spreadsheets.google.com/pub?key=t2EIJILWu2WYMERzHSB0qEQ&output=html

A quick look at Apex Healthcare

A quick look at Apex Healthcare
http://spreadsheets.google.com/pub?key=t2jxPH-ilAzT814kpPY0n2w&output=html

A quick look at Amway (21.5.2010)

A quick look at Amway (21.5.2010)
http://spreadsheets.google.com/pub?key=tlimjjhbm3T8mnyglBWVagA&output=html

A quick look at Kossan (21.5.2010)

A quick look at Kossan (21.5.2010)
http://spreadsheets.google.com/pub?key=tOMR-3_0XEDLwnGGLwwcqrA&output=html

Padded Pensions Add to New York Fiscal Woes

May 20, 2010
Padded Pensions Add to New York Fiscal Woes
By MARY WILLIAMS WALSH and AMY SCHOENFELD

In Yonkers, more than 100 retired police officers and firefighters are collecting pensions greater than their pay when they were working. One of the youngest, Hugo Tassone, retired at 44 with a base pay of about $74,000 a year. His pension is now $101,333 a year.

It’s what the system promised, said Mr. Tassone, now 47, adding that he did nothing wrong by adding lots of overtime to his base pay shortly before retiring. “I don’t understand how the working guy that held up their end of the bargain became the problem,” he said.

Despite a pension investigation by the New York attorney general, an audit concluding that some police officers in the city broke overtime rules to increase their payouts and the mayor’s statements that future pensions should be based on regular pay, not overtime, these practices persist in Yonkers.

The city has even arranged for its police to put in overtime as flagmen on Consolidated Edison construction sites. Though a company is paying the bill, the city is actually reporting the work as city overtime to the New York State pension fund, padding future payouts — an arrangement at odds with the spirit of public employment, if not the law.

The Yonkers experience shows how errors, misunderstandings and wishful thinking are piling hidden new costs onto New York’s public pension system every year, worsening the state’s current fiscal crisis. And the problem is not just in New York. Public pension costs are ballooning everywhere, throwing budgets out of whack and raising the question of whether venerable state pension systems are viable.

In fact, the cost of public pensions has been systemically underestimated nationwide for more than two decades, say some analysts. By these estimates, state and local officials have promised $5 trillion worth of benefits while thinking they were committing taxpayers to roughly half that amount.

The use of public money for outsize retirement pay really stings when budgets don’t balance, teachers are being laid off, furloughs are being planned and everything from poison-control centers to Alzheimer’s day care is being cut, as is happening in New York.

According to pension data collected by The New York Times from the city and state, about 3,700 retired public workers in New York are now getting pensions of more than $100,000 a year, exempt from state and local taxes. The data belie official reports that the average state pension is a modest $18,000, or $38,000 for retired police officers and firefighters. (The average is low, in part, because it includes people who worked in government only part time, or just a few years, as well as surviving spouses getting partial benefits.)

Roughly one of every 250 retired public workers in New York is collecting a six-figure pension, and that group is expected to grow rapidly in coming years, based on the number of highly paid people in the pipeline.

Payouts for Decades

Some will receive the big pensions for decades. Thirteen New York City police officers recently retired at age 40 with pensions above $100,000 a year; nine did so in their 30s. The plan’s public information officer said that the very young retirees had qualified for special disability pensions, which are 50 percent larger than ordinary police pensions. He said several dozen of the highest-paid New York City police retirees had disabilities related to 9/11 and the rest of the disabilities resulted from injuries in the line of duty.

In virtually every case, the officials who granted the rich pensions thought they were offering something affordable, because the cost estimates were too low.

Before Yonkers adopted a richer pension formula for police in 2000, for instance, it was told the maximum cost would be $1.3 million a year. But instead, the yearly cost is now $3.75 million and rising.

David Simpson, a spokesman for the mayor of Yonkers, said pension cost projections were “often lowballs,” so the city could get stuck. “Once you give something, you can’t take it away,” he said.

Police pensions and overtime have been a sore point in Yonkers for many years and were the subject of an exposé in The Journal News in Westchester in 2009. A special audit of police overtime in Yonkers in 2007 found that the police department had failed to enforce its own rules, creating pervasive opportunities for abuse.

Despite all the attention, police are now being paid as flagmen by Con Edison on their days off, Mr. Simpson confirmed, adding that the city was tacking the extra hours onto their pay, which is then reported to the state pension fund.

“The system encourages police to take as much overtime as they can in the last year before retirement. That’s the way the system is structured,” he said. “There’s nothing illegal or unethical about this.”

In fact, a Con Edison spokesman, Robert McGee, said a number of other towns also require the company to use their police officers as flagmen, raising its labor costs.

A spokesman for the New York State comptroller’s office said that the city was in error and pointed to a 1986 decision by the Supreme Court of New York that found that hours worked by police for outside businesses could not be included in their state-paid pensions.

“It has long been established that such overtime from private special duty cannot be included,” said the spokesman, Mark Johnson.

The question of how to pay for generous benefits is proving a challenge to New York and many other states whose revenue has fallen and whose debts have become harder to manage, while public officials try to limit the kind of deep service cuts that often mean political death. Some hard-pressed governments are belatedly coming to the grim conclusion that they have promised workers more than their sagging economies can deliver.

Outside the United States, Greece and Spain have recently reduced government pensions to deal with burdensome debt that has impeded their ability to finance themselves. The new British coalition government has said it will review public pension costs there as well.

Municipalities in this country cannot easily follow suit even as financial problems mount, though, because reducing benefits for their existing employees is considered impossible under the current laws of most states.

The New York State constitution bars public employers from slowing the rate at which workers build up their pensions over the course of their careers. That degree of protection contrasts sharply with the private sector, where companies can generally change the rate at which workers build their benefits at any time. Furthermore, as companies have reduced pensions substantially over the last two decades, states and cities have embellished theirs with sweeteners like inflation adjustments and lower retirement ages that appealed to unions and their members, who vote.

Police and other safety workers are in many cases allowed to retire with full pensions after 20 years. Other workers can often do so after 30 years, even as young as 55, although future hires in New York will have to work to age 62 to get their full benefits, under a law passed in January.

Census data from 2008 show that the typical state or municipal pension is substantially richer than the typical company pension — $15,941 versus $7,904 — for retirees aged 65 and older. By tradition, public employees have said they accepted lower salaries in exchange for better benefits, but the Census data show this has not been true for a number of years. In 2008 the median pay for a worker in the private sector was $39,877, compared with $45,124 for a state or local employee. The data show broad national aggregates that do not try to compare similar occupations.

And, while companies must adhere to uniform federal guidelines about setting aside money to pay pensions, states do not. Some, like New Jersey, have failed to fund their pensions for years and have fallen so far behind they may never catch up again. New York City and New York State have been more diligent about contributing the required amounts each year — but the required amounts now turn out to have been too low, in part because they counted on solid investment returns that have not materialized.

In Yonkers, contributions to the state pension fund keep rising. This year, to save money, the city is proposing to eliminate about 90 police jobs, out of 640. The savings, though, will not even cover the extra cost of the overtime-enriched pensions. Meanwhile, the police say the layoffs will make the situation worse, because shrinking the police force means those who remain must work even more overtime, driving up pension costs even more.

An online, searchable database compiled by The Times contains the names and pensions of about 3,700 public retirees in New York who receive more than $100,000 a year. Information was provided by New York State’s two big pension plans, one for teachers and the other for other state and local workers outside New York City.

Four of New York City’s five big pension funds also provided data. But the city police pension fund listed the six-figure amounts being collected by 536 retired police officers without giving their names. The pension plan for the city’s firefighters has yet to provide the information, as required by public information law.

Even without names, the pension list from the New York City police plan shows a trend toward very youthful retirement, at a time when the city’s contributions to the police pension fund have risen sharply.

New York City has budgeted a contribution of about $2 billion for this year — about 64 percent of the police payroll, one of the highest pension contribution rates in the United States. That amount does not yet include money to make up for the investment losses of 2008, so the rate is almost sure to rise.

A Variety of Occupations

Not all the people getting six-figure pensions are former police and firefighters from cities with liberal overtime and disability policies. Hundreds more worked at hospitals, power utilities, port authorities and other “public benefit corporations” — hybrid entities that compete with the private sector and pay their officials accordingly, but allow them, at the same time, to participate in the state pension fund.

Edward A. Stolzenberg makes a good example. He started out more than three decades ago in the Westchester County government; today, in retirement, he collects $222,143 a year, one of the biggest pensions paid by the New York State pension fund.

In between, he became county health commissioner, running the Westchester Medical Center when it was a big, struggling county hospital. The county made it a public benefit corporation in 1997, with a mandate to grow and compete with the big hospitals in New York City.

In the process Mr. Stolzenberg’s salary shot up. By the time he retired, he was the highest-paid official in Westchester County, he said, with a salary of more than $400,000 a year. That was still less than the rate at a for-profit hospital, he said.

“In a time when the state budget is pretty bad and money is pouring out, people look at pensions and say, ‘This is terrible! Why are people getting this kind of money?’ ” he acknowledged. “It may not be viable. But that’s the way the state structured it.”

He added that his successor at the medical center was making more than $900,000 and accruing a pension.

Companies that find they have overpromised have a way out. They can declare bankruptcy, and if a judge approves, they can send their pension plans to the federal agency that insures corporate pensions. That agency limits its coverage to what is considered a basic pension, currently $54,000 for a 65-year-old retiree, much less for younger people. If Yonkers could send its police plan to the federal guarantor, for instance, Mr. Tassone, at 47, would have his benefit cut from $101,333 to just $15,660.

But state plans don’t have such an insurance program, much less any definition of a basic, guaranteed benefit.

Federal tax law does put a cap on pension payouts, currently $195,000 a year. Congress set this cap, which has risen with inflation, more than 30 years ago to keep employers from turning their pension funds into abusive tax shelters.

But New York State found a way around it. In 1997, lawmakers created a safe-harbor mechanism allowing retirees to collect bigger pensions legally — a second pool of money called the Excess Benefit Fund. Towns all over the state pay the associated costs, even though only a few of them have retirees who qualify. At least 28 recipients in New York get pensions above $195,000 a year. One of the highest is George M. Philip, who gets $261,037 after retiring as chief executive and chief investment officer of the New York State teachers’ pension fund. Since retiring, he has gone back to work as president of the State University of New York at Albany, drawing an additional $280,000 last year.

New York’s attorney general, Andrew M. Cuomo, has said public pensions are getting out of hand, and has begun an investigation of places, like Yonkers, where there are unusual concentrations of six-figure retirees.

But he may well find that most recipients have done nothing illegal. The benefits have been enacted by legislators, signed into law by governors, hailed by comptrollers and adopted by local officials — all of whom were told by actuaries and other financial advisers that the pensions would cost just a fraction of what they are now turning out to cost.

“In very few cases do they know what they’re agreeing to,” said Edmund J. McMahon, director of the Empire Center for New York State Policy, which tracks pension costs. “They almost always obscure the costs, from themselves and from the public.”

Offended by Comments

Mr. Cuomo did not name Mr. Tassone but spoke of a Yonkers officer who had retired at 44 on $101,033 a year. Mr. Tassone said all his neighbors knew it was him, and he bristles at the implication that he got more than he was supposed to. He said he could correctly document all the overtime he worked, and that the practice was approved by the mayor and city council.

The special audit in Yonkers named Mr. Tassone in its sample of retirees with unusual overtime records, but did not accuse him of doing anything wrong. Disciplinary proceedings were brought against only one officer, who is now retired.

Mr. Tassone said the only reason he joined the police force was the promise of a full pension after just 20 years, and it would have been wrong for the state or city to go back on the promise after using it to recruit him.

He said he put up with hardships for 20 years as a police officer, “and now I’m at the end of it and I’ve become a target,” he said. “I broke my hand three times. I broke my left ankle. I blew out my knee. In my last two years alone, I made between 350 and 400 arrests, and a lot of those people weren’t volunteering.”

Because he could retire young, he added, it was important to start out with the largest pension possible. In the coming years, inflation will eat away at his benefit. Public pensions in New York City and State have had a cost-of-living adjustment feature since 2000, but it applies only to the first $18,000.

“I concede, I have a very good pension, but what’s that pension going to be worth when I’m 70 years old?” Mr. Tassone said.

Although limited to the first $18,000, the cost-of-living adjustment was the most expensive pension enhancement enacted in recent memory in New York, according to the Independent Budget Office. The cost has, once again, proved higher than expected.

Yonkers still offers full pensions to police after 20 years, but just in theory. For the moment, the city is too broke to send any new cadets to the police academy, and retirees are not being replaced.

http://www.nytimes.com/2010/05/21/business/economy/21pension.html?src=me&ref=business

A.I.G.’s Derivatives at European Banks Could Expose It to Debt Crisis

May 21, 2010
A.I.G.’s Derivatives at European Banks Could Expose It to Debt Crisis
By MARY WILLIAMS WALSH

The waves of financial trouble rippling across Europe could end up splashing at least one American institution: the taxpayer-owned American International Group.

A.I.G. has sought to unwind its derivatives business, which gave it a big exposure to Europe.

After an outcry over details disclosed last year about how the government’s bailout helped a number of European banks, the company intended to rid itself of the derivatives it sold to those institutions to help them comply with their capital requirements.

But its latest quarterly filing with regulators shows that the insurance behemoth still has significant exposure to those banks. A.I.G. listed the total notional value of these derivatives, credit-default swaps, as $109 billion at the end of March. That means if events in Europe turned sharply against A.I.G., its maximum possible loss on these derivatives would be $109 billion.

No one is suggesting that is likely.

Still, it would be a sore spot if A.I.G. once again had to make good on a European bank’s investment losses, even on a small scale. A spokesman for A.I.G., Mark Herr, declined to name the European banks that bought its swaps to shore up their capital.

A.I.G.’s stock has also fallen in recent days amid uncertainty over whether the continuing European debt crisis could set back an important, $35.5 billion asset sale. A.I.G.’s chief executive, Robert Benmosche, announced in March that the company would sell its big Asian life insurance business to Prudential of Britain, raising money to pay back part of its rescue loans.

The transaction needs the approval of 75 percent of Prudential’s shareholders.

Shares of A.I.G. fell seven consecutive trading days to close at $34.81 on Thursday. That was a drop of 23 percent since May 11. The shares recovered slightly on Friday, closing at $35.96.

A.I.G.’s swaps work something like bond insurance. The European banks that bought them could keep riskier assets on their books without running afoul of their capital requirements, because the insurer promised to make the banks whole if the assets soured. The contracts call for A.I.G.’s financial products unit to pay in cases of bankruptcy, payment shortfalls or asset write-downs.

A.I.G. is also required to post collateral to the European banks under certain circumstances, but the company said it could not forecast how much.

It was the collateral provisions of a separate portfolio of credit-default swaps that caused A.I.G.’s near collapse in September 2008. Those swaps were tied to complex assets whose values were hard to track.

The European bank assets now in question consist mostly of pooled corporate loans and residential mortgages. A.I.G. has said they are easier to evaluate and therefore less risky.

A.I.G. had hoped these swaps would become obsolete at the end of 2009, when European banking was to have completed its adoption of a detailed new set of capital adequacy rules, known as Basel II. Since A.I.G.’s swaps were designed to help banks comply with the more simplistic previous regime, the insurer thought they would serve no useful purpose after the changeover and could be terminated without incident.

But international bank regulators have yet to fully adopt Basel II. A.I.G.’s first-quarter report said “it remains to be seen” which capital adequacy rules would be used in different parts of Europe. Mr. Herr said A.I.G. could not comment beyond the information already filed with regulators. In its first-quarter report, the insurer said the banks were holding the loans and mortgages in blind pools, making it hard to know how they would weather Europe’s storm. Some pools have fallen below investment grade.

A.I.G. said the pools of loans and mortgages were not generally concentrated in any industry or country. They have an expected average maturity, over all, of a little less than two years. The company said it was getting regular reports on the blind pools and losses so far had been modest.

http://www.nytimes.com/2010/05/22/business/22aig.html?ref=business

Lost Decade Looming?

May 20, 2010
Lost Decade Looming?
By PAUL KRUGMAN

Despite a chorus of voices claiming otherwise, we aren’t Greece. We are, however, looking more and more like Japan.

For the past few months, much commentary on the economy — some of it posing as reporting — has had one central theme: policy makers are doing too much. Governments need to stop spending, we’re told. Greece is held up as a cautionary tale, and every uptick in the interest rate on U.S. government bonds is treated as an indication that markets are turning on America over its deficits. Meanwhile, there are continual warnings that inflation is just around the corner, and that the Fed needs to pull back from its efforts to support the economy and get started on its “exit strategy,” tightening credit by selling off assets and raising interest rates.

And what about near-record unemployment, with long-term unemployment worse than at any time since the 1930s? What about the fact that the employment gains of the past few months, although welcome, have, so far, brought back fewer than 500,000 of the more than 8 million jobs lost in the wake of the financial crisis? Hey, worrying about the unemployed is just so 2009.

But the truth is that policy makers aren’t doing too much; they’re doing too little. Recent data don’t suggest that America is heading for a Greece-style collapse of investor confidence. Instead, they suggest that we may be heading for a Japan-style lost decade, trapped in a prolonged era of high unemployment and slow growth.

Let’s talk first about those interest rates. On several occasions over the past year, we’ve been told, after some modest rise in rates, that the bond vigilantes had arrived, that America had better slash its deficit right away or else. Each time, rates soon slid back down. Most recently, in March, there was much ado about the interest rate on U.S. 10-year bonds, which had risen from 3.6 percent to almost 4 percent. “Debt fears send rates up” was the headline at The Wall Street Journal, although there wasn’t actually any evidence that debt fears were responsible.

Since then, however, rates have retraced that rise and then some. As of Thursday, the 10-year rate was below 3.3 percent. I wish I could say that falling interest rates reflect a surge of optimism about U.S. federal finances. What they actually reflect, however, is a surge of pessimism about the prospects for economic recovery, pessimism that has sent investors fleeing out of anything that looks risky — hence, the plunge in the stock market — into the perceived safety of U.S. government debt.

What’s behind this new pessimism? It partly reflects the troubles in Europe, which have less to do with government debt than you’ve heard; the real problem is that by creating the euro, Europe’s leaders imposed a single currency on economies that weren’t ready for such a move. But there are also warning signs at home, most recently Wednesday’s report on consumer prices, which showed a key measure of inflation falling below 1 percent, bringing it to a 44-year low.

This isn’t really surprising: you expect inflation to fall in the face of mass unemployment and excess capacity. But it is nonetheless really bad news. Low inflation, or worse yet deflation, tends to perpetuate an economic slump, because it encourages people to hoard cash rather than spend, which keeps the economy depressed, which leads to more deflation. That vicious circle isn’t hypothetical: just ask the Japanese, who entered a deflationary trap in the 1990s and, despite occasional episodes of growth, still can’t get out. And it could happen here.

So what we should really be asking right now isn’t whether we’re about to turn into Greece. We should, instead, be asking what we’re doing to avoid turning Japanese. And the answer is, nothing.

It’s not that nobody understands the risk. I strongly suspect that some officials at the Fed see the Japan parallels all too clearly and wish they could do more to support the economy. But in practice it’s all they can do to contain the tightening impulses of their colleagues, who (like central bankers in the 1930s) remain desperately afraid of inflation despite the absence of any evidence of rising prices. I also suspect that Obama administration economists would very much like to see another stimulus plan. But they know that such a plan would have no chance of getting through a Congress that has been spooked by the deficit hawks.

In short, fear of imaginary threats has prevented any effective response to the real danger facing our economy.

Will the worst happen? Not necessarily. Maybe the economic measures already taken will end up doing the trick, jump-starting a self-sustaining recovery. Certainly, that’s what we’re all hoping. But hope is not a plan.


http://www.nytimes.com/2010/05/21/opinion/21krugman.html?src=me&ref=general

Finding Profit From Investing in Workers

May 21, 2010, 9:00 AM
Finding Profit From Investing in Workers
By STEVEN GREENHOUSE

Giving pay incentives to low-level workers and investing in their health and well-being can increase companies’ productivity and profits. Moreover, listening to the suggestions of low-level workers can go far to save companies money.

Jody Heymann
Those are among the findings of a six-year international study led by Jody Heymann, who is founding director of the Institute for Health and Social Policy at McGill University and was founding director of the Project on Global Working Families at Harvard.

The overarching theme of her report, “Profit at the Bottom of the Ladder,” published by Harvard Business Press, is that it is good business for companies to invest in and listen to their workers — not just high-level ones, but also those on the bottom.

“The companies in our study showed that investing in their employees at all levels made economic sense, going against the common market wisdom that considers these investments an unnecessary expense,” Ms. Heymann concluded in the report.

Her report found that after American Apparel adopted a teamwork system in which workers at a Los Angeles factory were paid based on the number of garments their team produced, productivity nearly tripled. Output jumped to 90,000 pieces a day from 30,000, aided by a 12 percent increase in the number of workers at the factory.

And once the Dancing Deer Baking Company in Boston began offering free classes in English as a second language to its bakery workers, the report found, efficiency increased because the company’s employees could communicate better with one another.

Ms. Heymann said she did not choose companies at random or do a scientific survey, but instead took an initial look at several hundred companies that had employee-friendly policies. Upon seeing that most of them did not have policies that improved conditions for employees at the bottom, she ultimately focused in depth on a dozen companies in nine countries that had such policies and were succeeding financially.

Her report said that investing in employees’ well-being yielded dividends for companies. The report found that after an auto parts company, Autoliv Australia, adopted a more flexible policy on leaves and vacations, turnover fell to 3 percent a year from nearly 20 percent.

When SA Metal, one of the largest metal recycling companies in South Africa, decided to provide employees with free access to H.I.V./AIDS treatment, that had substantial costs for the company, costing about $3.50 a day per employee who sought treatment. But the program produced considerable savings because it cost roughly $120 a day whenever one of the company’s truck drivers missed work for health-related reasons.

Another example cited in the report: by having a health clinic on site, American Apparel and SA Metal reduced the time that employees needed to take for outside appointments.

The report also found that “offering training and career tracks to line workers led to lower turnover and easier recruitment, and served to make employees more efficient while they were with the company.” Xerox Europe, the report said, “emphasized career opportunities to decrease the high turnover rates that were characteristic of the call center industry.” As a result of the career track program at Xerox Europe, over the course of a year, 20 percent of entry-level employees received promotions, the report found.

“Companies in our study established ways to learn from their lowest- level employees, who had the most expertise on the ways in which much of the work at the company was done and could be improved,” the report said.

At the Great Little Box Company, based in British Columbia, one employee put forward a money-saving idea on how a machine could produce 13-inch boxes in addition to the 20-inch boxes it was already producing. This increased the use of that machine and the flexibility of production. Under Great Little Box’s Idea Recognition Program, individual employees could receive rewards of up to $2,500 in Canadian dollars ($2,359) for ideas that saved several times that amount.

To increase workers’ sense of engagement, Isola, a roofing supplies company in Norway, adopted a teamwork system of production in which a half dozen workers functioned as a group, with the team leader reporting directly to the plant manager. The report said this fostered a greater sense of responsibility and, combined with the mutual pressure workers felt from other team members, led to a 33 percent drop in absenteeism over a six-month period.

The report was written with Magda Barrera, a research assistant.

Juliet Schor, a professor of sociology at Boston College and the author of a new book, “Plenitude: The New Economics of True Wealth,” said: “This effort has strong case studies showing that firms can prosper when they take the high road, and that means their employees are also prospering. It’s a good direction for any economy.” Citing the success of “high-road economies like Germany that share their prosperity,” she said the study demonstrated that “this strategy could work at the micro level at many firms.”

Herman Leonard, a professor of management at the Kennedy School at Harvard, praised the report for providing models to inspire other companies.

“This book is a terrific step forward in the general domain of corporate social responsibility because people have been talking for a long time about the business case for responsibility, the idea that if we do the right thing that will also be good for the company,” Professor Leonard said. “She focuses on how companies have re-engineered their own businesses in ways that have been good for their lowest-income employees and the community and also good for the company.”

In a telephone news briefing about the report, Roseanne Martino, general manager of One if by Land, Two if by Sea, a restaurant in Greenwich Village, embraced the report’s conclusions. Ms. Martino said that after her company began offering various benefits in 1999 — health insurance, paid vacation, paid sick days and a 401(k) plans — employee turnover fell and workers’ attitudes changed.

“What our workers did was, they helped us save money,” she said. “They policed one another. They came to us and let us know when people were stealing from us. Through good and bad times, we have had a very loyal staff, and you end up having 65 managers instead of three or four managers because everyone is really watching one another and watching your bottom line.” Ms. Martino said employee suggestions helped One if by Land save $60,000 last year on its electric bills.

Ms. Heymann said the companies that she studied had continued these employee incentive and engagement programs during the recent downturn. This was not surprising, she said, because these programs — such as incentive pay and soliciting employee suggestions — helped reduce costs and increase productivity.

“What was striking was how these companies fare under economic pressure,” Ms. Heymann said. “What they were doing helped them when they were under economic pressure. It doesn’t mean they were immune or bulletproof. It does mean they’re doing better than their peers.”

http://economix.blogs.nytimes.com/2010/05/21/finding-profit-from-investing-in-workers/?ref=business

Bill Passed in Senate Broadly Expands Oversight of Wall St.

May 20, 2010
Bill Passed in Senate Broadly Expands Oversight of Wall St.

By DAVID M. HERSZENHORN

WASHINGTON — The Senate on Thursday approved a far-reaching financial regulatory bill, putting Congress on the brink of approving a broad expansion of government oversight of the increasingly complex banking system and financial markets.

The legislation is intended to prevent a repeat of the 2008 crisis, but also reshapes the role of numerous federal agencies and vastly empowers the Federal Reserve in an attempt to predict and contain future debacles.

The vote was 59 to 39, with four Republicans joining the Democratic majority in favor of the bill. Two Democrats opposed the measure, saying it was still not tough enough.

Democratic Congressional leaders and the Obama administration must now work to combine the Senate measure with a version approved by the House in December, a process that is expected to take several weeks.

While there are important differences — notably a Senate provision that would force big banks to spin off some of their most lucrative derivatives business into separate subsidiaries — the bills are broadly similar, and it is virtually certain that Congress will adopt the most sweeping regulatory overhaul since the aftermath of the Great Depression.

“It’s a choice between learning from the mistakes of the past or letting it happen again,” the majority leader, Harry Reid of Nevada, said after the vote. “For those who wanted to protect Wall Street, it didn’t work.”

The bill seeks to curb abusive lending, particularly in the mortgage industry, and to ensure that troubled companies, no matter how big or complex, can be liquidated at no cost to taxpayers. And it would create a “financial stability oversight council” to coordinate efforts to identify risks to the financial system. It would also establish new rules on the trading of derivatives and require hedge funds and most other private equity companies to register for regulation with the Securities and Exchange Commission.

Passage of the bill would be a signature achievement for the White House, nearly on par with the recently enacted health care law. President Obama, speaking in the Rose Garden on Thursday afternoon, declared victory over the financial industry and “hordes of lobbyists” that he said had tried to kill the legislation.

“The recession we’re emerging from was primarily caused by a lack of responsibility and accountability from Wall Street to Washington,” Mr. Obama said, adding, “That’s why I made passage of Wall Street reform one of my top priorities as president, so that a crisis like this does not happen again.”

The president also signaled that he would take a strong hand in developing the final bill, which could mean changes to the restrictive derivatives provisions the Senate measure includes and Wall Street opposes. It is also likely that the administration will try to remove an exemption in the House bill that would shield auto dealers from oversight by a new consumer protection agency. Earlier, Mr. Obama had criticized the provision as a “special loophole” that would hurt car buyers.

As the Senate neared a final vote, Senator Sam Brownback, Republican of Kansas, withdrew an amendment to put a similar exemption for auto dealers into the Senate bill.

Mr. Brownback’s move had the effect of killing an amendment by Senators Jeff Merkley, Democrat of Oregon, and Carl Levin, Democrat of Michigan, to tighten language barring banks from proprietary trading, or playing the markets with their own money — a restriction generally known as the Volcker rule for the former Fed chairman Paul A. Volcker, who proposed the idea. Congressional Republican leaders, adopting an election-year strategy of opposing initiatives supported by the Obama administration, voiced loud criticism of the legislation while trying to insist that they still wanted tougher policing of Wall Street.

But while Republicans criticized the bill in mostly political terms, arguing that it was an example of Democrats’ trying to expand the scope of government, some experts have warned that the bill, by focusing too much on the causes of a past crisis, still leaves the financial system vulnerable to a major collapse.

The Senate bill, sponsored primarily by Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the banking committee, would seek to curb abusive lending by creating a powerful Bureau of Consumer Protection within the Federal Reserve to oversee nearly all consumer financial products.

In response to the huge bailouts in 2008, the bill seeks to ensure that troubled companies, no matter how big or complex, can be liquidated at no cost to taxpayers. It would empower regulators to seize failing companies, break them apart and sell off the assets, potentially wiping out shareholders and creditors.

To coordinate efforts to identify risks to the financial system, the bill would create a “financial stability oversight council” composed of the Treasury secretary, the chairman of the Federal Reserve, the comptroller of the currency, the director of the new consumer financial protection bureau, the heads of the Securities and Exchange Commission and the Federal Deposit Insurance Corporation, the director of the Federal Housing Finance Agency and an independent appointee of the president.

The bill would touch virtually every aspect of the financial industry, imposing, for instance, a thicket of rules for the trading of derivatives, the complex instruments at the center of the 2008 crisis.

With limited exceptions, derivatives would have to be traded on a public exchange and cleared through a third party.

And, under a provision written by Senator Blanche L. Lincoln, Democrat of Arkansas, some of the biggest banks would be forced to spin off their trading in swaps, the most lucrative part of the derivatives business, into separate subsidiaries, or be denied access to the Fed’s emergency lending window.

The banks oppose that provision, and the administration has also said that it sees no benefit.

Concern about the derivatives provisions also led Senator Maria Cantwell, Democrat of Washington, to vote against the bill, saying it still included a dangerous loophole that would undermine efforts to regulate derivative trades. Senator Russ Feingold of Wisconsin was the other Democrat to oppose the measure.

The four Republicans to support the bill were Senators Susan Collins and Olympia J. Snowe of Maine; Scott Brown, the freshman from Massachusetts; and Charles E. Grassley of Iowa, who is up for re-election this year.

Among the differences between the House and Senate bills is the inclusion in the House measure of a $150 billion fund, to be financed by a fee on big banks, to help pay for liquidation of failing financial companies.

The administration opposes the fund, which it says it believes could hamper its ability to deal with a more costly collapse of a financial company. Republicans demanded that a similar $50 billion fund be removed from the Senate bill because they said it would encourage future bailouts of failed financial companies.

There are numerous other differences. For instance, the House bill addresses the consumer protection goals by establishing a stand-alone agency that would be subject to annual budget appropriations by Congress. The Senate bill establishes its consumer protection bureau within the Federal Reserve, limiting future Congressional oversight.

Lawmakers said that the bills would be reconciled in a formal conference proceeding, possibly televised.

Edward Wyatt contributed reporting.

http://www.nytimes.com/2010/05/21/business/21regulate.html?src=me&ref=business

Regulators Shut Small Minnesota Bank

May 21, 2010
Regulators Shut Small Minnesota Bank

By THE ASSOCIATED PRESS
Filed at 6:28 p.m. ET

WASHINGTON (AP) -- Regulators have shut down a small bank in Minnesota, bringing the number of U.S. bank failures this year to 73.

The Federal Deposit Insurance Corp. on Friday took over Pinehurst Bank, based in St. Paul, Minn., with $61.2 million in assets and $58.3 million in deposits. Coulee Bank, based in La Crosse, Wis., agreed to assume the assets and deposits of the failed bank.

The failure of Pinehurst Bank is expected to cost the deposit insurance fund about $6 million.

http://www.nytimes.com/aponline/2010/05/21/business/AP-US-Bank-Closures.html?_r=1&src=busln