tag:blogger.com,1999:blog-3072462588341688522024-02-20T12:07:56.152-08:00dailywombatA commentary on sustainability, history, politics, economics, eco-centric lifestyles and the really important things in life.jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.comBlogger199125tag:blogger.com,1999:blog-307246258834168852.post-20115632164167050002012-05-14T13:50:00.002-07:002012-05-14T13:50:41.838-07:00Lower Your Property Taxes Through Assessment Appeal<div class="postcontent">
CHICAGO, May 14 (Reuters) – One of the best investments I<br />
made in my home this year was to hire somebody to prove that its<br />
value had fallen.<br />
<br />
I know this sounds daft, but it resulted in a lower property<br />
tax bill. In our case, our taxes dropped by $1,000 to around<br />
$10,000 for the 2011 tax year. But we didn’t challenge our taxes<br />
ourselves – we will pay a specialized property-tax consultant<br />
$250 – 25 percent of our tax savings – to appeal for us.<br />
<br />
If you owe more than your home is worth and you want to stay<br />
in your home – or just can’t sell – taxes are the one fixed cost<br />
you can have some success in reducing. (You can also try to<br />
refinance to a lower mortgage rate, but that can be difficult<br />
or impossible when you haven’t any or enough home equity.)<br />
<br />
To begin your home-assessment challenge, you can either hire<br />
a consultant to appeal your assessed valuation locally as my<br />
wife and I did, or do it yourself.<br />
<br />
Part of this story is hardly satisfying. We knew our home<br />
value declined by at least $50,000 in the housing bust. Our<br />
estimated market value now is roughly what we paid for it more<br />
than a dozen years ago when we built it. Fortunately, due to a<br />
large down payment, we are not under water, although that equity<br />
value probably will not be coming back soon.<br />
<br />
It’s never made more sense to challenge your home assessment<br />
than it does now, although relatively few do. Some 11 million<br />
properties are underwater, meaning due to equity loss, the<br />
mortgages on these homes exceed the value of the properties,<br />
according to CoreLogic. Taxes will not necessarily track the<br />
depleted equity values, so you have to see if your local<br />
assessor has valued your property correctly.<br />
<br />
Adding salt to homeowners’ wounds is the ongoing,<br />
disheartening erosion of home prices in most cities: Over the<br />
past year, 15 of the 20 largest markets have experienced<br />
declines year-over-year through February, according to the S&P<br />
Case-Shiller Index. U.S. home prices are now at their lowest<br />
level since 2002.<br />
<br />
The disparities between what homes are worth on the open<br />
market now and what they are assessed at for tax purposes can<br />
often be huge. The National Taxpayers Union estimates that from<br />
30 to 60 percent of U.S. properties may be over-assessed, though<br />
only 5 percent of property owners challenge their assessments.<br />
<br />
The gap between assessed and market value is even larger in<br />
some areas where assessors haven’t accurately marked down home<br />
values due to the housing bust. That is one reason why there<br />
were more than 25,000 assessment appeals in my county in<br />
Northern Illinois last year, compared to 17,000 the previous<br />
year. You will have to do the research on your own to tell if<br />
you’re properly assessed since each property is assessed<br />
differently depending upon home type and local market<br />
conditions.<br />
<br />
Should you choose to go solo on your assessment challenge,<br />
you will need to find three comparable properties that have<br />
declined in value. Also check the property description with your<br />
assessor to see if it’s correct. If the assessor erroneously<br />
included in your property record a finished basement or more<br />
living space or amenities than you actually have, you can<br />
correct it by contacting the assessor directly. That could<br />
result in an immediate assessment reduction.<br />
<br />
Are you a senior citizen or a veteran? There’s another way<br />
you might be able to save on property taxes. Check to see if you<br />
qualify for a special exemption. You also should have a<br />
homestead exemption for living in your home. You also may<br />
receive a break on recent improvements or energy-producing<br />
appliances like solar panels. While this is not part of the<br />
appeals process, it might be another way of saving you money.<br />
<br />
Having tried appealing on my own in past years with meager<br />
success, I would recommend you hire a consultant. Assessors are<br />
really in the business of pooling money for taxing bodies; many<br />
of them are not homeowner friendly and assessors may guard the<br />
data and methods they use to value homes zealously. I discovered<br />
this years ago the hard way, and helped set up a nonprofit group<br />
in my area to inform homeowners on how to deal with assessors.<br />
<br />
Most private consultants will take a percentage of your tax<br />
savings or a flat fee, or both. They should be experienced<br />
assessment professionals (mine worked in a township assessor’s<br />
office) or a professional appraiser. You can find these<br />
consultants through a search engine. Enter “property tax<br />
consultants” for your county. We found ours through a<br />
neighbor’s referral.<br />
<br />
Keep in mind that an appraisal for a bank is not the same<br />
thing as a valuation for the assessor. It’s a different animal<br />
and your assessor may not accept a current real-estate<br />
appraisal.<br />
<br />
If you cannot reach an agreement with your local government<br />
assessor on a lower home value, then you can appeal at the state<br />
and county levels, although that typically involves more time<br />
and paperwork. Many appeal boards are incredibly backed up and<br />
if you miss their deadlines, you’ll have to wait another year.<br />
<br />
Here is another misconception you need to avoid: While you<br />
can lower your home’s assessed value, it does not always<br />
translate into a lower tax bill. The other side of the equation<br />
is what rates local taxing bodies such as schools, fire<br />
districts and counties charge you. They can – and will – raise<br />
their rates to cover their budget shortfalls. So you can have<br />
situations where home values have plummeted, but tax rates go up<br />
to cover revenue shortfalls.<br />
<br />
Begin planning your assessment challenge now. You will not<br />
only lower your total ownership expenses, but make your home<br />
more marketable. A lower tax bill than your neighbors adds<br />
considerably to curb appeal when it comes time to sell.<br />
Editing by Linda Stern and Phil Berlowitz)<br />
</div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-42505986556683854952012-04-17T20:02:00.000-07:002012-04-17T20:03:04.225-07:00Creating Your Investment Bucket List<span id="articleText"><p>By <a href="http://blogs.reuters.com/search/journalist.php?edition=us&n=john.wasik&">John Wasik</a></p><span id="midArticle_1"></span><p> (Reuters) - Got travel or mountain climbing on your bucket list? How about taking up the guitar? If you really want to live life to the fullest in your remaining days, then what you should also add to those goals is a list of your investment priorities and adjusting your risk accordingly.</p><span id="midArticle_2"></span><p>This idea doesn't come from a cheesy Hollywood movie, but rather from the study of behavioral portfolio theory put forward by Nobel Prize-winner Harry Markowitz and leading behavioral economics expert and <a href="http://www.reuters.com/finance" title="Full coverage of finance">finance</a> professor and author Meir Statman (). They theorize that if investors divide their portfolios into mental account layers measured by risk, they can counter nervous investment errors.</p><span id="midArticle_3"></span><p>This is how it works: let's say you have a $1 million portfolio. You can divide it up into different-sized buckets with goals for items like college savings and retirement. For example:</p><span id="midArticle_4"></span><p>* The largest bucket, or sub-account, would be for retirement. Assume that about $800,000 is in this bucket for an event that's 15 years away. Ultimately, you would like to build this to $2 million.</p><span id="midArticle_5"></span><p>* Saving for college? Earmark $150,000 for a goal that's three years away, eventually totaling $180,000 when your student matriculates.</p><span id="midArticle_6"></span><p>* Want to fund a bequest for your alma mater or your favorite charity? Put aside $50,000 for a goal that's 25 years away.</p><span id="midArticle_7"></span><p>If all of these goals were equal - and they are not - you might leave them in one portfolio. However, you want to take much less risk with the college fund than with the bequest goal that is 25 years away.</p><span id="midArticle_8"></span><p>By marking each bucket high, low or medium risk, you've identified some prospective allocations in this behavioral approach. In this case, risk is roughly equivalent to the time you have to save for each goal. The shorter the time horizon, the lower the risk you can assign to the bucket.</p><span id="midArticle_9"></span><p>The short-term bucket should be invested mostly in bonds or cash equivalents in which you cannot lose principal. This is your most secure bucket and it's for goals such as saving for a down payment on a home or a car, or to set aside money for a known expenditure like property taxes. Don't expect much, if any, return on these funds. Federally-insured money-market accounts, Treasury bills and certificates of deposit are probably the safest assets.</p><span id="midArticle_10"></span><p>The medium-term bucket can be for major emergency expenses such as unemployment and out-of-pocket medical expenses. I keep that money in a short-maturity bond fund. It's not principal-protected, but it pays a somewhat higher return than a money-market fund.</p><span id="midArticle_11"></span><p>A medium-term bucket is also a good place for college savings. For the biggest chunk of college funds for my two daughters, for example, I have money set aside in automatically age-adjusted 529 savings plans. As they get older, the fund company shifts more money from stocks into bonds. I like this approach because the accounts are rebalanced every year, so I don't fret about market risk. All I worry about is putting enough money in to cover soaring education bills.</p><span id="midArticle_12"></span><p>Your longer-term goals can be weighted more heavily toward stocks and alternative vehicles. Again, you can choose an automatic approach through a target-date maturity fund that ratchets down stock-market risk as you age, balance your own portfolio of low-cost exchange-traded funds or hire a fiduciary adviser to select passive funds for you (the most expensive route).</p><span id="midArticle_13"></span><p>As you create your bucket list, don't get tripped up by things like projected or "desired" returns. Guess on the conservative side - less than 4 percent for bonds and 6 percent for stocks.</p><span id="midArticle_14"></span><p>It's also important not to try to overthink your decisions. Be flexible and try different scenarios. Use allocation engines to guide you through determining a comfortable portfolio mix. For some good calculators, see websites like those of Yahoo Finance, TIAA-CREF or T. Rowe Price.</p><span id="midArticle_15"></span><p>Any comprehensive financial planner who works on a fee-only basis (no commissions) will be able to fine-tune your strategy if your needs are complex. Brokers and insurance agents should be avoided.</p><span id="midArticle_16"></span><p>If you do this right, you'll be able to see a range of investing possibilities that you may not see today. There is no one right way to go about this, but if it is done with care, you can avoid a leaky investing bucket.</p></span><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-46042588242083140842012-03-05T13:43:00.000-08:002012-03-05T13:44:05.742-08:00Ignoring the Market and Being True to Yourself<div class="postcontent"><p>By <a href="http://blogs.reuters.com/search/journalist.php?edition=us&n=john.wasik&">John Wasik</a></p> <p>(Reuters) – For many investors who have stayed away from the stock market for the past four years, this is a Hamlet moment. Returns look so tempting right now as stock indexes show their best performance since May 2008, with technology shares leading the way. To invest or not to invest?</p> <p>Fortunately, you can take a Polonius approach to the market. He’s the father of Ophelia and Laertes who gets stabbed by Hamlet while spying on the vengeful prince of Denmark. Despite his bad timing, he has some great advice: “This above all: To thine own self be true.”</p> <p>I’m reminded of Polonius’s speech by the notorious bear money manager Jeremy Grantham, who counsels long-term patience and resilience in a recent newsletter. While Grantham is bullish on “high-quality” (dividend-paying) stocks, oil, copper, forestry and farmland, I’m not suggesting you jump into anything before you do some serious self-analysis.</p> <p>How do you be true to yourself? You need to lay down a set of investment principles and goals — if you haven’t down so already. When do you want to retire? Are you saving for college? Do you have to take care of an elderly relative? How much risk can you tolerate in the form of annual losses? Once you’ve answered these questions, write them down. This is your template for asset allocation.</p> <p>COOKING LESSON</p> <p>Your asset allocation is like making a pie. In fact, when you’re done, it should look like a pie chart with each portion of stocks, bonds, cash and other investments graphically displayed. It won’t come out right, though, unless you’ve been honest with yourself.</p> <p>A self-questionaire will get you most of the way there. I like the retirement asset allocator at Yahoo! Finance (<a href="http://link.reuters.com/buq86s">link.reuters.com/buq86s</a>).</p> <p>Bankrate.com also has a useful tool (<a href="http://link.reuters.com/cuq86s">link.reuters.com/cuq86s</a>).</p> <p>The Yahoo tool, for example, asks you about upcoming major expenditures, time horizons, income, age and investment risk profile. Since it’s geared toward behavior and not absolute numbers and market predictions, it tends to focus more on your psychology. Very few people are good at market forecasts, nor should they be.</p> <p>Based on what you tell these calculators, they will give you a thumbnail asset allocation. Here’s a sample based on my inputs:</p> <p>* 50 percent stocks, with 15 percent in large-company value, 10 percent in large-company growth, 10 percent in small/mid-sized companies, 15 percent in non-U.S. stocks.</p> <p>* 45 percent in fixed income, with 25 percent in U.S. bonds and 20 percent in international bonds.</p> <p>* 5 percent cash in a money-market fund.</p> <p>Of course, this pretty much reflects my age (54) and how I’ve invested my family’s portfolio. You have to adjust the percentages to your situation. It’s a fairly conservative mix.</p> <p>I’d like to see more of an allocation to treasury-indexed securities and commodities for inflation protection. I’ve done that in our portfolio, although you probably won’t get this kind of advice from a generic, off-the-shelf tool.</p> <p>FILLING IN THE PIE</p> <p>Wait, you’re not done yet. At this point, all you have is the crust and shell of the pie and what it might look like. You need to fill it with something. You can easily create your mix with passive, low-cost exchange-traded or mutual funds. Sites like <a href="http://myplaniq.com/">MyPlanIQ.com</a>, <a href="http://folioinvesting.com/">Folioinvesting.com</a> or <a href="http://betterment.com/">Betterment.com</a> can help with individual portfolios.</p> <p>With these pre-packaged portfolios, you can take as much or as little risk as you want. Don’t forget to do some retirement-income estimates as well. There is a plethora of calculators, on every mutual fund and brokerage-firm site.</p> <p>For even greater customization, you should talk with fiduciary advisers such as certified financial planners, registered investment advisers or chartered financial analysts. Even certified public accountants designated as personal financial specialists can help you craft a personalized plan. These are the kind of professionals you need to consult if your needs are complex and you also need tax, estate and college-planning advice.</p> <p>Having invoked Polonius’s famous line, I caution you to do what he says and not what he does. Do your homework. Spell out your dreams and fears. Don’t act on impulse just because the market is surging. Invest based on the way you live, not what Wall Street tells you to do. Don’t follow your gut; look at long-term returns.</p> <p>In other words, don’t stand behind a curtain waiting to hear what you want to hear and end up getting skewered. You don’t have to be a bit player in a tragedy involving your money and future.</p> <p>(Reuters Editing by Beth Pinsker Gladstone and Andrea Evans)</p> </div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com1tag:blogger.com,1999:blog-307246258834168852.post-37640992864274890832012-01-28T14:00:00.000-08:002012-01-28T14:01:21.377-08:00A Way to May the US Tax Code Fairer<span id="articleText"><span class="focusParagraph"><p><span class="articleLocatio</span>n">(Reuters) - If the president and Congress are serious about income equality and cutting huge breaks for the wealthy, they should raise the capital gains rate.</span></p> </span><span id="midArticle_1"></span><p>While the president didn't mention it by name in his State of the Union speech on January 24, it's one of the many gorillas in the tax reform room.</p><span id="midArticle_2"></span><p>There's no question that the 15 percent rate on capital gains and dividends largely favors super-wealthy taxpayers over wage earners. Just look at Mitt Romney's tax return. As former Labor Secretary and economist Robert Reich once noted: "It's a loophole large enough for the super-rich to drive their Ferraris through. About 80 percent of the income of America's richest 400 comes in the form of capital gains." (<a href="http://link.reuters.com/gen36s">link.reuters.com/gen36s</a>)</p><span id="midArticle_3"></span><p>According to economist Jared Bernstein, who analyzed Congressional Research Service figures, capital gains and dividends were "the largest single contributor to the growth of inequality from 1996-2006." (<a href="http://link.reuters.com/hen36s">link.reuters.com/hen36s</a>)</p><span id="midArticle_4"></span><p>Why should those who primarily make money from private equity, financial, business and real estate appreciation and dividends pay more than 50 percent less than wage workers who are subject to the top rate in federal, state, Medicare and Social Security taxes?</p><span id="midArticle_5"></span><p>If you're from the supply-side camp, it's because the lower rate may encourage wealthy taxpayers to invest in capital, business and job formation while raising more tax revenues. More fundamentally, at least according to the conservative group Americans for Tax Reform, "when you tax something more, you get less of it."</p><span id="midArticle_6"></span><p>When taxpayers know that the capital gains rate is going up, the "fire sale" effect comes into play: They sell assets to get taxed at the lower rate before the higher levy kicks in, hence the higher cash flow to the Treasury before the lower tax expires.</p><span id="midArticle_7"></span><p>But there's no consistent evidence that shows that a lower capital gains rate does much for the economy long term. The rate of new business formations actually climbed from 1983-1987, when the maximum capital gains rate was 20 percent, according to the Kauffman Foundation, a think tank that specializes in entrepreneurism. (<a href="http://link.reuters.com/jen36s">link.reuters.com/jen36s</a>)</p><span id="midArticle_8"></span><p>When the gains rate hit a maximum 29 percent from the middle of 1993 into 1997, there was another spurt of new business growth. Since 2006, though, small-business creation has generally fallen - even with the lower capital gains rate. The recession and housing meltdown are the likely malefactors.</p><span id="midArticle_9"></span><p>Of course, recessions or periods of double-digit interest rates - which hurt small businesses the hardest - are the worst times for small-firm growth anyway, so the capital gains rate would not necessarily have been a primary hindrance during times like 1979 through 1983.</p><span id="midArticle_10"></span><p>When do capital gains proceeds fill up the national Treasury the most? The data is inconclusive. In 1988, realized gains as a percentage of gross domestic product were more than 7 percent - the highest amount in almost a quarter century, and that was when gains rate was 20 percent.</p><span id="midArticle_11"></span><p>Tax rates are often like porridge. Sometimes they may be too high; at other times just right. It could be that 20 percent is a sweet spot for gains. In contrast, the lowest capital gains/GDP percentage was 1.57 percent in 1977, when the maximum rate was nearly 40 percent.</p><span id="midArticle_12"></span><p>What can barely be debated is that the capital gains rate is one of the multi-millionaire's best fiscal friends. Those who made $10 million or more, according to IRS statistics from 2009, reaped a total of nearly $70 billion in long-term capital gains. That's 10 times the amount of gains taken by those making from $75,000 to $100,000.</p><span id="midArticle_13"></span><p>While cutting the capital gains rate generates more revenue overall due to the fire-sale effect, it's not in the best interest of the country to keep it at 15 percent. Raising it would also reduce the burgeoning federal deficit. If it's not an efficient way of creating jobs or businesses, why keep it so low?</p><span id="midArticle_14"></span><p>"Arguments that the capital gains rate affects economic growth are even more tenuous," says the non-partisan Tax Policy Center. The group saw no correlation between rates and GDP growth "during the last 50 years."</p><span id="midArticle_15"></span><p>Of course, the gains rate is but one item among thousands of special breaks in the tax code. You have to put everything on the table, from mortgage deductions to offshore corporate income if you want to ferret out wasteful tax handouts, which is highly unlikely in this election year.</p><span id="midArticle_0"></span><p>Yet if one believed that Congress was earnestly tackling deficit reform in the interest of fairness and fiscal sanity - or did nothing this year - I would tell my tax preparer to take every possible break in 2012. That's because the special rate on capital gains will expire after December 31 - a deadline that will seem pretty urgent right around election time in November.</p><span id="midArticle_1"></span><p>(The writer is a Reuters columnist. The opinions expressed are his own.)</p></span><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-4943999205644960342012-01-06T11:49:00.000-08:002012-01-06T11:50:16.839-08:00Even the Bond King Can Be Wrong<span id="articleText"><div id="articleInfo"> <p class="byline">By <a href="http://blogs.reuters.com/search/journalist.php?edition=us&n=john.wasik&">John F. Wasik</a></p> </div> <span id="midArticle_0"></span><span class="focusParagraph"><p><span class="articleLocatio</span>n">No matter what theme you adopt in a market forecast, predictability has always been a bugaboo. Just ask Bill Gross, the legendary manager of the PIMCO Total Return bond fund.</span></p> </span><span id="midArticle_1"></span><p>Gross's $244 billion baby saw at least $5 billion in assets flee in 2011, more than $1.4 billion in the fourth quarter alone. Relative to the size of his fund, this is a notable vote of no confidence ().</p><span id="midArticle_2"></span><p>Investors voted with their money because of Gross's bet against U.S. Treasuries last year. Like many of us, he digested the headlines and became dyspeptic over the Congress defaulting on its debt, sluggish economy, the S&P credit downgrade and <a href="http://www.reuters.com/subjects/euro-zone" title="Full coverage of Euro Zone">euro zone</a> debt woes. Yet what actually happened didn't follow Gross's "new normal" script. Instead we got the "old abnormal" of unpredictability.</p><span id="midArticle_3"></span><p>While none of those perils can be dismissed - nobody is out of the woods - something odd happened. U.S. debt remained a safe haven and even more money flowed into Treasuries, which became the best-performing bond class and returned 17 percent last year.</p><span id="midArticle_4"></span><p>In the second half of last year, U.S. Treasury prices climbed, while hot money fled European paper. It wasn't too long ago that the euro was seen as a respectable currency while the buck was being battered. Gold, that ultimate nervous Nellie insurance policy, also went south for a while.</p><span id="midArticle_5"></span><p>"The 'new normal' thesis at PIMCO was predicated on a low interest rate environment dragging safe bonds down as investors sought higher-yielding opportunities elsewhere," said Jeff Tjornehoj, director of research at Lipper, a Thomson Reuters company. "That was reasonable in 2009, but started to fade in 2010 and was completely undone in 2011 as credit conditions in European banks deteriorated and investors rushed to safety."</p><span id="midArticle_6"></span><p>So it's time to question whether Bill Gross is on target with his new "paranormal" theory and more importantly, if active managers can consistently predict market movements and protect your wealth.</p><span id="midArticle_7"></span><p>Is Gross still on track? Here's what he said in his most recent "Investment Outlook" ():</p><span id="midArticle_8"></span><p>"For 2012, in the face of a delivering zero-bound interest rate world, investors must lower return expectations. 2-5 percent for stocks, bonds and commodities are expected long term returns for global financial markets that have been pushed to the zero bound, a world where substantial real price appreciation is getting close to mathematically improbable."</p><span id="midArticle_9"></span><p>Of course, Gross has forgotten more about bond trading than I'll ever know, so his long-term record is worth respecting. His cautions are still valid. But actively managing money becomes nettlesome because the future is as slippery as a politician's promise. What's predicted doesn't always transpire; if you make big bets, you can suffer big losses.</p><span id="midArticle_10"></span><p>The larger question for investors is should you even bother with an active manager making periodic wagers based on theories that may not hold water?</p><span id="midArticle_11"></span><p>Would you be better off in passive bond-index funds like the Vanguard Total Bond Market ETF or the iShares Barclays Aggregate Bond fund, which I hold as a U.S. broad-market bond proxy in my 401(k) portfolio?</p><span id="midArticle_12"></span><p>Passive investing usually makes more sense since you avoid the high costs and frequent missteps of active managers. As of the last Lipper research report, Gross's PIMCO Total Return fund finished in the bottom 12 percent of its category, posting a 4.15 percent return. That's compared to a 6 percent average performance for its peers.</p><span id="midArticle_13"></span><p>That's why a passive strategy still makes sense. The Vanguard fund, for example, samples a fairly static basket of U.S. government-based mortgage bonds, Treasuries, corporates, utilities and a touch of non-U.S. paper. It charges 0.11 percent annually for management. The PIMCO fund has an expense ratio of 1.15 percent annually with a costly 430 percent turnover rate, indicating high trading costs that are passed along to investors.</p><span id="midArticle_14"></span><p>As for predicting the market going forward? Be cautious and hedge any large position in bonds (European or American), stocks and metals. The only guarantee is that big financial events often follow an abnormal course.</p></span><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-77835177031341892982011-11-29T20:30:00.001-08:002011-11-29T20:31:34.972-08:00How to Help the Jobless<span id="articleText"><span class="focusParagraph"><p><span class="articleLocatio</span>n">(Reuters) - Two of my friends lost their jobs in the last month. One had worked for a large computer services company for 31 years. Another was an information technology manager whose position was eliminated in a restructuring. Both men are in their fifties.</span></p> </span><span id="midArticle_1"></span><p>Having been laid off more than once, I have a certain protocol I share with friends. I hope it's of value to them; I know it's paid off for me. Here's the plan that has worked for me in the past:</p><span id="midArticle_2"></span><p>-- The best strategy is to be ready for a potential layoff with several months of cash, no credit card debt and an up-to-date resume. But don't lose heart if you're one of the more than 15 million unemployed and 1 million "discouraged" workers who can't find openings suitable to their skills and have stopped looking. There are strategies to lessen the pain and to improve your chances of finding a new job.</p><span id="midArticle_3"></span><p>-- Ideally, don't leave your employer without knowing what benefits are available. Many large companies offer a suite of outplacement services to laid-off workers. Always take advantage of them.</p><span id="midArticle_4"></span><p>One of my newly laid off friends got help in writing a resume, branding statement and doing interviews. He also got to keep his company-issued laptop. You're also entitled to at least 26 weeks of unemployment compensation, and in some cases as much as 99 weeks (assuming Congress extends long-term benefits by year-end).</p><span id="midArticle_5"></span><p>-- You'll also need to make decisions about health care and your 401(k) plan. You have a choice of whether to keep your 401(k) with an employer or roll it over into another plan. Take your time in deciding what to do. I generally recommend that people look at the offerings of the largest fund companies (Fidelity, Vanguard, T. Rowe Price) and see if they can get better service, lower expense ratios and more diversification.</p><span id="midArticle_6"></span><p>If health insurance is not covered in a severance plan, you may be eligible for it through a COBRA extension (<a href="http://link.reuters.com/zyq35s">link.reuters.com/zyq35s</a>). This is a federal law that says an employer with more than 20 workers must extend their health plan to you if they lay you off. There's a nasty catch, though: You may have to pay for the premiums, although they can't be more than 104 percent of what employees are paying.</p><span id="midArticle_7"></span><p>Of course, with no income coming in for a while, a large insurance premium could be unaffordable. If so, look at trade or alumni associations that may offer less-expensive group coverage. You'd have to be a member to qualify. A third alternative is to shop for short-term policies online (<a href="http://www.ehealthinsurance.com/">www.ehealthinsurance.com/</a>).</p><span id="midArticle_8"></span><p>Price high-deductible health policies first. Although out-of-pocket expenses range from roughly $1,200 for individuals to $11,900 for families (<a href="http://link.reuters.com/car35s">link.reuters.com/car35s</a>), they are designed to cover most catastrophic health events such as heart attack, stroke or cancer. The premiums are much lower than full coverage policies and don't offer "soup to nuts" coverage.</p><span id="midArticle_9"></span><p>-- Cash reserves are also essential. My friends were diligent savers, but they needed to do cash-flow statements to see how long their cash would hold out. That's a simple matter of adding up all basic expenses such as mortgage/rent, food, property taxes, health insurance and utilities to come up with a monthly "nut" number. These are the core bills when all discretionary items such as restaurant meals, movies/entertainment and cable TV are stripped out.</p><span id="midArticle_10"></span><p>-- Need quick cash? Don't forget, that in a pinch, you can cash in or borrow against a life insurance policy -- if it carries a cash value -- or go down to one car.</p><span id="midArticle_11"></span><p>And if you absolutely need the money, you can tap into your retirement plan, although I don't recommend it, because if you do it prior to age 59 ½, you'll pay income tax plus a 10 percent</p><span id="midArticle_12"></span><p>federal penalty on withdrawals. That money's awfully hard to replace.</p><span id="midArticle_13"></span><p>-- The nonmonetary part of joblessness is no less important. How well networked are you? Have you updated profiles on social media services such as Linkedin? Have you told friends and associates that you're looking for work? Have you checked college alumni association for job services? Use all social media options.</p><span id="midArticle_14"></span><p>Often the hardest emotional toll is the long wait before another job is secured. Prior to the 2007 recession, the average wait to reemployment was five weeks, according to the U.S. Bureau of Labor Statistics. Today the wait is double that, and potentially longer if your chosen profession or industry is contracting.</p><span id="midArticle_15"></span><p>New perspectives and brainstorming are essential. Forget about what you did; what can you do? Write down your life skills. What are you best at? What have you accomplished on the job and outside of work? What are your social skills? Do you need additional training? Don't forget skills you may have mastered outside the office volunteering.</p><span id="midArticle_0"></span><p>The best jobs are often not advertised. Look at business headlines to see if companies are expanding. What kind of people are they seeking? Drill down into the story to see which executive is quoted and pitch them directly.</p><span id="midArticle_1"></span><p>My recently unemployed friends are optimistic. They have decades of experience, are highly motivated and are well organized. One friend has already been on two interviews, and the other one has spent hours with an outplacement firm refining his resume.</p><span id="midArticle_2"></span><p>Ultimately, getting a decent job is a numbers game. Job candidates need to make contact with the people who are doing the hiring -- and do it on a daily basis. Resumes are useful, but they may not sell their talents well enough.</p><span id="midArticle_3"></span><p>---</p><span id="midArticle_4"></span><p>The author is a Reuters columnist. The opinions expressed are his own.</p></span><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-29597365262456492492011-11-29T20:30:00.000-08:002011-11-29T20:31:21.056-08:00How to Help the Jobless<span id="articleText"><span class="focusParagraph"><p><span class="articleLocatio</span>n">(Reuters) - Two of my friends lost their jobs in the last month. One had worked for a large computer services company for 31 years. Another was an information technology manager whose position was eliminated in a restructuring. Both men are in their fifties.</span></p> </span><span id="midArticle_1"></span><p>Having been laid off more than once, I have a certain protocol I share with friends. I hope it's of value to them; I know it's paid off for me. Here's the plan that has worked for me in the past:</p><span id="midArticle_2"></span><p>-- The best strategy is to be ready for a potential layoff with several months of cash, no credit card debt and an up-to-date resume. But don't lose heart if you're one of the more than 15 million unemployed and 1 million "discouraged" workers who can't find openings suitable to their skills and have stopped looking. There are strategies to lessen the pain and to improve your chances of finding a new job.</p><span id="midArticle_3"></span><p>-- Ideally, don't leave your employer without knowing what benefits are available. Many large companies offer a suite of outplacement services to laid-off workers. Always take advantage of them.</p><span id="midArticle_4"></span><p>One of my newly laid off friends got help in writing a resume, branding statement and doing interviews. He also got to keep his company-issued laptop. You're also entitled to at least 26 weeks of unemployment compensation, and in some cases as much as 99 weeks (assuming Congress extends long-term benefits by year-end).</p><span id="midArticle_5"></span><p>-- You'll also need to make decisions about health care and your 401(k) plan. You have a choice of whether to keep your 401(k) with an employer or roll it over into another plan. Take your time in deciding what to do. I generally recommend that people look at the offerings of the largest fund companies (Fidelity, Vanguard, T. Rowe Price) and see if they can get better service, lower expense ratios and more diversification.</p><span id="midArticle_6"></span><p>If health insurance is not covered in a severance plan, you may be eligible for it through a COBRA extension (<a href="http://link.reuters.com/zyq35s">link.reuters.com/zyq35s</a>). This is a federal law that says an employer with more than 20 workers must extend their health plan to you if they lay you off. There's a nasty catch, though: You may have to pay for the premiums, although they can't be more than 104 percent of what employees are paying.</p><span id="midArticle_7"></span><p>Of course, with no income coming in for a while, a large insurance premium could be unaffordable. If so, look at trade or alumni associations that may offer less-expensive group coverage. You'd have to be a member to qualify. A third alternative is to shop for short-term policies online (<a href="http://www.ehealthinsurance.com/">www.ehealthinsurance.com/</a>).</p><span id="midArticle_8"></span><p>Price high-deductible health policies first. Although out-of-pocket expenses range from roughly $1,200 for individuals to $11,900 for families (<a href="http://link.reuters.com/car35s">link.reuters.com/car35s</a>), they are designed to cover most catastrophic health events such as heart attack, stroke or cancer. The premiums are much lower than full coverage policies and don't offer "soup to nuts" coverage.</p><span id="midArticle_9"></span><p>-- Cash reserves are also essential. My friends were diligent savers, but they needed to do cash-flow statements to see how long their cash would hold out. That's a simple matter of adding up all basic expenses such as mortgage/rent, food, property taxes, health insurance and utilities to come up with a monthly "nut" number. These are the core bills when all discretionary items such as restaurant meals, movies/entertainment and cable TV are stripped out.</p><span id="midArticle_10"></span><p>-- Need quick cash? Don't forget, that in a pinch, you can cash in or borrow against a life insurance policy -- if it carries a cash value -- or go down to one car.</p><span id="midArticle_11"></span><p>And if you absolutely need the money, you can tap into your retirement plan, although I don't recommend it, because if you do it prior to age 59 ½, you'll pay income tax plus a 10 percent</p><span id="midArticle_12"></span><p>federal penalty on withdrawals. That money's awfully hard to replace.</p><span id="midArticle_13"></span><p>-- The nonmonetary part of joblessness is no less important. How well networked are you? Have you updated profiles on social media services such as Linkedin? Have you told friends and associates that you're looking for work? Have you checked college alumni association for job services? Use all social media options.</p><span id="midArticle_14"></span><p>Often the hardest emotional toll is the long wait before another job is secured. Prior to the 2007 recession, the average wait to reemployment was five weeks, according to the U.S. Bureau of Labor Statistics. Today the wait is double that, and potentially longer if your chosen profession or industry is contracting.</p><span id="midArticle_15"></span><p>New perspectives and brainstorming are essential. Forget about what you did; what can you do? Write down your life skills. What are you best at? What have you accomplished on the job and outside of work? What are your social skills? Do you need additional training? Don't forget skills you may have mastered outside the office volunteering.</p><span id="midArticle_0"></span><p>The best jobs are often not advertised. Look at business headlines to see if companies are expanding. What kind of people are they seeking? Drill down into the story to see which executive is quoted and pitch them directly.</p><span id="midArticle_1"></span><p>My recently unemployed friends are optimistic. They have decades of experience, are highly motivated and are well organized. One friend has already been on two interviews, and the other one has spent hours with an outplacement firm refining his resume.</p><span id="midArticle_2"></span><p>Ultimately, getting a decent job is a numbers game. Job candidates need to make contact with the people who are doing the hiring -- and do it on a daily basis. Resumes are useful, but they may not sell their talents well enough.</p><span id="midArticle_3"></span><p>---</p><span id="midArticle_4"></span><p>The author is a Reuters columnist. The opinions expressed are his own.</p></span><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com1tag:blogger.com,1999:blog-307246258834168852.post-71444977798011049492011-11-02T06:42:00.001-07:002011-11-02T06:42:48.621-07:00How to Nail Zombie Funds<span id="articleText"><div id="articleInfo"> <p class="byline">By <a href="http://blogs.reuters.com/search/journalist.php?edition=us&n=john.wasik&">John Wasik</a></p> </div> <span id="midArticle_0"></span><span class="focusParagraph"><p><span class="articleLocatio</span>n">(REUTERS) - Do you have zombie index funds within your portfolio?</span></p> </span><span id="midArticle_1"></span><p>Instead of eating up your brains, they devour your nest egg with high expenses and walking dead performance. They may be lurking within your 401(k)-type plan or individual retirement account.</p><span id="midArticle_2"></span><p>I like index funds because they generally can track nearly any kind of asset class. As such, they are the white bread of investing and should cost about the same from fund to fund. The cheaper the better. Why pay Nieman-Marcus prices for the same thing you can get at Costco or Sam's Club for less?</p><span id="midArticle_3"></span><p>You can vanquish these funds without overtly violent acts, but first you have to identify them. Unfortunately, mandated fee disclosure is still pending, so you have to take the initiative.</p><span id="midArticle_4"></span><p>So how do you identify a zombie fund? First you need a reliable benchmark for comparison purposes. The easiest way is to look at the index that the fund is supposed to be tracking.</p><span id="midArticle_5"></span><p>A good proxy for the U.S. bond market, for example, is the Barclays Capital Aggregate Bond Index. It's a basket of listed bonds. If a fund tracks the index return within 0.20 percentage points or less, then that's pretty good and not expensive.</p><span id="midArticle_6"></span><p>A low-cost bond index fund would look like the Fidelity Spartan Intermediate Term Bond Index investor class fund, with a 0.20 percent expense ratio. You'd need at least $10,000 to get into this fund, though.</p><span id="midArticle_7"></span><p>You want to pay a manager more to get less return on bonds? The ING US Bond Index portfolio charges a hefty 0.95 percent annually, meaning it will lag the index by nearly a full percentage point every year.</p><span id="midArticle_8"></span><p>What about garden-variety stock index funds? Suppose you were stuck in a fund like the Principal Large Cap S&P 500 Index fund (C Shares). The managers charge you 1.3 percent annually to hold a basket of the largest U.S. stocks. You could reap huge savings by replacing it with the Fidelity Spartan S&P 500 Index Advantage fund, with an expense ratio of 0.07 percent.</p><span id="midArticle_9"></span><p>Here's where "less is more" refers to more than architecture. The Principal fund lagged the S&P index by roughly a percentage point over the past year through October 28.</p><span id="midArticle_10"></span><p>The Fidelity index fund, in contrast, slightly beat the index over the same period. By lowering your expense ratio, you got back that percentage point you would've lost in the more expensive fund.</p><span id="midArticle_11"></span><p>Over time, the numbers add up. Let's say you had $100,000 in the Principal fund earning 5 percent over 30 years. At the end of that period, you'd have lost more than $140,000 to fees and foregone earnings. The Fidelity fund would have only cost you about $9,000. So one decision can save you roughly $131,000. Run your own numbers on the free SEC Mutual Fund Expense Analyzer (see <a href="http://www.sec.gov/investor/tools/mfcc/mfcc-int.htm">here</a>). It will take about two minutes.</p><span id="midArticle_12"></span><p>If you have a zombie fund in your portfolio, run away from it and consider offerings in the DFA, Fidelity, iShares, Schwab, TIAA-CREF or Vanguard groups.</p><span id="midArticle_13"></span><p>Have a nest-egg eater in your 401(k)? Suggest alternatives to your employer or plan administrator. By law, they must provide the most prudent, low-cost choices. You can sue them if they've loaded your plan with zombies. Several employee groups have done so in recent years -- and won (see <a href="http://www.uselaws.com/news/3/108">www.uselaws.com/news/3/108</a>).</p></span><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-38715591648640384072011-10-10T12:10:00.000-07:002011-10-10T12:12:47.659-07:00Managing the Message<div class="module" id="post-20609"> <div class="moduleBody"> <div class=""> <div class="columnRight grid8" id="single"> <h2>What the Occupy Wall Street crowd should be saying when they talk about their plight<br /></h2> <div class="timestamp">By John F. Wasik (Reuters)</div><div class="articletools"><ul id="sharetools"><li style="display: inline;vertical-align:top;" class="share "><img src="http://blogs.reuters.com/reuters-money/wp-content/themes/reuters-default/images/vdots.gif" class="textmiddle" /></li><li style="display:inline;vertical-align:top;width:390px;" class="share"> <span></span><br /></li></ul> </div> <div class="headerTopics"> <br /><a href="http://blogs.reuters.com/reuters-money/tag/taxes"></a> </div> <div id="postcontent"><p><a href="http://blogs.reuters.com/reuters-money/files/2011/10/RTR2S23T.jpg"><img class="alignleft size-medium wp-image-20611" title="A demonstrator from the Occupy Wall Street campaign stands with a dollar taped over his mouth as he stands in Zucotti Park near the financial district of New York September 30, 2011. REUTERS/Lucas Jackson " src="http://blogs.reuters.com/reuters-money/files/2011/10/RTR2S23T-300x201.jpg" alt="A demonstrator from the Occupy Wall Street campaign stands with a dollar taped over his mouth as he stands in Zucotti Park near the financial district of New York September 30, 2011. REUTERS/Lucas Jackson " height="201" width="300" /></a>Are the thousands who have taken to the streets in the “<a href="http://blogs.reuters.com/reuters-money/2011/10/10/what-the-occupy-wall-street-crowd-should-be-saying/%28http://www.reuters.com/article/2011/10/06/us-wallstreet-protests-idUSTRE7945JB20111006%29">Occupy Wall Street</a>” (OWS) protests a bunch of anarchistic slackers or do they have a point?</p> <p>If they’re protesting their personal financial situations or prospects for the American Dream, they have plenty to howl about, but the “99 percent” crowds could use some message management.</p> <p>When I recently visited the Chicago OWS spin-off in front of the Federal Reserve Bank, they were decrying everything from predator drones to corporations in general. There were fewer than 100 people there, although their theme was similar to the New York demonstrations.</p> <p>Instead of yelling at people ensconced behind financial district edifices, though, protesters could be making some more constructive demands. I’d like to humbly offer a few suggestions:</p> <ul><li>Demand that big banks give ordinary citizens the same rates they receive from the Federal Reserve on loans. Borrowers can’t re-negotiate their college loans the way a big corporation or bank can, because they have access to interest rates that are nearly zero. Moreover, students can’t consolidate high-rate private loans with lower-rate federal borrowing, so the plums of high finance are out of their reach. Those who graduated from college may be staring down decades of paying off debt — an average of nearly $23,000 per student; those with professional degrees are wincing at six-figure burdens.</li><li>Demand that Congress permit regular folks to discharge student debt in bankruptcy. It’s somewhat of a consolation that graduates can get lower payments based on sparse income or employment if they have federal loans, but they still have to repay those loans. If they file for bankruptcy, they can’t discharge those debts, which are like albatrosses. Not so with the megabanks, who not only received a multi-trillion-dollar bailout, but got the U.S. Treasury and Federal Reserve to buy their bad debt and toxic securities. There’s a solid reason why the <a href="http://www.nytimes.com/2011/09/13/education/13loans.html">delinquency rate for student loan</a>s is almost as high as credit cards.</li><li>Demand that Congress pass a stimulus plan to create infrastructure, education, research and clean energy jobs instead of investing in two wars that three-quarters of the American electorate thinks are senseless. If the job market were robust, none of these protesters would have to worry. Like previous generations, they could work, pay off their debts and buy things like appliances, furniture and homes. They could afford to have children and provide them decent educations. That was the American Dream. The younger generation is not getting the job opportunities their parents or grandparents had. They are faced with average <a href="http://articles.moneycentral.msn.com/learn-how-to-invest/The-real-unemployment-rate.aspx">15 percent unemployment</a>. It’s much higher for minorities. Even if they can get a job, wages are depressed due to the recession and many are underemployed, working several jobs or are part-timers.</li><li>Instead of targeting financial districts, focus on specific congressmen and senators blocking financial/bankruptcy reform and job creation.</li></ul> <p> Unless more people get in the face of politicians, one thing is certain: it will be continue to be a <em>raw</em> deal for the middle class. Now is the time for the protesters to take their demonstrations out of financial districts and into the offices of their elected representatives. All of this reminds me of when Ralph Waldo Emerson visited Henry David Thoreau in jail, who was imprisoned for not paying a poll tax. Emerson asked his friend why he was there. “Why are <em>you </em>not here?” Thoreau replied. Maybe we’re not quite on the streets today in spirit, but most of us were there some time ago in personal financial solidarity — whether we choose to admit it or not.</p> </div> </div> </div> </div> </div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-21463543086353850442011-10-03T15:36:00.000-07:002011-10-03T15:38:12.552-07:00Cutting Your Property TaxesBy John F. Wasik (Reuters)<br /><span style="font-weight: bold;"><br /></span> <div class="facebookRec"> </div><span name="trackingEnabledModule"></span><span name="trackingEnabledModule"></span><span name="trackingEnabledModule"><div class="columnRight"><div id="relatedInteractive" class="relatedRail gridPanel grid2"> </div></div></span> <div class="columnRight"><div class="relatedRail gridPanel grid2"> </div></div> <div class="relatedPhoto landscape" id="articleImage"> <img src="http://www.reuters.com/resources/r/?m=02&d=20111003&t=2&i=510435178&w=460&fh=&fw=&ll=&pl=&r=2011-10-03T192935Z_01_BTRE7921I5H00_RTROPTP_0_USA-ECONOMY" alt="A view of a house for sale is seen in Los Angeles in this February 24, 2010 file photo. REUTERS/Mario Anzuoni/Files" border="0" /> </div> <span id="articleText"> <span id="midArticle_start"></span> <div id="articleInfo"> <p> <span class="timestamp"><br /></span> </p> </div> <span class="focusParagraph"><p>The author is a columnist for Reuters.com and author of The Audacity of Help: Obama's Economic Plan and the Remaking of America. The opinions expressed are his own.</p> </span><span id="midArticle_0"></span><p>By <a href="http://blogs.reuters.com/search/journalist.php?edition=us&n=john.wasik&">John Wasik</a></p><span id="midArticle_1"></span><p> (Reuters) - For years, the mantra of American homeownership was to count on home appreciation. Every year like clockwork the value went up and houses were a growing source of wealth.</p><span id="midArticle_2"></span><p>Now, more than three years after the housing market imploded, the tune is different. It may make sense for you to prove that your home's value has dropped so you can file for reduced property taxes.</p><span id="midArticle_3"></span><p>This is the time of the year when local assessors send out notices of your home's assessed value. Note, however, that this is not your real market value. It's a base value that's used to calculate your property taxes. If you want to reduce your real estate taxes, start with paring your assessed value.</p><span id="midArticle_4"></span><p>You have a reasonably good chance of winning a challenge to your assessed valuation. It's estimated that some 60 percent of residential properties are over-assessed, although only a handful of home owners appeal, according to the National Taxpayers Union.</p><span id="midArticle_5"></span><p>As someone who's volunteered with a local nonprofit in Northeastern Illinois on property tax issues, I know it's worth fighting assessments every year. Sometimes I win, sometimes I lose. If you feel that your assessment is too high, there are many ways to challenge it, but it takes some homework and diligence.</p><span id="midArticle_6"></span><p>You can always start by checking the property record of your home, which is on file with the assessor. Does it have the correct number of bathrooms and bedrooms? Is the total living space correct? Does it list a finished basement in error? You can fix any incorrect data by either allowing the assessor to inspect your home or by submitting an approved builder's drawing or survey.</p><span id="midArticle_7"></span><p>Although you can dispute the assessed market value of your home with your assessor, it's not an easy task since you may need at least three comparable homes in your neighborhood with lower values.</p><span id="midArticle_8"></span><p>If you can't reach an agreement with your assessor, then you'll have to file appeals with your county and state property-tax appeal boards. Your documentation should be filed on time and you may be scheduled for a short hearing.</p><span id="midArticle_9"></span><p>You can, of course, hire a consultant or lawyer to do the appeal for you, but they will charge a flat fee or take a percentage of your tax savings.</p><span id="midArticle_10"></span><p>When going through this process, you may feel like it's an uphill battle. It's much easier for assessors to neglect reducing assessed values -- even though home prices have plummeted 30 percent or more in many metropolitan areas since the housing meltdown began. They're in the business of pooling money for the taxing bodies, not providing current market values.</p><span id="midArticle_11"></span><p>Yet to get an idea on how much housing values have dropped, you need to consult some recent numbers from <a href="http://realtor.com/">Realtor.com</a> , the main web site from the National Association of Realtors, the trade association.</p><span id="midArticle_12"></span><p>Here's a sampling of some <a href="http://www.reuters.com/finance/markets" title="Full coverage of markets">markets</a> that showed the largest year-over-year declines in median list prices, that is, what buyers were asking for homes:</p><span id="midArticle_13"></span><p>*Chicago: -14.9 percent</p><span id="midArticle_14"></span><p>*Las Vegas : -11.19 percent</p><span id="midArticle_15"></span><p>*Atlanta: -11.17 percent</p><span id="midArticle_0"></span><p>*Los Angeles/Long Beach: -10.99 percent</p><span id="midArticle_1"></span><p>*Detroit: -10.39 percent</p><span id="midArticle_2"></span><p>*Tampa/Clearwater: -10.26 percent</p><span id="midArticle_3"></span><p>Of course, these markets have declined much more than these percentages show since the real-estate market peaked in 2006-2007. So you may be able to reap some genuine savings in your property-tax bill.</p><span id="midArticle_4"></span><p>For the purposes of your assessment, you can generally only focus on the last year. Your mission is to show how similar properties in your immediate area have declined along with your home.</p><span id="midArticle_5"></span><p>Assessors aren't interested in national, statewide or even county housing prices, though. Stick to your neighborhood and get a professional appraisal for assessed valuation. And if there's something that has reduced the value of your property - a recent storm, neighborhood deterioration, etc. - you should present your case with pictures.</p><span id="midArticle_6"></span><p>Even if you get a reduction in your assessed value, you may not see a huge decline in your property taxes, if at all. In most places, taxing bodies can still raise their tax rates or multipliers. When multiplied by your assessed value (minus any exemptions or credits), the rates will determine your tax bill. Unless subject to a tax cap, even in a sour property market taxes can still rise.</p><span id="midArticle_7"></span><p>Since they are suffering from reduced tax revenue due to the housing recession, most public services are going to do whatever they can to ensure that they receive as much money from taxpayers as possible.</p><span id="midArticle_8"></span><p>The good news is that, unless you employ outside help, it will cost you nothing to fight.</p><span id="midArticle_9"></span><p>There's a strange benefit in arguing that your home is worth less than the year before. While it may be a blow to your ego, it's a fight worth waging that can make a difference in your tax bills in the future.</p></span><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-85942369529438584682011-09-27T07:24:00.000-07:002011-09-27T07:25:51.911-07:00Some Sanity in Scary Times<div class="module" id="post-20123"> <div class="moduleBody"> <div class=""> <div class="columnRight grid8" id="single"> <h2>Balancing your portfolio in a bonkers market</h2> <div class="timestamp">By John F. Wasik<br /></div> <div class="articletools"> <ul id="sharetools"><li style="display: inline;vertical-align:top;padding-left: 6px;" class="share"><br /></li><li style="display: inline;vertical-align:top;" class="share "><img src="http://blogs.reuters.com/reuters-money/wp-content/themes/reuters-default/images/vdots.gif" alt="" class="textmiddle" /></li><li style="display: inline;vertical-align:top; padding-top: 2px;" class="share"><span style="padding-top: 2px;vertical-align:top; display:inline-block;"><span class="IN-widget" style="line-height: 1; vertical-align: baseline; display: inline-block; text-align: center;"><span style="padding: 0pt ! important; margin: 0pt ! important; text-indent: 0pt ! important; display: inline-block ! important; vertical-align: baseline ! important; font-size: 1px ! important;"><span id="li_ui_li_gen_1317133244218_0"><a id="li_ui_li_gen_1317133244218_0-link"><span id="li_ui_li_gen_1317133244218_0-logo">in</span><span id="li_ui_li_gen_1317133244218_0-title"><span id="li_ui_li_gen_1317133244218_0-mark"></span><span id="li_ui_li_gen_1317133244218_0-title-text">Share</span></span></a></span></span></span></span></li></ul> </div><div id="postcontent"><p><a href="http://blogs.reuters.com/reuters-money/files/2011/09/balance_lo.jpg"><img class="alignleft size-medium wp-image-20152" title="Scales of Justice are seen in Brittany's Parliament in Rennes" src="http://blogs.reuters.com/reuters-money/files/2011/09/balance_lo-300x200.jpg" alt="" height="200" width="300" /></a>Balance is a rare bird these days. Jobs, housing, stocks, European debt: All seem to be in a <a href="http://www.reuters.com/article/2011/09/23/us-markets-stocks-idUSTRE7850EA20110923">spasmodic tailspin</a>.</p> <p>There is some consolation that a balanced portfolio can help smooth out the jagged curves of a bipolar market economy. But balance is rarely what we think it is, and it needs constant monitoring.</p> <p>When most investment advisers tout a balanced portfolio, it typically means one thing: About 60 percent would be invested in a U.S. all-stock fund and the remainder in bonds.</p> <p>A good proxy for the stock component would be the index exchange-traded fund <a href="http://www.reuters.com/finance/stocks/overview?symbol=SPY">SPDR S&P 500 fund.</a> U.S. bonds could be ably represented by the <a href="http://www.reuters.com/finance/stocks/overview?symbol=LAG.P">SPDR Barclays Aggregate Bond ETF</a>. Both funds are low cost, diversified ways of owning the lion’s share of each market. Here’s how the returns break out, according to Craig Israelsen, professor of finance at Brigham Young University, who analyzed the underlying indexes:</p> <p>A balanced portfolio is roughly half as risky as an all-stock mix. If you looked at August’s returns, you would have only lost 2.75 percent in the 60/40 portfolio, compared to a 5.5 percent loss in the all-stock portfolio or a 1.37 percent gain in the much safer all-bond portfolio. No surprises there because bonds are safe havens when investors flee stocks as they did during last month’s volatility — and may continue to do so in a broad-based pullback.</p> <p>Let’s look back even deeper into the past decade, which included two recessions, 9/11, the 2008 meltdown and the <a href="http://www.reuters.com/article/2011/07/21/us-column-personalfinance-idUSTRE76J6D520110721">dot-com blow-out of 2001</a>. Bonds are again the best performers as a buffer against stocks — returning 5.5 percent vs. 2.59 percent for 100 percent stocks. Between those two extremes was the balanced portfolio, with a 4.1 percent return through August 31.</p> <p>In an even more volatile period — going back only five years to include the 2008 meltdown, recession and recovery — bonds again came out on top with a 6.26 percent return, compared to 0.74 percent return for all stocks and 3.3 percent for the balanced mix.</p> <p>It’s hard to argue against being all in stocks or bonds at the right moments. In good times, stocks are the place to be as you’re rewarded with dividends and capital appreciation based on <a href="http://www.reuters.com/article/2011/09/25/us-usa-stocks-weekahead-idUSTRE78M7BZ20110925">corporate earnings expectations</a>. When the skies darken, though, bonds are decent hideouts due to their steady payments and appreciation when interest rates decline. Yet how do you time the market? That’s what makes the balanced approach a solid middle ground that lowers both stock and bond-market risk simultaneously.</p> <p>Long-term, the middle route makes a huge difference. From 1926 through 2010, according to a recent<a href="http://individual.troweprice.com/staticFiles/Retail/Shared/PDFs/PriceReports/Summer2011PriceReport.pdf"> T. Rowe Price study</a>, a balanced portfolio delivered returns above 10 percent almost as frequently as an all-stock portfolio — with 40 percent less volatility.</p> <p>That means in a dreadful year for stocks, the balanced portfolio would only lose 28 percent, compared to 43 percent for the 100 percent stocks mix.</p> <p>The balanced approach is a compelling argument for mutual funds that automatically do the 60/40 allocation and for <a href="http://blogs.reuters.com/reuters-money/2011/08/11/target-date-funds-faring-better-in-this-market-meltdown/">target-date </a>or lifestyle choices within 401(k)-type plans that do the same thing only with specific years targeted for retirement withdrawals. Every major mutual-fund firm offers them as does <a href="https://www.folioinvesting.com/rtg/category.jsp?category=Target%20Date">Folio Investing</a>.</p> <p>You could also build a balanced portfolio on your own by buying the two SPDR funds I mentioned above. Buy them through a deep-discount broker or find their equivalents commission-free through Fidelity Investments, <a href="http://www.reuters.com/finance/stocks/overview?symbol=SCHW.N">Charles Schwab</a> or the Vanguard Group.</p> <p>Want to take the balanced approach one-step further? Consider an ultra-balanced approach with at least 12 separate funds representing seven asset classes, such as the ones found in the <a href="http://www.7twelveportfolio.com/">7-12 portfolio</a>. Over the past five years, the passive version of 7-12 has returned 4.8 percent, compared with 3.87 percent for the <a href="http://www.reuters.com/finance/stocks/VBINX.O/key-developments">Vanguard Balanced Index</a> and 0.71 for the<a href="http://www.reuters.com/finance/stocks/companyNews?blob=&symbol=VOO"> Vanguard 500 Index fund</a>, according to Israelsen, who designed the portfolio.</p> <p>Israelsen has expanded the definition of balanced portfolios by including inflation-protected bonds, cash, natural resources/commodities, global real estate, emerging markets and all sizes of companies. This model reduces risk through diversification and includes tangible assets such as commodities and real estate.</p> <p>What’s important in a balanced approach for moderate to conservative investors is that more global asset classes get you away from the all-U.S. stocks and bonds orthodoxy. This diversity not only gives you room to breath, you’ll never fly too close to the sun.</p> </div> </div> </div> </div> </div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-32122682714481301182011-09-23T12:50:00.000-07:002011-09-23T12:51:22.813-07:00Market Madness Avoidable<h2>How to focus in a manic market</h2> <div class="timestamp">By John F. Wasik (Reuters)<br /></div><br /><p><a href="http://blogs.reuters.com/reuters-money/files/2011/09/trader.jpg"><img class="alignleft size-medium wp-image-20081" title="Trader Neil Catania works on the floor of the New York Stock Exchange September 22, 2011. REUTERS/Brendan McDermid" src="http://blogs.reuters.com/reuters-money/files/2011/09/trader-300x219.jpg" alt="" height="219" width="300" /></a>While the market was doing another backward swan dive, one email came to me that reflected the mass anxiety: “Some are saying it may be time to panic, and I am resisting. What do you think? And what does panic mean: Jump? Sell off?”</p> <p>After I offered some brief words of staid resolve, it occurred to me that the luncheon speaker at the <a href="http://www.morningstaradvisor.com/products/conference/etfinvest_home.asp">Morningstar ETF conference</a> I was attending at the time had the right idea, even though he didn’t utter a word about finance or markets.</p> <p>Words of fortitude came from <a href="http://www.jeffzaslow.com/">Jeffrey Zaslow</a>, who co-authored books with <a href="http://www.chesleysullenberger.com/">Chesley Sullenberger</a>, the pilot who safely landed a disabled jet in the Hudson River (saving all 155 aboard); and <a href="http://www.thelastlecture.com/">Randy Pausch</a>, the Carnegie-Mellon Professor who offered a moving “last lecture” on life and love before he died of cancer.</p> <p>Both men faced life-threatening panics and had to make tough decisions. Sullenberger had minutes to decide the best course of action when bird strikes took out his jet’s engines after he left LaGuardia airport. Pausch had a few months to deliver his key life lessons to his students, colleagues and family.</p> <p>What did they both have in common? Focus and an ability to discern what was important. To distill the essentials of life and articulate them. A lifetime of training, experience and thoughtful examination had prepared them for the moment of truth. As Zaslow noted, they — along with most of us — would be remembered for what they did in critical moments. Yet another such global moment is upon us.</p> <p>I’m not going to pretend that the markets will suddenly see tomorrow that all will be okay with European banking, or that the U.S. government or American megabanks will fix their tattered balance sheets anytime soon. Or that we’re not all headed for a global recession or more bank failures.</p> <p>All of that is possible and that’s why the markets are so utterly spooked. Volatility will not ease soon and if you can’t afford the risk, you shouldn’t be invested in stocks.</p> <p>What I do know is that this is a perfect time to concentrate on what’s essential to you and your family. It’s nearing year-end, so now’s the perfect time to start asking — and answering — these questions:</p> <p><strong>Are you protected?</strong><br />This question goes beyond having the basic forms of insurance to cover your vehicles, home/apartment/valuables, life and health. Disability insurance is essential because you’re far more likely to suffer loss of income for health reasons. Portfolio protection is key to make sure all of the risks (inflation, market, credit) are fully hedged.</p> <p><strong>Is your “gross family spending” positive?</strong><br />I heard this phrase from <a href="http://www.researchaffiliates.com/">Robert Arnott of Research Affiliates </a>and thought it was perfectly descriptive of household financial health. It’s simple: Do your assets (home, business equity, pension, savings, cash) exceed your liabilities (mortgage, credit cards, taxes owed, loans)? If not, what can you do to clean up your balance sheet?</p> <p><strong>Do you have a plan?</strong><br />I’m not just talking about a comprehensive financial plan that sets down your goals, objectives and risk factors in an investment policy statement. What about your estate planning? Do you have a living will or trust? Do you want to continue your education? How can you reduce your taxes? How do you plan to invest in your human capital — what you’re good at and passionate about?</p> <p><strong>What’s your legacy?</strong><br />This is the hardest question of all. Building an estate is just fine, but if you leave behind love for the people you care about, there’s nothing wrong with that. This is the most lasting legacy.</p> <p>You may come to the conclusion that you need some help in answering all of these questions. It wouldn’t hurt to approach all of your trusted advisors or summon your family to discuss some of these items. Also check in with your lawyer, accountant or <a href="http://blogs.reuters.com/reuters-money/2011/09/23/how-to-find-focus-in-a-flummoxed-market/www.napfa.org">financial planner</a>.</p> <p>Please note: By “trusted,” I don’t mean brokers or agents. Professionals who are not on commission can give you more objective advice.</p> <p>Don’t make a move until you know your long-term plan. Now is a bad time to make a decision if you’re just doing it out of panic. You’re not alone in this and there’s no need to completely jump into gold or cash without having a rational defense.</p> <p>The bottom line is sustainability. If your debts are out of control, why are you worried about the markets? And if you’re not protected against loss of income, the European banking situation is incredibly irrelevant.</p> <p>After you’ve consulted with your family and professional counselors, then decide if your plan makes sense. You may feel that you’re still wobbly — and need to make some course corrections. But at least you won’t be flying blind.</p><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-90889096047106804592011-09-16T12:23:00.000-07:002011-09-16T12:24:38.573-07:00Why Social Security Will SurvivePerry’s monstrous lies about Social Security<div class="module" id="post-19755"><div class="moduleBody"><div class=""><div class="columnRight grid8" id="single"><span style="text-decoration: underline;"><br />By John F. Wasik (Reuters)<br /></span><div id="postcontent"><p><a href="http://blogs.reuters.com/reuters-money/files/2011/09/perry.jpg"><img class="alignleft size-medium wp-image-19760" title="Texas Governor Rick Perry speaks during the CNN/Tea Party Republican presidential candidates debate in Tampa, Florida September 12, 2011. REUTERS/Scott Audette " src="http://blogs.reuters.com/reuters-money/files/2011/09/perry-300x240.jpg" alt="" width="300" height="240" /></a>Gov. Rick Perry, the GOP presidential candidate who calls Social Security a “monstrous lie” and a “<a href="http://www.reuters.com/article/2011/09/08/us-usa-campaign-debate-idUSTRE7861J620110908">Ponzi scheme</a>” has implied that future retirees can’t rely upon receiving benefits from the system.</p> <p>Not only is Perry shooting wildly from the hip on these statements — a strategy cynically designed to attract angry, younger independent voters — he’s spewing some layered <a href="http://www.nytimes.com/2011/09/08/us/politics/08republican-debate-text.html?_r=1&pagewanted=all">falsehoods that need to be addressed</a>.</p> <p>Social Security can not only be preserved for future generations, its coming fiscal shortfalls can be fixed relatively simply. What Perry also neglects to mention is that it’s one of the most successful <a href="http://www.cbpp.org/cms/index.cfm?fa=view&id=1863">anti-poverty programs</a> in U.S. history.</p> <p>The before-and-after Social Security picture is dramatic. Before Social Security, almost half of elderly Americans had income below the poverty line, reports the Center on Budget and Policy Priorities. Roughly 12 percent of elderly citizens are considered poor today. The program lifted more than 11 million out of poverty — more than 60 percent of those were women.</p> <p>Here’s some even more relevant Texas-sized context: Today, more people are slipping back into poverty because of permanent job losses, recessions, a housing meltdown, stock-market downturns, reduced employment benefits, higher medical costs and stagnant wage growth. The U.S. poverty rate last year increased for the third straight year — the highest it’s been since 1993. Some 46 million have annual incomes <a href="http://www.reuters.com/article/2011/09/13/us-usa-economy-poverty-idUSTRE78C3YV20110913">below the poverty line</a> of $22,113.</p> <p>As the U.S. is saddled with the highest poverty rate among industrialized countries, why are the anti-poverty features of Social Security being attacked?</p> <p>Behind Perry’s venom about the system is a larger truth that he’s yet to illuminate: Making cash-strapped states responsible for replacing Social Security or privatizing it is unrealistic. There is nothing in the private sector — nor is anything likely to emerge — that could replace Social Security at the same low cost to taxpayers.</p> <p><a href="http://blogs.reuters.com/reuters-money/2011/08/25/why-entitlement-is-not-a-four-letter-word/">Simply trashing Social Security</a> by calling it a Ponzi scheme ignores the fact that when you pay your FICA payroll tax, you’re getting an inflation-adjusted annuity, disability insurance, a small death benefit for your survivors plus Medicare benefits.</p> <p>Try to find a package like this in the private sector. It doesn’t exist. You’d have to buy an<a href="http://blogs.reuters.com/reuters-money/2011/03/23/4-ways-to-add-inflation-protection-to-your-retirement-plan/"> inflation-protected annuity</a>, disability and life policy separately — and they are no bargains.</p> <p>Keep in mind, when private insurers offer these products they have to pay commissions and marketing costs, so they load policies with lots of hidden expenses. They can’t offer the same economies of scale that Social Security can, which isn’t burdened with the excessive marketing and administrative expenses.</p> <p>On an inflation-adjusted annuity alone, you pay dearly to keep up with the cost of living. Compared to an immediate annuity (without inflation protection), your payment would be from <a href="http://www.ebri.org/pdf/programs/policyforums/CPI_Fixed_Annuities_Value.pdf">24 percent to 30 percent lower</a>. For that reason, private inflation-protected annuities are relatively scarce and unpopular.</p> <p>Private disability policies, which I recommend, are expensive outside of group plans (buy one through your employer if you can). For a 40-year-old wanting a $4,500 monthly benefit, the<a href="http://www.instantdisabilityinsurancequote.com/Results.aspx"> annual premium would be about $2,300</a>.</p> <p>Life insurance premiums vary greatly, depending upon your health, age and amount of coverage. The older and sicker you are, the higher the cost. If you have chronic conditions, risky occupation or a flawed medical history, good luck getting coverage. Social Security and Medicare don’t turn anyone away.</p> <p>What about examining Perry’s inference that current workers are contributing money for today’s retirees?<br />That’s true, but it’s not a Ponzi scheme. It’s well known that there will be fewer workers in the future to fund the system, which will create a <a href="http://www.cbo.gov/ftpdocs/115xx/doc11580/07-01-SSOptions_forWeb.pdf">regular structural deficit by 2016</a>. But that’s only the case if nothing happens and Congress completely ignores technical fixes or simply cuts benefits.</p> <p>There’s more about the “if nothing is done” scenario: The <a href="http://www.ssa.gov/oact/progdata/fundFAQ.html#n2">Social Security Trust Fund</a> — Congress borrows the cash and replaces it with Treasury securities from a pool of payroll taxes — will be exhausted in 2039, according to the Congressional Budget Office. Yet that doesn’t mean that Social Security will be bust; it will then begin to pay reduced benefits, again, if Congress doesn’t take action.</p> <p>In what Washington Post economics blogger Ezra Klein calls “the boring truth” about <a href="http://www.washingtonpost.com/blogs/ezra-klein/post/the-boring-truth-about-social-security/2011/09/08/gIQAp9oaCK_blog.html">Social Security</a>, Congress can raise the amount of salary subject to Social Security tax to <a href="http://voices.washingtonpost.com/ezra-klein/2010/09/30_options_for_reforming_socia.html">fill the funding hole</a>.</p> <p>Right now, the <a href="http://ssa.gov/pubs/10003.html">earnings cap is $106,800</a> and the tax is only 4.2 percent for employees, which may drop even more (temporarily) if Congress approves President Obama’s extended payroll tax break.</p> <p>If you want to get personal on how Social Security will impact your life, run a benefits estimate of how much you’re <a href="http://www.ssa.gov/planners/calculators.htm">entitled to at retirement age</a>. For me, it’s about $2,000 a month. It’s not a lot of money and I know I couldn’t live on that where I live now.</p> <p>Now think of what would happen to your future lifestyle if that modest supplement was scaled back — or you had to retire later. Would you have enough in your 401(k) and other savings to ensure a dignified retirement?</p> <p>Behind Social Security is an appallingly simple truth: We can put more money into it by asking higher-salaried employees to pay more, and by including immigrants and public-sector employees. I know that doesn’t have much political sizzle to it, but this kind of math doesn’t lie.</p> </div> </div> </div> </div> </div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-65363672840922384032011-09-09T13:51:00.000-07:002011-09-09T13:52:45.343-07:009/11's Unfinished Business<div class="module" id="post-282"> <div class="moduleBody"> <div class=""> <div class="columnRight grid8" id="single" style="margin:0px"> <h2>Days of simmering carbon rage in the post 9/11 world</h2> <div class="timestamp">By John F. Wasik (Reuters)<br /></div> <div class="articletools"> <ul id="sharetools"><li style="display: inline;vertical-align:top;padding-left: 6px;" class="share"><br /></li><li style="display: inline;vertical-align:top;" class="share "><img src="http://blogs.reuters.com/john-wasik/wp-content/themes/reuters-default-full/images/vdots.gif" alt="" class="textmiddle" /></li><li style="display: inline;vertical-align:top; padding-top: 2px;" class="share"><span style="padding-top: 2px;vertical-align:top; display:inline-block;"><span class="IN-widget" style="line-height: 1; vertical-align: baseline; display: inline-block; text-align: center;"><span style="padding: 0pt ! important; margin: 0pt ! important; text-indent: 0pt ! important; display: inline-block ! important; vertical-align: baseline ! important; font-size: 1px ! important;"><span id="li_ui_li_gen_1315600627876_0"><a id="li_ui_li_gen_1315600627876_0-link"><span id="li_ui_li_gen_1315600627876_0-logo">in</span><span id="li_ui_li_gen_1315600627876_0-title"><span id="li_ui_li_gen_1315600627876_0-mark"></span><span id="li_ui_li_gen_1315600627876_0-title-text">Share</span></span></a></span></span></span></span></li><li style="display: inline;vertical-align:top;" class="share "><img src="http://blogs.reuters.com/john-wasik/wp-content/themes/reuters-default-full/images/vdots.gif" class="textmiddle" /></li><li style="display:inline;vertical-align:top;width:390px;" class="share"> <span></span><br /></li></ul> </div> <div class="headerTopics"> </div> <div id="postcontent"><p style="text-align: center;"><a href="http://blogs.reuters.com/john-wasik/files/2011/09/daryl.jpg"><img class="aligncenter size-large wp-image-284" title="Actress Daryl Hannah is arrested during a protest Washington" src="http://blogs.reuters.com/john-wasik/files/2011/09/daryl-1024x682.jpg" alt="" width="614" height="409" /></a></p> <p><strong>By John Wasik</strong><br /><em> The opinions expressed are his own.</em></p> <p>Three friends were recently arrested for sitting in front of the White House to protest a potentially damaging Keystone XL tar sands pipeline. They were joined by actress Darryl Hannah, <a href="http://current.com/shows/countdown/videos/activist-bill-mckibben-on-why-tar-sands-pipeline-is-game-over-for-the-climate" target="_blank">environmentalist Bill McKibben</a> and more than 1,200 others.</p> <p>Although they were handcuffed, stuffed into a paddy wagon like livestock and quickly released after paying a $100 fine, they believed their civil disobedience was instrumental in bringing attention to a damaging fossil fuel production process. They are all in their seventh decades and highly educated, but felt they needed to make a stand.</p> <p>A decade removed from the horror of 9/11 and what’s changed in our attitude towards ecology, energy and economics?</p> <p>We are still frighteningly dependent upon imported oil and there’s no comprehensive U.S. energy policy other than to consume with abandon every last molecule of carbon by blowing up mountains, fracking bedrock, fouling waterways, polluting oceans and warming the atmosphere.</p> <p>If you think I’m conflating the horrendous loss of life on and since 9/11 with something unrelated, I’m not. Terrorism is a beast that seems to know no master and we’re still fighting that battle. We are all still grieving for the thousands lost and a violated sense of security that will never be reclaimed.</p> <p>Yet we can only live in the present and head into the future. The U.S. mostly exports jobs now and debt now instead of fostering new energy technologies to rid us of dependence upon foreign petroleum. We’ve become really good at consuming more than our share and kowtowing to entrenched interests that profit from feeding this addicted dragon, which has the face of most all of us.</p> <p>If you were looking for a hint of an energy policy in President Obama’s <a href="http://www.reuters.com/article/2011/09/09/us-obama-jobs-economy-idUSTRE7881C920110909" target="_blank">jobs speech Thursday night</a>, you would have needed a microscope. The proposed <a href="http://www.whitehouse.gov/the-press-office/2011/09/08/address-president-joint-session-congress" target="_blank">$447 billion plan</a> is big on more tax cuts and didn’t directly promote earlier Obama proposals for green energy development.</p> <p>Meanwhile, the carbon age grinds on with more drilling and billing from countries who are not really our friends. Each drop of the 4 million imported barrels of oil the U.S. imports every day uncomfortably links us to many countries that have appalling human rights records that are often openly hostile to American interests.</p> <p>If anything, U.S. energy security has worsened since 9/11. With the exception of Canada, the leading U.S. oil supplier, <a href="ftp://ftp.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html" target="_blank">five out of the top six exporting countries</a> are run by repressive, hostile or unstable governments (Iraq is number six on the list). We’re financing brutal thuggery on a global scale.</p> <p>The deadly irony is our nearly complete dependence upon fossil fuels — and our many battles to protect this dependency — has cost lives. Some one in eight soldiers were killed in Iraq from 2003-2007 just <a href="http://www.renewableenergyworld.com/rea/blog/post/2011/08/measuring-our-oil-addiction-by-more-than-just-dollars-and-cents" target="_blank">protecting fuel convoys</a>.</p> <p>All told, the U.S. war on terror in two countries and elsewhere is estimated to have <a href="http://www.thefiscaltimes.com/Articles/2011/09/06/911-and-the-War-on-Terror-A-5-Trillion-Choice.aspx#page1" target="_blank">cost us $5 trillion</a>.</p> <p>The lives and the dollars lost to fossil fuel dependence are needlessly wasted. The Navy alone estimates that for every $10 hike in the price of crude, it spends <a href="http://www.reuters.com/article/2011/02/23/us-navy-energy-idUSTRE71M0PQ20110223" target="_blank">$300 million more annually in fuel costs</a>. And that’s just the Navy.</p> <p>Shouldn’t that money be going to create jobs, fund schools, clean energy research and fixing infrastructure?</p> <p>Reducing U.S. dependence upon crude (and coal for that matter) can bolster the flagging U.S. economy and trim the budget deficit. The clean technology sector surged 8 percent last year and is now <a href="http://www.usatoday.com/tech/news/2011-07-12-green-jobs-economy_n.htm" target="_blank">outpacing job creation in the oil industry</a>.</p> <p>Policymakers in Washington have known all of this for years, yet keep ignoring the inebriated folly of energy co-dependence.</p> <p>This institutional blindness leads to astounding decisions such as the U.S. State Department green lighting the <a href="http://www.tarsandsaction.org/" target="_blank">environmental soundness</a> of the <a href="http://www.huffingtonpost.com/social/para_cord/state-department-keystone-xl-oil-pipeline_n_938138_104922539.html" target="_blank">tar sands pipeline</a>.</p> <p>Since when did the State Department gain meaningful authority over environmental concerns? What’s next? Will the Energy Department gain purview over Yellowstone?</p> <p>I’d like to believe that my friends briefly sacrificed their freedom and, in the <a href="http://www.fff.org/freedom/fd0503e.asp" target="_blank">words of Henry David Thoreau</a>, refused to “resign their conscience” to show what an onerous burden dirty energy places upon the entire earth and society. They don’t want to leave behind one of the most destructive legacies of the industrial era that has become a paramount human rights issue as well.</p> <p>We must challenge our government when it ignores the collective conscience. And if two wars, street protests, massive activism and voluntary incarceration aren’t enough? Then we will have learned nothing from one of the lessons of 9/11.</p> <p><em>Photo: American actress Daryl Hannah is arrested as she joins a protest against the Keystone XL oil pipeline, outside the White House in Washington, August 30, 2011. Dozens were arrested on Tuesday in the protest against the pipeline that, if completed, will stretch from Canada to the gulf coast of the United States. REUTERS/Jason Reed</em></p> </div> </div> </div> </div> </div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-70491070772834088552011-09-07T12:22:00.000-07:002011-09-07T12:24:14.971-07:00How Wall Street is Blocking Financial Reform<div class="print-logo"><img class="print-logo" src="http://cloudfront-1.iwatchnews.org/sites/all/themes/iwatch_theme/logo.png" alt="iWatch News" id="logo" /> </div> <div class="print-site_name">Published on <em class="placeholder">iWatch News</em> (<a href="http://www.iwatchnews.org/">http://www.iwatchnews.org</a>)</div> <p> </p><div class="print-breadcrumb"><a href="http://www.iwatchnews.org/">Home</a> > Investor protections imperiled by Wall Street, GOP assault on financial reform</div> <hr class="print-hr"> <header> <hgroup> <h4 class="field field-name-field-term field-type-taxonomy-term-reference field-label-hidden"><a href="http://www.iwatchnews.org/finance/consumer-finance">Consumer Finance</a> <span class="print-footnote">[1]</span></h4> <h2 itemprop="headline"><a href="http://www.iwatchnews.org/2011/09/07/6142/investor-protections-imperiled-wall-street-gop-assault-financial-reform" itemprop="url">Investor protections imperiled by Wall Street, GOP assault on financial reform</a> <span class="print-footnote">[2]</span></h2><br /><br /><br /></hgroup> </header> <div class="field field-name-body field-type-text-with-summary field-label-hidden" itemprop="description"> <div class="field-items"> <div class="field-item"><p>It's no secret that a powerful, well-funded coalition of mega-banks, derivatives users and insurance brokers wants to see major pieces of the Wall Street financial reform law dismembered and defunded. They are partnering with mostly GOP House members to do so. </p><p>What's lost in this complex cyclone of industry lobbying, free-market ideology and campaign contributions: some of the most pro-investor protections of the law are at risk of disappearing, including safeguards that would help every American who deals with a broker, bank or insurance adviser. </p><p>Among the pro-investor measures facing an uncertain future: </p><ul><li>Requiring stock brokers and insurance agents who offer financial advice to act as “fiduciaries” and put client interests ahead of their own profits; </li><li>Creating an Office of the Investor Advocate and a new Investor Advisory Committee within the Securities and Exchange Commission. Both have been <a href="http://www.sec.gov/spotlight/dodd-frank/dates_to_be_determined.shtml">put on hold </a> <span class="print-footnote">[3]</span> for lack of funding; </li><li>Supplying all the funding mandated by the Dodd-Frank financial reform law for the new Consumer Financial Protection Bureau; </li><li>Increasing the annual funding sought by the SEC and the Commodity Futures Trading Commission to carry out their Dodd-Frank mandates. </li></ul><p>The all-out assault on the reforms began almost as soon as the law was signed in July 2010. </p><p><strong>Following the money </strong></p><p>Financial industry dollars have been pouring into congressional coffers for years and have mushroomed in the wake of the Dodd-Frank law. </p><p>While both Democrats and Republicans receive money from Wall Street, banks and insurers, several House GOP members have aggressively led efforts to dismember key provisions of the Wall Street reform law. </p><p>The House Financial Services Committee, now chaired by Republican Spencer Bachus of Alabama, has been at the forefront of trying to delay or dismantle Dodd-Frank investor rules. This was the committee that did the heavy lifting for financial reform under former chairman Barney Frank, the Massachusetts Democrat and eponymous co-author of the law passed in 2010. </p><p>Bachus has not only opposed the formation of the CFPB, he has introduced several bills to delay its start-up and replace its sole director with a five-member board answerable to a financial crisis committee of top regulators. </p><p>Bachus' frontal assault on the consumer bureau and other Dodd-Frank regulations reflects the disdain of GOP House leadership in general. Only three Republicans voted for the Dodd-Frank bill when it passed the House in a 237-192 vote on June 30, 2010. </p><p>First quarter 2011 campaign finance filings reviewed by the Sunlight Foundation showed "that seven of the 10 freshmen Republicans appointed to the House Financial Services Committee have received 40 percent or more of their political action committee (PAC) contributions from the finance, insurance, and real estate sector." </p><p>Bachus, who depends on the financial services industry for more than 80 percent of his campaign funds, framed his attack on the CFPB and other Dodd-Frank reforms in the context of government accountability and over-regulation. </p><p>“Everyone on this Committee supports robust consumer protection. But there must be real oversight and accountability of every massive government bureaucracy, and that includes the CFPB,” Bachus <a href="http://financialservices.house.gov/News/DocumentSingle.aspx?DocumentID=241225">said</a> <span class="print-footnote">[4]</span> on the passage of a trio of bills passed by the Financial Services Committee on May 13. </p><p>A coalition of consumer groups including the Consumer Federation of America and the U.S. Public Interest Research Group assailed Bachus' approach, saying that his bills "aren't about reasonable oversight of the CFPB, they are an attack on consumer protection," according to Ed Mierzwinski of US PIRG. </p><p>When financial reform was still being debated in 2009, opponents of the bill—mostly Republican—reaped an average 20 percent more in campaign contributions from the financial industry than proponents, according to the Center for Responsive Politics. </p><p>House Democrats also received plenty of money from financial interests for their re-election campaigns. </p><p>Frank, an architect of the bill, received nearly $1.3 million, the second-highest amount of any House member, from the industry. Jim Himes of Connecticut received $1.2 million. He was followed by Ron Klein of Florida and Carolyn Maloney of New York, who received about $1 million each. Topping the list with $1.7 million was Democrat Paul Kanjorski of Pennsylvania, a former House Financial Services subcommittee chairman who lost his seat in the last election. </p><p>When Republicans took over House leadership last November, they began blasting away at the Dodd-Frank law with the support of the financial services industry. Since they knew they couldn't repeal the bill outright, they cherry-picked provisions that were most costly to the industry such as fiduciary duty, derivatives reform and the CFPB. </p><p>Bachus <a href="http://www.iwatchnews.org/2010/12/15/2252/bank-lobbyists-plead-delay-derivatives-fdic-fee-rules">told</a> <span class="print-footnote">[5]</span> an Alabama newspaper weeks after the November 2010 election that his role was to "serve the banks," later clarifying his comment to say that regulators should set parameters for banks but not micromanage them. </p><p>"If they (Republicans) can get control of both houses," Frank told <em>iWatch News </em>, "they can gut this thing (Dodd-Frank). In general, [GOP attacks on Dodd-Frank] are a way to attract campaign contributions and intimidate regulators." </p><p>Bachus and his House Financial Services Committee have already passed more than a dozen bills this year aimed at killing or weakening various aspects of the reform law, but the bills have not advanced in the Democratic-controlled Senate. </p><p>The <a href="http://www.iwatchnews.org/2010/11/04/2356/spencer-bachus-financial-services-committee">top donors </a> <span class="print-footnote">[6]</span> to Bachus: Independent Community Bankers PAC, JP Morgan Chase & Co., American Financial Services Association and Capital One Financial Corp. Assn. PAC. Of the 20 top contributors to Bachus, only two—ExxonMobil and Honeywell—had no direct connection to financial services. </p><p>All told, Bachus' campaign <a href="http://sunlightfoundation.com/blog/2010/12/09/incoming-finance-committee-chairman-relies-on-finance-campaign-contributions/">took in </a> <span class="print-footnote">[7]</span> at least $1.23 million from the finance, insurance and real estate sector, more than half of the $1.97 million he raised in the 2010 election cycle, according to Sunlight Foundation. </p><p>Financial lobbies have been particularly generous to those on the House Financial Services’ capital markets subcommittee, which has jurisdiction over the SEC, exchanges, capital markets and government-sponsored housing enterprises like Fannie Mae and Freddie Mac. </p><p>The subcommittee’s chairman, Republican Scott Garrett of New Jersey, opposes expanding the fiduciary standard. Garrett and 13 of GOP colleagues sent a letter on March 17 to the SEC, saying the agency "has not identified and defined clear problems that </p><p>would justify a [fiduciary duty] rulemaking and does not have a solid basis upon which to move forward." Lawmakers said they shared the concerns of the SEC’s two Republican commissioners, who <a href="http://www.sec.gov/news/speech/2011/spch012211klctap.htm">said</a> <span class="print-footnote">[8]</span> the agency’s fiduciary study “fails to adequately justify its recommendation that the Commission embark on fundamentally changing the regulatory regime for broker-dealers and investment advisers." </p><p>Garrett also demanded a "thorough cost-benefit analysis" of any fiduciary rule that the SEC might propose. Soon after receiving the letter, the SEC chairman announced the rule was put on hold for further study. </p><p>Like Bachus, Garrett's campaign was flush with financial services money. Throughout Garrett’s political career, his single-largest contributor by industry came from the finance, insurance, real estate and securities sector, which <a href="http://www.opensecrets.org/politicians/summary.php?cid=N00000743">accounted</a> <span class="print-footnote">[9]</span> for $1.8 million of the career total $5.2 million raised. </p><p>To be sure, the party in power generally receives more money from special interests, especially when new regulations surface. </p><p>According to Opensecrets.org, "The average member of the Financial Services Committee received about 75 percent more money in the last election cycle from industries under their jurisdiction than the average member of Congress." That included more than $3 million from the American Bankers Association, $1.7 million from JP Morgan Chase, $1.6 million from Bank of America and $1.3 million from Wells Fargo. </p><p>By imposing restrictions and curtailing funds for the key agencies responsible for protecting investors, House Republicans have put regulators on notice that they will be gunning for them. And if Republicans take control of the Senate in 2012, Dodd-Frank may be mortally wounded. </p><p>Investors who lost money from commission-oriented broker advice will continue to get hurt or be sold risky investments they don’t need without tougher watchdogs, according to consumer advocates. </p><p>"There absolutely needs to be fiduciary duty," says Robert Talbot, a University of San Francisco law professor who has represented hundreds of broker-fleeced investors. "People are completely trusting." </p><p><strong>Attack on SEC funding, fiduciary rule </strong></p><p>SEC Chairman Mary Schapiro, a champion of the Dodd-Frank reforms, has faced an onslaught from House and Senate Republicans. GOP members of the House Financial Services Committee want to cut the SEC’s funding and staffing, which would make it difficult for the agency to put in force the major safeguards mandated by the Dodd-Frank law, such as the Office of the Investor Advocate and better policing of investment advisers. </p><p>Republicans also want to neuter the power of the new consumer protection agency, <a href="http://financialservices.house.gov/News/DocumentSingle.aspx?DocumentID=241225">complaining</a> <span class="print-footnote">[4]</span> that the CFPB should not be led by a single director as the agency is now structured. </p><p>Not only is the alliance of GOP lawmakers and the financial services industry seeking to cut funding for the SEC, it wants to shelve a stricter fiduciary rule for brokers. Under pressure from a group of House Republicans and GOP members of the Senate Banking Committee, Schapiro has delayed the rulemaking for the fiduciary rulemaking. The SEC has already received more than 400 <a href="http://www.sec.gov/comments/4-606/4-606.shtml">emails</a> <span class="print-footnote">[10]</span> from industry groups as well as small investors in response to its January study. </p><p>One of the biggest supporters of expanding the fiduciary rule, the AARP, plans to do its own research to gauge the financial impact of the proposed rule, said Mary Wallace, senior legislative representative of the group that represents Americans over 50. Amid attempts to weaken or dismantle the Dodd-Frank law, Wallace says it's essential that the fiduciary rule survive so that investors will "be guaranteed that the products they are being sold are the best for the client's needs." </p><p>Schapiro recently told <em>iWatch News </em> that the agency has placed a higher priority on other rules for the time being. The reform law requires the SEC to write some 100 new rules, create five new offices and produce more than 20 reports. The SEC <a href="http://www.sec.gov/news/testimony/2011/ts050411mls.htm">plans</a> <span class="print-footnote">[11]</span> further economic analysis of the fiduciary issue, and hopes to propose a fiduciary rule in the second half of this year, Schapiro said in May. </p><p>Even with its new powers under the Dodd-Frank law, the agency acknowledges that it will be difficult to police such a large and powerful industry. </p><p>The investor protection agency was crippled during the Bush administration as the SEC budget was reduced or frozen from 2005 to 2007 – just as Wall Street was selling securitized products that later proved to be toxic for investors and the financial system. Only recently has the agency returned to staffing levels of fiscal year 2005, Schapiro says. </p><p>In the interim, the SEC saw trading volume double, a 50 percent jump in the number of investment advisers, and investor assets grow to $38 trillion. </p><p>Six years ago, about 19 SEC examiners were available for every $1 trillion invested; now the ratio is 12 examiners per trillion, Schapiro said. Investor protection advocates are troubled by the fact that assets under management have ballooned while the number of watchdogs has dropped. </p><p>The agency requested $1.4 billion for fiscal 2012, an amount it says would be covered by the fines and other revenue the SEC generates. That's an increase of $222 million over the previous year, and would pay for 780 new jobs to carry out Dodd-Frank. House and Senate Republicans would like to cut the agency's funding. </p><p>"Insufficient funding for the SEC means fewer cops on the beat," Schapiro said in an April 8 speech, "even though fraudsters show no sign of backing off." </p><p><strong>Industry defends status quo </strong></p><p>Main Street investors have to look deep into the back story of the fiduciary rule to understand why it's attracted the enmity of financial advisers, brokers and insurance agents. The fiduciary rule would upend current business models used by brokers and insurance agents. It would cost brokerages, insurers and banks millions of dollars to retrain their brokers as fiduciaries, add in-house compliance practices and register with states or the SEC as investment advisers. </p><p>How much would it cost the industry? </p><p>Spokesmen with Securities Industry and Financial Markets Association (SIFMA), the National Association of Insurance and Financial Advisors (NAIFA) and the Independent Insurance Agents and Brokers of America did not respond to <em>iWatch News’ </em></p><p> repeated requests to comment on the issue. </p><p>Registered investment advisers, certified financial planners and many financial advisers already work in a fiduciary capacity with clients. And so do many lawyers and accountants who provide financial advice. </p><p>A coalition of fiduciary advisers has long supported and lobbied for the SEC rule. Their business model is simple: the client comes first. Brokers typically adhere to a much-weaker standard that simply says they must choose financial products that are "suitable" for clients – a definition allowing them to sell products with lucrative fees and commissions. </p><p>Another big difference: If an investor is wronged by an investment adviser, the investor can sue in court. But non-fiduciary brokers and insurance adviser/agents usually require customers to take any disputes to an arbitration forum run by the securities industry self-regulator, FINRA. </p><p>To challenge a broker’s behavior, a small investor must pay fees and appear before a three-member arbitration panel run by the industry with at least one of the arbitrators representing the brokerage industry. And as an investor, the odds are not in your favor, says Louis Straney, a securities arbitration consultant based in Santa Fe, N.M. </p><p>At present, the number of fiduciary advisers is small, so any imposition of a fiduciary rule on broker-dealers and other commissioned financial sales representatives would have broad impact and help the majority of American investors, according to investor advocates. </p><p>There are less than 12,000 registered investment advisers policed by the states and SEC, and even fewer certified financial planners. But the securities industry is represented by more than 600,000 brokers and 400,000 insurance agents, many of whom are cross-licensed to sell securities and commissioned variable annuities, which regulators frequently cite as sources of marketing abuses—particularly to older investors. </p><p>SIFMA, the main industry group representing securities brokers, stated earlier this year it supports "a uniform fiduciary standard of care for broker-dealers, investment advisers…yet remains concerned about the possible effects on broker-dealers' ability to serve customers as this approach is developed.” </p><p>While appearing to support the concept of fiduciary duty, SIFMA has also claimed that its customers would pay more if they were subject to fees instead of commission. A SIFMA-paid study said an investor with $200,000 in assets would pay $460 more annually in additional expenses with fee-based advisers versus commission-based brokers. </p><p>NAIFA, a group representing 200,000 insurance agent/advisers, also says that small investors would be hurt. A NAIFA survey of more than 3,000 members found that imposing a fiduciary duty would force many to "discontinue providing some services to middle-market clients," the group said. </p><p>“Clients aren’t concerned about whatever standard of care might be imposed by regulators or legislators,” NAIFA President Terry Headley said in a recent <a href="http://www.naifa.org/newsevents/releases/2011712_riskprotection.cfm">statement</a> <span class="print-footnote">[12]</span>. “An imposed universal fiduciary standard that increases costs and eliminates the ability of investors to choose how, and from whom, they receive financial products, advice and services would not be in the best interests of consumers.” </p><p>Barbara Roper, who has championed fiduciary duty for years on behalf of the Consumer Federation of America, has asked House Republicans to drop their opposition. </p><p>"The SEC has proposed a way to move forward on fiduciary duty that maximizes investor protections while minimizing industry disruption," Roper said in a May 9 letter to lawmakers. "It would be tragic if opposition from a few industry members intent on maintaining the status quo were able to derail that progress." </p><p>However, FINRA arbitration <a href="http://www.finra.org/ArbitrationMediation/AboutFINRADR/Statistics/">statistics</a> <span class="print-footnote">[13]</span> indicate growing discontent with non-fiduciary brokers and advisers. The number of investors’ claims citing "misrepresentation, omission of facts, unsuitability, negligence, failure to supervise and misrepresentation" doubled in 2009 over the previous year, according to FINRA data. The single-largest problem category was "breach of fiduciary duty." </p><p>The human toll </p><p>With the 2010 passage of financial reform, there was some hope that investors would gain more robust protection from inappropriate investments. Some $114 billion has been directly lost by investors since 2008 in high-risky, broker-sold products such as auction-rate securities, principal-protected notes and sham securities, according to a study <a href="http://bit.ly/ionRLi">published</a> <span class="print-footnote">[14]</span> by the nonprofit Nation Institute. </p><p>Linda Soltis, 63, could have used one of the reform law's intended investor shields when she was approached by a broker working inside a Washington Mutual Bank. After inheriting some money from her brother in 2007, the retired San Francisco teacher was hoping to buy a condo in one of the most expensive real estate markets in the country. </p><p>Despite making clear that her goal was to keep her money insulated from market volatility, the bank broker invested the money in risky and inappropriate mutual funds that earned him a healthy commission. When the Wall Street meltdown occurred in late 2008, Soltis was told by her broker that she had lost more than $46,000—a large part of her life savings. </p><p>After contacting several lawyers, her case against the broker was taken up by the Investor Justice Clinic at the University of San Francisco law school, which was able to recover more than $43,000 in an arbitration award against the bank, JP Morgan Chase & Co., which bought Washington Mutual in 2008 after it failed. </p><p>"Something about being in a bank made me trust him," Soltis says of the broker. "I thought he represented me and cared about my account. Then it came out in arbitration that his job was sales. I wasn't able to buy the condo when the money was lost." </p><p>Soltis is one of many investors who have been confused by brokers who work in banks, major wealth management firms or insurance agencies. </p><p>She could have been protected if the bank broker was required to act as a “fiduciary <em>,”</em> a legal definition that means placing the client’s financial interests first. Investment advisers are already held to this legal standard when recommending where clients should put their money. But many less-sophisticated investors are unaware of the difference between brokers and investment advisers. </p><p>The Dodd-Frank law created a Consumer Financial Protection Bureau (CFPB) and an SEC Office of the Investor Advocate, both designed to protect bank customers and </p><p>small investors with a new arsenal of police. It also ordered the SEC to study a fiduciary duty for brokers. </p><p>The SEC <a href="http://www.sec.gov/news/studies/2011/913studyfinal.pdf">produced</a> <span class="print-footnote">[15]</span> a report in January that said that the fiduciary standard should apply to anyone giving financial advice. The agency planned to begin writing a rule to that effect until it ran into pressure from Republican lawmakers and financial services industry lobbyists. </p><p><em>John F. Wasik is </em><a href="http://www.johnwasik.com/"><em>author</em></a> <span class="print-footnote">[16]</span><em> of ``The Cul-de-Sac Syndrome'' and 12 other books, and is a Reuters columnist. </em></p><p> </p></div> </div> </div><div class="field field-name-field-deck field-type-text-long field-label-hidden"><div class="field-items"><div class="field-item even">SEC has yet to move on rules that would hold brokers, insurance agents to stricter “fiduciary” duty to clients</div></div></div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com1tag:blogger.com,1999:blog-307246258834168852.post-44228858685758103842011-09-05T08:20:00.000-07:002011-09-05T08:21:18.188-07:00How to Create Jobs with JusticeBy John F. Wasik (Reuters)<br /><br /><br /><div class="topStoryBlogs"> <h2><a href="http://blogs.reuters.com/reuters-money/2011/09/02/where-is-the-real-u-s-jobs-plan/">Where is the real U.S. jobs plan?</a></h2> <div class="contributor" style="float: left; margin-right: 8px;"> <a href="http://blogs.reuters.com/john-wasik/"><img src="http://blogs.reuters.com/john-wasik/wp-content/profile-images/upe_ms_2263-profile-image.jpg" alt="" border="0" /></a> </div> <div class="author"><br /></div><br /><div class="postcontent"><p><a href="http://blogs.reuters.com/reuters-money/files/2011/09/jobs.jpg"><img class="size-medium wp-image-19254 alignleft" title="A man carrying a stack of job listings listens to a discussion at the One Stop employment center in San Francisco, California, August 12, 2009. REUTERS/Robert Galbraith " src="http://blogs.reuters.com/reuters-money/files/2011/09/jobs-300x193.jpg" alt="" width="300" height="193" /></a>Jobs, justice and peace. Have three themes ever been so intimately intertwined since Dr. Martin Luther King, Jr., championed this <a href="http://thehill.com/blogs/congress-blog/civil-rights/178119-remembering-dr-kings-dream-of-jobs-justice-and-peace%29">tri-partite campaign</a> in his 1967 March on Washington?</p> <p>Unemployment is ravaging the country, especially <a href="http://www.bls.gov/news.release/empsit.t02.htm">among urban minorities.</a> Yet Congress has yet to put forward a comprehensive jobs plan to create employment. We’re still fighting two wars and garrisoning troops in Europe and Japan as the jobless rate soars at home. Debt reduction is still a priority over job creation.</p> <p>The current economic downturn has put the brakes on economic progress for most of the American working class. They shared in widespread growth during the 1990s, but have been falling behind during the latest recession.</p> <p>The pain has been uneven and most punishing in the inner city and among the young. For white men and women, the jobless rate for those 20 years and older was around 8 percent as of July. For white teenagers (age 16 to 19), the rate was 23 percent.</p> <p>Unemployment for African-American adults is twice as high as white adults at 16 percent. For African-American teenagers, the rate soars to nearly 40 percent.</p> <p>Much of the reason that decent-paying jobs have evaporated is that inner cities and suburbs have been de-populated and businesses have left — many of them to wealthy suburbs or overseas. Unionized industrial jobs have also fled.</p> <p>There’s been great progress made since the end of World War II to create a broad base of high-paying jobs, although the bulk of those positions were in unionized manufacturing companies, nearly all of which have cut back, shut down or outsourced. High-wage jobs left urban manufacturing districts to be replaced by low-wage service jobs or occupational deserts.</p> <p>There is a pernicious poverty in places where there’s no job growth and few opportunities. Go to any old industrial city like Chicago, Cleveland or Detroit to see what an occupational desert looks like.</p> <p>Where once there were large plants employing thousands of workers, there are now empty lots. South Chicago and Chicago Heights, where I first started my journalism career, used to be thriving places, employing tens of thousands.</p> <p>Men I knew like <a href="http://books.google.com/books/about/Always_bring_a_crowd.html?id=c0H7FGUv8D0C">Frank Lumpkin</a> came up from the Jim Crow south to northern cities like Chicago to land decent-paying jobs and to raise families. The mill in which he toiled shut down 30 years ago. Nothing has replaced it. Ironically, one abandoned Chicago steel mill site became a temporary venue for a recent Dave Matthews concert.</p> <p>Being stuck in low-paying jobs is a social curse. It’s a sign that upward mobility hasn’t been extended to everyone. What’s to blame? Is it the failure of our educational system? Congress? State governments? Overpaying CEOs and Wall Street traders?</p> <p>Instead of blasting the usual suspects, let’s take a hard look at our educational system. Somehow public schools aren’t guiding graduates to the right kinds of skills needed for lucrative, in-demand jobs such as biomedical engineers, network analysts, financial examiners, biophysicists and biochemists.</p> <p>The top-paying jobs require extensive training and higher education. Almost half of the very high-paying occupations forecast to grow the most by the <a href="http://www.bls.gov/emp/ep_table_103.htm">U.S. Department of Labor require college</a>.</p> <p>One-third of those fast-growing job categories require little training and are categorized as low or very-low paying: Home health aides, skin-care specialists, physical therapist aides, veterinary technicians, dental/medical assistants and fitness trainers. But these new service jobs often fall short because they won’t guarantee new workers living wages.</p> <p>Not all of the current jobless situation can be attributed to a mismatch between needed skills and openings, though.</p> <p>The “underemployment rate” — those who had to take part-time work because they couldn’t find full-time positions — more than doubled from 2007 through March, 2011, among those with bachelor’s degrees, reported the <a href="http://www.epi.org/economic_snapshots/entry/lack_of_jobs_not_lack_of_skills_explains_underemployment_rate/">Economic Policy Institute</a>, a think tank affiliated with organized labor.</p> <p>“The fact that the economy’s best-educated workers have seen a more than doubling in their underemployment rate is just one of many pieces of evidence suggesting that the anemic recovery reflects a general lack of job growth rather than a deficit of skills or education among its workers,” the Institute stated.</p> <p>Cutting more government programs will only create more unemployment. Any <a href="http://www.commondreams.org/video/2011/08/15">job stimulus plan</a> has to marry training and education not only with present needs, but the job market of the future. How to best accomplish this?</p> <p>We have diseases to cure, rebuilding to do and energy needs to meet. An <a href="http://thehill.com/blogs/transportation-report/highways-bridges-and-roads/170681-obama-pushes-for-infrastructure-bank-proposal-after-debt-deal">infrastructure bank i</a>s a start.</p> <p>A sustained national program to create clean energy technologies, a new generation of long-term storage batteries, biomedical research and modernizing the electrical grid is another approach. Despite these immediate needs, Washington is helping the wrong people.</p> <p>As Princeton professor Cornel West wrote in a recent <a href="http://www.nytimes.com/2011/08/26/opinion/martin-luther-king-jr-would-want-a-revolution-not-a-memorial.html">New York Times piece</a>, referring to Washington’s side-stepping of Dr. King’s prophetic legacy:</p> <p>“Instead of articulating a radical democratic vision and fighting for homeowners, workers and poor people in the form of mortgage relief, jobs and investment in education, infrastructure and housing, the administration gave us bailouts for banks, record profits for Wall Street and giant budget cuts on the backs of the vulnerable.”</p> <p>If job opportunities don’t materialize on a mass scale, it won’t matter how much government spending is cut. Government assistance will then have to expand to accommodate a burgeoning, restive underclass.</p> <p>Leadership from everyone in the political spectrum is lacking and most acutely from the Congress and White House. Washington needs to reconnect to the need to champion universal civil and economic justice.</p> <p>Or, as <a href="http://mlk-kpp01.stanford.edu/index.php/encyclopedia/documentsentry/where_do_we_go_from_here_delivered_at_the_11th_annual_sclc_convention/">Dr. King </a>so eloquently put it, “Let us be dissatisfied until the tragic walls that separate the outer city of wealth and comfort from the inner city of poverty and despair shall be crushed by the battering rams of the forces of justice.”</p> </div> </div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com2tag:blogger.com,1999:blog-307246258834168852.post-62292157053865478692011-08-30T06:14:00.001-07:002011-08-30T06:15:34.450-07:00Why You Can't Beat the Stock Market Through Active TradingBy John F. Wasik (Reuters)
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<br />The days of you trying to make a buck actively trading in the stock market are over.
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<br />Individuals don’t stand a chance anymore because they are largely competing against rational machines often guided by herd-like irrational forces. The robots can rule in the blink of an eye.
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<br />I’m not spouting lines from an Isaac Asimov novel, but citing reality. The machines and people who program and profit from them have won — for now.
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<br />I knew it was over for human traders when I heard that high-frequency trading firms were hooking up their data lines directly to exchange computers to gain an extra hundredth of a second in execution time.
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<br />High-speed programs are designed to move millions of shares in a fraction of a second to take advantage of small movements in securities prices. These algorithms are ideal Wall Street workers. They don’t need health insurance and you don’t have to pay them bonuses to help finance their Lamborghinis or homes in the Hamptons.
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<br />There’s no way to beat the machines, unless of course, you have a faster machine, better programs or the ability to predict the future. Your odds are better in Vegas, which never had great odds for a palooka pulling a one-armed bandit.
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<br />Who are you trading against when you take on the machines? Any entity from a boutique investment firm with a handful of “quants” — math majors who flocked to Wall Street for the big bucks — to a mega-bank or hedge fund. Some 60 percent of the volume of the New York Stock Exchange is attributed to high-speed trading, maybe more.
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<br />Although many market observers blamed machine traders for a flash crash last year, regulators have done little to slow down these speed demons.
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<br />Machine traders don’t even need a human analyst to pull the trigger on trades based on the day’s news or price changes. Who watches CNBC any more in these firms? They don’t have to: Machine-readable feeds from all of the news services and exchanges go right into their computers and trading decisions happen without much direct human intervention.
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<br />The trading floor is becoming as relevant as the telegraph system.
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<br />That’s why will see even more flash crashes and huge price swings called “mini-flash crashes.”
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<br />The only perennial truth about the stock market is that it will remain volatile and virtually unpredictable because it’s based on the mass actions of millions of people. It’s like trying to predict the direction of a giant school of dumb fish.
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<br />Every day, even more money is chasing potential price swings at the speed of light all over the world. The more traders adopt these systems, the greater the chaos.
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<br />There are, of course, various ways of protecting your money from the market madness. Crafting a low-risk, long-term portfolio allocation of stocks, bonds and alternatives for your age, lifestyle and risk profile is one way.
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<br />For long-term stock investors, you’ll be better off in exchange-traded funds like the Vanguard High-Dividend Yield fund or the SPDR S&P Dividend fund. Both offer a portfolio of high-dividend paying stocks.
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<br />You can also create a high-dividend portfolio of your own, but you’d need to diversify across at least a dozen industries to buffer sector risk.
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<br />Dividends generally aren’t impacted by high-speed trading. If a company has sufficient earnings, they cut you a check every quarter. Once you create your portfolio (with individual stocks), you’d enroll in dividend-reinvestment programs to buy new shares on a regular basis on a dollar-cost averaging basis. That would ensure you wouldn’t be buying in at the market peak. The majority of these programs allow you to buy new shares commission-free.
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<br />Don’t even try to time the purchase of your stocks, because Washington will do nothing to protect you against huge market swings.
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<br />Wall Street is spreading plenty of money around in lobbying efforts to make sure that their trading desks don’t get regulated in any meaningful way. Sated with financial services industry contributions, House Republicans have already spent most of the year trying to kill Dodd-Frank financial reforms, so high-speed trading isn’t even near the top of their agenda.
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<br />So my advice couldn’t be more succinct. The best way to beat the machines is pretty simple: Don’t even play them. Game over.<div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com1tag:blogger.com,1999:blog-307246258834168852.post-11982118876085083722011-08-12T14:51:00.000-07:002011-08-12T14:52:07.750-07:00Tea Party UnpatriotismThe Tea Party’s “blue deal” for America
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<br />By John F. Wasik
<br />Reuters
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<br />Imagine being elected to government even though you’re openly hostile to it.
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<br />Such is the perverse arrangement the Tea Party has with the electorate, which is foisting a “Blue Deal” on Americans. As opposed to a “New” deal or even “Square” deal, the Blue Deal and its prolonged pain will hurt most middle-class Americans through higher costs in retirement, health care and public health.
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<br />Tea Party affiliates’ nonchalant posturing on the potential debt default influenced the Standard and Poor’s decision to downgrade U.S. debt and the ensuing turmoil.
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<br />Now that the Congressional super-committee has been named to begin
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<br />cutting more government spending — and hopefully raising revenues — it’s time to craft a balanced agenda that will preserve social programs while cutting government waste.
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<br />The Tea Party’s brash intrusion into U.S. politics was a needed wake-up call, although the movement will be more destructive than productive if it doesn’t create a tide that lifts all boats. Here are the major stumbling blocks that need to be addressed head-on by the committee:
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<br /> Being the World’s Cop. If Congress is truly interested in the kind of debt reduction the ratings agencies and markets will take seriously, it has to end its role as gendarme to the world’s hotspots. Rep. Barney Frank (D-Mass.) said as much on Tuesday in a National Public Radio interview in which he was cut off before he had a chance to fully explain why. Frank said overspending on needless military expenses is one reason U.S. debt was downgraded by Standard & Poor’s. Nobel Prize winning economist Joseph Stiglitz estimated in 2008 that the Iraq and Afghan wars will cost the U.S. at least $3 trillion — double the cost of the Korean War and outpacing the 12-year Viet Nam war. Pull out of these countries and reduce spending on forces in Europe and Asia and Congress will not have to touch social programs.
<br /> Deregulation Will Cost Money and Lives. The epic dismantling of government regulation by conservative GOP members is going to result in more deaths and higher costs for everyone. Ralph Nader, who knows more than anyone how consumer regulation works, noted that at least 150 million workers will be adversely impacted by cuts in workplace safety and health regulation. There’s more: ”There are 307 million eaters in America,” Nader states. “More than 7,000 of them die from contaminated food and more than 300,000 are hospitalized each year. The Tea Partiers pushed cuts through the House to the already underfunded FDA food safety programs.” Add to that the assault on investor protection, unions, bank regulation and environmental protection, and it’s difficult not to conclude that the Tea Party’s unrelenting hostility toward government watchdogs will largely hurt the populace.
<br /> Tax Expenditures Cost the Treasury Billions. Tax breaks such as mortgage interest and health insurance deductions take away up to $1 trillion from the Treasury every year and do nothing to promote affordable housing or health care. Conservative economist Martin Feldstein at the Bureau of Economic Research proposes capping all personal write-offs at 2 percent of annual gross adjusted income. He estimates that would raise annual tax revenue by $278 billion annually. Isn’t this a tax increase? While those making $500,000 a year would likely pay $40,000 more in taxes, taxpayers in the $25,000 to $50,000 range would pay only $1,000. The theme here is restoring progressivity to the tax code instead of raising rates. The wealthiest taxpayers don’t get to lard up on breaks that most of the middle class won’t benefit from. In any discussion about taxes, the Tea Party needs to recognize that fairness in the tax code can partially eliminate the cuts in education and health care. Needless corporate breaks that don’t create any jobs and rob the Treasury should also be on the chopping block.
<br /> Rebuild the American Dream. A new social contract is needed. A mindless slashing of every government program isn’t the answer. Social Security and Medicare are enormously successful social programs that have kept millions out of poverty. When you cut benefits, the math is simple: It will increase costs for the retired. If anything, these programs should be expanded to cover more people. Government should be in the business of saving money on hospital stays, medicine and retirement fund management. Social programs should be part of a separate discussion that doesn’t demonize them and implements meaningful cost controls reached by a consensus of Americans. Another dialogue should begin on how to create jobs and involve the private sector, which is sitting on more than $3.6 trillion in cash. Activities that are harmful to society — such as pollution, junk food, smoking, gambling, alcohol and trading speculation — should be heavily taxed. Use the revenue to create 21st Century jobs that pay a living wage and fund public education and clean energy.
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<br />Compromise and social progress need to have a seat at the table. The alternative: Chaos, economic despair, social unrest and a lower standard of living. We need only look to the streets of England or the Arab world to see how gross social inequity eventually translates into anarchy.
<br /><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-41033073111043270962011-08-06T21:12:00.000-07:002011-08-06T21:13:14.937-07:00iBank: The Time is RightBy John Wasik<br /><br />We have iPhones, iPods and iPads. Why not an “iBank?”<br /><br />This wouldn’t be an electronic gizmo that’s obsolete in a year, though. It would be a public-private partnership to bolster America’s infrastructure. It will create jobs, cut the deficit and repair what needs to be fixed all over the country.<br /><br />An infrastructure bank, or iBank, solves a lot of problems without busting the budget. Instead of providing direct government grants or earmarks for specific projects, loans are made by a government-banking entity.<br /><br />The U.S. is inexcusably late to the game on this time-tested idea. The European Investment Bank has financed some $350 billion in projects from 2005 through 2009. China spent 9 percent of its gross domestic product — also roughly $350 billion — to build subways, highways and high-speed rail in 2009 alone. Brazil invested $240 billion over the past three years.<br /><br />The idea is not without high-level support. President Obama recently called for the creation of an iBank. In backing a U.S. iBank, Senator John Kerry of Massachusetts testified last year that “a national infrastructure bank will make Americans builders again.”<br /><br />If the iBank became reality — and really it’s a necessity to compete in a globalized economy — there’s no shortage of projects. According to the American Society of Civil Engineers, more than $2 trillion is needed to fix U.S. bridges, dams, waterways and wastewater plants.<br /><br />The sheer scale of a big fix is staggering: Some 69,000 bridges need to be repaired. The outdated electrical grid needs to be modernized everywhere. You can build solar plants and windmills all you want, but if you have no power lines to transport the electrons from the deserts and plains, you’re whistling in the wind.<br /><br />Several spin-offs of an iBank have been floating around for years, and the idea already has support across the political spectrum. A “Clean Energy Bank” would fund solar energy equipment. Sen. Bernie Sanders of Vermont, supports legislation that would install 10 million roof solar panels. Sen. Mark Kirk of Illinois proposed a “Lincoln Legacy” infrastructure bill.<br /><br />How is the iBank different from just handing out the money to each Congressional district and letting the local representative decide where the money should go?<br /><br />In Kerry’s vision, federal dollars would be matched with private dollars from pension funds and endowments. Kerry told the Time’s Joe Klein recently that “a $10 billion federal contribution will leverage about $640 billion in private investments.” Kerry claims he has support from business, labor and Republican Senators.<br /><br />Instead of doling out pork-barrel funding for bridges to nowhere, an independent board would decide which projects are needed most. It’s the inverse of a military base closing commission. Instead of shutting down facilities, this entity would greenlight and finance the most-worthy projects.<br /><br />One thing an iBank wouldn’t be is another big-check stimulus plan, which Congress passed in 2009. That nearly $800 billion package was a huge fiscal band-aid to help states, school districts and wage earners through the recession. Yes, there were some public works projects that created short-term jobs, but the bulk of the money went to tax relief and the states.<br /><br />The U.S. needs a new approach to economic triage. The June jobs report was nothing short of dismal as employment growth hit a wall with only 18,000 new jobs coming on the market.<br /><br />Crumbling infrastructure will cost the U.S. economy nearly 1 million jobs and shave $3.1 trillion from gross domestic product by 2020, the Society of Civil Engineers estimates.<br /><br />What about the budget? Isn’t there a disconnect between the current passion for cutting the federal deficit and spending money to fix America?<br /><br />There’s little question that putting people to work will help the economy. Working people pay income, sales and property taxes, which flow back into communities. The steadily employed buy homes, vehicles and appliances. Increased tax revenue in turn reduces the deficit.<br /><br />The iBank may be able to accomplish what a decade of personal income and estate-tax cuts didn’t: Provide the necessary public-private capital to revive the economy. Not even Harry Potter can make magic work on the U.S. economy without some significant infrastructure investment.<div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-56643884272079281932011-07-29T15:28:00.000-07:002011-07-29T15:30:09.630-07:00Payback Time for BanksBy John F. Wasik (Reuters)<br /><br /><h2>It’s time for banks to pay back their debt to the rest of us</h2>The deficit dance has been a convenient distraction for big U.S. banks. They’ve not only escaped new taxes for now, but they also are relishing their taxpayer bailout by earning robust profits.<div id="postcontent"> <p>Except for Bank of America, the major U.S. banks are doing just fine, thank you. Yet for all of the abundant generosity and forgiveness of the American people, have banks lent out enough money to Americans to make a difference to the economy at large?</p> <p>No. Banks are lending less to consumers than they did in 2007, the year before the full-blown financial meltdown, according to <a href="http://www.federalreserve.gov/releases/g19/Current/">recent Federal Reserve Consumer Credit tallies</a>.</p> <p>Outstanding consumer credit was $2.5 trillion in 2007 compared to $2.4 trillion through May of this year. Revolving credit was down fivemo percent in the first quarter of this year. Total consumer lending was down about $100 billion in 2010 and 2009 alone from 2007 levels.</p> <p>The net effect was less money flowing to consumers, who are the engine of the U.S. economy. Even if you wanted to build that addition to your home or buy a foreclosed home, good luck getting a large loan from a bank — unless you have perfect credit ratings.</p> <p>Banks’ bowstring-tight standards for mortgages and home-equity loans triggered the lending squeeze. The Fed’s July 13 <a href="http://www.federalreserve.gov/monetarypolicy/mpr_20110713_part2.htm">Monetary Policy</a> report told the story:</p> <blockquote><p>“Mortgage originations trailed off with the end of the refinancing wave that occurred last fall, when interest rates declined … Bank lending through home equity lines also remained extraordinarily weak, reflecting in part tight lending standards amid declines in home prices that cut further into home equity. Both credit card and other consumer loans from banks contracted, on balance, over the first half of the year.”</p></blockquote> <p>For taxpayers, the bailout begun in 2008 worked as a mega-banking stimulus unrivaled in history. The largest banks were saved and became bigger. Their trading profits and brokerage operations were protected. Then they were able to pour their taxpayer-enabled profits into lobbying against the needed financial reforms of the Dodd-Frank law. Undaunted, banks are still free to lend out money to credit card holders for <a href="http://www.bankrate.com/funnel/credit-cards/credit-card-results.aspx">14 percent or more</a>.</p> <p>In the economy at large, though, layoffs continue, the housing market is still in intensive care and the Federal Reserve’s stimulus plan is a bust.</p> <p>Despite their soaring profits, megabanks still owe U.S. taxpayers money from the bailout. A new study of released by the <a href="http://www.prwatch.org/news/35270">Center for Media and Democracy</a> shows that $1.5 trillion of the $4.8 trillion in federal bailout loans are still outstanding.</p> <p>An even bigger boondoggle is the government’s effective nationalization of the U.S. home mortgage market. Through the purchase of mortgage backed securities and debt from government-seized Fannie Mae and Freddie Mac, the Fed has supported the moribund housing market.</p> <p>The Obama Administration has yet to put forward a plan to resolve its ownership and continued funding of Fannie and Freddie, two fiscal black holes. Meanwhile, homeowners are still getting foreclosed upon with no end in sight.</p> <p>“The Federal Reserve and the Treasury have spent $1.6 trillion in a bank-shot to save the housing market by using the same financial companies that got us into this mess,” said Conor Kenny, lead author of the Center study. “That’s more than 800 times what they’ve spent directly to keep homeowners in their houses, and the banks have only made money off the whole thing.”</p> <p>For American taxpayers, the social return on the bailout has been dismal. Bank foreclosures have <a href="http://www.reuters.com/article/2011/07/14/us-usa-economy-realtytrac-idUSTRE76D0GN20110714">resumed their rise</a>. So-called “robo-signing” abuses in home purchases where mortgages are fudged to the benefit of banks <a href="http://www.reuters.com/article/2011/07/19/us-foreclosure-banks-idUSTRE76H5XX20110719">also continu</a><a href="http://www.reuters.com/article/2011/07/19/us-foreclosure-banks-idUSTRE76H5XX20110719">e</a>. And jobless claims are <a href="http://www.reuters.com/article/2011/07/21/us-usa-economy-jobless-claims-idUSTRE76K30620110721">rising</a>.</p> <p>It’s time for banks to pay back their debt in a profound way. Yet first, an attitude adjustment is in order: Financial speculation in bank profits should be taxed to pay for education and health care. This trading tax will also reduce the federal deficit over time.</p> <p>A <a href="http://robinhoodtax.org/">“Robin Hood” tax</a> like this would even the social capitalism balance sheet. Such a plan is afoot in the U.K. and it should be on the table in any larger discussion</p> <p> </p> </div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-18827070131208236322011-07-22T15:46:00.000-07:002011-07-22T15:47:53.609-07:00Debt Ceiling Sellout<div class="module" id="post-17280"> <div class="moduleBody"> <div class=""> <div class="columnRight grid8" id="single"> <h2>3 more gloomy bargains: How much the debt deal will cost you</h2> <div class="timestamp">By John F. Wasik (Reuters)<br /></div> <div class="articletools"><ul id="sharetools"><li style="display: inline;vertical-align:top; padding-top: 2px;" class="share"><span style="padding-top: 2px;vertical-align:top; display:inline-block;"><span class="IN-widget" style="line-height: 1; vertical-align: baseline; display: inline-block; text-align: center;"><span style="padding: 0pt ! important; margin: 0pt ! important; text-indent: 0pt ! important; display: inline-block ! important; vertical-align: baseline ! important; font-size: 1px ! important;"><span id="li_ui_li_gen_1311374530659_0"><a id="li_ui_li_gen_1311374530659_0-link"><span id="li_ui_li_gen_1311374530659_0-logo"></span><span id="li_ui_li_gen_1311374530659_0-title"><span id="li_ui_li_gen_1311374530659_0-mark"></span><span id="li_ui_li_gen_1311374530659_0-title-text">are</span></span></a></span></span></span></span></li><li style="display: inline;vertical-align:top;" class="share "><img src="http://blogs.reuters.com/reuters-money/wp-content/themes/reuters-default/images/vdots.gif" class="textmiddle" /></li><li style="display:inline;vertical-align:top;width:390px;" class="share"> <span></span><br /></li></ul><img src="http://blogs.reuters.com/reuters-money/wp-content/themes/reuters-default/images/vdots.gif" alt="" class="textmiddle" /> </div><br /><div id="postcontent"><p><a href="http://blogs.reuters.com/reuters-money/files/2011/07/debt.jpg"><img class="alignleft size-medium wp-image-17283" title="A demonstrator holds placards to protest U.S. debt in front of the Capitol in Washington July 18, 2011. REUTERS/Kevin Lamarque " src="http://blogs.reuters.com/reuters-money/files/2011/07/debt-300x204.jpg" alt="" height="204" width="300" /></a>No matter what plan Washington concocts to reduce the deficit, it’s going to cost you something. “Shared sacrifice” is in vogue, but your pain will be bigger if you’re unfortunate enough to earn wages or need social benefits.</p> <p>Most conservative deficit-reduction plans <a href="http://blogs.reuters.com/reuters-money/2011/07/21/5-ways-a-big-deficit-deal-will-whack-your-retirement/">shred the social safety net</a> and cherished personal write-offs in unprecedented ways. The core elements of each proposal will pare middle-class tax breaks, Medicare and Social Security.</p> <p>As Yogi Berra once said, “it’s déjà vu all over again.” The $3.7 trillion Senate <a href="http://danieljmitchell.files.wordpress.com/2011/07/a-bipartisan-plan-to-reduce-our-nations-deficits-v7.pdf%29">“Gang of Six” plan</a> and related iterations bear a striking resemblance to a “Moment of Truth” <a href="http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf">deficit commission report</a> issued, and mostly ignored, late last year and pieces of a <a href="http://www.heritage.org/research/reports/2011/05/saving-the-american-dream-the-heritage-plan-to-fix-the-debt-cut-spending-and-restore-prosperity">Heritage Foundation plan</a> ironically entitled “Saving the American Dream.”</p> <p>No plan will preserve or protect the American Dream as we’ve come to know it. And the powers that be don’t seem to be rattled by the potential chaos if an agreement on raising the federal debt ceiling by <a href="http://www.reuters.com/article/2011/07/21/us-usa-ratings-sandp-idUSTRE76K3TU20110721">Aug. 2 doesn’t happen</a>. Markets may collapse, benefits will be delayed and salaries won’t get paid if the U.S. can’t issue more debt, but the <a href="http://blogs.reuters.com/frontrow/2011/07/14/stark-realities-of-u-s-life-without-credit/">Beltway bickering</a> goes on.</p> <p>Instead, we have this power play in the form of Byzantine musical chairs. One sure loser is already ordained, though: Middle America. Let’s look at where the deficit commission, Senate and Heritage plans intersect:</p> <p><strong>“Broaden the tax base”</strong><br />This is one of the most Orwellian prevarications since the coining of the “death tax.” (Have you ever met a dead person who paid a tax?) When conservative policymakers say this, they don’t mean raising taxes, they mean lowering tax rates and eliminating “tax expenditures,” like deductions for individuals.</p> <p>The Senate “Gang” plan proposes three tax brackets ranging from eight to 29 percent. Currently the<a href="http://www.savingtoinvest.com/2010/04/2010-and-2011-tax-brackets-new.html"> highest personal tax rate is 35 percent</a>. The Senate plan would also cut the hated $1.7 trillion alternative minimum tax. At first blush, both moves will reduce revenue flowing into the Treasury and balloon the deficit. How would the Senate make up the shortfall, considering that it also cuts corporate tax rates from 35 percent to as low as 23 percent? They say: “Reform, not eliminate, tax expenditures for health, charitable giving and homeownership.” Bottom line: Your after-tax cost for healthcare and mortgages may be higher. Although limiting the mortgage interest deduction to one home and capping it isn’t a bad idea, this is not a “broadening” of the tax base. Middle class workers will pay more — unless the cost of healthcare and homeownership mysteriously drop.</p> <p><strong>“Enacting a $500 billion down payment … ” </strong><br />One of the key elements of this Senate concept carves up Social Security. Instead of the current formula for cost-of-living adjustments, the Senate (and deficit commission) would substitute a<a href="http://www.bls.gov/cpi/super_paris.pdf"> “chained” Consumer Price Index.</a> Through economic legerdemain, this new index would shave an estimated 0.25 percent annually from the current cost-of-living payments. That means a lower Social Security payment!</p> <p>What about bringing more government workers into the system, immigration reform or simply raising the cap on earnings subject to Social Security and Medicare taxes? None of this is mentioned. After all, to “broaden” the tax base — at least in this perverse definition — “reformers” will reduce benefits. Note: There was no COLA paid in January due to low inflation, even though for millions of retired folks the cost of medicine, food and energy rose. The takeaway here is that “entitlement reform” means cutting benefits and raising your out-of-pocket costs for Medicare and Social Security.</p> <p><strong>“Repeal the CLASS Act” </strong><br /><a href="http://www.politico.com/news/stories/0711/59502_Page2.html">The Senate document</a> doesn’t even bother to explain what this is, but I will. The CLASS Act was one of the better ideas to emerge from Washington in recent years. It would have given workers the option to buy lower-cost long-term care insurance through their workplace. If you’ve seen a nursing home bill lately, you know that decent care costs more than <a href="http://www.genworth.com/content/etc/medialib/genworth_v2/pdf/ltc_cost_of_care.Par.85518.File.dat/Executive%20Summary_gnw.pdf">$70,000 a year</a>. It’s estimated that 70 percent of Americans over 65 will need long-term care at some point. Right now, either families or the Medicaid program absorbs these exorbitant costs — and Medicaid funding has one of the biggest bulls eyes on it. So middle-class and lower-class families will pay more.</p> <p>There is some good news in all of this. If you’re a hedge fund, private equity manager, bank, corporate treasurer or securities investor, you’ll be just fine. No one has suggested raising taxes on capital gains, trading profits, derivatives, dividends or “carried interest.” Apparently not everyone will be asked to sacrifice when the tax base is broadened.</p> </div> </div> </div> </div> </div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-39306673709104158112011-07-15T08:44:00.001-07:002011-07-15T08:45:16.388-07:00Can Your Protect Your Savings in the Event of a US Debt Default?<div class="module" id="post-16780"> <div class="moduleBody"> <div class=""> <div class="columnRight grid8" id="single"> <h2>Debt ceiling & dumber: No safe haven for your money?</h2><span style="text-decoration: underline;">By John F. Wasik (Reuters)</span><br /><div id="postcontent"><p><a href="http://blogs.reuters.com/reuters-wealth/files/2011/07/debttrillion.jpg"><img class="alignleft size-medium wp-image-16784" title="James Bowers stands in the rain outside the New York Stock Exchange REUTERS/Chip East " src="http://blogs.reuters.com/reuters-wealth/files/2011/07/debttrillion-300x199.jpg" alt="" height="199" width="300" /></a>Washington is now acting out a scene from Tennessee Williams’ classic play<a href="http://americanplayers.org/plays-and-tickets/the-glass-menagerie"> Glass Menagerie</a>. The <a href="http://www.reuters.com/article/2011/07/14/us-usa-debt-geithner-idUSTRE76D5MU20110714">ever-fragile players </a>are about to shatter .</p> <p>Yet this is not the time to turn a farce into a tragedy. A <a href="http://blogs.reuters.com/reuters-wealth/2011/07/14/how-to-protect-yourself-from-a-u-s-default/">default on U.S. debt</a> will make the 2008 debacle look like a Simpson’s episode. Interest rates will soar through the roof. Everything from mortgage rates to adjustable credit card financing will skyrocket. Payrolls may be imperiled along with Social Security and Medicare payments. Think economic crash and burn — in a big way.</p> <p>If the credit rating of U.S. debt is <a href="http://www.reuters.com/article/2011/07/14/us-usa-ratings-moodys-idUSTRE76D00Q20110714%29">downgraded from AAA</a>, that will automatically signal to the global bond market that investors should demand higher yields for taking more risk. Standard & Poor’s has put the U.S. on its ominous <a href="http://www.reuters.com/article/2011/07/15/us-sp-us-idUSTRE76E01S20110715?feedType=RSS&feedName=topNews">“CreditWatch” status</a> and will downgrade unless a debt deal is struck soon.</p> <p>Money moves exponentially faster than politics these days. If bond managers get even a whiff of actual default, they will move their funds out of U.S. Treasuries at the speed of light. That tsunami may devalue anything measured in dollars, including U.S. stocks; corporations would then fire even more people and halt capital investment. Unemployment would hit Depression-era levels. Americans would wistfully recall the days of nine percent joblessness.</p> <p>More importantly, a debt default will be a smack-down to the credibility of the U.S. as an issuer of the highest-quality bonds. It will also clobber the liquidity of anyone who holds U.S. paper, from Chinese banks to Europeans hoping to escape debt debacles in Greece, Ireland, Portugal, Spain and Italy. Trillions could flow out of Treasuries into countries perceived as fiscally sound.</p> <p><a href="http://www.washingtonpost.com/opinions/warning-to-washington-dont-mess-with-the-debt-ceiling/2011/07/12/gIQA5Q4ADI_story.html?hpid=z2">Here’s </a>PIMCO’s Bill Gross, the biggest bond fund manager by assets, writing in the Washington Post: “Global investment managers have global choices these days, and a solvent Germany or Canada is just a wire transfer away for trillions of potential investment dollars looking for a safer haven.”</p> <p>Gross said several weeks ago that he sold U.S. Treasuries from his PIMCO portfolio. “The debt ceiling must be raised and not be held hostage by budget negotiations,” Gross concludes. “Don’t mess with the debt ceiling, Washington. Bond and currency vigilantes will make you pay.”</p> <p>Both parties have now entered the “break it, you own it” phase of their bickering. Who do you pay first in the event of a default? The military? Air-traffic controllers? Who gets burned? Social Security recipients? National Park visitors?</p> <p>How do you avoid getting walloped? If the White House and Republicans can’t agree on a plan to avoid default, it would be silly to retreat into gold or other precious metals. You can’t use bullion to buy food, medicine or pay utilities.</p> <p>Worst-case scenario: To protect yourself against interest rates ballooning, you could short Treasury bonds. This is incredibly speculative — and risky.</p> <p>One approach is to buy leveraged exchange-traded funds such as the <a href="http://www.reuters.com/finance/stocks/overview?symbol=TBT">ProShares Ultrashort 20+ US Treasury ETF</a>. This fund promises a return 200 percent of the inverse performance of a 20-year U.S. Treasury-bond index. So if interest rates soar, you can make a lot of money, or just offset the losses in every other part of your portfolio.</p> <p>Of course, this is a money-loser if politicos come to their senses and interest rates don’t climb dramatically. A lower-risk approach may be to hold onto a high-quality money-market fund that mostly holds corporate debt. Cash would be king — as long as it didn’t involve defaulted U.S. debt. In truth, though, no one really knows what will happen or what the safe havens will be.</p> <p>There are other ways of defusing this mindless political kabuki: Take Social Security and Medicare off the table for now. Discuss them separately in a series of expert town hall forums over the next year. Besides, these programs should never have been held hostage in the perfunctory debt-ceiling passage. They are largely self-funded by payroll taxes and merit separate treatment.</p> <p>The American people, who overwhelmingly support social insurance benefits, deserve an intelligent dialogue on whether all or part of these programs should be cut or privatized under the Republican template. When I talked to a packed room of fiscally conservative older Americans Wednesday night on whether they wanted to see Medicare or Social Security privatized, not one raised a hand.</p> <p>Wiser heads may prevail, although it’s ironic that shorting Treasuries is not only an uber-cautionary strategy, but a portfolio position held by a key player in the debt talks — Rep. Eric Cantor (R-Va.), the House Majority Leader, at least in his 2010 <a href="http://pfds.opensecrets.org/N00013131_2010.pdf">financial disclosure statement</a>.</p> <p>Is Cantor merely trying to speculate on inflation returning, which countless pundits have been forecasting for years? Or maybe, since he’s at the center of this maelstrom, he’s cynically hedging his bets.</p> <p>We’re not playing checkers here. The pieces can break in a disastrous way.</p> </div> </div> </div> </div> </div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-46024678504719805842011-06-21T15:17:00.000-07:002011-06-21T15:18:00.693-07:00Check your insurance!<div class="module" id="post-15370"> <div class="moduleBody"> <div class=""> <div class="columnRight grid8" id="single"> <h1>8 home issues your insurer doesn’t cover</h1> <div class="timestamp">By John F. Wasik (Reuters)<br /></div><a href="http://blogs.reuters.com/reuters-wealth/files/2011/06/lightning.jpg"><img class="alignleft size-medium wp-image-15372" title="A lightning bolt strikes the ground near homes in Alexandria, Virginia on June 14, 2003, after a late afternoon electrical storm passedthrough the area. REUTERS/Gregg Newton" src="http://blogs.reuters.com/reuters-wealth/files/2011/06/lightning-300x202.jpg" alt="" height="202" width="300" /></a>You won’t believe this, but my house was hit by lightning — twice.<div id="postcontent"> <p>I know this isn’t supposed to happen. Fortunately nobody was hurt and the house didn’t burn down. Yet I think a deity (maybe Thor or Zeus) was reminding me to check my insurance coverage and install lightning rods.</p> <p>Checking your <a href="http://blogs.reuters.com/reuters-wealth/2011/05/26/coastal-living-bad-weather-pushes-insurance-higher/">homeowner’s insurance</a> is a matter of seeing 1) what they won’t cover and 2) your out-of-pocket expenses, based on your deductibles.</p> <p>Since I carry a $1,000 deductible on my homeowner’s policy, which reduces my premium, I know anything under that threshold is on me.</p> <p>It could have been worse. In the case of my dual lightning strikes, I only had to pay to replace (2) circuit boards from my garage-door opener, a sump pump and computer board in my stove. Those expenses totaled about $900. The garage-door opener repair service generously offered to send in a claim directly to my insurer, which was helpful, but it still wouldn’t exceed the threshold of my deductible.</p> <p>I discovered in researching this subject that even if my lightning-related expenses had exceeded $1,000, my insurer may not have reimbursed me anyway since power-surge damages typically aren’t covered. I had bought a cheap surge protector to protect my garage door opener, which didn’t do much good against a million volts. (I noticed in the hardware store, though, that more expensive surge strips carried insurance in case any appliance got fried, so that was some reassurance).</p> <p>Since I live in the Midwest, I’m most concerned with water and wind damage. In the winter, we get these gremlins called ice dams that back up on frozen gutters and leak into the house. Roof vents have also leaked in the past, which have caused extensive ceiling damage upstairs. Insurance covered that.</p> <p>What gets tricky is that insurance rarely pays for water that accumulates from burst pipes, broken sump pumps or sewers. Tornadoes and hurricanes? Sure, but not minor floods and seepage.</p> <p>Here are some other problem areas when it comes to homeowner’s <a href="http://blogs.reuters.com/reuters-wealth/2011/05/16/insurance-the-new-asset-class/">insurance</a>:</p> <p><strong>Roof damage</strong><br />As I mentioned above, big storm damage is generally covered. If you’re hit by a hailstorm, then claim payment depends on the size of the hail and what it did to your roof and vehicles.</p> <p><strong>Termites and rodents</strong><br />It’s amazing how much damage a critter can do, but insurance generally doesn’t cover pest destruction. Exterminators aren’t covered, either. You’ll need a trapper for skunks and other varmints.</p> <p><strong>Home office equipment</strong><br />Most home policies don’t cover computers, copiers and fax machines, especially when it involves power surges. You may need a separate rider or business equipment policy. Surge protectors and uninterrupted power systems usually protect your key equipment.</p> <p><strong>Liability<br /></strong>What if someone is injured on your property and they sue you? Most policies have liability protection, but check on the limits. Generally $1 million is common, but you can always buy more coverage.</p> <p><strong>Flooding<br /></strong>As I mentioned above, this is generally not covered. If you live on a flood plain, buy<a href="http://www.floodsmart.gov/floodsmart/?wt.srch=1&WT.mc_id=Fema_Google1"> low-cost government flood insurance separately</a>.</p> <p><strong>Normal wear and tear</strong><br />Don’t expect your insurer to pay to replace a 20-year-old roof that hasn’t been damaged by a storm, old siding or other items that just wear out.</p> <p><strong>Mold</strong><br />Since this became a huge problem a few years ago, many insurers stopped covering this and added exemptions, except in rare cases. Check your policy “endorsements” to see if your insurer covers this. In insurance jargon, an <a href="http://thismatter.com/money/insurance/types/common-homeowners-policy-endorsements.htm">endorsement</a> or “rider” is a clause insurers add to your policy that says they will or won’t cover a certain kind of claim.</p> <p><strong>Earthquakes<br /></strong>Like flooding, this may require a special policy or coverage, depending upon where you live.</p> <p>Keep in mind that, depending upon how much you want to spend, you can always buy more insurance. You can even get coverage to protect against identity theft. Generally, though, you can save the most amount of money by keeping deductibles high, which lowers premiums.</p> <p>No matter what kind of policy you get, make sure you have inflation protection and replacement cost coverage. Even though the value of the contents of your home or apartment may have declined, the cost of replacing them hasn’t.</p> </div> </div> </div> </div> </div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-13223360954378464612011-06-06T14:21:00.000-07:002011-06-06T14:22:49.107-07:00College Costs too Much<div class="module" id="post-14746"> <div class="moduleBody"> <div class=""> <div class="columnRight grid8" id="single"> <h1>Is college worth the investment?</h1> <div class="timestamp">By John F. Wasik (Reuters)<br /></div> <div class="articletools"><ul id="sharetools"><li style="display: inline;vertical-align:top; padding-top: 2px;padding-right: 57px;" class="share"><span style="position: absolute; padding-top: 2px;"><span class="IN-widget" style="line-height: 1; vertical-align: 1px; display: inline-block; text-align: center;"><span style="padding: 0pt ! important; margin: 0pt ! important; text-indent: 0pt ! important; display: inline-block ! important; vertical-align: middle ! important; font-size: 1px ! important;"><span id="li_ui_li_gen_1307378866985_0"><a id="li_ui_li_gen_1307378866985_0-link"><span id="li_ui_li_gen_1307378866985_0-logo">in</span><span id="li_ui_li_gen_1307378866985_0-title"><span id="li_ui_li_gen_1307378866985_0-mark"></span><span id="li_ui_li_gen_1307378866985_0-title-text">Share</span></span></a></span></span></span></span></li><li style="display: inline;vertical-align:top;" class="share "><img src="http://blogs.reuters.com/reuters-wealth/wp-content/themes/reuters-default/images/vdots.gif" class="textmiddle" /></li></ul><br /></div><br /><div id="postcontent"><p><a href="http://blogs.reuters.com/reuters-wealth/files/2011/06/college.jpg"><img class="alignleft size-medium wp-image-14748" title="Graduating student Abel Charron displays a "Hire me" sign written on his mortar board before the 2007 USC School of Cinematic Arts commencement at the University of Southern California in Los Angeles, in this May 11, 2007 file photo. REUTERS/Mario Anzuoni/Files " src="http://blogs.reuters.com/reuters-wealth/files/2011/06/college-300x190.jpg" alt="" height="190" width="300" /></a>Is a college education worth it? In the free market of ideas, maybe. In a labor market that can’t be sustained by wage growth or job creation, probably not. Another bubble may be bursting.</p> <p>The college degree payback may be long and may not materialize for decades. A six-figure education may not be a guarantee to higher real wages in the near future and it may not be worth <a href="http://blogs.reuters.com/reuters-wealth/2011/04/15/5-ways-to-get-more-financial-aid/">going into debt to finance it</a>.</p> <p>I’m not alone in this sentiment. A widespread public skepticism is fueled by poor short-term job prospects. It’s not surprising that 57 percent of those surveyed by the Pew Research Center said that higher education doesn’t provide a good value and 75 percent said it’s<a href="http://pewsocialtrends.org/2011/05/15/is-college-worth-it/"> just too expensive for most people</a>.</p> <p>As young people attempt to enter the workforce and<a href="http://www.alternet.org/economy/151149/the_next_bubble_is_about_to_burst%3A_college_grads_face_dwindling_jobs_and_mounting_loans_/"> face an unemployment rate</a> twice that of the majority of the general population, you have to take pause and examine what’s happened to create this bleak situation.</p> <p>After World War Two, employment was plentiful. People who wanted a decent job in manufacturing or the white-collar sector could find one and stay there for 30 years. About one-third of private-sector workers were guaranteed union benefits, healthcare (even in retirement) and defined-benefit pensions. Productivity was on the rise and consumers drove the economy because they had plenty of disposable income and little debt.</p> <p>That era, called the <a href="http://www.beyondchron.org/news/index.php?itemid=9225">“Great Prosperity</a>” by former Labor Secretary Robert Reich, ended in roughly 1977. Over the past 30 years, collective bargaining, decent manufacturing jobs and guaranteed benefits began to disappear. I remember that time because I was just getting out of college in the middle of a nasty recession and took a low-paying job myself.</p> <p>Because high-paying manufacturing jobs were offshored over the past generation, workforce preparation increasingly focused on services and the white-collar sector. While office-oriented employers mostly demanded workers have college degrees, there were no extra payments for overtime. Guaranteed pensions were thrown into the maw of the stock and bond markets in the form of 401(k)s. Healthcare was also eroded.</p> <p>Real wages, that is, what you earned after you subtracted inflation and taxes, entered a freefall in the past two decades. “Rather than be out of work, most Americans quietly settled for lower real wages,” Reich recently told Congress, “or wages that have risen more slowly than the overall growth of the economy per person.”</p> <p>That brings us back to the value of a college degree. If the price of college had tracked real wages, net job growth or just inflation, then college tuition should have fallen dramatically in recent years relative to the outgoing economic tide of the middle class.</p> <p>Yet the depletion of household wealth and earnings in recent years has made the gap between college bills and incomes even wider. While consumer inflation has soared some 107 percent since 1986 (through late 2010), <a href="http://www.inflationdata.com/inflation/inflation_articles/Education_Inflation.asp">college tuition has ballooned 467 percent</a>.</p> <p>Why the huge disparity between consumer prices and higher education bills?</p> <p>Colleges benefited from a huge influx of students — the children of baby boomers — so they didn’t see their enrollment numbers decline significantly. The opposite was true; leading them to believe that there was a robust demand for their services. Universities kept investing in bricks and mortar and hiring professors while raising their prices to pay for it all. At the same time, states dialed back on their funding for public universities.</p> <p>Then the catastrophic meltdown of 2008 skewered the economics of paying for college. Those who lost home equity had less collateral for home-equity loans or cash-outs. Bond returns were dismal and stocks had a bum decade.</p> <p>Responding to this massive wealth evaporation, roughly about the time the <a href="http://blogs.reuters.com/reuters-wealth/2011/05/31/housing-crash-is-it-time-to-buy-low/">U.S. housing market</a> (and then stock market) collapsed, private non-profit colleges started a wave of tuition discounting, according to the <a href="http://www.nacubo.org/Research/NACUBO_Tuition_Discounting_Study.html">National Association of College and University Business Officers</a>.</p> <p>Discounting reached an all-time high of 42 percent last year, the group reported, with 88 percent of freshmen receiving institutional grants. I expect this trend to continue as more and more families pull out of four-year colleges.<br />In the interim, if more students attend community colleges, eschew loans and encourage their children to take advanced-placement courses in high school — and demand tuition discounts — the paradigm will continue to shift and prices for bachelor’s degrees will fall across the board.</p> <p>When the bubble bursts, though, it won’t be for the expectations that Americans have for their children after college. After all, even the Pew study shows that college graduates will likely have a $20,000 annual earning advantage over high-school grads.</p> <p>A college education is a value relative to future earnings, vocational success and its ability to lift you above the economic burdens of underemployment and stagnant earnings. Right now, that equation just doesn’t measure up for most families.</p> </div> </div> </div> </div> </div><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0tag:blogger.com,1999:blog-307246258834168852.post-6249083923605498582011-06-02T14:16:00.000-07:002011-06-02T14:19:21.681-07:00Warnings on structured productsI wrote about these products in a Demos/Nation Institute study and pieces in Morningstar.com, The New York Times and AARP Magazine.<br /><br />While the SEC and FINRA are now issuing warnings about these products, they stopped short of saying there would be future or ongoing probes. Tell the agencies you want a full investigation.<br /><br />Here's the SEC notice:<br /><br /> <br /> <table border="0" cellpadding="0" cellspacing="0" width="100%"> <tbody><tr> <td align="center" width="50%"><img src="http://www.sec.gov/images/seccolo2-trans.gif" alt="SEC logo" height="101" width="100" /></td> <td align="center" width="50%"><img src="http://www.sec.gov/images/finralogo.gif" alt="FINRA logo" height="60" width="130" /></td> </tr> </tbody></table> <h1>SEC, FINRA Warn Retail Investors About Investing in Structured Notes with Principal Protection</h1> <h3>FOR IMMEDIATE RELEASE<br />2011-118</h3> <p><i>Washington, D.C., June 2, 2011</i> — The Securities and Exchange Commission’s Office of Investor Education and Advocacy and the Financial Industry Regulatory Authority (FINRA) have issued an investor alert called <a href="http://www.sec.gov/investor/alerts/structurednotes.htm">Structured Notes with Principal Protection: Note the Terms of Your Investment</a> to educate investors about the risks of structured notes with principal protection, and to help them understand how these complex financial products work. The retail market for these notes has grown in recent years, and while these structured products have reassuring names, they are not risk-free. </p> <p>Structured notes with principal protection typically combine a zero-coupon bond – which pays no interest until the bond matures — with an option or other derivative product whose payoff is linked to an underlying asset, index or benchmark. The underlying asset, index or benchmark can vary widely, from commonly cited market benchmarks to currencies, commodities and spreads between interest rates. The investor is entitled to participate in a return that is linked to a specified change in the value of the underlying asset. However, investors should know that these notes might be structured in a way such that their upside exposure to the underlying asset, index or benchmark is limited or capped.</p> <p>Investors who hold these notes until maturity will typically get back at least some of their investment, even if the underlying asset, index or benchmark declines. But protection levels vary, with some of these products guaranteeing as little as 10 percent — and any guarantee is only as good as the financial strength of the company that makes that promise.</p> <p>“Structured notes with principal protection contain risks that may surprise many investors and can have payout structures that are difficult to understand,” said Lori J. Schock, Director of the SEC’s Office of Investor Education and Advocacy. “This alert is a ‘must read’ for investors considering these products, especially those with the mistaken belief that these investments offer complete downside protection.”</p> <p>“The current low interest rate environment might make the potentially higher yields offered by structured notes with principal protection enticing to investors,” said FINRA Senior Vice President for Investor Education John Gannon. “But retail investors should realize that chasing a higher yield by investing in these products could mean winding up with an expensive, risky, complex and illiquid investment.”</p> <p>FINRA and the SEC’s Office of Investor Education and Advocacy are advising investors that structured notes with principal protection can have complicated pay-out structures that can make it hard to accurately assess their risk and potential for growth. Additionally, investors considering these notes should be aware that they could tie up their principal for upwards of a decade with the possibility of no profit on their initial investment.<i> Structured Notes with Principal Protection: Note the Terms of Your Investment</i> also includes a list of questions investors should ask before investing in these products.</p> <p>For additional information regarding the SEC and FINRA’s educational outreach and program, please visit <a href="http://www.investor.gov/">www.investor.gov</a> or <a href="http://www.sec.gov/investor">www.sec.gov/investor</a> or <a href="http://www.finra.org/">www.finra.org</a>.</p> <p> </p><div class="blogger-post-footer">www.johnwasik.com</div>jfwasikhttp://www.blogger.com/profile/09765380482300292433noreply@blogger.com0