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Emma -:- The Alpha Currency is the Dollar -:- Sun, Feb 27, 2005 at 14:37:19 (EST)

johnny5 -:- Hoyt Book for the history buffs -:- Sun, Feb 27, 2005 at 14:35:55 (EST)

David E.. -:- Coming Generational Storm - a reveiw -:- Sun, Feb 27, 2005 at 12:12:44 (EST)

Jennifer -:- Real Estate and REITs -:- Sun, Feb 27, 2005 at 07:01:07 (EST)
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Terri -:- REITs -:- Sun, Feb 27, 2005 at 07:12:55 (EST)

Dorian -:- Real estate in inflation or deflation -:- Sun, Feb 27, 2005 at 06:10:55 (EST)
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David E.. -:- Re: Real estate in inflation or deflation -:- Sun, Feb 27, 2005 at 12:07:28 (EST)
__ johnny5 -:- Hud's demographic projections -:- Sun, Feb 27, 2005 at 13:09:58 (EST)
_ Terri -:- Real Estate and REITs -:- Sun, Feb 27, 2005 at 07:17:52 (EST)
__ johnny5 -:- Homer Hoyt Reits -:- Sun, Feb 27, 2005 at 07:53:15 (EST)
___ Jennifer -:- A Sham? -:- Sun, Feb 27, 2005 at 13:01:38 (EST)
____ johnny5 -:- Re: A Sham? -:- Sun, Feb 27, 2005 at 13:17:28 (EST)
_____ Jennifer -:- Right -:- Sun, Feb 27, 2005 at 14:17:19 (EST)
______ johnny5 -:- Re: Right -:- Sun, Feb 27, 2005 at 14:29:59 (EST)
_______ Jennifer -:- Complete Right -:- Sun, Feb 27, 2005 at 15:47:30 (EST)
_____ johnny5 -:- Re: A Sham? -:- Sun, Feb 27, 2005 at 13:24:39 (EST)
___ Terri -:- Re: Homer Hoyt Reits -:- Sun, Feb 27, 2005 at 10:15:16 (EST)

johnny5 -:- More problems -:- Sun, Feb 27, 2005 at 00:56:48 (EST)
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johnny5 -:- Pirce Hedonics: A Critical Review -:- Sun, Feb 27, 2005 at 01:49:24 (EST)

johnny5 -:- Core Inflation Measurement -:- Sat, Feb 26, 2005 at 23:54:54 (EST)
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johnny5 -:- More academic papers -:- Sun, Feb 27, 2005 at 00:12:54 (EST)
__ johnny5 -:- Re: More academic papers -:- Sun, Feb 27, 2005 at 00:53:59 (EST)

Terri -:- Inflation, Renats or Housing -:- Sat, Feb 26, 2005 at 21:32:11 (EST)
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Terri -:- Inflation, Rents or Housing [cont.] -:- Sat, Feb 26, 2005 at 21:50:41 (EST)
__ Pete Weis -:- Re: Inflation, Rents or Housing [cont.] -:- Sun, Feb 27, 2005 at 13:01:23 (EST)

Terri -:- Energy Stocks in the S&P -:- Sat, Feb 26, 2005 at 17:10:50 (EST)
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Terri -:- Paul Krugman's Note on Oil -:- Sat, Feb 26, 2005 at 20:19:51 (EST)
__ Pete Weis -:- Good post Terri -:- Sun, Feb 27, 2005 at 12:34:14 (EST)

Terri -:- Safety Above All -:- Sat, Feb 26, 2005 at 16:29:19 (EST)
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Pete Weis -:- Re: Safety Above All -:- Sat, Feb 26, 2005 at 19:04:12 (EST)
__ Terri -:- How to be Most Secure -:- Sat, Feb 26, 2005 at 19:36:49 (EST)
___ johnny5 -:- Academic studies -:- Sat, Feb 26, 2005 at 23:10:09 (EST)

Terri -:- Short and Long Term -:- Sat, Feb 26, 2005 at 14:20:00 (EST)
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Terri -:- Risk Protection -:- Sat, Feb 26, 2005 at 15:04:45 (EST)

Terri -:- Bond Funds as Protection -:- Sat, Feb 26, 2005 at 14:02:18 (EST)
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Pete Weis -:- Question? -:- Sat, Feb 26, 2005 at 14:23:00 (EST)
__ Terri -:- Federal Reserve Protection -:- Sat, Feb 26, 2005 at 14:36:22 (EST)
___ Pete Weis -:- Not much room for lowering -:- Sat, Feb 26, 2005 at 15:39:13 (EST)
____ Terri -:- There is Lots of Room -:- Sat, Feb 26, 2005 at 15:50:30 (EST)

Terri -:- What if There is a Bear Market? -:- Sat, Feb 26, 2005 at 13:46:39 (EST)
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Terri -:- Value Stocks -:- Sat, Feb 26, 2005 at 16:03:39 (EST)
_ Pete Weis -:- Think you may be.... -:- Sat, Feb 26, 2005 at 14:04:07 (EST)
__ Terri -:- Planning Planning -:- Sat, Feb 26, 2005 at 16:50:39 (EST)
__ Terri -:- 1973 - 1974 -:- Sat, Feb 26, 2005 at 14:45:20 (EST)
___ Pete Weis -:- You are an absolute.... -:- Sat, Feb 26, 2005 at 15:50:49 (EST)
____ Terri -:- Being Realistic -:- Sat, Feb 26, 2005 at 16:14:45 (EST)
_____ David E.. -:- Bill Gross -:- Sat, Feb 26, 2005 at 20:12:07 (EST)
_____ Pete Weis -:- Crying wolf........ -:- Sat, Feb 26, 2005 at 16:26:00 (EST)
______ Terri -:- Caution -:- Sat, Feb 26, 2005 at 16:45:18 (EST)

Pete Weis -:- Politician tells economist to...... -:- Sat, Feb 26, 2005 at 12:07:23 (EST)
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johnny5 -:- If it does get worse? -:- Sat, Feb 26, 2005 at 12:15:28 (EST)
__ Pete Weis -:- Re: If it does get worse? -:- Sat, Feb 26, 2005 at 16:24:30 (EST)
___ Terri -:- Benchmarks -:- Sat, Feb 26, 2005 at 17:37:43 (EST)

Emma -:- Women's Voices in Rwanda -:- Sat, Feb 26, 2005 at 11:21:25 (EST)
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johnny5 -:- Re: Women's Voices in Rwanda -:- Sat, Feb 26, 2005 at 12:30:09 (EST)
__ Emma -:- Re: Women's Voices in Rwanda -:- Sat, Feb 26, 2005 at 17:54:45 (EST)

Pete Weis -:- Building contractors, electricians,... -:- Sat, Feb 26, 2005 at 11:18:16 (EST)
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Terri -:- Re: Building contractors, electricians,... -:- Sat, Feb 26, 2005 at 11:37:06 (EST)

Terri -:- Conservative Investing -:- Sat, Feb 26, 2005 at 10:15:08 (EST)
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johnny5 -:- Beautiful Minds -:- Sat, Feb 26, 2005 at 11:59:01 (EST)

Emma -:- Wal-Mart and Unions In Canada -:- Sat, Feb 26, 2005 at 09:24:16 (EST)

Emma -:- Indonesia and Oil Prices -:- Sat, Feb 26, 2005 at 09:20:16 (EST)
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Emma -:- Indonesia and Oil Prices - 1 -:- Sat, Feb 26, 2005 at 09:20:39 (EST)

Terri -:- Conservative Investing -:- Sat, Feb 26, 2005 at 07:25:19 (EST)

Terri -:- Stabilty in Markets -:- Sat, Feb 26, 2005 at 06:40:09 (EST)
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johnny5 -:- Re: Stabilty in Markets -:- Sat, Feb 26, 2005 at 10:39:41 (EST)

johnny5 -:- USA only accounts for 16% global growth -:- Fri, Feb 25, 2005 at 20:58:59 (EST)

johnny5 -:- threat to commercial aviation -:- Fri, Feb 25, 2005 at 18:34:54 (EST)

Terri -:- The Bull Market Continues -:- Fri, Feb 25, 2005 at 15:29:41 (EST)
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johnny5 -:- Davos - where are the catalysts? -:- Fri, Feb 25, 2005 at 18:20:33 (EST)

Terri -:- National Index Returns -:- Fri, Feb 25, 2005 at 14:32:51 (EST)

johnny5 -:- Vanguard no longer offering metals? -:- Fri, Feb 25, 2005 at 13:39:34 (EST)
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Ari -:- Vanguard offering metals and materials -:- Fri, Feb 25, 2005 at 15:56:27 (EST)

Terri -:- Vanguard Returns -:- Fri, Feb 25, 2005 at 12:06:02 (EST)
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Terri -:- Sector Returns -:- Fri, Feb 25, 2005 at 12:06:36 (EST)
__ johnny5 -:- 2 way street -:- Fri, Feb 25, 2005 at 12:48:34 (EST)

johnny5 -:- Free Money floating in the air! -:- Fri, Feb 25, 2005 at 09:56:37 (EST)

johnny5 -:- Keynes on currency settlements -:- Fri, Feb 25, 2005 at 07:51:05 (EST)

johnny5 -:- Waking up homeless in America -:- Fri, Feb 25, 2005 at 07:34:05 (EST)

johnny5 -:- Laura we can -:- Fri, Feb 25, 2005 at 06:42:01 (EST)

http://www.lasun.net -:- Guckert Story -:- Thurs, Feb 24, 2005 at 23:52:25 (EST)

johnny5 -:- Soylent Green - new use for the old? -:- Thurs, Feb 24, 2005 at 19:02:06 (EST)

Terri -:- Flexible Investing -:- Thurs, Feb 24, 2005 at 17:18:43 (EST)
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johnny5 -:- Re: Flexible Investing -:- Thurs, Feb 24, 2005 at 18:01:51 (EST)

Pancho Villa alias Green-go -:- 'Toys' or 'Noise' ? -:- Thurs, Feb 24, 2005 at 17:09:58 (EST)
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johnny5 -:- Sparks to light a powder keg? -:- Thurs, Feb 24, 2005 at 17:30:21 (EST)
__ Pancho Villa alias Gringo -:- Re: Sparks to light a powder keg? -:- Thurs, Feb 24, 2005 at 18:03:28 (EST)

johnny5 -:- What is the current P/E of the market? -:- Thurs, Feb 24, 2005 at 16:21:10 (EST)

johnny5 -:- Industry Standard Reporting -:- Thurs, Feb 24, 2005 at 15:38:58 (EST)

johnny5 -:- Bush buys raymond james? -:- Thurs, Feb 24, 2005 at 13:36:16 (EST)

Setanta -:- Ryanair announce purchase of 140 Boeings -:- Thurs, Feb 24, 2005 at 13:26:55 (EST)
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Terri -:- Why Is Ryanair a Success -:- Thurs, Feb 24, 2005 at 14:33:57 (EST)
__ Setanta -:- Re: Why Is Ryanair a Success -:- Fri, Feb 25, 2005 at 04:59:14 (EST)
___ Terri -:- Re: Why Is Ryanair a Success -:- Fri, Feb 25, 2005 at 12:41:44 (EST)

Setanta -:- For the Starve the Beast Fans -:- Thurs, Feb 24, 2005 at 12:10:33 (EST)

Emma -:- Medical Companies Joining Offshore Trend -:- Thurs, Feb 24, 2005 at 11:21:28 (EST)

Emma -:- Medical Malpractice Rates? -:- Wed, Feb 23, 2005 at 14:19:44 (EST)
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johnny5 -:- Re: Medical Malpractice Rates? -:- Wed, Feb 23, 2005 at 14:36:35 (EST)
__ Setanta -:- Re: Medical Malpractice Rates? -:- Thurs, Feb 24, 2005 at 09:36:13 (EST)
___ Terri -:- Insurance for 'Good' Patients -:- Thurs, Feb 24, 2005 at 11:06:49 (EST)
____ johnny5 -:- Re: Insurance for 'Good' Patients -:- Thurs, Feb 24, 2005 at 11:48:23 (EST)
__ Alfred E. Neuman -:- Re: Medical Malpractice Rates? -:- Wed, Feb 23, 2005 at 22:49:24 (EST)

Emma -:- Commercial Real Estate -:- Wed, Feb 23, 2005 at 13:53:32 (EST)

Flor Pereda -:- Your paper about Currency Crises -:- Wed, Feb 23, 2005 at 11:42:02 (EST)
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Jennifer -:- Re: Your paper about Currency Crises -:- Wed, Feb 23, 2005 at 12:26:47 (EST)
__ Flor Pereda -:- Re: Your paper about Currency Crises -:- Wed, Feb 23, 2005 at 15:34:00 (EST)
___ Pancho Villa alias El Gringo -:- Re: Your paper about Currency Crises -:- Wed, Feb 23, 2005 at 16:48:16 (EST)
____ Jennifer -:- Re: Your paper about Currency Crises -:- Wed, Feb 23, 2005 at 19:44:16 (EST)
_____ Flor -:- Re: Your paper about Currency Crises -:- Thurs, Feb 24, 2005 at 06:08:06 (EST)
______ Jennifer -:- Flor on Currency Crises -:- Thurs, Feb 24, 2005 at 11:08:12 (EST)
____ Jennifer -:- Re: Your paper about Currency Crises -:- Wed, Feb 23, 2005 at 19:37:22 (EST)

Emma -:- Sending Money to Mexican Families -:- Wed, Feb 23, 2005 at 11:06:40 (EST)
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johnny5 -:- Re: Sending Money to Mexican Families -:- Wed, Feb 23, 2005 at 14:23:54 (EST)
__ Harry Paranuts -:- Re: Sending Money to Mexican Families -:- Wed, Feb 23, 2005 at 23:01:07 (EST)

Emma -:- India: Having the Vote and Little Else -:- Wed, Feb 23, 2005 at 10:51:47 (EST)

Terri -:- Interest Rates -:- Wed, Feb 23, 2005 at 10:23:12 (EST)
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johnny5 -:- Re: Interest Rates -:- Wed, Feb 23, 2005 at 10:33:42 (EST)
__ Terri -:- Asset Prices -:- Wed, Feb 23, 2005 at 12:39:53 (EST)
___ Terri -:- Saving and Debt -:- Wed, Feb 23, 2005 at 14:08:30 (EST)

johnny5 -:- Fund Managers understating risk by 40%? -:- Wed, Feb 23, 2005 at 09:06:55 (EST)

Emma -:- The Dollar -:- Wed, Feb 23, 2005 at 06:24:14 (EST)
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emma -:- Re: The Dollar -:- Wed, Feb 23, 2005 at 07:26:09 (EST)

Emma -:- A Decline in Dollar Value -:- Wed, Feb 23, 2005 at 05:52:32 (EST)
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Pete Weis -:- Good question -:- Wed, Feb 23, 2005 at 09:21:47 (EST)
_ Emma -:- A Decline in Dollar Value - 1 -:- Wed, Feb 23, 2005 at 06:00:33 (EST)
__ Pete Weis -:- OPEC -:- Wed, Feb 23, 2005 at 15:06:57 (EST)
___ johnny5 -:- Re: OPEC -:- Wed, Feb 23, 2005 at 17:41:47 (EST)
____ Pete Weis -:- Right -:- Wed, Feb 23, 2005 at 19:44:46 (EST)
_____ johnny5 -:- Smooth it out! -:- Thurs, Feb 24, 2005 at 05:38:29 (EST)
______ Pete Weis -:- Steadfastly positive -:- Thurs, Feb 24, 2005 at 10:16:09 (EST)
_______ johnny5 -:- Yah - what you said! -:- Thurs, Feb 24, 2005 at 11:29:31 (EST)
________ Pete Weis -:- Agree -:- Thurs, Feb 24, 2005 at 11:48:56 (EST)
_______ Terri -:- Thank you, Pete. -:- Thurs, Feb 24, 2005 at 11:12:11 (EST)

Emma -:- America's Senior Moment - Paul Krugman -:- Wed, Feb 23, 2005 at 05:37:46 (EST)
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Javier Penos -:- Re: America's Senior Moment - Paul Krugman -:- Wed, Feb 23, 2005 at 23:10:19 (EST)
_ Emma -:- Paul Krugman's New Essay -:- Wed, Feb 23, 2005 at 08:33:55 (EST)

johnny5 -:- New bush faith based financial products -:- Tues, Feb 22, 2005 at 23:04:42 (EST)

johnny5 -:- The future generation of risk managers -:- Tues, Feb 22, 2005 at 22:48:50 (EST)

Pete Weis -:- Setser on recent events -:- Tues, Feb 22, 2005 at 21:12:35 (EST)
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johnny5 -:- Re: Setser on recent events -:- Tues, Feb 22, 2005 at 22:53:31 (EST)

Emma -:- Africans Entering America -:- Tues, Feb 22, 2005 at 20:56:03 (EST)
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johnny5 -:- Re: Africans Entering America -:- Tues, Feb 22, 2005 at 22:48:06 (EST)

Terri -:- Efficient Markets and Indexing -:- Tues, Feb 22, 2005 at 17:42:51 (EST)
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johnny5 -:- 33% value, growth, small cap? -:- Tues, Feb 22, 2005 at 19:01:32 (EST)

johnny5 -:- Indexing and Market Efficiency -terri? -:- Tues, Feb 22, 2005 at 16:48:47 (EST)

johnny5 -:- Time-Weighted performance reporting? -:- Tues, Feb 22, 2005 at 13:25:30 (EST)
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Institutional Investor -:- Re: Time-Weighted performance reporting? -:- Wed, Feb 23, 2005 at 19:09:09 (EST)
__ johnny5 -:- Being standard = ethical? -:- Wed, Feb 23, 2005 at 23:54:18 (EST)
___ johnny5 -:- Moving Money -:- Thurs, Feb 24, 2005 at 00:26:22 (EST)

Yann -:- Could you help me? -:- Tues, Feb 22, 2005 at 12:35:54 (EST)
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Terri -:- New Trade Theory -:- Tues, Feb 22, 2005 at 14:56:54 (EST)
__ Pancho Villa alias El Gringo -:- Re: New Trade Theory -:- Tues, Feb 22, 2005 at 17:03:17 (EST)

Emma -:- Big Oil and Alaska -:- Tues, Feb 22, 2005 at 12:31:32 (EST)

johnny5 -:- Raymond James being sued by the SEC -:- Tues, Feb 22, 2005 at 11:46:31 (EST)

Emma -:- Latin America Fails On Basic Needs -:- Tues, Feb 22, 2005 at 10:10:46 (EST)
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Emma -:- Latin America Fails On Basic Needs - 1 -:- Tues, Feb 22, 2005 at 10:11:34 (EST)

Emma -:- Japan's Ties to China -:- Tues, Feb 22, 2005 at 10:08:28 (EST)

Emma -:- The Dollar -:- Tues, Feb 22, 2005 at 06:12:15 (EST)
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Emma -:- Transition -:- Tues, Feb 22, 2005 at 06:34:10 (EST)
__ Pete Weis -:- Free Riders -:- Tues, Feb 22, 2005 at 10:09:23 (EST)
___ Pancho Villa alias El Gringo -:- Re: China urged to drop dollar peg -:- Tues, Feb 22, 2005 at 14:12:50 (EST)
____ Pete Weis -:- Dollar strain worsening -:- Tues, Feb 22, 2005 at 15:12:31 (EST)
_____ johnny5 -:- China no like Soros -:- Tues, Feb 22, 2005 at 15:42:18 (EST)

Pancho Villa -:- Confidence, the J(LO)-Curve(s), and ... -:- Mon, Feb 21, 2005 at 20:23:29 (EST)
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Emma -:- Where and When -:- Tues, Feb 22, 2005 at 08:25:57 (EST)
__ Pancho Villa alias Gringo -:- Re: Where and When -:- Tues, Feb 22, 2005 at 09:21:18 (EST)
___ johnny5 -:- Re: Where and When -:- Tues, Feb 22, 2005 at 09:44:38 (EST)

johnny5 -:- China Credit crunch coming? -:- Mon, Feb 21, 2005 at 19:36:48 (EST)

Terri -:- On Hedge Fund Management -:- Mon, Feb 21, 2005 at 18:08:33 (EST)

johnny5 -:- lawyers derivatives = FUN -:- Mon, Feb 21, 2005 at 17:58:06 (EST)

Pete Weis -:- We now invest in a very different... -:- Mon, Feb 21, 2005 at 17:39:34 (EST)
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johnny5 -:- Re: We now invest in a very different... -:- Tues, Feb 22, 2005 at 09:47:47 (EST)
_ Terri -:- Are Hedge Funds the Answer? -:- Mon, Feb 21, 2005 at 18:06:59 (EST)
__ johnny5 -:- Re: Are Hedge Funds the Answer? -:- Tues, Feb 22, 2005 at 13:44:21 (EST)
__ Pete Weis -:- Re: Are Hedge Funds the Answer? -:- Mon, Feb 21, 2005 at 22:25:55 (EST)
__ Terri -:- Alternate Indexes -:- Mon, Feb 21, 2005 at 18:27:54 (EST)
___ johnny5 -:- Turnover TOO HIGH -:- Tues, Feb 22, 2005 at 13:51:39 (EST)
Terri -:- Re: Alternate Indexes -:- Mon, Feb 21, 2005 at 18:36:37 (EST)

johnny5 -:- Shell had the BEST system EVER! -:- Mon, Feb 21, 2005 at 17:18:11 (EST)

johnny5 -:- Risk not important?? Huh? -:- Mon, Feb 21, 2005 at 16:22:50 (EST)
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Institutional Investor -:- Re: Risk not important?? Huh? -:- Mon, Feb 21, 2005 at 20:42:59 (EST)
__ johnny5 -:- Costs matter and there are no gaurantees -:- Mon, Feb 21, 2005 at 21:11:28 (EST)
_ Institutional Investor -:- Re: Risk not important?? Huh? -:- Mon, Feb 21, 2005 at 17:29:58 (EST)
__ johnny5 -:- Re: Risk not important?? Huh? -:- Mon, Feb 21, 2005 at 17:49:27 (EST)
_ johnny5 -:- Linkage - attribution - whats the difference? -:- Mon, Feb 21, 2005 at 16:36:44 (EST)

Saul Berger -:- The Social Security Scam fine tuning -:- Mon, Feb 21, 2005 at 14:35:38 (EST)

Emma -:- America's Senior Moment - Paul Krugman -:- Mon, Feb 21, 2005 at 14:06:16 (EST)
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Saul -:- Re: America's Senior Moment - Paul Krugman -:- Mon, Feb 21, 2005 at 14:33:30 (EST)
__ Jennifer -:- Paul Krugman's Review -:- Mon, Feb 21, 2005 at 19:21:02 (EST)

Setanta -:- Ten years after: Leeson looks back -:- Mon, Feb 21, 2005 at 13:42:15 (EST)
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johnny5 -:- Short memories -:- Mon, Feb 21, 2005 at 14:49:03 (EST)
_ johnny5 -:- Shiller advocated derivates for housing -:- Mon, Feb 21, 2005 at 14:31:57 (EST)
__ Setanta -:- Re: Shiller advocated derivates for housing -:- Tues, Feb 22, 2005 at 04:08:45 (EST)
___ johnny5 -:- What's in your wallet? -:- Tues, Feb 22, 2005 at 09:39:04 (EST)

Emma -:- The Alternative Minimum Tax -:- Mon, Feb 21, 2005 at 11:49:24 (EST)
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johnny5 -:- Blue States -:- Mon, Feb 21, 2005 at 14:23:02 (EST)

Setanta -:- The signs don't look good! -:- Mon, Feb 21, 2005 at 11:29:00 (EST)
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Ari -:- Is There Inflation? -:- Mon, Feb 21, 2005 at 11:40:25 (EST)
__ johnny5 -:- Re: Is There Inflation? -:- Mon, Feb 21, 2005 at 13:59:05 (EST)
__ Setanta -:- Re: Is There Inflation? -:- Mon, Feb 21, 2005 at 13:51:54 (EST)
___ Terri -:- Asset Inflation or General Inflation -:- Mon, Feb 21, 2005 at 14:10:29 (EST)
___ johnny5 -:- Re: Is There Inflation? -:- Mon, Feb 21, 2005 at 13:59:30 (EST)

Emma -:- Africans Entering America -:- Mon, Feb 21, 2005 at 11:09:22 (EST)

johnny5 -:- Buffet's WMD's -:- Mon, Feb 21, 2005 at 10:33:00 (EST)

Terri -:- Simple Sound Asset Allocation -:- Mon, Feb 21, 2005 at 10:15:27 (EST)
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johnny5 -:- Re: Simple Sound Asset Allocation -:- Mon, Feb 21, 2005 at 11:30:38 (EST)
__ Jennifer -:- Municipal Bonds -:- Mon, Feb 21, 2005 at 12:45:34 (EST)

johnny5 -:- Asset allocation increasing in stocks -:- Mon, Feb 21, 2005 at 06:22:16 (EST)

Terri -:- Sector Stock Indexes -:- Sun, Feb 20, 2005 at 21:00:55 (EST)

johnny5 -:- International asset allocation a waste? -:- Sun, Feb 20, 2005 at 17:07:56 (EST)
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Pete Weis -:- Focused Investment..... -:- Sun, Feb 20, 2005 at 19:31:02 (EST)
__ johnny5 -:- Re: Focused Investment..... -:- Mon, Feb 21, 2005 at 04:38:12 (EST)
__ Terri -:- GNMA and Value Stocks -:- Sun, Feb 20, 2005 at 20:54:39 (EST)
_ Terri -:- Re: International asset allocation a waste? -:- Sun, Feb 20, 2005 at 19:28:51 (EST)
__ johnny5 -:- Alpha and Omega -:- Mon, Feb 21, 2005 at 05:16:27 (EST)
___ Institutional Investor -:- Re: Alpha and Omega -:- Mon, Feb 21, 2005 at 10:57:08 (EST)
____ Terri -:- Nice Set of Posts -:- Mon, Feb 21, 2005 at 14:53:32 (EST)
____ johnny5 -:- Re: Alpha and Omega -:- Mon, Feb 21, 2005 at 12:45:44 (EST)
_____ Institutional Investor -:- Re: Alpha and Omega -:- Mon, Feb 21, 2005 at 12:56:10 (EST)
______ johnny5 -:- Re: Alpha and Omega -:- Mon, Feb 21, 2005 at 13:27:12 (EST)
_____ Institutional Investor -:- Re: Alpha and Omega -:- Mon, Feb 21, 2005 at 12:47:24 (EST)

Emma -:- Procter & Gamble Goes After Men -:- Sun, Feb 20, 2005 at 15:35:57 (EST)

johnny5 -:- Bogle makes me depressed -:- Sun, Feb 20, 2005 at 13:37:10 (EST)
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Terri -:- The Way to be Happy -:- Sun, Feb 20, 2005 at 14:51:51 (EST)
__ johnny5 -:- Re: The Way to be Happy -:- Sun, Feb 20, 2005 at 16:02:42 (EST)
___ Terri -:- Re: The Way to be Happy -:- Sun, Feb 20, 2005 at 16:32:59 (EST)
____ johnny5 -:- Re: The Way to be Happy -:- Sun, Feb 20, 2005 at 16:57:11 (EST)

Terri -:- When is a Stock Priced Well? -:- Sun, Feb 20, 2005 at 13:10:32 (EST)
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johnny5 -:- The UNIVERSAL hedging formula -:- Sun, Feb 20, 2005 at 14:22:32 (EST)

Emma -:- Real Estate Agents Represent Whom -:- Sun, Feb 20, 2005 at 11:13:53 (EST)
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Pete Weis -:- Re: Real Estate Agents Represent Whom -:- Sun, Feb 20, 2005 at 13:04:35 (EST)
__ Terri -:- Re: Real Estate Agents Represent Whom -:- Sun, Feb 20, 2005 at 14:23:09 (EST)

Emma -:- Japan's Puzzles -:- Sun, Feb 20, 2005 at 10:41:51 (EST)
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Pete Weis -:- Re: Japan's Puzzles -:- Sun, Feb 20, 2005 at 14:37:28 (EST)
__ johnny5 -:- Asset allocate out of the USA -:- Sun, Feb 20, 2005 at 14:44:46 (EST)
_ Emma -:- Paul Krugman on Japan's Economy -:- Sun, Feb 20, 2005 at 12:27:08 (EST)
_ johnny5 -:- Re: Japan's Puzzles -:- Sun, Feb 20, 2005 at 11:21:10 (EST)

Emma -:- Fruit and Big Macs? -:- Sun, Feb 20, 2005 at 10:28:05 (EST)

Emma -:- Bond Market Caution -:- Sun, Feb 20, 2005 at 09:34:16 (EST)

Emma -:- What Can We Learn From Japan -:- Sun, Feb 20, 2005 at 07:35:50 (EST)
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johnny5 -:- Re: What Can We Learn From Japan -:- Sun, Feb 20, 2005 at 08:23:16 (EST)

Emma -:- Could We Be Japan -:- Sun, Feb 20, 2005 at 07:34:39 (EST)
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johnny5 -:- We beat inflation uncle Al -:- Sun, Feb 20, 2005 at 09:24:10 (EST)
__ Terri -:- We Have Beaten Inflation -:- Sun, Feb 20, 2005 at 10:04:32 (EST)

Emma -:- What is Wrong With Japan -:- Sun, Feb 20, 2005 at 07:33:23 (EST)
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johnny5 -:- Post Bubble Dynamics -:- Sun, Feb 20, 2005 at 08:01:55 (EST)
__ Terri -:- On China -:- Sun, Feb 20, 2005 at 10:00:30 (EST)
___ johnny5 -:- Re: On China -:- Sun, Feb 20, 2005 at 10:51:28 (EST)
____ Terri -:- Why Comcast? -:- Sun, Feb 20, 2005 at 12:33:24 (EST)
_____ johnny5 -:- Re: Why Comcast? -:- Sun, Feb 20, 2005 at 14:31:54 (EST)
______ Terri -:- Re: Why Comcast? -:- Sun, Feb 20, 2005 at 19:32:24 (EST)

johnny5 -:- 1720 Carry Trade - Credit Ballooned? -:- Sat, Feb 19, 2005 at 15:53:12 (EST)
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Jennifer -:- Portfolio Allocation -:- Sat, Feb 19, 2005 at 18:14:32 (EST)
__ johnny5 -:- Re: Portfolio Allocation -:- Sat, Feb 19, 2005 at 19:20:47 (EST)
_ johnny5 -:- Yield Curve - low grade bonds -:- Sat, Feb 19, 2005 at 16:04:07 (EST)
__ Terri -:- Re: Yield Curve - low grade bonds -:- Sat, Feb 19, 2005 at 16:16:42 (EST)
___ johnny5 -:- Where is the cheap stuff? -:- Sat, Feb 19, 2005 at 16:36:13 (EST)
____ Terri -:- Re: Where is the cheap stuff? -:- Sat, Feb 19, 2005 at 17:05:25 (EST)
_____ johnny5 -:- Re: Where is the cheap stuff? -:- Sun, Feb 20, 2005 at 10:07:52 (EST)
______ Terri -:- Warren Buffett Invests -:- Sun, Feb 20, 2005 at 11:22:12 (EST)
_______ johnny5 -:- International Diversification -:- Sun, Feb 20, 2005 at 14:08:28 (EST)

Terri -:- Investing in Long Term Bonds Since 1973 -:- Sat, Feb 19, 2005 at 15:29:54 (EST)
_
johnny5 -:- SS asset allocation -:- Sun, Feb 20, 2005 at 15:43:29 (EST)
_ jimsum -:- Re: Investing in Long Term Bonds Since 1973 -:- Sat, Feb 19, 2005 at 18:40:21 (EST)
__ Terri -:- Many Happy Returns -:- Sat, Feb 19, 2005 at 20:31:38 (EST)
__ johnny5 -:- Re: Investing in Long Term Bonds Since 1973 -:- Sat, Feb 19, 2005 at 19:13:06 (EST)
___ Terri -:- Returns -:- Sat, Feb 19, 2005 at 20:36:12 (EST)

Terri -:- Fannie Mae and Freddie Mac -:- Sat, Feb 19, 2005 at 11:16:53 (EST)
_
Pete Weis -:- Transparent? -:- Sat, Feb 19, 2005 at 13:49:40 (EST)
__ Terri -:- Re: Transparent? -:- Sat, Feb 19, 2005 at 14:51:08 (EST)
___ johnny5 -:- Nobel Prize winners failed! -:- Sat, Feb 19, 2005 at 19:05:13 (EST)
____ Pete Weis -:- 'The Fall of Fannie Mae'.. -:- Sat, Feb 19, 2005 at 21:31:48 (EST)
_____ johnny5 -:- Re: 'The Fall of Fannie Mae'.. -:- Sun, Feb 20, 2005 at 06:47:45 (EST)

Emma -:- Business Leadership in China -:- Sat, Feb 19, 2005 at 10:43:19 (EST)

Emma -:- AIDS in South Africa -:- Sat, Feb 19, 2005 at 10:22:29 (EST)

Emma -:- An Indian Refinery -:- Fri, Feb 18, 2005 at 16:24:26 (EST)

Emma -:- India and China and Oil -:- Fri, Feb 18, 2005 at 15:53:59 (EST)
_
johnny5 -:- China is now worlds leading consumer -:- Fri, Feb 18, 2005 at 16:17:56 (EST)

Pancho Villa -:- 'Masters' or 'Servants'? -:- Fri, Feb 18, 2005 at 15:35:53 (EST)
_
Pete Weis -:- We yearn for respect from... -:- Fri, Feb 18, 2005 at 21:42:08 (EST)
__ Emma -:- Re: We yearn for respect from... -:- Sat, Feb 19, 2005 at 10:45:01 (EST)

Terri -:- We are Reminded Why Costs Matter -:- Fri, Feb 18, 2005 at 15:30:20 (EST)

Pete Weis -:- Peak conventional world oil..... -:- Fri, Feb 18, 2005 at 15:07:40 (EST)
_
johnny5 -:- Re: Peak conventional world oil..... -:- Fri, Feb 18, 2005 at 15:33:41 (EST)
__ Terri -:- Appreciate You Guys -:- Fri, Feb 18, 2005 at 21:13:03 (EST)

johnny5 -:- Vangaurd analyzes US asset allocation -:- Fri, Feb 18, 2005 at 12:39:07 (EST)

johnny5 -:- asset allocation MYTHS -:- Fri, Feb 18, 2005 at 12:36:39 (EST)

Emma -:- Blantyre, Malawi: AIDS and Custom -:- Fri, Feb 18, 2005 at 10:51:52 (EST)
_
Emma -:- Blantyre, Malawi: AIDS and Custom - 1 -:- Fri, Feb 18, 2005 at 10:53:02 (EST)

Pete Weis -:- One of the Fed's chief worries -:- Fri, Feb 18, 2005 at 10:27:36 (EST)
_
Pete Weis -:- Systemic risk -:- Fri, Feb 18, 2005 at 21:49:49 (EST)

Setanta -:- And the Lord did come across a T-Rex -:- Fri, Feb 18, 2005 at 10:15:58 (EST)
_
Emma -:- Re: And the Lord did come across a T-Rex -:- Fri, Feb 18, 2005 at 15:43:41 (EST)

Terri -:- Building a Bond Portfolio -:- Fri, Feb 18, 2005 at 07:22:34 (EST)
_
johnny5 -:- Where should londoners have invested 19th century? -:- Fri, Feb 18, 2005 at 10:18:50 (EST)
__ Terri -:- Where Should We Have Invested? -:- Fri, Feb 18, 2005 at 17:55:10 (EST)
_ Pete Weis -:- Re: Building a Bond Portfolio -:- Fri, Feb 18, 2005 at 10:18:02 (EST)
__ johnny5 -:- YESBUT -:- Fri, Feb 18, 2005 at 10:23:46 (EST)

Yann -:- Your opinion? -:- Fri, Feb 18, 2005 at 07:11:16 (EST)
_
Setanta -:- Re: Your opinion? -:- Fri, Feb 18, 2005 at 10:32:19 (EST)
__ Jennifer -:- Re: Your opinion? -:- Fri, Feb 18, 2005 at 15:41:23 (EST)

Terri -:- Stocks and Bonds -:- Fri, Feb 18, 2005 at 06:19:12 (EST)

Terri -:- The Modern Equity Premium -:- Fri, Feb 18, 2005 at 06:17:58 (EST)
_
johnny5 -:- 3.5%? -:- Fri, Feb 18, 2005 at 09:48:08 (EST)
__ Terri -:- Thank You Thank You -:- Fri, Feb 18, 2005 at 15:05:00 (EST)

Yann -:- Reviewing introductory economics -:- Fri, Feb 18, 2005 at 04:16:23 (EST)
_
johnny5 -:- Re: Reviewing introductory economics -:- Fri, Feb 18, 2005 at 09:25:52 (EST)
__ jimsum -:- Re: Reviewing introductory economics -:- Fri, Feb 18, 2005 at 13:53:12 (EST)
_ Setanta -:- Re: Reviewing introductory economics -:- Fri, Feb 18, 2005 at 04:37:31 (EST)
__ Yann -:- Re: Reviewing introductory economics -:- Fri, Feb 18, 2005 at 06:49:27 (EST)

Terri -:- Stocks and Currency Movements -:- Thurs, Feb 17, 2005 at 20:56:21 (EST)
_
johnny5 -:- Re: Stocks and Currency Movements -:- Fri, Feb 18, 2005 at 01:42:41 (EST)

Terri -:- International Bonds -:- Thurs, Feb 17, 2005 at 11:41:27 (EST)
_
johnny5 -:- Re: International Bonds -:- Thurs, Feb 17, 2005 at 14:24:42 (EST)
__ Terri -:- Energy and Materials -:- Thurs, Feb 17, 2005 at 17:53:23 (EST)

A. Lee Biggs -:- news -:- Thurs, Feb 17, 2005 at 11:35:27 (EST)

Pete Weis -:- Pushing on a string? -:- Thurs, Feb 17, 2005 at 10:14:43 (EST)
_
Emma -:- Re: Pushing on a string? -:- Thurs, Feb 17, 2005 at 12:33:51 (EST)

Emma -:- Is Self-Interest the Sole Motivator? -:- Thurs, Feb 17, 2005 at 10:09:40 (EST)
_
Setanta -:- Re: Is Self-Interest the Sole Motivator? -:- Thurs, Feb 17, 2005 at 12:45:08 (EST)
__ Paul G. Brown -:- Re: Is Self-Interest the Sole Motivator? -:- Thurs, Feb 17, 2005 at 14:09:13 (EST)
___ Emma -:- Re: Is Self-Interest the Sole Motivator? -:- Thurs, Feb 17, 2005 at 14:17:50 (EST)
____ Setanta -:- Re: Is Self-Interest the Sole Motivator? -:- Fri, Feb 18, 2005 at 04:18:15 (EST)
_____ Emma -:- We Must Think -:- Fri, Feb 18, 2005 at 14:54:42 (EST)

Setanta -:- Make your mind up - are you a YesBut -:- Thurs, Feb 17, 2005 at 09:51:15 (EST)
_
johnny5 -:- Absorbed by the State -:- Thurs, Feb 17, 2005 at 10:58:28 (EST)
_ Jennifer -:- Re: Make your mind up - are you a YesBut -:- Thurs, Feb 17, 2005 at 10:06:59 (EST)
__ Setanta -:- Re: Make your mind up - are you a YesBut -:- Thurs, Feb 17, 2005 at 12:40:22 (EST)
___ Jennifer -:- Re: Make your mind up - are you a YesBut -:- Thurs, Feb 17, 2005 at 12:56:44 (EST)

Terri -:- Financial Companies Abroad -:- Thurs, Feb 17, 2005 at 07:26:33 (EST)

Terri -:- Hedging With Stocks or Bonds -:- Thurs, Feb 17, 2005 at 07:19:35 (EST)

Terri -:- TIPS -:- Thurs, Feb 17, 2005 at 06:10:32 (EST)
_
David E.. -:- Understanding TIPS -:- Thurs, Feb 17, 2005 at 18:29:10 (EST)

Terri -:- European Bonds or Stocks? -:- Thurs, Feb 17, 2005 at 05:49:42 (EST)
_
Pete Weis -:- Stocks less risky? -:- Thurs, Feb 17, 2005 at 09:56:29 (EST)
__ Pete Weis -:- Correction! -:- Thurs, Feb 17, 2005 at 09:58:32 (EST)
___ Terri -:- European Stocks or Euros? -:- Thurs, Feb 17, 2005 at 12:40:54 (EST)
____ Pete Weis -:- Don't understand -:- Thurs, Feb 17, 2005 at 15:14:36 (EST)
_____ Terri -:- Important -:- Thurs, Feb 17, 2005 at 20:51:01 (EST)
______ Terrell -:- Re: Important -:- Thurs, Feb 17, 2005 at 23:10:20 (EST)
_______ Terrell -:- Re: Important -:- Fri, Feb 18, 2005 at 12:57:11 (EST)
_______ Terri -:- Re: Important -:- Fri, Feb 18, 2005 at 06:25:47 (EST)
________ Terri -:- Re: Important -:- Fri, Feb 18, 2005 at 14:52:41 (EST)
_______ johnny5 -:- Dollar has fallen 50% -:- Fri, Feb 18, 2005 at 01:38:48 (EST)
________ Setanta -:- Re: Dollar has fallen 50% -:- Fri, Feb 18, 2005 at 05:34:52 (EST)
_________ johnny5 -:- Re: Dollar has fallen 50% -:- Fri, Feb 18, 2005 at 07:06:19 (EST)
__________ Terri -:- Re: Dollar has fallen 50% -:- Fri, Feb 18, 2005 at 10:46:55 (EST)

Terri -:- Duration and Convexity -:- Thurs, Feb 17, 2005 at 05:43:49 (EST)
_
Terri -:- Convexity Measures -:- Thurs, Feb 17, 2005 at 05:56:19 (EST)

johnny5 -:- Germany and Japan—shrinking giants -:- Thurs, Feb 17, 2005 at 03:14:32 (EST)
_
Terri -:- Re: Germany and Japan—shrinking giants -:- Thurs, Feb 17, 2005 at 17:57:13 (EST)
_ johnny5 -:- The fall of the middle class -:- Thurs, Feb 17, 2005 at 04:51:15 (EST)

Terri -:- Understanding Alan Greenspan -:- Wed, Feb 16, 2005 at 20:39:16 (EST)
_
David E.. -:- Many people are troubled by Greenspan -:- Wed, Feb 16, 2005 at 22:11:26 (EST)

Terri -:- Risk and Duration -:- Wed, Feb 16, 2005 at 20:26:36 (EST)
_
David E.. -:- Re: Risk and Duration -:- Wed, Feb 16, 2005 at 21:50:33 (EST)
__ Terri -:- Re: Risk and Duration -:- Thurs, Feb 17, 2005 at 06:01:04 (EST)
__ Pete Weis -:- US bonds = losses -:- Wed, Feb 16, 2005 at 22:22:08 (EST)
___ Terri -:- Re: US bonds = losses -:- Thurs, Feb 17, 2005 at 06:03:14 (EST)
____ Pete Weis -:- Re: US bonds = losses -:- Thurs, Feb 17, 2005 at 09:09:40 (EST)
_____ jimsum -:- Re: US bonds = losses -:- Thurs, Feb 17, 2005 at 20:40:09 (EST)
______ Terri -:- Canada and Australia -:- Thurs, Feb 17, 2005 at 20:53:46 (EST)
_____ Terri -:- Re: US bonds = losses -:- Thurs, Feb 17, 2005 at 11:43:45 (EST)

Terri -:- What is Systemic Risk? -:- Wed, Feb 16, 2005 at 19:01:55 (EST)
_
David E.. -:- Re: What is Systemic Risk? -:- Wed, Feb 16, 2005 at 22:09:41 (EST)
_ Terri -:- On Systemic Risk -:- Wed, Feb 16, 2005 at 19:51:49 (EST)

Emma -:- Bond Supply and Demand -:- Wed, Feb 16, 2005 at 14:21:20 (EST)
_
David E.. -:- Supply of Long Term bonds -:- Wed, Feb 16, 2005 at 22:23:37 (EST)
_ Pete Weis -:- Demand is for short term -:- Wed, Feb 16, 2005 at 17:26:24 (EST)
__ Terri -:- Re: Demand is for short term -:- Wed, Feb 16, 2005 at 19:05:49 (EST)

Emma -:- John Kenneth Galbraith -:- Wed, Feb 16, 2005 at 12:11:37 (EST)
_
Pete Weis -:- Great look back in time... -:- Thurs, Feb 17, 2005 at 09:15:44 (EST)
__ Jennifer -:- Re: Great look back in time... -:- Thurs, Feb 17, 2005 at 12:57:31 (EST)

Terri -:- Rougher Bond Markets? -:- Wed, Feb 16, 2005 at 10:54:41 (EST)

johnny5 -:- new nuclear energy -:- Wed, Feb 16, 2005 at 10:13:01 (EST)
_
Emma -:- Re: new nuclear energy -:- Thurs, Feb 17, 2005 at 18:02:44 (EST)

johnny5 -:- The face that launched a thousand ships -:- Wed, Feb 16, 2005 at 09:16:52 (EST)

johnny5 -:- Debt is killing the poor -:- Wed, Feb 16, 2005 at 08:05:39 (EST)

Terri -:- Japan in Recession -:- Wed, Feb 16, 2005 at 07:25:07 (EST)
_
Peter Weis -:- Germany is near recession -:- Wed, Feb 16, 2005 at 22:30:08 (EST)

Emma -:- South Korea's 'Sea Women' -:- Tues, Feb 15, 2005 at 15:57:07 (EST)

Emma -:- China INC. -:- Tues, Feb 15, 2005 at 14:06:38 (EST)
_
Diogenes -:- Re: The giant's feet of clay -:- Wed, Feb 16, 2005 at 16:42:58 (EST)

Emma -:- Mongolia: E for Engllish F for Future -:- Tues, Feb 15, 2005 at 13:42:54 (EST)
_
Emma -:- Mongolia: E for Engllish F for Future - 1 -:- Tues, Feb 15, 2005 at 13:43:17 (EST)

jimsum -:- The start of a trade war? -:- Tues, Feb 15, 2005 at 13:40:24 (EST)

Terri -:- Stocks and Bonds -:- Tues, Feb 15, 2005 at 11:31:46 (EST)

Pancho Villa -:- Roubini on The Bush Budget (Part X^x) -:- Tues, Feb 15, 2005 at 10:20:59 (EST)
_
Jennifer -:- Re: Roubini on The Bush Budget (Part X^x) -:- Tues, Feb 15, 2005 at 12:49:42 (EST)

Pancho Villa -:- Aye Aye Mister Nye -:- Tues, Feb 15, 2005 at 10:11:51 (EST)

johnny5 -:- 100 times fatality rate -:- Tues, Feb 15, 2005 at 08:53:23 (EST)

Setanta -:- Demographic Trends & Economic Indicators -:- Tues, Feb 15, 2005 at 04:29:39 (EST)
_
johnny5 -:- Re: Demographic Trends & Economic Indicators -:- Tues, Feb 15, 2005 at 09:30:30 (EST)
__ jimsum -:- Re: Demographic Trends & Economic Indicators -:- Tues, Feb 15, 2005 at 17:58:31 (EST)
___ Terri -:- Re: Demographic Trends & Economic Indicators -:- Tues, Feb 15, 2005 at 19:31:08 (EST)
__ Jennifer -:- Re: Demographic Trends & Economic Indicators -:- Tues, Feb 15, 2005 at 12:51:16 (EST)

Emma -:- How the Irish Paved Civilization -:- Mon, Feb 14, 2005 at 13:50:50 (EST)

Emma -:- Environmental Violence in Brazil -:- Mon, Feb 14, 2005 at 12:08:08 (EST)

Emma -:- A Philosopher's Inquiry -:- Mon, Feb 14, 2005 at 11:51:35 (EST)

Emma -:- The Public Thinker -:- Mon, Feb 14, 2005 at 11:35:02 (EST)
_
johnny5 -:- Re: The Public Thinker -:- Tues, Feb 15, 2005 at 10:43:15 (EST)

Emma -:- The Importance of Being Earnest -:- Mon, Feb 14, 2005 at 11:29:41 (EST)

Terri -:- Productivity and Economic Growth -:- Mon, Feb 14, 2005 at 10:56:51 (EST)
_
Terri -:- Productivity and Excess -:- Mon, Feb 14, 2005 at 11:22:50 (EST)

Terri -:- Projection of S&P Returns -:- Mon, Feb 14, 2005 at 07:18:58 (EST)
_
Pete Weis -:- Re: Projection of S&P Returns -:- Mon, Feb 14, 2005 at 10:29:21 (EST)
__ Terri -:- Re: Projection of S&P Returns -:- Mon, Feb 14, 2005 at 13:20:29 (EST)
___ Pete Weis -:- Re: Projection of S&P Returns -:- Mon, Feb 14, 2005 at 15:11:26 (EST)
____ Terri -:- Conservative Projection -:- Mon, Feb 14, 2005 at 15:40:25 (EST)

Pete Weis -:- How does this affect US & ........ -:- Mon, Feb 14, 2005 at 00:02:50 (EST)
_
Terri -:- Re: How does this affect US & ........ -:- Mon, Feb 14, 2005 at 06:02:30 (EST)
__ Pete Weis -:- With the yen weakening... -:- Mon, Feb 14, 2005 at 09:27:45 (EST)
___ Terri -:- Japan Can Buy US Debt -:- Mon, Feb 14, 2005 at 10:18:36 (EST)
____ Pete Weis -:- Re: Japan Can Buy US Debt -:- Mon, Feb 14, 2005 at 15:18:58 (EST)
_____ Terri -:- Re: Japan Can Buy US Debt -:- Mon, Feb 14, 2005 at 15:31:04 (EST)

Emma -:- Dustin Hoffman, 'Death of Salesman' -:- Sun, Feb 13, 2005 at 20:31:17 (EST)

Pete Weis -:- Interesting article from the past -:- Sun, Feb 13, 2005 at 20:26:18 (EST)

Emma -:- The Chinese Way to Brand Identity -:- Sun, Feb 13, 2005 at 18:42:16 (EST)
_
johnny5 -:- Re: The Chinese Way to Brand Identity -:- Sun, Feb 13, 2005 at 19:48:03 (EST)

Emma -:- Fat Substitute Out of the Kitchen -:- Sun, Feb 13, 2005 at 18:24:26 (EST)

Emma -:- Arthur Miller on Tianamen -:- Sun, Feb 13, 2005 at 17:22:38 (EST)

Emma -:- Attention Must Be Paid -:- Sun, Feb 13, 2005 at 17:10:53 (EST)
_
johnny5 -:- Re: Attention Must Be Paid -:- Sun, Feb 13, 2005 at 19:03:14 (EST)
__ Jennifer -:- Re: Attention Must Be Paid -:- Sun, Feb 13, 2005 at 19:38:02 (EST)

Pete Weis -:- Ghawar -:- Sun, Feb 13, 2005 at 14:35:01 (EST)
_
johnny5 -:- Is there enough for us all? -:- Sun, Feb 13, 2005 at 20:01:19 (EST)

Emma -:- Foreign Aid? -:- Sun, Feb 13, 2005 at 10:35:45 (EST)
_
johnny5 -:- Re: Foreign Aid? -:- Sun, Feb 13, 2005 at 19:18:44 (EST)
_ Pete Weis -:- Re: Foreign Aid? -:- Sun, Feb 13, 2005 at 12:44:13 (EST)
__ Emma -:- Re: Foreign Aid? -:- Sun, Feb 13, 2005 at 17:11:24 (EST)

johnny5 -:- C-Span Broadcast - Economic Hit Man -:- Sat, Feb 12, 2005 at 17:21:01 (EST)

Katie -:- Oil and Debt -:- Sat, Feb 12, 2005 at 17:20:06 (EST)
_
Setanta -:- Re: Oil and Debt -:- Mon, Feb 14, 2005 at 11:51:43 (EST)
__ Pete Weis -:- My read of this is different -:- Mon, Feb 14, 2005 at 21:51:50 (EST)
___ Setanta -:- Re: My read of this is different -:- Tues, Feb 15, 2005 at 05:53:29 (EST)
____ Pete Weis -:- Re: My read of this is different -:- Tues, Feb 15, 2005 at 09:31:19 (EST)
__ Emma -:- The Irish -:- Mon, Feb 14, 2005 at 12:44:58 (EST)
__ Setanta -:- Re: Oil and Debt -:- Mon, Feb 14, 2005 at 12:05:12 (EST)
_ Pete Weis -:- Very important post -:- Sun, Feb 13, 2005 at 13:43:30 (EST)
__ Tom -:- Re: Very important post -:- Mon, Feb 14, 2005 at 06:02:44 (EST)
___ Jennifer -:- Re: Very important post -:- Mon, Feb 14, 2005 at 11:00:56 (EST)

Emma -:- India's Infrastructure -:- Sat, Feb 12, 2005 at 17:15:31 (EST)

Emma -:- Arthur Miller: An Appreciation -:- Sat, Feb 12, 2005 at 11:39:39 (EST)

Emma -:- Sweden's Take on Private Pensions -:- Sat, Feb 12, 2005 at 10:33:49 (EST)
_
Emma -:- Sweden's Take on Private Pensions - 1 -:- Sat, Feb 12, 2005 at 10:34:12 (EST)

Emma -:- Big Oil's Cash Burden -:- Sat, Feb 12, 2005 at 10:03:27 (EST)
_
Emma -:- Big Oil's Cash Burden - 1 -:- Sat, Feb 12, 2005 at 10:03:57 (EST)

Terri -:- The Dollar -:- Sat, Feb 12, 2005 at 06:45:45 (EST)

Emma -:- A New Deal Legacy -:- Sat, Feb 12, 2005 at 05:59:45 (EST)

johnny5 -:- Fear of foreign currency debt overblown? -:- Sat, Feb 12, 2005 at 03:22:31 (EST)
_
johnny5 -:- Re: Fear of foreign currency debt overblown? -:- Sat, Feb 12, 2005 at 03:53:29 (EST)

johnny5 -:- Dow 30 returns for foreigners -:- Sat, Feb 12, 2005 at 01:50:10 (EST)

Terri -:- Projections for Stocks and Bonds -:- Fri, Feb 11, 2005 at 17:26:58 (EST)
_
Pete Weis -:- what's your dollar projection? -:- Fri, Feb 11, 2005 at 21:07:25 (EST)
__ Terri -:- Decline Decline -:- Fri, Feb 11, 2005 at 21:19:26 (EST)
___ Terri -:- Re: Decline Decline -:- Fri, Feb 11, 2005 at 22:06:40 (EST)
_ Terri -:- Projections for Stocks and Bonds - 1 -:- Fri, Feb 11, 2005 at 17:27:32 (EST)

Opine_Man -:- Column from Friday Feb 11 -:- Fri, Feb 11, 2005 at 17:02:29 (EST)
_
Paul G. Brown -:- Re: Column from Friday Feb 11 -:- Fri, Feb 11, 2005 at 17:14:40 (EST)

Terri -:- Worries and Proportion -:- Fri, Feb 11, 2005 at 16:09:14 (EST)

Terri -:- Alan Greenspan's Messages -:- Fri, Feb 11, 2005 at 13:54:31 (EST)
_
Terri -:- Political Reality? -:- Fri, Feb 11, 2005 at 13:55:11 (EST)

Terri -:- Profits versus Wages -:- Fri, Feb 11, 2005 at 11:53:49 (EST)

Emma -:- Marketing of Vioxx -:- Fri, Feb 11, 2005 at 10:34:55 (EST)
_
Emma -:- Marketing of Vioxx - 1 -:- Fri, Feb 11, 2005 at 10:35:32 (EST)

Terri -:- Why we Invest -:- Fri, Feb 11, 2005 at 07:21:30 (EST)

Terri -:- Bonds and Dividends -:- Fri, Feb 11, 2005 at 06:21:35 (EST)
_
Terri -:- Stocks and Interest -:- Fri, Feb 11, 2005 at 07:25:12 (EST)

johnny5 -:- The end of the Oil Standard -:- Thurs, Feb 10, 2005 at 22:44:44 (EST)

Terri -:- China, India Move Closer in Trade -:- Thurs, Feb 10, 2005 at 20:54:01 (EST)
_
johnny5 -:- Re: China, India Move Closer in Trade -:- Fri, Feb 11, 2005 at 01:03:31 (EST)
__ Jennifer -:- Economic and Social Partners -:- Fri, Feb 11, 2005 at 09:59:25 (EST)
___ Ari -:- Re: Economic and Social Partners -:- Fri, Feb 11, 2005 at 11:09:06 (EST)
____ johnny5 -:- Profit on the backs of slaves -:- Fri, Feb 11, 2005 at 18:35:18 (EST)

Terri -:- Alan Greenspan -:- Thurs, Feb 10, 2005 at 19:47:33 (EST)

Emma -:- Medicare Costs -:- Thurs, Feb 10, 2005 at 17:41:47 (EST)

Dorian -:- Low-cost real estate as hedge -:- Thurs, Feb 10, 2005 at 16:49:26 (EST)
_
johnny5 -:- Re: Low-cost real estate as hedge -:- Thurs, Feb 10, 2005 at 17:27:48 (EST)
_ Terri -:- Re: Low-cost real estate as hedge -:- Thurs, Feb 10, 2005 at 17:14:10 (EST)

Emma -:- Sticker Shock on Appliances -:- Thurs, Feb 10, 2005 at 13:21:18 (EST)

Pete Weis -:- Out of whack -:- Thurs, Feb 10, 2005 at 12:44:33 (EST)

Emma -:- Diamonds and Competition are Forever -:- Thurs, Feb 10, 2005 at 10:54:43 (EST)

Emma -:- Wal-Mart and Unions and Canada -:- Thurs, Feb 10, 2005 at 10:20:53 (EST)

Mik -:- North Korea announces it has nuclear weapons -:- Thurs, Feb 10, 2005 at 09:41:37 (EST)
_
Setanta -:- Re: North Korea announces it has nuclear weapons -:- Fri, Feb 11, 2005 at 04:05:40 (EST)
__ Emma -:- Re: North Korea announces it has nuclear weapons -:- Fri, Feb 11, 2005 at 15:06:58 (EST)
__ Mik -:- Re: North Korea announces it has nuclear weapons -:- Fri, Feb 11, 2005 at 11:52:31 (EST)
___ Emma -:- America and China -:- Fri, Feb 11, 2005 at 15:10:23 (EST)
_ David E.. -:- Miserable Failure n/m -:- Thurs, Feb 10, 2005 at 11:43:38 (EST)

Jennifer -:- Happiness is Bond Funds -:- Thurs, Feb 10, 2005 at 08:47:32 (EST)

Ari -:- Mississipppi as a Model -:- Thurs, Feb 10, 2005 at 06:10:35 (EST)

Ari -:- Emerging Markets -:- Thurs, Feb 10, 2005 at 05:57:30 (EST)
_
johnny5 -:- Re: Emerging Markets -:- Thurs, Feb 10, 2005 at 22:06:25 (EST)

Terri -:- Accounting Accounting -:- Wed, Feb 09, 2005 at 11:22:28 (EST)

Terri -:- The Risk of Hard Landing in 2005-2006 -:- Wed, Feb 09, 2005 at 11:09:34 (EST)
_
Pete Weis -:- A view of the forest..... -:- Wed, Feb 09, 2005 at 14:59:13 (EST)
__ Pete Weis -:- A little more of the forest -:- Wed, Feb 09, 2005 at 15:18:58 (EST)
___ johnny5 -:- Re: A little more of the forest -:- Wed, Feb 09, 2005 at 23:03:00 (EST)
____ Jennifer -:- Re: A little more of the forest -:- Thurs, Feb 10, 2005 at 20:46:10 (EST)

Emma -:- Retirement Benefits Dwindle -:- Wed, Feb 09, 2005 at 09:53:34 (EST)
_
Emma -:- Stock Index Returns -:- Thurs, Feb 10, 2005 at 13:29:38 (EST)
_ johnny5 -:- What if you privatized in 1969? -:- Thurs, Feb 10, 2005 at 00:19:28 (EST)
__ Ari -:- Re: What if you privatized in 1969? -:- Thurs, Feb 10, 2005 at 07:19:58 (EST)
___ David E.. -:- No distortion -:- Thurs, Feb 10, 2005 at 11:54:18 (EST)
____ Ari -:- Distortion -:- Thurs, Feb 10, 2005 at 15:46:35 (EST)
_____ David E.. -:- Re: Distortion -:- Thurs, Feb 10, 2005 at 17:45:50 (EST)
______ johnny5 -:- Phantom gains due to inflation -:- Thurs, Feb 10, 2005 at 20:18:13 (EST)
_______ David E.. -:- Re: Phantom gains due to inflation -:- Fri, Feb 11, 2005 at 15:07:56 (EST)
________ Terri -:- Re: Phantom gains due to inflation -:- Fri, Feb 11, 2005 at 15:37:04 (EST)
______ Terri -:- Re: Distortion -:- Thurs, Feb 10, 2005 at 19:04:58 (EST)
__ johnny5 -:- Re: What if you privatized in 1969? -:- Thurs, Feb 10, 2005 at 00:24:31 (EST)
_ Emma -:- Retirement Benefits Dwindle - 1 -:- Wed, Feb 09, 2005 at 09:54:24 (EST)
__ Emma -:- Retirement Benefits Dwindle - 2 -:- Wed, Feb 09, 2005 at 09:54:45 (EST)

Emma -:- Medicare's Drug Benefit Cost -:- Wed, Feb 09, 2005 at 09:49:04 (EST)

Terri -:- Long Term Interest Rates -:- Wed, Feb 09, 2005 at 06:24:05 (EST)
_
RL -:- Re: Long Term Interest Rates -:- Wed, Feb 09, 2005 at 08:29:01 (EST)
__ Jennifer -:- Re: Long Term Interest Rates -:- Wed, Feb 09, 2005 at 09:41:30 (EST)

Terri -:- S&P Return History -:- Wed, Feb 09, 2005 at 06:09:41 (EST)

Terri -:- Summary Growth and Market Projections -:- Wed, Feb 09, 2005 at 05:59:27 (EST)
_
Jennifer -:- Re: Summary Growth and Market Projections -:- Wed, Feb 09, 2005 at 08:41:49 (EST)
__ Pete Weis -:- Risk? -:- Wed, Feb 09, 2005 at 09:28:49 (EST)
___ Terri -:- Re: Risk? -:- Wed, Feb 09, 2005 at 09:50:54 (EST)

James -:- looking for a Krugman reference -:- Tues, Feb 08, 2005 at 22:54:02 (EST)

Terri -:- The Sources of Stock Market Returns -:- Tues, Feb 08, 2005 at 20:33:01 (EST)
_
Terri -:- Possible Stock Market Returns -:- Tues, Feb 08, 2005 at 20:34:58 (EST)
__ Terri -:- Possible Stock Market Returns [cont.] -:- Tues, Feb 08, 2005 at 20:40:51 (EST)
___ Pete Weis -:- Just one problem -:- Tues, Feb 08, 2005 at 22:04:23 (EST)
____ Dorian -:- Re: Just one problem -:- Wed, Feb 09, 2005 at 07:19:29 (EST)
_____ Jennfier -:- Re: Just one problem -:- Wed, Feb 09, 2005 at 11:42:19 (EST)
______ Pete Weis -:- No need to worry..... -:- Wed, Feb 09, 2005 at 21:53:25 (EST)

John Trester -:- stocks and gambling -:- Tues, Feb 08, 2005 at 17:32:20 (EST)

Emma -:- Morgan Stanley -:- Tues, Feb 08, 2005 at 16:58:40 (EST)

Terri -:- Duration in Bond Funds -:- Tues, Feb 08, 2005 at 12:07:33 (EST)
_
Terri -:- Duration in Bond Funds [cont.] -:- Tues, Feb 08, 2005 at 12:37:37 (EST)

Emma -:- Dangerous Wall Street? -:- Tues, Feb 08, 2005 at 10:05:43 (EST)
_
Pete Weis -:- Corrupt Wall Street -:- Tues, Feb 08, 2005 at 15:11:02 (EST)
__ David E.. -:- Amen -:- Tues, Feb 08, 2005 at 20:11:51 (EST)

Emma -:- Dangerous Chinese Banking -:- Tues, Feb 08, 2005 at 09:58:58 (EST)

Pete Weis -:- America's last ownership society -:- Tues, Feb 08, 2005 at 09:58:20 (EST)
_
Terri -:- Re: America's last ownership society -:- Tues, Feb 08, 2005 at 16:33:29 (EST)

Terri -:- The Need for Bond Fund Income -:- Tues, Feb 08, 2005 at 06:18:22 (EST)
_
Jennifer -:- What Recourse? -:- Tues, Feb 08, 2005 at 07:23:16 (EST)
__ Pete Weis -:- The great conumdrum. nm -:- Tues, Feb 08, 2005 at 10:01:57 (EST)
___ Pete Weis -:- Re: The great conumdrum. nm -:- Tues, Feb 08, 2005 at 10:15:09 (EST)

Terri -:- Alternative Minimum Tax -:- Tues, Feb 08, 2005 at 05:48:21 (EST)
_
Terri -:- Revenue Problem -:- Tues, Feb 08, 2005 at 05:54:58 (EST)

Terri -:- Asian Bond Market Support -:- Tues, Feb 08, 2005 at 05:35:16 (EST)

Terri -:- Bond and Stocks -:- Tues, Feb 08, 2005 at 05:27:49 (EST)
_
jimsum -:- Re: Bond and Stocks -:- Tues, Feb 08, 2005 at 11:28:22 (EST)
__ Terri -:- Re: Bond and Stocks -:- Tues, Feb 08, 2005 at 12:10:40 (EST)

johnny5 -:- Economic Hit Man -:- Mon, Feb 07, 2005 at 18:45:23 (EST)
_
Terri -:- Re: Economic Hit Man -:- Mon, Feb 07, 2005 at 20:44:06 (EST)

Emma -:- A Debate on Environmentalism -:- Mon, Feb 07, 2005 at 18:43:26 (EST)

Emma -:- Trim Deficit? Only With Magic -:- Mon, Feb 07, 2005 at 10:56:51 (EST)

Pete Weis -:- The change in course of money... -:- Mon, Feb 07, 2005 at 10:24:59 (EST)
_
Terri -:- Adaptability -:- Mon, Feb 07, 2005 at 10:42:34 (EST)
__ Pete Weis -:- 'Pixie Dust' -:- Mon, Feb 07, 2005 at 15:17:18 (EST)
___ Terri -:- Possibly -:- Mon, Feb 07, 2005 at 18:19:39 (EST)

Pete Weis -:- Return of the 30's? -:- Sun, Feb 06, 2005 at 14:19:16 (EST)
_
Terri -:- Re: Return of the 30's? -:- Sun, Feb 06, 2005 at 20:42:21 (EST)
_ johnny5 -:- Re: Return of the 30's? -:- Sun, Feb 06, 2005 at 20:35:14 (EST)
__ Pete Weis -:- Re: Return of the 30's? -:- Mon, Feb 07, 2005 at 15:07:33 (EST)
__ johnny5 -:- Re: Return of the 30's? -:- Sun, Feb 06, 2005 at 20:42:35 (EST)

Emma -:- Dargon for Trade Eagle for Safety -:- Sun, Feb 06, 2005 at 14:02:38 (EST)
_
Emma -:- Dargon for Trade Eagle for Safety - 1 -:- Sun, Feb 06, 2005 at 14:02:59 (EST)

Emma -:- Jared Diamond on Ernst Mayr -:- Sun, Feb 06, 2005 at 12:59:27 (EST)

Emma -:- The Science of Biology -:- Sun, Feb 06, 2005 at 11:14:27 (EST)
_
Emma -:- Re: The Science of Biology -:- Sun, Feb 06, 2005 at 11:15:15 (EST)

Emma -:- Seeking to Cut Subsidies to Farmers -:- Sun, Feb 06, 2005 at 09:58:47 (EST)

Emma -:- If Profits Grow, How Can Market Sink? -:- Sun, Feb 06, 2005 at 09:49:40 (EST)

Emma -:- Biology of Race and Concept of Equality -:- Sun, Feb 06, 2005 at 07:34:38 (EST)
_
Emma -:- Re: Biology of Race and Concept of Equality -:- Sun, Feb 06, 2005 at 07:36:56 (EST)

Emma -:- Ernst Mayr -:- Sun, Feb 06, 2005 at 06:54:16 (EST)
_
Emma -:- Teaching -:- Sun, Feb 06, 2005 at 06:57:23 (EST)

Emma -:- Example -:- Sun, Feb 06, 2005 at 06:02:59 (EST)

Emma -:- It's Maybe a Selective Bubble -:- Sat, Feb 05, 2005 at 17:13:24 (EST)

Terri -:- Vanguard Returns -:- Sat, Feb 05, 2005 at 14:39:59 (EST)
_
Terri -:- Sector Indexes -:- Sat, Feb 05, 2005 at 17:23:53 (EST)

Emma -:- Carnival in Brazil: Work and Play -:- Sat, Feb 05, 2005 at 11:04:50 (EST)

Terri -:- Bearish or Bullish? -:- Sat, Feb 05, 2005 at 10:37:43 (EST)
_
Terri -:- Bearish or Bullish? [cont.] -:- Sat, Feb 05, 2005 at 10:39:26 (EST)
__ Pete Weis -:- S&P PE eventually below 10 -:- Sat, Feb 05, 2005 at 12:51:02 (EST)
___ Terri -:- Long Term Returns are Comforting -:- Sat, Feb 05, 2005 at 14:43:45 (EST)

Terri -:- Projecting Stock Market Returns -:- Sat, Feb 05, 2005 at 10:19:55 (EST)
_
Pete Weis -:- Re: Projecting Stock Market Returns -:- Sat, Feb 05, 2005 at 13:06:03 (EST)
__ Terri -:- Re: Projecting Stock Market Returns -:- Sat, Feb 05, 2005 at 14:20:54 (EST)

Emma -:- Greenspan Says Trade Gap May Narrow -:- Sat, Feb 05, 2005 at 10:06:08 (EST)

Terri -:- Alan Greenspan -:- Fri, Feb 04, 2005 at 19:10:57 (EST)
_
Pete Weis -:- Re: Alan Greenspan -:- Fri, Feb 04, 2005 at 21:03:15 (EST)
__ Terri -:- Monetary and Fiscal Policy -:- Sat, Feb 05, 2005 at 07:17:46 (EST)
___ Pete Weis -:- Re: Monetary and Fiscal Policy -:- Sat, Feb 05, 2005 at 12:26:02 (EST)
____ Terri -:- Re: Monetary and Fiscal Policy -:- Sat, Feb 05, 2005 at 14:45:12 (EST)

Terri -:- Stocks and Bonds -:- Fri, Feb 04, 2005 at 14:47:22 (EST)

Emma -:- California and Enron and Energy -:- Fri, Feb 04, 2005 at 11:52:51 (EST)
_
Emma -:- And Paul Krugman -:- Fri, Feb 04, 2005 at 12:02:09 (EST)
__ Jennifer -:- Lucky to Have PK -:- Fri, Feb 04, 2005 at 17:43:33 (EST)

Emma -:- California and Enron and Energy -:- Fri, Feb 04, 2005 at 11:52:13 (EST)
_
Rlease excuse -:- and remove duplicate post -:- Fri, Feb 04, 2005 at 12:03:47 (EST)

Terri -:- Jobs Jobs Jobs -:- Fri, Feb 04, 2005 at 10:16:07 (EST)

Mik -:- Attacking Iran is not on the Agenda -:- Fri, Feb 04, 2005 at 09:41:01 (EST)

Terri -:- Adding to the Government Deficit -:- Fri, Feb 04, 2005 at 07:22:35 (EST)
_
Terri -:- Setting Aside the New Deal -:- Fri, Feb 04, 2005 at 07:23:33 (EST)

Emma -:- Black Migration, Slave and Free -:- Thurs, Feb 03, 2005 at 20:36:29 (EST)

Terri -:- America's Economic Growth Rate? -:- Thurs, Feb 03, 2005 at 18:46:42 (EST)

Emma -:- Condo Fever -:- Thurs, Feb 03, 2005 at 14:31:42 (EST)
_
Emma -:- Condo Fever - 2 -:- Thurs, Feb 03, 2005 at 14:32:07 (EST)

Emma -:- German Joblessness Rises -:- Thurs, Feb 03, 2005 at 11:21:28 (EST)

Mona Smith -:- Social Security -:- Thurs, Feb 03, 2005 at 11:16:29 (EST)
_
Emma -:- Re: Social Security -:- Thurs, Feb 03, 2005 at 11:25:55 (EST)
__ Mona Smith -:- Re: Social Security -:- Thurs, Feb 03, 2005 at 16:02:15 (EST)
___ Nat -:- Re: Social Security -:- Thurs, Feb 03, 2005 at 19:47:49 (EST)
____ Terri -:- Drug Costs -:- Thurs, Feb 03, 2005 at 20:10:51 (EST)
___ Jennifer -:- Re: Social Security -:- Thurs, Feb 03, 2005 at 17:31:38 (EST)

Emma -:- How to Measure Poverty -:- Thurs, Feb 03, 2005 at 11:11:19 (EST)

Emma -:- China to Cut Taxes on Farmers -:- Thurs, Feb 03, 2005 at 10:53:57 (EST)
_
Emma -:- China to Cut Taxes on Farmers - 2 -:- Thurs, Feb 03, 2005 at 10:54:23 (EST)

Pete Weis -:- Nothing has changed -:- Wed, Feb 02, 2005 at 21:26:36 (EST)
_
Terri -:- Re: Nothing has changed -:- Thurs, Feb 03, 2005 at 21:28:18 (EST)

Terri -:- The Bull Market in Long Term Bonds -:- Wed, Feb 02, 2005 at 18:20:38 (EST)
_
Terri -:- International Stock Markets -:- Wed, Feb 02, 2005 at 19:55:41 (EST)

Emma -:- Medicaid Limits Asked -:- Wed, Feb 02, 2005 at 13:47:08 (EST)

Emma -:- Poor Old Ireland Rich New Ireland? -:- Wed, Feb 02, 2005 at 11:37:52 (EST)
_
Setanta -:- Re: Poor Old Ireland Rich New Ireland? -:- Thurs, Feb 03, 2005 at 04:52:51 (EST)
__ Terri -:- Mortgage Rate? -:- Thurs, Feb 03, 2005 at 20:07:34 (EST)
___ Setanta -:- Re: Mortgage Rate? -:- Fri, Feb 04, 2005 at 04:54:42 (EST)
____ Emma -:- Re: Mortgage Rate? -:- Fri, Feb 04, 2005 at 11:44:34 (EST)
____ Terri -:- Re: Mortgage Rate? -:- Fri, Feb 04, 2005 at 07:27:46 (EST)
__ Terri -:- Re: Poor Old Ireland Rich New Ireland? -:- Thurs, Feb 03, 2005 at 10:02:13 (EST)
___ Emma -:- Re: Poor Old Ireland Rich New Ireland? -:- Thurs, Feb 03, 2005 at 11:08:09 (EST)

Emma -:- Oil Industry Mergers? -:- Wed, Feb 02, 2005 at 11:11:37 (EST)

Emma -:- Accents of Africa: Outsourcing -:- Wed, Feb 02, 2005 at 10:41:55 (EST)
_
Emma -:- Accents of Africa: Outsourcing - 2 -:- Wed, Feb 02, 2005 at 10:42:43 (EST)

Emma -:- China and Russia and Oil -:- Wed, Feb 02, 2005 at 10:25:04 (EST)
_
Emma -:- China and Russia and Oil - 2 -:- Wed, Feb 02, 2005 at 11:07:10 (EST)

Pete Weis -:- Of musical chairs & hot potatoes -:- Wed, Feb 02, 2005 at 10:23:48 (EST)
_
Terri -:- Re: Of musical chairs & hot potatoes -:- Wed, Feb 02, 2005 at 15:02:44 (EST)

Terri -:- Stocks for the Long Run -:- Wed, Feb 02, 2005 at 06:31:30 (EST)
_
Pete Weis -:- Re: Stocks for the Long Run -:- Wed, Feb 02, 2005 at 10:28:35 (EST)
__ Terri -:- Re: Stocks for the Long Run -:- Wed, Feb 02, 2005 at 11:44:23 (EST)
___ Pete Weis -:- You are my gauge -:- Wed, Feb 02, 2005 at 15:23:04 (EST)
____ Terri -:- The Gauge Gauges -:- Wed, Feb 02, 2005 at 17:40:40 (EST)
_____ Pete Weis -:- Re: The Gauge Gauges -:- Wed, Feb 02, 2005 at 19:25:49 (EST)
_ ? -:- Re: Stocks for the Long Run -:- Wed, Feb 02, 2005 at 07:26:28 (EST)
__ Terri -:- Paul Krugman's Return on Stocks -:- Wed, Feb 02, 2005 at 10:35:12 (EST)

Terri -:- Productivity and Social Security -:- Wed, Feb 02, 2005 at 05:22:25 (EST)

Emma -:- South Africa Earses a Racial Barrier -:- Tues, Feb 01, 2005 at 17:15:29 (EST)
_
Mik -:- Emma take alook at this -:- Thurs, Feb 03, 2005 at 14:23:00 (EST)
__ Emma -:- Re: Emma take alook at this -:- Thurs, Feb 03, 2005 at 16:25:34 (EST)

Jim -:- Privatization -:- Tues, Feb 01, 2005 at 16:28:25 (EST)
_
Erica -:- Tsk Tsk Tsk, That's personalization !!! -:- Wed, Feb 02, 2005 at 12:52:40 (EST)
_ Ari -:- Re: Privatization -:- Tues, Feb 01, 2005 at 21:29:36 (EST)

Emma -:- Hitting the Tax-Break Jackpot -:- Tues, Feb 01, 2005 at 13:02:57 (EST)

Pancho Villa(in) -:- Bush's Crash Test Dummies -:- Tues, Feb 01, 2005 at 07:28:29 (EST)
_
Setanta -:- Re: Bush's Crash Test Dummies -:- Tues, Feb 01, 2005 at 12:35:00 (EST)
_ Erica -:- Good quesiton Mr. Delong -:- Tues, Feb 01, 2005 at 09:43:04 (EST)
__ Erica -:- Re: Good quesiton Mr. Delong -:- Tues, Feb 01, 2005 at 10:02:15 (EST)
___ jimsum -:- Re: Good quesiton Mr. Delong -:- Tues, Feb 01, 2005 at 17:47:24 (EST)

Terri -:- Chile's Stock Market -:- Mon, Jan 31, 2005 at 18:18:26 (EST)
_
Jennifer -:- Re: Chile's Stock Market -:- Tues, Feb 01, 2005 at 07:20:40 (EST)
__ Pancho Villa -:- Re: OT, Jennifer -:- Tues, Feb 01, 2005 at 07:31:59 (EST)
___ Civil -:- Questions -:- Wed, Feb 02, 2005 at 10:56:25 (EST)

Emma -:- A New Direction for Unions? -:- Mon, Jan 31, 2005 at 17:28:12 (EST)
_
Emma -:- A New Direction for Unions? - 2 -:- Mon, Jan 31, 2005 at 17:45:27 (EST)
__ Emma -:- A New Direction for Unions? - 3 -:- Mon, Jan 31, 2005 at 17:46:03 (EST)
___ Emma -:- A New Direction for Unions? - 4 -:- Mon, Jan 31, 2005 at 21:43:24 (EST)
____ Emma -:- A New Direction for Unions? - 5 -:- Mon, Jan 31, 2005 at 21:44:11 (EST)

Emma -:- Federal Reserve to Raise Interest Rates -:- Mon, Jan 31, 2005 at 15:47:19 (EST)
_
Jennifer -:- Re: Federal Reserve to Raise Interest Rates -:- Tues, Feb 01, 2005 at 07:24:54 (EST)

Terri -:- US Tax Amnesty and the Dollar -:- Mon, Jan 31, 2005 at 12:56:02 (EST)

Emma -:- Employer Subsidies Lower Benefits -:- Mon, Jan 31, 2005 at 11:44:19 (EST)

Emma -:- China Starts to Give Girls Their Due -:- Mon, Jan 31, 2005 at 10:45:46 (EST)

Emma -:- International REITs -:- Sun, Jan 30, 2005 at 15:53:35 (EST)

Emma -:- Venezuela Land Reform -:- Sun, Jan 30, 2005 at 10:44:23 (EST)

Emma -:- China's Fear of Ghosts -:- Sun, Jan 30, 2005 at 10:06:09 (EST)
_
Emma -:- China's Martyr Complex -:- Sun, Jan 30, 2005 at 10:27:45 (EST)

Emma -:- Davos: The Enigma of China -:- Sun, Jan 30, 2005 at 09:54:28 (EST)

Emma -:- Age Bias at Work -:- Sun, Jan 30, 2005 at 09:44:56 (EST)

Emma -:- Changing Neighborhoods With Homes -:- Sun, Jan 30, 2005 at 09:29:55 (EST)

Dorian -:- Real estate prices -:- Sun, Jan 30, 2005 at 06:45:20 (EST)
_
Jennifer -:- Re: Real estate prices -:- Mon, Jan 31, 2005 at 08:45:46 (EST)
__ Pete Weis -:- real estate goes bust ..... -:- Tues, Feb 01, 2005 at 12:06:24 (EST)

Terri -:- Treasury Buying by Private Investors -:- Sat, Jan 29, 2005 at 19:37:44 (EST)
_
Terri -:- Bonds -:- Sat, Jan 29, 2005 at 20:02:58 (EST)
__ Terri -:- Corporate Savings -:- Sat, Jan 29, 2005 at 20:16:07 (EST)

Ed -:- Unemployment Rate -:- Sat, Jan 29, 2005 at 11:37:38 (EST)
_
Terri -:- Re: Unemployment Rate -:- Sat, Jan 29, 2005 at 13:47:53 (EST)
__ Ed -:- Re: Unemployment Rate -:- Sat, Jan 29, 2005 at 16:32:49 (EST)
___ Terri -:- Re: Unemployment Rate -:- Sat, Jan 29, 2005 at 17:20:58 (EST)

Emma -:- Congratulations -:- Sat, Jan 29, 2005 at 11:26:30 (EST)
_
Jennifer -:- Congratulations and Gift -:- Sat, Jan 29, 2005 at 16:12:00 (EST)
__ Bobby -:- Re: Congratulations and Gift -:- Sat, Jan 29, 2005 at 23:26:16 (EST)

Emma -:- A Merger in Search of a Home. Yours. -:- Sat, Jan 29, 2005 at 10:07:13 (EST)
_
Emma -:- A Merger in Search of a Home. Yours. - 2 -:- Sat, Jan 29, 2005 at 11:22:43 (EST)
__ Emma -:- A Merger in Search of a Home. Yours. - 3 -:- Sat, Jan 29, 2005 at 14:53:09 (EST)

Emma -:- Paul Krugman's Column Note -:- Sat, Jan 29, 2005 at 09:22:47 (EST)
_
Bobby -:- Re: Paul Krugman's Column Note -:- Sat, Jan 29, 2005 at 10:41:37 (EST)

Terri -:- Market Patterns -:- Sat, Jan 29, 2005 at 07:21:35 (EST)

Bobby -:- Message Board Cleaning -:- Sat, Jan 29, 2005 at 02:07:09 (EST)
_
Emma -:- Re: Message Board Cleaning -:- Sat, Jan 29, 2005 at 05:37:17 (EST)
_____ Bobby -:- Re: Message Board Cleaning -:- Sun, Feb 06, 2005 at 19:48:58 (EST)


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Subject: The Alpha Currency is the Dollar
From: Emma
To: All
Date Posted: Sun, Feb 27, 2005 at 14:37:19 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/27/business/yourmoney/27advi.html The Alpha Currency? It's Still the Dollar By WILLIAM J. HOLSTEIN FEARS that the dollar could go into a free fall because of big budget and trade deficits are overblown, says Henry Kaufman, known for his longtime work as an economist at Salomon Brothers, where he was often bearish about American economic prospects. Now 77, he is an independent consultant and is on the board of Lehman Brothers. Here are excerpts from a recent conversation: Q. As someone who has been bearish in general, why are you positive about the dollar? A. 'Positive' is a little bit of an overstatement. I believe the dollar will remain the key reserve currency for the foreseeable future. The United States is the dominant world power, and with world power goes leadership of the currency. If you go back to the British Empire or the Dutch or the Spanish, you'll find that world power also means a dominant currency. We have an economy that is performing far, far better than the other industrialized countries. Therefore, profits here are better than they are in most places around the world. Our interest rates are competitive. Q. But the Bush administration, despite some statements to the contrary, seems intent on expanding government deficits. Isn't that sending a bad signal? A. The immediate issue is, 'Who is going to finance the American budget deficit?' Let me give you a couple of numbers. Japan will continue to buy about $200 billion of U.S. government debt a year. They have a large export surplus to the United States. China, which also has a large surplus, will also probably buy about $100 billion. Thirdly, the Federal Reserve is a buyer for monetary reasons, and that will account for $50 billion to $75 billion. Lastly, other buyers have emerged over the past year, namely some of the oil-producing countries. The price of oil has increased very dramatically. That money cannot readily be spent by producers such as Saudi Arabia and Qatar. Therefore, you have to put them in for $50 billion to $75 billion of purchases of American securities. So there isn't very much left for the time being for domestic investors to finance. Q. But it appears there is a deeply felt sense in the administration that a cheap dollar will spur American economic growth and reduce the debt to the rest of the world. A. If it becomes an outspoken approach by the administration, that would be quite dangerous. Talking down your own currency when you're the key reserve currency and when you are dependent on foreign sources of money would ultimately create problems. The secretary of the Treasury, as well as the president, should always articulate that 'we are in favor of a stable currency.' They should never even whisper the idea that 'if the dollar goes down, that's all right with us.' Q. What do you think of the quotation attributed to Vice President Dick Cheney that 'Reagan proved deficits don't matter'? A. That is an incorrect observation by the vice president. Deficits do matter over the long term. There are times in the business cycle in which the U.S. Treasury competes very heavily against the private sector. When that occurs, it escalates interest rates. It puts pressure on inflation. It's a dangerous approach. Q. In its heart of hearts, do you think the Bush administration agrees with you? A. I think a number of people in the administration probably believe so. I believe a number of people in the Federal Reserve believe so. But whether the inner sanctum of the administration will say that a stable dollar is a key consideration, that may be questionable. We are just in a fortuitous situation today, meaning this year and probably next year, in which the size of the budget deficit doesn't matter for the immediate future. But ongoing budget deficits of this order of magnitude over time will matter. Q. A Chinese official was quoted as saying that his government was not happy with the dollar's weakness. Do you think the Chinese or Japanese could shift their holdings elsewhere? A. I doubt that very much. Both China and Japan are big exporters to the United States. I believe that the Chinese and Japanese, down deep, realize that if they shifted from the American dollar to the euro, it would endanger their export drive to the United States. Q. So what is your prognosis for the dollar? A. I think there is going to be reasonable stability with occasionally a little bit of a give in the value of the dollar. Q. Do you think a decline in the value of the dollar sharply stimulates our exports? A. I do not. It takes much longer this time around for the decline in the dollar to have a significant impact on our trade. It involves a number of countries such as India and China that provide goods and services to us at a very low labor cost. To turn that around, that will require a really significant decline in the value of the dollar. That's not about to happen. Q. In your lifetime, have you seen a time of such huge fiscal and trade imbalances? A. Not really. Today, there is an enormous international disequilibrium. For the near term, it is in the best interest of all the participants to maintain it. Q. What could trip that disequilibrium into an economic disaster for the United States? A. We could have a massive terrorist attack. The price of oil could ratchet very high. No. 3, if Europe and Japan lifted economic activity significantly, that would turn things around and put more pressure on the United States.

Subject: Hoyt Book for the history buffs
From: johnny5
To: All
Date Posted: Sun, Feb 27, 2005 at 14:35:55 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.beardbooks.com/one_hundred_years_of_land_values_in_chicago.html One Hundred Years of Land Values in Chicago: The Relationship of the Growth of Chicago to the Rise of Its Land Values, 1830-1933 By Homer Hoyt 2000/09 - Beard Books 1587980169 - Paperback - Reprint - 452 pp. US$34.95 A meaningful addition to the social and economic history of Chicago from 1830 to 1933. Category: Real Estate Early American Land Companies: Their Influence on Corporate Development Land Title Origins: A Tale of Force and Fraud From the back cover blurb: A source of invaluable data and analysis for students of urban land economics, One Hundred Years Of Land Values In Chicago was the first comprehensive study of land values in a large city over a long period of time. The author successfully wove in the social and economic history of Chicago as well. The book covers the years 1830-1933, a period of dizzying growth during which Chicago grew from a cluster of a dozen log huts at the site where the Chicago River meets Lake Michigan, to a booming city of 211 square miles and a population of almost 3.5 million. Over those hundred years, ground value grew from a few thousand dollars to more than $5 billion. What a century it was! Chicago rode a roller-coaster ride of the railroad boom, the Civil War, the Great Chicago Fire, the first skyscrapers, the First World's Fair, the First World War, and the Great Depression. The book is exhaustively researched, with 103 maps showing land values of specific sections in various years; the evolution of the railroad; the growth of public transportation (from horse car lines and street-car lines to elevated lines); sewer construction; the distribution of buildings of various heights; population densities; residential areas by predominant ethnic groups, among others. There are 103 data tables as well, including employment and wage figures; mortgage rates and amounts; property sales and rents; and various comparisons with cities of similar size. Review by Gail Owens Hoelscher From Turnarounds and Workouts, August 15, 2001 This book represents the first comprehensive study of land values in a large city over a long period of time. The author's goal was to trace cyclical fluctuation in land values in an American city, in the expectation of contributing to the policy debate on taxing real estate investments. He managed to achieve much more, however. Indeed from the viewpoint of land values, he offers a fascinating general history of Chicago through the early 1930s. He very skillfully interweaves the city's social and economic history into its land economic history and interprets the interrelationships among them. The book covers the years 1830-1933, a period of dizzying growth, during which time Chicago grew from a cluster of a dozen log huts at the site where the Chicago River meets Lake Michigan, to a booming city of 211 square miles and a population of almost 3.5 million. Over those hundred years, ground value grew from a few thousand dollars to more than $5 billion. And what a century it was, a roller coaster of the railroad boom, the Civil War, the Great Chicago Fire, the first skyscrapers, the first World's Fair, World War I and the Great Depression. The reader is immediately struck by the sheer size of the research project the author designed and undertook. He examined thousands of actual real estate sales and compared them with the appraisals and opinions of real estate dealers. He researched and had drawn 103 maps showing land values of specific sections of the city in various years; the evolution of the railroad; the growth of public transportation (from horse-car lines and street-car lines to elevated lines); sewer construction; the distribution of buildings of various heights; population densities; and residential areas by predominant ethnic group, among others. There are 103 data tables as well, including the value of various buildings in different years; construction of infrastructure; number and types of registered vehicles; employment and wages; mortgage rates and amounts; property sales and rents; and various comparisons with cities of similar size. The author defines a real estate cycle as 'the composite effect of the cyclical movements of a series of forces that are to a certain degree independent and yet which communicate impulses to each other in a time sequence, so that when the initial or primary factor appears it tends to set the others in motion in a definite order.' He found that in Chicago during the period studied, these forces, in the order in which they appeared , were population growth; rent levels, and operating costs of existing buildings and new construction; land values; and subdivision activity. He divides these forces into 20 'events,' all the way from the first, 'gross rents begin to rise rapidly;' through to the sixth, 'volume of building is stimulated by easy credit;' the eleventh, 'lavish expenditure for public improvements;' the seventeenth, 'banks reverse their boom policy on real estate,' leading to stagnation and foreclosures; the nineteenth, 'the wreckage is cleared away;' and finally, 'ready for another boom.' One Hundred Years of Land Values in Chicago is a source of invaluable data and analysis on the subject of urban land economics, and is equally fascinating from the standpoint of American history. The author notes that 'with all its kaleidoscopic neighborhoods and its babble of tongues... with all its rough edges and its bluntness, Chicago is a city with a unique and magnetic personality.' And well worth reading about. Homer Hoyt was one of the early well respected real estate theorists who developed the theory that communities will tend to grow toward their largest neighboring city, all other things being equal. My Hoyt was overjoyed with the application of his theory in a modern setting and donated funds to establish the Homer Hoyt Center at Florida State University, which is now known as the Homer Hoyt Program in Land Economics and Finance. List of Illustrations xxiii List of Tables xxvii Part I. History of the Relation of the Growth of Chicago to the Rise in its Land Values, 1830-1933 Chapter I. The Canal Land Boom, 1830-42 3 Chapter II. The Land Boom of the Railroad Era, 1843-62 45 Chapter III. The Land Boom That Followed a Panic, a Civil War, and a Great Fire, 1803-77 81 Chapter IV. The Land Boom of the First Skyscrapers and the First World's Fair, 1878-98 128 Chapter V. The Land Boom of a New Era That Followed a World War, 1898-1933 196 Part II. Analysis of the Relation of the Growth of Chicago to the Rise of its Land Values Chapter VI. The Relation Between the Growth of Chicago and the Rise of Its Land Values 279 Chapter VII. The Chicago Real Estate Cycle 368 Appendixes Appendix I. The Chicago Land Market 427 Appendix II. Methods Employed in Determining Chicago Land Values, 1830-1932 460 Appendix III. Statistical Tables 470 Bibliography 497 Index 503

Subject: Coming Generational Storm - a reveiw
From: David E..
To: All
Date Posted: Sun, Feb 27, 2005 at 12:12:44 (EST)
Email Address: Not Provided

Message:
by Paul Krugman. Sweet reason makes the storm clear. link http://www.nybooks.com/articles/17771

Subject: Real Estate and REITs
From: Jennifer
To: All
Date Posted: Sun, Feb 27, 2005 at 07:01:07 (EST)
Email Address: Not Provided

Message:
A way to invest fluidly in real estate is through REITs. REITs generally specialize in particular markets or market segments. The REIT Index can be bought as can individual REITs, though the index has the diversification. REIT research is in order.

Subject: REITs
From: Terri
To: Jennifer
Date Posted: Sun, Feb 27, 2005 at 07:12:55 (EST)
Email Address: Not Provided

Message:
REITs have had strong gains since 2000. How the REIT Index fairs as the Federal Reserve continues to raise short term interest rates will be important to notice.

Subject: Real estate in inflation or deflation
From: Dorian
To: All
Date Posted: Sun, Feb 27, 2005 at 06:10:55 (EST)
Email Address: Not Provided

Message:
So far I have not been able to find any serious flaw in my conclusion that of all possible investments in the economic uncertainty which lies ahead, real estate in markets which haven't already inflated beyond common sense looks like the best investment. If the dollar falls, which is virtually certain, it won't affect real estate or more likely will increase its value. If there is deflation, people will still need a place to live and the less expensive properties will if anything be in greater demand. Interest rates will no doubt have to go up, but I remember in the late 70's when inflation and interest rates rose past the double digits that real estate gained in value - in fact it created a bubble in real estate - despite the high interest rates. The problem is that real estate in most major markets has already appreciated to dangerously high levels, but if you can see out markets which have not yet over-inflated, and in cities which have economies which won't be wiped out by major economic upheavals, then I think lower end real estate will be the safest investment. The major drawback is that real estate much harder to invest in than stocks and bonds, and not something which everyone will want to get involved with. Dorian

Subject: Re: Real estate in inflation or deflation
From: David E..
To: Dorian
Date Posted: Sun, Feb 27, 2005 at 12:07:28 (EST)
Email Address: Not Provided

Message:
Hi Dorian, here is another view. Diversification is key, don't pick one asset class, especially don't pick one end of an asset class and especially don't focus on lower end. It is possible that demand for lower end will not increase as you expect. There are other choices besides moving to the lower end, many will decide to take in boarders and stay in their high end houses. And some could decide to move into RV's. It is not a lock that demand for lower end will increase. There is no such thing as a perfect investment that will always be better than anything else. Be careful with your money.

Subject: Hud's demographic projections
From: johnny5
To: David E..
Date Posted: Sun, Feb 27, 2005 at 13:09:58 (EST)
Email Address: johnny5@yahoo.com

Message:
Long paper but a good read http://www.huduser.org/Publications/PDF/demographic_trends.pdf This paper addresses current and projected changes in the nature of the nation’s population and its households that will affect the demand for housing.1 Perhaps the most important change is that, for the first time in history, we are looking at a population that will have roughly equal numbers of people in every age group. (The age picture of the country is looking more like a pillar than the classic pyramid.) Although the nation’s population continues to grow at all ages, the largest growth is in the population that has largely completed its child rearing. Other things equal, this shift should in itself increase the proportion of the population that owns, rather than rents, its housing. Households are a better predictor of changes in housing demand than population, and the nation’s increasingly [MR1] diverse age structure is changing its household composition. In particular, household size is shrinking, as married couples without children (in the home) and single-person households each outnumber “traditional family” households. Among other things, this trend is undermining old assumptions about age-based choices of city versus suburban housing. Not too many years ago, housing professionals thought almost exclusively about the housing needs and preferences of families with children. (Indeed, houses were generally referred to as “family” houses.) Now they need to understand the needs and preferences of several different household types, not just for housing construction but also including preferences for refitting a current home to meet the needs of a new, post-child-rearing household configuration and avoid a move from a cherished home or valued neighborhood. Building flexibility into housing financing is another implication, given the increasing numbers of householders at different stages of the life course. Financing has traditionally been designed for young couples acquiring a home they might live in for most of their adult lives (and has been based on the assumption that their income would increase over the life of the mortgage). But longer lives are creating new life stages, as well as multiple household types for a given individual over a lifetime. A broader range of households also raises several policy issues. For example, people have a tendency to share preferences and lifestyles according to their broad age group and family situation. On the one hand, that implies a “balkanization” of neighborhoods that could be harmful to maintaining a viable community. On the other hand, it implies that “mixed” neighborhoods could be riven by disputes over such classic issues as noise, appearance, and use and support of community resources, like parks. In the past, differences in affordability assured a certain homogeneity of tastes among those living in a given neighborhood. In the future, housing policymakers may have to be more proactive in managing age-based differences and establishing consensus-based standards. Finally, households are not becoming equally diverse everywhere in the country. First, tabulations of 2000 census results for The Brookings Institution show that growing cities are adding population faster than households, and declining cities are losing population faster than households.12 This seeming conundrum largely reflects the dominance of young adults among interstate movers. As they leave their parents’ households, many choose new cities with vibrant job markets. They have their children in the new location, thus swelling the population. As a result, the traditional married with children families are a growing segment in many parts of the South and West, while they are now outnumbered by single-parent families in northern and midwestern cities, where population has declined significantly. In sum, the nation’s two major demographic changes—shifts in the population’s age and racial composition—have already created appreciable differences in the nation’s household picture. In an overall sense, the nation’s traditional household is increasingly minority, while the nation’s majority population increasingly lives in nontraditional households. Perhaps the most important implication for housing comes from the industry’s traditional focus on families with children. The survival of most adults to older ages has increased the share of older, childless adult households, and the increase in the minority population via immigration and higher fertility rates has increased the minority share of younger adult households. Consequently, households with children in them are increasingly minority. The effects of this shift are already being seen in changing character of familiar locations. The 2000 census found that cities where growth reflected large numbers of recent immigrants were particularly likely to develop a more “suburban” character via strong growth in the numbers of married couples with children. Meanwhile, suburbs around the country became more “urban,” as nonfamily households, especially young singles and elderly people living alone, came to outnumber traditional families in their populations. Given the obvious differences in household type and income by lifestage, the intersection of trends in age and racial and ethnic origin suggest that housing analysts need to understand each large age/race/income/household segment within their particular housing market. Such an understanding will enable them to identify needs and preferences that are shared, and thus constitute a large market, and distinguish those needs and preferences that need special treatment.

Subject: Real Estate and REITs
From: Terri
To: Dorian
Date Posted: Sun, Feb 27, 2005 at 07:17:52 (EST)
Email Address: Not Provided

Message:
The problem is how to invest intelligently in real estate markets beyond your home market or apart from a major market. REITs, even our own REIT, would be an answer. Then, research on REITs is needed.

Subject: Homer Hoyt Reits
From: johnny5
To: Terri
Date Posted: Sun, Feb 27, 2005 at 07:53:15 (EST)
Email Address: johnny5@yahoo.com

Message:
These guys help my dad out. http://www.hoyt.org/has/main.html The Hoyt REIT Model The Homer Hoyt Institute (HHI) and Hoyt Advisory Services (HAS) have developed a proprietary model (the Hoyt REIT Model) for investing in real estate investment trusts (REITs). For the last several years, the Institute has invested a substantial portion of its endowed funds in REITs. The cumulative return on those funds has greatly exceeded the return on the NAREIT index. Because of the success of its investment program using the Hoyt REIT Model, the Institute, through HAS, has decided to make the Model available for commercial applications. The professional services available include: Portfolio Analysis and Construction Planning, including: Market Entrance Strategies and Growth Strategies Market Research and Analysis, including Feasibility Studies and Public Offering Analysis Merger and Acquisition Analysis Further information on the Hoyt REIT Model is available on this site, or at www.reitnet.com. You may also contact Hoyt Advisory Services directly.

Subject: A Sham?
From: Jennifer
To: johnny5
Date Posted: Sun, Feb 27, 2005 at 13:01:38 (EST)
Email Address: Not Provided

Message:
I would be more than careful with whoever these folks are. This has all the feel of a sham.

Subject: Re: A Sham?
From: johnny5
To: Jennifer
Date Posted: Sun, Feb 27, 2005 at 13:17:28 (EST)
Email Address: johnny5@yahoo.com

Message:
Why do you feel they are a SHAM jennifer? I was under the impression they were one of the more respected organizations. Here is some more info - I will keep digging for you so we can get more educated - perhaps I am wrong: http://www.hoyt.org/asi/ Homer Hoyt Advanced Studies Institute (ASI) The Weimer School of Advanced Studies in Real Estate and Land Economics Established in 1982, the Weimer School is a unique and effective forum for fostering academic work that improves the quality of decision making in real estate and land economics. Through open discussion of evolving research, the real estate body of knowledge is expanded and focused on applications for industry. Academic, business, and government leaders share their knowledge, experience, and ideas to influence relevant research. This unique interactive program provides post-doctoral education for leading educators, and concentrated study of current academic thought and research for leading executives who have major research responsibilities. The Weimer School has financed research studies by faculty members of the nation's most prestigious real estate programs, including: University of California/Los Angeles, University of California/Berkeley, University of Georgia, University of Florida, Southern Methodist University, University of Wisconsin, University of Connecticut, University of Pennsylvania, The Ohio State University, University of Illinois, University of North Carolina, Indiana University, University of Texas/Austin, and University of Michigan. Most Weimer School Fellows are faculty members in major university real estate programs and researchers with organizations such as the American Enterprise Institute, the Federal Home Loan Mortgage Corporation, U.S. League of Savings Institutions, and the Joint Center for Housing Studies/Harvard University. An important feature of the Weimer School is the opportunity it affords academics and industry experts to learn from each other. Guest lecturers have represented some of America's most important companies including: Goldman Sachs & Company, U.S. Gypsum Corporation, Tramell Crow, LaSalle Partners, Landauer Associates, Inc., Arthur Andersen & Company, Strouse Greenberg & Co., MGIC, and Wachovia Corporation. Further confirmation of the quality of the Weimer School's programs and personnel came by way of a U.S. News and World Report survey of the nation's best departments in colleges and schools of business. The top five real estate programs in 1997 are as follows: University of Pennsylvania (Wharton), University of California at Berkeley (Haas), University of Wisconsin at Madison, Massachusetts Institute of Technology, and The Ohio State University. All five programs are associated with the Weimer School - as sources of Weimer School Fellows, home institutions of faculty members, and/or recipients of research grants from ASI. All of the five programs are represented on the Weimer School faculty.

Subject: Right
From: Jennifer
To: johnny5
Date Posted: Sun, Feb 27, 2005 at 14:17:19 (EST)
Email Address: Not Provided

Message:
Johnny, this look fine now. The links I used were strange, I should have tried others. Right you are.

Subject: Re: Right
From: johnny5
To: Jennifer
Date Posted: Sun, Feb 27, 2005 at 14:29:59 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.areuea.org/publications/ THE journal for real estate economics - hoyt group *a major sponsor* has been trying to bring more respect to real estate in academia - although this is my dad's field - being the stingy bastard that he is I am sure he would not throw money away with people that are scammers. I have so much reading to do on these journals myself. Hoyt himself was an early pioneer in city development. http://www.revision-notes.co.uk/revision/180.html http://www.ribbonrail.com/grizzlyflat/florida/florida3.htm Dick received a B.S.in 1981 in Economic Geography (locational and transportation theory) and a M.S. in Land Use and Resource Management in 1982, also in the Department of Geography at Florida State. Dick's Masters Thesis was the Applicability of the Homer Hoyt Sector Theory to Tallahassee. Homer Hoyt was one of the early well respected real estate theorists who developed the theory that communities will tend to grow toward their largest neighboring city, all other things being equal. My Hoyt was overjoyed with the application of his theory in a modern setting and donated funds to establish the Homer Hoyt Center at Florida State University, which is now known as the Homer Hoyt Program in Land Economics and Finance.

Subject: Complete Right
From: Jennifer
To: johnny5
Date Posted: Sun, Feb 27, 2005 at 15:47:30 (EST)
Email Address: Not Provided

Message:
Johnny, you are completely right. Thank you for correcting me. HOmer Hoyt is a real estate think tank and advisor on real estate, and the more I look the more interesting the work is.

Subject: Re: A Sham?
From: johnny5
To: johnny5
Date Posted: Sun, Feb 27, 2005 at 13:24:39 (EST)
Email Address: johnny5@yahoo.com

Message:
They sure have lots of smart people to be a SHAM don't they?? http://www.hoyt.org/asi/faculty.html Faculty members of the Weimer School include: Dr. Dennis R. Capozza Ross Professor of Real Estate Finance University of Michigan Business School Dr. John M. Clapp Professor Department of Finance University of Connecticut Dr. Peter F. Colwell (Faculty Emeritus) Professor of Finance, ORER Prof. of RE Director, Office of Real Estate Research University of Illinois Dr.Robert H. Edelstein Co-Chairman & Real Estate Development Chair Professor Fisher Center for R. E. & Urban Economics University of California-Berkeley Dr. Jeffrey Fisher Professor Center for Real Estate Studies Indiana University School of Business Dr. James Follain Housing Economics and Fin. Research Freddie Mac Dr. Patric H. Hendershott Professor University of Aberdeen Dr. G. Donald Jud (Faculty Emeritus) Department of Finance University of North Carolina-Greensboro Dr. David C. Ling William D. Hussey Professor Warrington College of Business University of Florida Dr. Stephen Malpezzi Associate Professor Center for Urban Land Econ. Research University of Wisconsin-Madison Dr. Norman Miller West Shell Professor University of Cincinnati Dr. Hough O. Nourse (Faculty Emeritus) Retired, The University of Georgia Dr. Henry Pollakowski Editor Journal of Housing Economics Massachusetts Institute of Technology Dr. John M. Quigley Chancellor's Professor of Economics and Public Policy Department of Economics University of California - Berkeley Dr. Ronald L. Racster Professor Emeritus Director, Center for Real Estate Education and Research The Ohio State University Dr. Lynne B. Sagalyn Professor University of Pennsylvania Dr. Maury Seldin Realtor Chair Professor Emeritus The American University Dr. Halbert C. Smith Professor Department of Finance, Insurance, & Real Estate University of Florida Dr. Kerry Vandell Tiefenthaler Chair and Director Center for Urban Land Economics Research University of Wisconsin-Madison Dr. Susan M. Wachter Professor of Real Estate and Finance, Real Estate Dept. Chairperson Wharton Real Estate Department University of Pennsylvania Dr. John C. Weicher (Faculty Emeritus) Senior Fellow HUD Dr. John E. Williams Dean Morehouse College http://www.hoyt.org/asi/awards_manuscript.html American Real Estate Society Manuscript Prize Winners sponsored by HOMER HOYT ADVANCED STUDIES INSTITUTE I. 'Thinking out of the Box' category -- awarded for best research paper presented at the American Real Estate Society Annual Meeting: 2004 Dr. Seow Eng Ong National University of Singapore 2003 Dr. Roger J. Brown San Diego State University 2002 Dr. Theron R. Nelson University of North Dakota Dr. Susan Logan Nelson University of North Dakota 2001 Dr. G. Donald Jud The University of North Carolina - Greensboro Dr. Dan Winkler The University of North Carolina - Greensboro 2000 Dr. Richard A. Graff Electrum Partners II. 'Best' research paper -- published in the Journal of Real Estate Research 2004 Portfolio Implications of Apartment Investing Randy I Anderson, Richard McLemore, Philip Conner and Yougou Liang JRER vol. 25 No. 2-2003 p. 113 - 131 2003 Time, Place, Space, Technology and Corporate Real Estate Strategy Karen M. Gibler, Roy T. Black and Kimberly P. Moon JRER vol. 24 No. 3-2002 p. 235 - 262 2002 The Stock of Private Real Estate Capital in the United States James D. Shilling and Yu Yun Jessie Yang JRER vol. 22 No. 3-2001 p. 243 - 270 2001 Office Rent Determinants During Market Decline Barrett A. Slade JRER vol. 20 No. 3-2000 p. 357 - 380 2000 Real Estate Cycle and Their Strategic Implications for Investors and Portfolio Managers in the Global Economy Stephen A. Phyrr, Stephen E. Roulac and Waldo L. Born JRER vol. 18 No. 1-1999 p. 7 - 68 1999 (tie) Ownership Structure and the Value of the Firm: The Case of REITs H. Swint Friday, G. Stacy Sirmans, and C. Mitchell Conover JRER vol. 17 , No. 1-1999 p. 71-90 and Stationarity and Co-Integration in Systems with Three National Real Estate Indices F.C. Neil Myer, Mukesh K. Chaudhry, and James R. Webb JRER vol. 13 no. 3-1997, pages 369-381

Subject: Re: Homer Hoyt Reits
From: Terri
To: johnny5
Date Posted: Sun, Feb 27, 2005 at 10:15:16 (EST)
Email Address: Not Provided

Message:
Carefully look to the Vanguard MSCI REIT Index for comparison. If a company that markets investment advice can show that the advice has even kept up with the index over a meaningful time period, then the company may be worth using. I wonder whether there will be such evidence, if so there would likely be a fund offered with a long public record.

Subject: More problems
From: johnny5
To: All
Date Posted: Sun, Feb 27, 2005 at 00:56:48 (EST)
Email Address: johnny5@yahoo.com

Message:
http://qrc.depaul.edu/djabon/cpi.htm#6 6. Problems with the CPI The CPI is widely used as a cost of living index, but technically it is not. The CPI measures the average change over time in the prices paid by urban consumers for a relatively fixed market basket of goods and services. A cost of living index would measure changes over time in the amount that consumers need to spend to reach a certain utility level or 'standard of living.' The CPI completely ignores important changes in taxes, health care, water and air quality, crime levels, consumer safety, and educational quality. Furthermore, the experience of any individual may vary dramatically from what the CPI indicates, because an individual's purchasing patterns may differ considerably from the standard market basket. Families with children have considerably different buying patterns than elderly households, for example. The CPI does not even attempt to represent the experience of people living in rural areas. Even accepting these limitations of application, the CPI has some possibly serious limitations in measurement. The limitations fall into two broad categories. Sampling errors The CPI measures the prices of only a sample of items from a sample of outlets in a sample of cities. The items are chosen by the use of the Consumer Expenditure Survey (CES). The interview portion of the survey, conducted quarterly from 5000 households, collects data on expenditures, assets, liabilities, incomes, large item purchases and household expenses. The diary portion of the CES (also administered to 5000 households) asks each sample household to make a complete record of all expenses for a two-week period. Another survey, the Point of Purchase Survey (POPS), is used to determine which outlets are used for prices. The Point of Purchase Survey is administered 16,800 individuals each year. It determines how much consumers spend for different classes of items and also how much they spend at each of the places from which the items were bought. Even after one has chosen a sample of items and a sample of outlets, one much choose which particular models or brands will be priced and on which day of the month prices will be sampled. An attempt is made to represent sale days and nonsale days in their proper proportions. The cities are sampled as well; the largest cities are always included and an attempt is made to choose samples from cities of intermediate and small sizes. This complex stratified sampling has errors simply because one cannot record the price of every item purchased by every household in every urban area. Non-sampling errors More significant than sampling errors are possible sources of systematic error. Most of these errors are thought to bias the CPI upward, so that the CPI would tend to report more inflation than consumers are really experiencing. Substitution bias Substitution bias refers to the fact that consumers respond to price changes by substituting relatively cheaper goods for goods that have become more expensive. For example as the price of beef rises, families may substitute chicken for beef. The households' market baskets change (perhaps with no decline in utility) keeping expenditures down, but the CPI reports inflation of the original market basket. For example, suppose in one month the price of beef is $1 per pound and the price of chicken is $1 per pound, and that the household consumes 1 pound of each for a total expenditure of 2 pounds. Next suppose the next month the price of beef rises to $1.50 and the price of chicken remains the same. The fixed market basket would report an expenditure of $2.50 (1 pound of each again), a 25% inflation rate. In fact, the household may cut back to 0.5 pound of beef and 1.5 pounds of chicken with an expenditure of 0.5*1.50 1.5*1=$2.25, yielding a 12.5% inflation rate. Complicating matters is that utility of each situation may well be different. Substitution bias can occur within item categories (e.g., consumers might substitute red delicious apples for granny smith apples when the price of granny smiths rise) and across item categories (e.g., consumers might substitute oranges for apples if the price of apples rises). The former is called lower level substitution bias, the latter high level substitution bias. Formula Bias Formula bias refers to a subtle problem relating to the fact that the initial quantities for items in the market basket were determined by dividing the current expenditure by the current average price. If the item happened to be on sale as of the point in time when they were first priced, that item would be systematically overweighted in the market basket and would bias the CPI upward because the prices of sale items tend to rise in subsequent months. The Bureau of Labor Statistics has developed a method called 'seasoning' to adjust for this bias. New Outlet Bias The opening of a new discount outlet may give consumers the opportunity to purchase the same goods at a lower price. The current CPI ignores these price changes. To take the price changes totally into account would bias the CPI downward, since purchasing at discount stores tends to be accompanied with lower levels of service; discount stores tend to have less knowledgeable sales staff, less variety, less convenient store hours, less liberal return policies. However, some economists believe that ignoring outlet switching effects altogether biases the CPI upward because price differentials are not totally offset by differences in service quality, especially as discount stores have taken advantage of more efficient technologies of distribution. For example, Wal-Mart, a discount chain., has the most sophisticated distribution system of any retailer. That Wal-Mart has become the largest retailer in the US suggests that consumers do not consider the Wal-Mart's lower prices to be offset by inferior service. Quality Change Bias The Bureau of Labor Statistics does make an attempt to adjust for quality changes. If a product is 10% 'better', and its price rises by 15%, the Bureau of Labor Statistics will attempt to record a price increase of approximately 5%. For example, median rent from 1976 to 1993 for all rental occupied units increased 2.92 times. The CPI rental index ratio for the same period was only 2.46. This difference means that the Bureau of Labor Statistics had factored in improvements in rental units at rate of approximately 1% per year. However, some economists believe that the Bureau of Labor Statistics systematically underestimates quality improvements, thereby biasing the CPI upward. For example in the case of rental units, from1970 to 1993 time period, the mean number of rooms in rental units increased by 9.7%; the mean number of rooms per person increased by 27%. The mean number of bathrooms increase by 23.3%. The fraction of all units containing central air conditioning increased from 10.8% to 41.7%. The number of rental units with dishwashers increased dramatically, and the quality of the refrigerators, stoves or oven/cooktop combinations, and garbage disposals increased considerably. Other categories whose quality improvements may not be completely factored in are apparel, new and used cars, and professional medical services. New Product Bias New products and new models of existing products tend to have a 'product cycle.' A typical new product is introduced at a relatively high price with low sales volume. Improvements in manufacturing techniques and higher sales volumes usually allow prices to be reduced and quality to improve. Later, when the product 'matures,' the price will tend to increase more rapidly than average. This pattern can be seen with many familiar products such as microwave ovens, VCR's, and cellular telephones. As with quality changes, the Bureau of Labor Statistics has methods to continually incorporate new products into the market basket, because the interval between the major revisions of the market basket (approximately ten years) is too long. However, there tends to be lag between introduction of a new product and its inclusion in the market basket, so that new products tend to be included later in their product cycles. The result is that the CPI might be biased upward. Time of Month Bias The Bureau of Labor Statistics does not collect prices on weekends and holidays when certain items are disproportionately put on sale in certain outlets. There is some evidence that the fraction of purchases made on weekends and holidays has increased as well. This effect would make the CPI less representative of the average consumer and bias it upward. In 1996, the Senate Finance Committee appointed a advisory commission to study the consumer price index. Its chairman was Michael J. Boskin of Stanford University, and the report became widely known as the Boskin Report. The report recommended downward adjustments in the CPI of 1.1% broken down as follows: Estimates Of Biases In The CPI-Based Measure Of The Cost Of Living (Percentage Points Per Annum) from the Boskin Report Sources of Bias Estimate Upper Level Substitution 0.15 Lower Level Substitution 0.25 New Products/Quality Change 0.60 New Outlets 0.10 Total 1.10 Plausible range (0.80-1.60) If the CPI is biased upward, it has numerous undesirable consequences. Many government programs have mandatory cost of living adjustments based on the CPI. The increases in the past would have been too high. Tax brackets are adjusted upward using the CPI; if the CPI is biased upward, tax brackets would have been adjusted too high, leading to less tax revenue. The higher payments and lower revenues would contribute to a higher national debt. An inaccurate CPI also gives citizens an incorrect view of the state of the US economy as well.

Subject: Pirce Hedonics: A Critical Review
From: johnny5
To: johnny5
Date Posted: Sun, Feb 27, 2005 at 01:49:24 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.newyorkfed.org/research/epr/03v09n3/0309hult.pdf The new debate began in early 1995, when Federal Reserve Chairman Alan Greenspan testified before the Senate Finance Committee that he thought that the CPI was biased upward by perhaps 0.5 to 1.5 percentage points per year. This remark did not surprise specialists who understood the technical difficulties involved in constructing accurate price indexes, but it created a small sensation in the political arena. Here at last was a chance to get around one of the most difficult issues in the debate over balancing the federal budget: what to do about the social security program. Here was a way to reduce expenditures to balance the federal budget and rescue the social security trust fund from insolvency in the next century. The beauty of it all was that the solution did not involve raising new taxes or changing benefit formulas. Instead, the solution involved “fixing” a biased method of adjusting social security benefits for the effects of price inflation, .....The NRC panel did not provide unanimous support for the underlying philosophy of the CPI as a pure cost-of-living index, and, in its own words, differs from the Stigler and Boskin et al. reports in this regard (National Research Council 2002, p. 3). The report’s Recommendation 4-2 noted that the “BLS should continue to expand its experimental development and testing of hedonic methods.” On the other hand, Recommendation 4-3 of the report cautioned against immediately expanding the use of hedonics in constructing the CPI itself: “Relative to our view on BLS research, we recommend a more cautious integration of hedonically adjusted price change estimates into the CPI.” The report explained the apparent disconnect between the two recommendations by pointing to a “concern for the perceived credibility of current methods,” adding that “while there is an established academic literature on estimating hedonic functions, researchers are much less experienced using them across a wide variety of goods” (National Research Council 2002, pp. 6-7). ....The absence of explicit criteria is not surprising because the political economy of statistical measurement is largely terra incognita in the practice of economics. However, the NRC panel report forces the debate in this new direction. ....The upward shift in the hedonic function indicates that inflationary pressures dominate any cost-reducing product innovation, but from the data in the exhibit it is not possible to separate the two effects (or even tell if product innovation has occurred). variety. A problem arises if the variety disappears from the sample. When this happens, a replacement must be found, and if a new variety is selected, whose observed price is , then the BLS must consider the possibility that some part of the observed price increase may be because of a change in quality.4 At this point, the BLS must decide if the new variety is a comparable or noncomparable substitute. If it is comparable, and are deemed to be equivalent and the observed price ratio is not adjusted for quality. If this is wrong and the new variety is really a noncomparable substitute, the ratio overstates the true rate of pure price increase when .5 More generally, the price ratio is the product of a pure price term and a quality term. ....The portrait of price hedonics painted in the preceding section is rather flattering, particularly when compared with competing alternatives. What, then, accounts for the conservative Recommendation 4-3 from the NRC panel and an ambient skepticism on the part of some users? One of the leading developers and practitioners of price hedonics, Triplett, found it necessary to devote an entire article to the analysis and refutation of common criticisms of the hedonic method (Triplett 1990). I believe that a large part of the problem reflects a lower degree of confidence in data that are imputed using regression analysis. Price estimates collected directly from an underlying population are generally regarded as “facts.” When the price is inferred using regression techniques, it becomes a “processed” fact subject to researcher discretion. ....The resulting price estimates involve a sampling variance and a potential for bias and are no different in this regard than estimates obtained using regression analysis. There is, however, an important difference from the standpoint of perceived credibility. The CPI sample is constructed directly from the population of consumption goods in retail outlets whose prices are “facts on the ground.” Full enumeration of the population is conceptually possible, lending verisimilitude to the sampling process. The perceived credibility of the researcher discretion involved in regression analysis is not so well anchored. The old saw about statistical regressions applies here: “If you torture Mother Nature long enough, she will ultimately confess to anything you want.” This quip reflects a widely understood but seldom emphasized truth about applied econometrics: researchers rarely complete their analysis with the very first regression they try. The first pass-through of the data often produces unsatisfactory results, such as poor statistical fits and implausible coefficient estimates. Rather than stop the analysis at this point, researchers typically use the same data to try out different functional forms and estimation techniques, and drop weak explanatory variables until plausible or satisfactory results are obtained (or the project is abandoned). The NRC panel report cites instances of these practices during the incorporation of price hedonics in the CPI program (National Research Council 2002, p. 142). ...The first general issue is that price hedonics is subject to the problem of all product differentiation models: where does a good stop being a variety of a given product class and become a product on its own? It is intuitively reasonable to group all Toyota Corollas in the same class and treat different equipment options as characteristics. Is it as reasonable to group included near-substitutes such as Toyota Camrys or all Toyota passenger cars into the same product class? Perhaps the product classes should be functional—subcompacts, compacts, luxury sedans, suburban utility vehicles—regardless of brand. Theory gives only the following guidance: items should be grouped according to a common hedonic function. For example, if equation is the correct specification, all items in the hedonic class must have the same list of characteristics and the same -coefficients. This implied grouping seems reasonable for different configurations of a Toyota Corolla, but increasingly less so as the range of included items is expanded. It should be possible to test for homogeneity of items included in a hedonic class, but it is not clear how often this is actually done. Dummy variables for different brands within a given class can be used in some cases, but this is essentially an admission that some important characteristics are missing or that the -coefficients differ in at least one dimension. This problem is attenuated in the CPI because the items included in the matched-model design are rather narrowly specified. However, although the narrowness of matchedmodel item specifications helps with the problem of heterogeneous -coefficients, it exacerbates the problem of “representativeness.” Learning a lot about inflation and quality change in one narrowly defined class like Toyota Corollas may not be indicative of the experience of the broader class of automobiles. A second general class of issues involves the selection of characteristics. Hedonic theory suggests that a characteristic should be included in the analysis if the characteristic influences consumer and producer behavior. This implicitly assumes that consumers and producers have the same list, which is far from obvious (Pakes 2002). The consumer may be interested in performance characteristics such as top speed and acceleration, while the seller may focus on product attributes like engine horsepower, and the design engineer on technical characteristics like valve design. Furthermore, different consumers may base their spending decisions on different sets of characteristics or assign different weights to them, meaning that the -coefficients in equation 1 are really not fixed parameters, but weighted averages. As a result, estimated parameters may not be stable over time, and the implied estimates of price and quality may shift simply because of changes in the mix of consumers Another concern is the problem of separability and “inside” and “outside” characteristics. The -coefficients in equation 1 may be unstable over time for another reason: the characteristics defining one good are not separable from the characteristics defining other goods. This is a well-known result in aggregation theory and is hardly unique to price hedonics. But the hedonic hypothesis is a form of aggregation and the stringent conditions for separability may fail. In this case, a change in some characteristic outside the set of “insidethe- hedonic-function” characteristics may cause the relation between the inside elements to shift, leading to a change in the -coefficients.7 A similar problem can arise when some of the relevant characteristics are left out of the regression analysis. The problem of missing inside characteristics and nonseparability with respect to outside characteristics can be subjected to econometric tests. However, the truth is that the selection of characteristics is heavily influenced by data availability, and it is not clear how much progress can realistically be expected to occur when dealing with these conceptual issues. Choice of appropriate functional form is the third general class of problems often raised in critiques of price hedonics. The three most common forms—linear, semi-log, and loglog— do not allow for a very rich set of possible interactions among characteristics. Important complementarities often exist, for example, between microprocessor speed and storage capacity. One does not substitute for the other at a given price in most applications. Expanding an automobile’s performance to racecar levels involves an increase in many characteristics, not just a very large increase in horsepower alone. This suggests the use of more flexible functional forms such as the trans-log. Furthermore, as noted in the preceding section, innovations in product quality can take the form of extensions of the length of the hedonic function over time, and this is hard to capture with the usual functional forms. Pakes derives an alternative interpretation of the hedonic function in which price equals marginal cost plus a market power term that depends on the elasticity of demand for the characteristic. This is the Pakes-I result, and it is surely correct for many of the goods for which price hedonics is employed. However, the implications of this result are novel to the point of heterodoxy: Hedonic regressions have been used in research for some time and they are often found to have coefficients which are “unstable” either over time or across markets, and which clash with naive intuition that characteristics which are generally thought to be desirable should have positive coefficients. This intuition was formalized in a series of early models whose equilibrium implied that the “marginal willingness to pay for a characteristic equaled its marginal cost of production.” I hope [the preceding] discussion has made it amply clear that these models can be very misleading [author’s emphasis]. The derivatives of a hedonic price function should not be interpreted as willingness to pay derivatives or cost derivatives; rather they are formed from a complex equilibrium process (Pakes 2002, p. 14). This view clashes strongly with the conventional view, which is summarized in the National Research Council (2002) report in the following way: Strange-looking variable coefficients could be indicative of larger problems—including omission of key value indicators, characteristic mismeasurement, and functional form issues (p. 142). Furthermore, It is hard to know when a hedonic function is good enough for CPI work: the absence of coefficients with the “wrong” sign may be necessary, but it is surely not sufficient (p. 143). These results represent a potential paradigm shift in the field of price hedonics. They have yet to be vetted by the specialists in the field, but some or all of each proposition is likely to survive scholarly scrutiny.8 There are a number of issues to be resolved, such as the problem of cross-sectional stability. The same mechanism that causes the hedonic coefficients to be unstable over time may also cause them to be unstable in a cross-section of consumer prices drawn from different locations and different types of retail outlets. In this case, the movement along the hedonic function at any point in time may not be possible. This, and other issues, await further debate. The Political Economy of Price Hedonics There is a saying in tax policy that “an old tax is a good tax.” This does not follow from any deep analytical insight into optimal tax theory, but from the pragmatic observation that taxation requires the consent of the governed. The public must accept and respect the tax, and this does not happen automatically when a tax is introduced. There is typically a learning curve as people adjust their behavior in light of new tax incentives, and gainers and losers are sorted out. The tax matures as affected groups negotiate changes and as unforeseen consequences become apparent and are dealt with. A similar argument leads to the proposition that “old data are good data.” Old data, like old taxes, involve learning by the public and by policymakers about a new set of facts, and both may involve large economic stakes. In the case of CPI reform, the Boskin Commission estimated that the cumulative effects of a 1 percentage point per year bias would have added $1 trillion to the national debt between 1997 and 2008. If price hedonics were completely successful in eliminating the Boskin Commission’s quality bias, the growth rate of the CPI would fall by about 25 basis points to 60 basis points per year, with an attendant reduction in cost-of-living payments to individuals.9 In addition, cost-of-living adjustments to social security, federal civilian and military retirement, supplemental security income, and other programs are not the only dimension of policy affected by this line of argument, because the CPI is used to index income tax parameters, Treasury inflation-indexed bonds, and some federal contracts. Moreover, a revision to the CPI also changes the metric that policymakers use to gauge the rate of inflation. They have to assess how much of the change in measured inflation is the result of underlying inflationary pressures and how much is the result of the new methods. This reflects a fundamental truth about the policy process: policy decisions (indeed, most decisions) must be made with imperfect information. There is learning over time about the nature of the data and the useful information they contain. Chairman Greenspan’s 1995 comment about his perception of a bias of 0.5 to 1.5 percentage points in the CPI is a case in point. The expanded use of price hedonics thus looks different to users who are interested in the “output” of the technique than to expert practitioners who are interested in developing the technique per se. Put differently, there is a policy-user learning curve that is different from the researcher learning curve. However, the two curves are related. The weaker the professional consensus is about a technique, the lower the level of confidence is in the technique’s consequences and in its acceptance by the public and policymakers. This is the essence of the “perceived credibility” standard.10 This line of argument has implications for the use of price hedonics in the CPI. Perceived credibility is linked to the degree of professional consensus, and Pakes (2002) has pretty much upset whatever consensus had existed. It will doubtless take time to sort out the propositions advanced by Pakes, and this alone justifies the conservatism of the NRC’s Recommendation 4-3. More research is needed on the robustness of price hedonic results to changes in assumptions about functional forms and characteristics and about the circumstances under which parameter instability and “wrong” signs occur. Monte Carlo studies, in which the true value of the parameters is known in advance, could be a useful way of understanding the pathology of the hedonic technique and assessing the accuracy of this technique and its ability to forecast the CPI, both in absolute terms and relative to other quality-adjustment methods. Research at the frontier should be innovative and challenging, aimed at convincing peer researchers. However, this is not the way good policy is made. Policy ultimately relies on the consent of the public, not the vision of convinced experts. Changes in official statistical policy therefore should be conservative and credible, and the research agenda must include a component aimed at building confidence that the benefits of change outweigh the costs. Accordingly, the National Research Council panel is right to insist on a conservative approach to the increased use of price hedonics in the CPI. However, the research community is also right to insist that this technique is the most promising way to account for changes in product quality in official price statistics. Researchers would also be right to point out that part of the credibility issue with hedonics is about the switch to the new technique, and not just about the technique itself. Had the BLS used price hedonics more extensively in the past rather than the more commonly used quality-adjustment methods, hedonics would probably have evolved by now to the point of perceived credibility. Indeed, if positions were reversed and the link, overlap, and class-mean methods were offered as substitutes for an entrenched hedonics methodology, the debate would be very different.

Subject: Core Inflation Measurement
From: johnny5
To: All
Date Posted: Sat, Feb 26, 2005 at 23:54:54 (EST)
Email Address: johnny5@yahoo.com

Message:
Not only are we strugglinh here in America - the euro boys are too :( http://www.dallasfed.org/research/papers/1999/wp9903.pdf The notion of core inflation has played an important role in the deliberations of monetary policymakers for the past twenty-five years. However, despite the central role of this concept, there is still no consensus on how best to go about measuring core inflation. The most elementary approach, and the one that is probably the most widely used, consists of simply excluding certain categories of prices from the overall inflation rate. This is the so-called “Ex. food and energy” approach to core inflation measurement, and it reflects the origin of the concept of core inflation in the turbulent decade of the 1970’s. More recently, however, there have been a variety of attempts to put the measurement of core inflation on a more solid footing. The newer approaches have two key features in common. First, they adopt a more statistical rather than behavioural approach to the problem of price measurement. And second, they invoke an alternative, monetary, concept of inflation, as opposed to the traditional microeconomic cost of living concept, as the guiding theory. This paper critically reviews various approaches to measuring core inflation. I do so by linking these approaches in a single theoretical framework, the so-called stochastic approach to index numbers. I evaluate the competing merits of the different approaches, and argue that a common shortcoming is the absence of a well-formulated theory of what these measures of inflation are supposed to be capturing. The notion that they somehow better capture the “monetary” component of inflation, or the component of inflation that ought to be of primary concern to central bankers, is of questionable validity. ...Eurostat can legitimately motivate the exclusion of certain categories of prices from the HICP. The category that has attracted the most attention by it omission is the costs of owner occupied housing. ...These calculations raise the question of what it is we want a core inflation statistic to measure. If the object we are pursuing is a true cost of living index, then it is not clear that we should be eliminating the effects of tax increases from our price measure. Furthermore, the reasoning above is only partial equilibrium. A proper treatment of the effects of indirect taxes on a measure of the price level would require a detailed general equilibrium analysis of the effects of the tax increase that would go well beyond current practice.2 While it is possible that some of the costs of inflation are captured by changes in the cost of living, some of them may require a much broader measure of market transactions. One conclusion from this line of reasoning is that for the purposes of monetary policy what is needed is not a microeconomic theory of the cost of living, but a macroeconomic theory of the cost of inflation. Thus we can interpret various measures of core inflation as attempts to better measure this more appropriate measure of inflation for monetary policy purposes. ....Note that so far nothing has been said about which prices to include in the calculations. The prices to be averaged in arriving at a measure of inflation could be just consumer prices, or could include the prices of all GDP transactions or the prices of all transactions (including intermediate transactions) or could even include the prices of assets. Fisher (1920) argued that when it comes to constructing a measure of the purchasing power of money we ought to look at as many prices as possible: “Perhaps the best and most practical scheme [for the construction of an index number] is that which has been used in the explanation of P in our equation of exchange, an index number in which every article and service is weighted according to the value of it exchanged at base prices in the year whose level of prices it is desired to find. By this means, goods bought for immediate consumption are included in the weighting, as are also all durable capital goods exchanged during the period covered by the index number. What is repaid in contracts so measured is the same general purchasing power. This includes purchasing power over everything purchased and purchasable, including real estate, securities, labor, other services, such as the services rendered by corporations, and commodities.” (Fisher, 1920, 217-218) It is interesting to note that the preamble to the European Council Regulation governing the calculation of the HICP which will form the basis for assessing inflation developments in the euro area notes that “• it is recognised that inflation is a phenomenon manifesting itself in all forms of market transactions including capital purchases, government purchases, payments to labour as well as purchases by consumers.” (European Commission, 1998) Once we have abandoned the cost of living as the guiding concept for inflation measurement for monetary policy purposes 6 See Diewert (1995). 9 there is no reason for confining our attention to changes in the prices of final consumer goods. Changes in the prices received by producers, changes in the prices of intermediate goods and changes in the prices of existing assets all carry information about monetary inflation. ...But why do we need to confine ourselves to looking to budget shares for weights? The use of budget shares as weights is best motivated by an appeal to the (atemporal) theory of the cost of living index. Yet implicit in the notion of core inflation that ought to be of primary concern to monetary policymakers is the idea that such inflation is inherently different to inflation as measured by the cost of living index. Thus the weighting scheme that is optimal from the perspective of constructing a cost of living index may no longer be optimal from the perspective of measuring inflation for the purposes of monetary policy. ...A weighting scheme that might be more appropriate for monetary policy purposes would weight prices by the strength or quality of the inflation “signal” they provide. Indeed this is the approach that implicitly underlies the “Ex. food and energy” or “Ex. indirect taxes” approaches to estimating core inflation that are used by many central banks and statistical agencies. In these approaches we attach zero weight to certain prices on the (unstated) grounds that they convey zero information about core inflation. Formally, 0 = i w if 2 2 ~ s s > i where 2 ~ s is some “unacceptably high” level of variability in short term price changes. It is worth noting that there is no justification for such a practice from the perspective of the theory of the cost of living index. The rationale for excluding certain prices from an estimate of core inflation must lie other than in the theory of the cost of living index. That is, choose weights for the various individual prices that are inversely proportional to the volatility of those prices. A weighting scheme along these lines has been investigated by Dow (1994), who termed the resulting measure of inflation a Variance Weighted Price Index, and by Diewert (1995), who termed the resulting measure of inflation Neo-Edgeworthian. Wynne (1997) reports the results of applying a scheme along these lines to US CPI data. The advantage of employing a variance weighting scheme to calculate core inflation is that we do not discard potentially useful information about core inflation that may be contained in food and energy prices, or whatever categories are excluded. The “Ex. food and energy” approach to estimating core inflation is further compromised by the fact that it requires that we make a once and for all judgement about what the least informative categories of prices are for estimating core inflation. A variance weighting scheme such as the above allows weights to change over time as the volatility of different categories of prices changes over time. Yet another weighting scheme was proposed informally by Blinder (1997). Starting from a definition of core inflation as the persistent or durable component of inflation, Blinder suggests that when it comes to calculating core inflation, individual price changes should be weighted by their ability to forecast future inflation. Blinder argues that central bankers are a lot more concerned about future inflation than they are about past inflation, and that when thinking about the measurement of core inflation as a signal extraction problem, future inflation is the object about which we are seeking information via current signals. Thus core inflation is defined in terms of its ability to predict future headline inflation. At present there have not been any attempts to operationalize this approach.10 ...Perhaps a more serious shortcoming of these models is that they fail to take account of persistence in both individual price changes and the inflation rate. Some of the dynamic models that have been proposed in recent years seek to remedy this problem, and succeed to varying degrees. We will start by looking at the Dynamic Factor Index (DFI) model proposed by Bryan and Cecchetti (1993) and Cecchetti (1997). This model is of interest for many reasons, not least of which is the fact that it is the only model that attempts to combine information on both the cross-section and time series characteristics of individual price changes in deriving a core inflation measure. Monetary theory tells us that, under a fiat monetary standard, the price level is ultimately determined by the stock of base money outstanding relative to the demand for it. Therefore the appropriate measure of M in the system above is a measure of the base money stock. However, the assumption of stationary velocity of base money is probably at odds with the data for several, if not all, industrialised countries. First and foremost before choosing a measure of core inflation we need to specify what it is we want the measure for. Do we want a measure of core inflation to answer the question “What would the inflation rate have been if oil prices (or indirect taxes) had not increased last month?” If so, then none of the approaches reviewed above will help. This question can only be answered in the context of a full general equilibrium model of the economy. Furthermore if the measure of inflation we are interested in is the cost of living, then it is not clear why we would ever want to exclude the effects of oil price increases or indirect taxes. Thus it must be the case that when measuring core inflation we have some other inflation concept in mind. Ideally a central bank would be most interested in a measure of inflation that measured the rate of decline in the purchasing power of money. Unfortunately there is no well developed and generally agreed upon theory that can serve as a guide to constructing such a measure. Thus in practical terms we left with the options of constructing a core inflation measure so as to better track the trend inflation rate (somehow defined) in real time, or what in many circumstances may amount to the same thing, forecast the future headline inflation rate.

Subject: More academic papers
From: johnny5
To: johnny5
Date Posted: Sun, Feb 27, 2005 at 00:12:54 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.dnb.nl/dnb/bin/doc/sr063_tcm13-36668.pdf Since the oil crises of the 70’s the term core inflation has played an important role in the monetary policy debate. In particular at central banks various estimators have been developed to measure what is sometimes called core, permanent, underlying or monetary inflation. Although there is no consensus in the literature on what core inflation actually is, all approaches intend to provide an inflation measure which is more informative for monetary policy than the change of the official consumer price index. There are several reasons why the CPI is not an ideal measure of inflation for monetary policy purposes. Firstly, the CPI is a noisy signal of the inflationary pressures in an economy. For example, seasonal influences, changes of the indirect tax rate, or purely relative price changes affect the CPI, but do not call for monetary policy action. Finally, central banks cannot control inflation as measured by the CPI. At least in the short run the CPI reacts to nearly every shock impinging on the economy and not only to variations of the money stock, for which the central bank is responsible. Since credibility is crucial to central bank performance, it would be desirable to have an operational inflation concept which only reflects price level movements for which the monetary authority is accountable. Such a concept would not only be interesting for the public, but also for central banks, because it would enable the early detection and correction of control errors. Motivated by one or more of these arguments, a host of methods has been developed to estimate core inflation. Most of these methods, however, lack a clear definition of what they are supposed to measure, which specific quantity in the population they should estimate. The methods suggested are either based on cross-sectional information, i.e. the distribution of individual price changes with respect to some reference period, on univariate or multivariate time series or on pooled cross-sectional and time series data 3. Cross-sectional methods attempt to refine the CPI, aiming to eliminate its transitory move-ments and to increase the signal-to-noise ratio. Three different types of inflation measures rely on purely cross-sectional information. The most well-known type encompasses price indices that simply exclude allegedly volatile components, such as seasonal food or energy prices. A more sophisticated class of measures contains the various trimmed mean estimators. These measures do not a priori exclude specific commodities from the price index once and for all, but remove those commodities of which the observed price change relative to the previous period is an ‘outlier’ 4. The weighted median belongs to this class of inflation measures. Finally, there are price indices which use the full cross-sectional information but aggregate the price changes with weights which are inversely related to their volatility. Clearly, since the weights of these price indices are not derived from budget shares, the scope of these inflation measures is not restricted to consumer prices 5. We will argue that our general equilibrium model provides a reasonable interpretation of empirical data. Furthermore, we will show that the standard battery of tests applied to the time series generated by our model does not reject the testable implications of the different SVAR models. In this sense, our simulation study yields results which are relevant for actual monetary policy. THey conclude svars aren't currently applicable to monetary authorities.

Subject: Re: More academic papers
From: johnny5
To: johnny5
Date Posted: Sun, Feb 27, 2005 at 00:53:59 (EST)
Email Address: johnny5@yahoo.com

Message:
CPI can really lack some useful information when you exclude f&e http://www.bankofengland.co.uk/workingpapers/wp242.pdf This paper examines a range of measures of core inflation for the United Kingdom, both conceptually and empirically, setting out their motivation and highlighting their potential limitations. No single measure performs well across the board, but a compromise conclusion on the usefulness of measures of core inflation is that each one may provide a different insight into the inflation process. There can be value in looking at a range of measures, as long as one bears in mind what information each type of indicator is best at providing. When all measures are giving the same message then, in a sense, monetary policy makers can reasonably consider that these measures are providing a reliable guide to inflationary pressures. It is when the measures start to diverge that policymakers need to take a much closer look at the reasons for those divergences. path, save perhaps for some unavoidable and unforecastable error. If we were to perform Marques et al’s tests on a measure of core inflation, it would fail conditions (ii) and (iii). That is, CPI inflation would not be attracted to the measure of core inflation since it follows the exogenously prescribed path, but core inflation would be attracted to CPI inflation.(18) This finding would cause us to reject this measure of core inflation as useful in providing forward-looking information about the future path of CPI inflation, even though it might well be useful in setting policy. Thus, failure in the tests does not necessarily mean that a measure of core inflation is not informative—it may just be that the effects of past policy mean that Marques et al’s tests do not help us make that judgment. In addition, because the differential between targeted and core inflation is likely to be some function of the stance of monetary policy, at least in the short run, the tests may be vulnerable to the Lucas critique. That is, if policy were to be based on some estimated relationship between core and targeted inflation, that relationship may change and become misleading as a guide to the future.

Subject: Inflation, Renats or Housing
From: Terri
To: All
Date Posted: Sat, Feb 26, 2005 at 21:32:11 (EST)
Email Address: Not Provided

Message:
We know there is a lack of connection between rents and real estate prices, we know how much housing costs contribute to the consumer price index. So change the way we calculate the index by using not rentals but housing cost, and there is inflation. Lots of inflation. This is what the Economist has done, and this is disturbing. Housing costs are 30% of the Consumer Price Index, and while rents are rising at a moderate pace housing prices are rising at a rapid pace. Then, is there inflation?

Subject: Inflation, Rents or Housing [cont.]
From: Terri
To: Terri
Date Posted: Sat, Feb 26, 2005 at 21:50:41 (EST)
Email Address: Not Provided

Message:
While I have no argument about the way the Consumer Price Index is calculated, the possibility that the current divergence between rents and housing prices has become so large that core inflation is much higher than we record may have to be considered. Of course, this would apply to other country statistics as well. In any event, I am a step closer to worrying about inflation.

Subject: Re: Inflation, Rents or Housing [cont.]
From: Pete Weis
To: Terri
Date Posted: Sun, Feb 27, 2005 at 13:01:23 (EST)
Email Address: Not Provided

Message:
I think the point to ponder about housing costs is the tendency for so many of us to take on mortgages at or near the limit of what the mortgage industry will allow. The mortgage industry has allowed dramatically higher mortgages as a percentage of gross income in recent years and they allow the borrower to service them with initially low (sometimes rediculously low) monthly payments. With many of these loans, the payments will rise after the begining years even if rates don't rise. If rates do rise than the situation becomes even worse. Folks have been willing to take on this high risk of not being able to service their mortgage payments a few years down the road because they believe their home will continue to rise in value rapidly and they don't want to be left behind. Mortgage brokers are willing to loosen requirements and invent very risky interest rate schemes because it is the only way to keep the golden egg rolling with home prices going up much faster than paychecks. Besides they are able to pass the risk on to bond holders and home owners. The government is not and has not been inclined to step in and regulate this mess because it has been the one thing which has kept our economy afloat over the last few years. So the question becomes - how much longer can this last and will it be long enough before something comes along to finally lift middle class wage earners out of their funk or......

Subject: Energy Stocks in the S&P
From: Terri
To: All
Date Posted: Sat, Feb 26, 2005 at 17:10:50 (EST)
Email Address: Not Provided

Message:
http://www.barra.com/Research/SectorWeights.aspx Notice that in Janaury 1980 the S&P weights was 20% energy stocks, where now after all the run of prices the weights is 7%. The economy has indeed changed. Financial servcies are now 22%, while in 1980 they were 5.4%. Technology and telecommunications went from 17% in 1980 to 18% now. So we have gone from being energy drives to finance driven in a sense.

Subject: Paul Krugman's Note on Oil
From: Terri
To: Terri
Date Posted: Sat, Feb 26, 2005 at 20:19:51 (EST)
Email Address: Not Provided

Message:
http://www.wws.princeton.edu/~pkrugman/oil.html April 9, 2002 A QUICK NOTE ON OIL If you want to get slightly scared about the economic implications of Middle East conflict, here's a useful chart from an Energy Information Agency report from a few years back. It shows how the strategic importance of OPEC, and of the Persian Gulf in particular, declined dramatically after the oil crises of the 1970s; that's why there weren't any more crises for 20 years. But now, through inattention, laziness, and greed, we've revived that strategic centrality. And no, drilling in ANWR is no answer. At peak, more than 10 years from start, it would produce a bit more than 1 percent of the world total. Take a look at the chart and see if that would make much difference. Conservation is the only way to make big inroads on this vulnerability in the medium term. And alternative sources of energy are the only long-term answer.

Subject: Good post Terri
From: Pete Weis
To: Terri
Date Posted: Sun, Feb 27, 2005 at 12:34:14 (EST)
Email Address: Not Provided

Message:
This is such an extremely important issue to the world economy. We must aggressively develop alternatives and we need to buy ourselves time with a real commitment to conservation.

Subject: Safety Above All
From: Terri
To: All
Date Posted: Sat, Feb 26, 2005 at 16:29:19 (EST)
Email Address: Not Provided

Message:
Suppose you invest an entire portfolio in the Vanguard GNMA fund. The yield is 5%, the duration 2.5 years. A 2 percentage point increase in mortgage rates would lower the price of the fund about 5%, but the yield would begin to rise toward 7%. In less than than 2.5 years, you would have earned about 5% annually. GNMAs are government insured. Where is the long term risk? A 50% stock index and 50% Bond Index fund portfolio strikes me as nicely protected against risk. Try the Value Stock Index if you wish. Try the Europe Index if you wish. A 40% stock index and 60% bond index portfolio is even more risk averse. A 60% stock portfolio of course and you are adding risk. What would you have? There are ways to invest with long term safety.

Subject: Re: Safety Above All
From: Pete Weis
To: Terri
Date Posted: Sat, Feb 26, 2005 at 19:04:12 (EST)
Email Address: Not Provided

Message:
'GNMAs are government insured. Where is the long term risk?' The risk is in the dollar in which they are denominated. Anyone who has invested in GNMA's and gotten 5% nominal returns over the last 2 years has actually lost at least 5% or more each year since the dollar has lost 10% or more against a 'basket' of currencies. In fact it has lost considerably more than that against many of the 'necessary' personal expenditures in life such as food, housing, energy, gas for the suv, insurance of every sort and sending your kid to college. The phony core CPI number the government puts out there is used to pump up the GDP number and for validation of negative real interest rates - I would call it a 'Snow' job foisted on the public by the Bush administration. So we need to remember that if we are invested in US dollar denominated investments, we need to make at least a 10% nominal (perhaps more) per annum gain if we are to break even with a 0% real return on investment. Am I wrong on this?

Subject: How to be Most Secure
From: Terri
To: Pete Weis
Date Posted: Sat, Feb 26, 2005 at 19:36:49 (EST)
Email Address: Not Provided

Message:
Interesting argument. I have not found any academic study criticizing the way we measure prices, but I will attend at once if I do. Of course, I hold the Europe Index as a dollar hedge. Australia Index as well. I hold the Value Index and the energy and health care funds as as hedges against inflation. But, bond fund have been terrific investments. The return of the Vanguard Long Term Bond Index these 5 years ending Janaury 31, 2005, was 10.9% annually. This is superb regardless of the dollar or inflation. The GNMA example is a fine example. Inflation is moderate, and if you wish to make a secure 5% there is the opportunity. If it becomes more expensive to travel to London, so what? The dollar gained in value from 1993 till 2001, now the gains have reversed. Should a highly conservative investor trail inflation for a while, but still have a reasonable nominal return, all will be well. Interest rates adjust to price changes. I understand the nagging doubts, for this is not Robert Rubin's economy, and we are trying to compensate, but there are ways to be secure with a most conservative domestic portfolio. Remember the duration of the GNMA portfolio is just 2.5 years.

Subject: Academic studies
From: johnny5
To: Terri
Date Posted: Sat, Feb 26, 2005 at 23:10:09 (EST)
Email Address: johnny5@yahoo.com

Message:
http://ideas.repec.org/p/fip/feddwp/99-03.html#related http://ideas.repec.org/p/fip/feddwp/99-03.html This paper reviews various approaches to the measurement of core inflation that have been proposed in recent years. The objective is to determine whether the European Central Bank (ECB) should pay special attention to one or other of these measures in assessing inflation developments in the euro area. I put particular emphasis on the conceptual and practical problems that arise in the measurement of core inflation, and propose some criteria that could be used by the ECB to choose a core inflation measure http://www.bankofengland.co.uk/workingpapers/wp242.pdf

Subject: Short and Long Term
From: Terri
To: All
Date Posted: Sat, Feb 26, 2005 at 14:20:00 (EST)
Email Address: Not Provided

Message:
Cyclical or secular, I really do not know the difference. An investor who held the Long Term Bond Index from 2000 has gained 10.9% annually these 5 years. Such an investor should be quite pleased. An investor with a conservative stock portfolio has been gaining for 28 months, and made up most or all the losses of the bear market. The Large Cap Value Stock Index is positive for these 5 years, the Mid Cap Index is positive, the Small Cap Index is positive. Gains have been substantial. The REIT Index has flourished, as have the Vanguard Health Care and Energy funds. The Europe Stock Index is positive over the past 5 years. With a conservative portfolio an investor should be most pleased, and should be well protected in furute.

Subject: Risk Protection
From: Terri
To: Terri
Date Posted: Sat, Feb 26, 2005 at 15:04:45 (EST)
Email Address: Not Provided

Message:
The Vanguard GNMA fund has a yield of 5.03% and a duration of 2.5 years. The bonds are government insured. What more could be asked for risk aversion? The really is minimal risk in any of the short term bond funds, and the yields are reasonable. The Fed intend to continue to raise interest rates, but there is little to worry about with a short term bond fund. The Inflated Protected Bond Fund has a longer duration, and I still do not know how the fund will behave if long term interest rates rise sharply.

Subject: Bond Funds as Protection
From: Terri
To: All
Date Posted: Sat, Feb 26, 2005 at 14:02:18 (EST)
Email Address: Not Provided

Message:
Suppose there is to be a bear market. There simplest recourse to the bear market of 2000 to 2002 was bond funds. The S&P Stock Index lost 1.9% annually these last 5 years from January 31, 2000 to January 31 2005. However the Vanguard Long Term Bond Index gained 10.9% annually during this period. While bond funds were weaker in the 1973 to 1974 bear market, they still were positive for the period. Rising interest rates may bring about a bear market, but there is little likelihood that rates will rise in the course of a bear market. An investor can choose to balance stock risk in a portfolio with any proportion of bonds. The bond funds chosen can be high in interest rate sensitivity as long term funds or low as short term funds. The beauty of diversifying with bond funds is they allow an investor not to have to worry about always timing the market while always being invested.

Subject: Question?
From: Pete Weis
To: Terri
Date Posted: Sat, Feb 26, 2005 at 14:23:00 (EST)
Email Address: Not Provided

Message:
What's the chance of rates staying low (regardless of a bear market) if fiscal policies cause large budget deficits and a current account deficit remains high in tandem? Typically, in a bear market economy tax revenues decrease making the budget deficit more severe. Either taxes must be increased on the wealthiest who suffer very little from a consumption point of view during such periods, or government spending must be slashed, or our political leaders will continue to borrow to the max. Under our present administration which scenario is most likely? What does this mean for our currency and our interest rates? Can we load up on cake and ice cream and expect to lose weight? Are consequences a thing of the past?

Subject: Federal Reserve Protection
From: Terri
To: Pete Weis
Date Posted: Sat, Feb 26, 2005 at 14:36:22 (EST)
Email Address: Not Provided

Message:
The Federal Reserve can and will protect the economy. There is scant general inflation, and should economic growth slow significantly for any reason the Fed can and will reverse course and begin to lower short term interest rates. Though the Fed will continue to slowly raise short term interest rates for a while, with a nicely growing economy there is leeway. Slow enough growth and the Fed will reverse course. We grew at 3.8% last quarter, which gives the Fed leeway. The Fed has made it clear the economy will not be harmed to stem the trade deficit or relative dollar value decline. Government budget deficits will be a problem for quite a while, but they do not preclude low interest rates. This is not to say in the least there is no danger, just to argue there is a Fed recourse.

Subject: Not much room for lowering
From: Pete Weis
To: Terri
Date Posted: Sat, Feb 26, 2005 at 15:39:13 (EST)
Email Address: Not Provided

Message:
Besides lowering rates risks further damage to confidence in the dollar. Alan Greenspan is discovering a disconnect between the fed rate and long term rates. Long term rates seem to be more dependent on the willingness of foreign central banks to absorb more dollar risk and bond investors belief that foreign central banks will continue to buy US debt. The fed rate doesn't seem to have much effect on long term rates and Greenspan seems to be worried about this. Greenspan has dropped his 'measured rate increase' terminology precisely because he has become more concerned by the twin deficits and dangers to the dollar. He may not (at least publically) be as worried as Paul Volker but he seems to be leaning more in Volker's direction. So I read the dropping of this terminology to mean - if necessary they might raise rates more aggressively to prevent a financial crisis. Risking a recession caused by steeper rates is preferabled to a financial crisis/collapse. One is a serious problem the other is a disaster. I think one could argue that this is the worst predicament a fed chairman has ever faced, since this is the greatest risk to the dollar in history.

Subject: There is Lots of Room
From: Terri
To: Pete Weis
Date Posted: Sat, Feb 26, 2005 at 15:50:30 (EST)
Email Address: Not Provided

Message:
Alan Greenspan and other Federal Reserve governors have been clear that the economy will not be harmed for the sake of the value of the dollar. I can not imagine otherwise. What if the dollar were to fall in short order 15 to 20%? The same happened in England and France in 1991-1992, with no ill effects beyond a brief attempt to stem the loss in value. We do learn, and we will not try to defend the dollar as the Bank of England tried to defend the Pound. The disaster is sacrificing the economy for the dollar and it will not be done, for the Fed governors have told us this, and the policy would be harmful as Keynes knew many years ago. There is lots of room to lower rates should that be needed. Right now we are growing well, the dollar is fine, the bond and stock markets are fine, so there is no near term worry.

Subject: What if There is a Bear Market?
From: Terri
To: All
Date Posted: Sat, Feb 26, 2005 at 13:46:39 (EST)
Email Address: Not Provided

Message:
The longest bear market of the past 60 years ended in October 2002, and lasted from 26 to 30 months depending on the index used to measure. So, a bear market of more than a year is seldom seen and seen only once in 60 years. The answer however to protecting against a bear market has been and seems to be bond funds.

Subject: Value Stocks
From: Terri
To: Terri
Date Posted: Sat, Feb 26, 2005 at 16:03:39 (EST)
Email Address: Not Provided

Message:
Notice that large and small cap value stocks held up remarkably well in both the 2000-2002 and 1973-1974 bear market periods. Valuation and dividends matter in difficult markets.

Subject: Think you may be....
From: Pete Weis
To: Terri
Date Posted: Sat, Feb 26, 2005 at 14:04:07 (EST)
Email Address: Not Provided

Message:
getting mixed up by cyclical bear markets vs. secular bear markets. 2000-2002 was either the longest and deepest cyclical bull market in history or it was the begining of a secular bear market (which is what I believe). The following is from an outfit which profits from investors staying in the markets and they are much more bullish than I. However, they provide a good explanation of bear markets (the stats regarding bear market periods were in table format so you have to jump back and forth line up the data): Will the Bear Be With Us a Long Time? This article is written by Dennis Tilley, director of research at Merriman Capital Management. A former aerospace engineer who has developed market timing systems for many years, Dennis has updated and improved virtually every timing system in use by MCM. by Dennis Tilley Director of Research Recently, I was watching the Suze Orman show on CNBC when a caller asked: “What is a secular bear market?” Apparently more and more investors are wondering about this, and I’ll use this article to address the topic. More important, I’ll talk about what investment strategies are effective in a secular bear market. There are no universally accepted rules for defining a secular bear market. But in very general terms, it’s a long time, perhaps 10 to 20 years, characterized by below-average stock market returns. Contrast this with a cyclical bear market, which typically lasts from a few months to a year. The four most recent cyclical bear markets didn’t last long: three months in 1987, four months in 1990, 10 months in 1994 and two months in 1998. The current bear market has lasted longer than these four combined. More and more commentators are claiming we are now in the beginning stages of a secular bear market. But in truth, it’s simply too soon to know. The last secular bear market in the United States was from 1966 to 1982. Japan continues to struggle through a severe secular bear market that started in 1990. Figure 1, showing the performance of the S&P 500 Index from 1929 to 1999, is divided into four time periods: two secular bear markets and two secular bull markets. Note that during the secular bear markets (1929 to 1941 and 1966 to 1981), the annualized returns for the index were significantly lower than its long-term average of 10.6 percent. Figure 1 Stock market returns (in percent) 1929-1999 1929-1941 1942-1965 1966-1981 1982-1999 Type of Market Total Period Secular Bear Secular Bull Secular Bear Secular Bull Length in Years 71 yrs 13 yrs 24 yrs 16 yrs 18 yrs Annualized Return of S&P 500 10.6 (2.4) 15.7 6.0 18.5 Inflation Index (CPI) 3.3 (0.8) 3.1 7.0 3.3 S&P500 Real Return 7.1 (1.6) 12.2 (0.9) 14.7 The 1966-1981 annualized return of 6.0 percent may not seem so bad in the current stock market climate. But adjusted for inflation, it represents a loss of 0.9 percent per year. While the protracted length of a secular bear market can be extremely discouraging, those with the fortitude to stick with their investments over the long term have eventually reaped the rewards of their patience. The two secular bull markets shown in this table produced exceptional returns for even longer periods of time. A secular bear market doesn’t mean stocks go straight down over a long period. Figure 2 shows the Dow Jones Industrial Average and S&P 500 since 1962. Though the period from 1966 to 1981 was a secular bear market, stocks went up and down in many cyclical bull and bear markets. But all the zigging and zagging did not lead to ever-higher stock prices. Still, the zigs and zags were often prominent enough that nimble investors could take advantage of them. The stock market is partly a creature of psychology. Near the end of a typical secular bull market, stocks are widely regarded as the best way to get rich. (Does that sound like late 1999?) But near the end of a typical secular bear market, many investors are looking at other asset classes to achieve their financial goals – bonds, real estate, gold and commodities. Strategies for a secular bear market The bad news may be the possibility of a new secular bear market. But the good news is that investors can maximize their chances for preservation and growth in such an environment with two strategies: diversification and timing. Because investors can’t see very well into the future, there’s simply no substitute for proper asset diversification. That means having significant exposure to international stocks as well as U.S. stocks, to small-cap stocks as well as large-cap ones and to value stocks as well as growth stocks.

Subject: Planning Planning
From: Terri
To: Pete Weis
Date Posted: Sat, Feb 26, 2005 at 16:50:39 (EST)
Email Address: Not Provided

Message:
The board will be gone soon, but we will begin again. What is necessary is to have definite plans for ourselves. Worry, and plan. I worry, and plan and you help wonderfully. This essay is useful, but when will these guys cite sources and date their work?

Subject: 1973 - 1974
From: Terri
To: Pete Weis
Date Posted: Sat, Feb 26, 2005 at 14:45:20 (EST)
Email Address: Not Provided

Message:
There are all sorts of stories and games with data to show that investors made no money from 1966 to 1981, and even if they did they really did not because of inflation. Phooey. Stock dividends were above 4% through the period, and when added to index returns show there were gains through the period and while inflation was a problem stock returns compensated nicely for inflation. Money was made in stocks, and bonds and real estate through the period from 1966 to 1981. The need was for a conservative or diversified portfolio. We can better and more easily diversify now.

Subject: You are an absolute....
From: Pete Weis
To: Terri
Date Posted: Sat, Feb 26, 2005 at 15:50:49 (EST)
Email Address: Not Provided

Message:
stalwart! It will be interesting if you begin to change your mind over time. Hey, maybe somehow we get through this economic minefield - the Chinese begin to shop at some store which sells many American goods or we develop enough products which consumers in emerging economies must have. I just don't see how we can live off all this borrowing and our housing market for many more years. You must believe we can, however.

Subject: Being Realistic
From: Terri
To: Pete Weis
Date Posted: Sat, Feb 26, 2005 at 16:14:45 (EST)
Email Address: Not Provided

Message:
Though I do wish economic policy were otherwise, I have been hearing about the dread of debt year after year after year, and I am sure not going to wait for debt to finally emerge as an investing problem. Rather I will invest cautiously and happily, for there are fine ways to do so. I do wish professional bears would offer more useable advice, but where? So, we learn. I try to be a realist.

Subject: Bill Gross
From: David E..
To: Terri
Date Posted: Sat, Feb 26, 2005 at 20:12:07 (EST)
Email Address: Not Provided

Message:
Bill Gross's column this month covers every investor's dilemna. The possibility that Japan and China will stop buying treasuries is the Sword of Damocle's over our heads. Everything will be great until the sword drops. But remember, in 1996 Greenspan talked about Irrational Exuberance. That was 9 years ago - and no real pain yet. There is a possibility that the bubble won't burst. You have to decide where to place yourself on the continum of risk. Balance the risk you will miss out on capital gains against the risk of suffering capital losses.

Subject: Crying wolf........
From: Pete Weis
To: Terri
Date Posted: Sat, Feb 26, 2005 at 16:26:00 (EST)
Email Address: Not Provided

Message:
gets the inevitable result.

Subject: Caution
From: Terri
To: Pete Weis
Date Posted: Sat, Feb 26, 2005 at 16:45:18 (EST)
Email Address: Not Provided

Message:
There is ample reason for caution, but then we can be cautious. Look to Japan and we can take heart at how the economy has held up since 1990, no matter the endless policy mistakes. Not a pleasing example, but the Japanese are living through this period of anemic growth quite nicely. I would have it otherwise, but it is comforting. We can learn from the Japanese. I wish Paul Krugman would write more on Japan.

Subject: Politician tells economist to......
From: Pete Weis
To: All
Date Posted: Sat, Feb 26, 2005 at 12:07:23 (EST)
Email Address: Not Provided

Message:
mind his P's & Q's. Its very comforting to know that we have such level headed and knowledgeable politicians in this world to counter these 'alarmist' economists. Australian PM rejects as alarmist warning that US deficits risk crash Thu Feb 24, 7:44 PM ET SYDNEY (AFP) - Australian Prime Minister John Howard dismissed as 'alarmist' a warning by the government's chief economic adviser that the United States was heading for a financial crash that could ravage the global economy. Secretary to the Treasury Ken Henry said Thursday the United States' current account and budget deficits were creating imbalances in savings and investment that could lead to a sharp fall in the US dollar and a bond market sell-off. Addressing a private meeting of Asian treasurers in Sydney, Henry likened a flood of money pouring into the United States to support its twin deficits to the stockmarket's dotcom bubble of the late 1990s, saying it could push up US and world interest rates. It was 'worryingly reminiscent of Federal Reserve (news - web sites) chairman Alan Greenspan (news - web sites)'s warning in 1996 of irrational exuberance in US stocks,' Henry said. He said it would damage US economic growth, cutting Chinese exports of manufactured products to US markets and threaten the world economy, including the boom in Australian mineral exports to China. But Howard said any talk of a world economic crash was alarmist. 'There are a lot of people who think the American budget deficit is too high,' he told a Melbourne radio station. 'I certainly would like to see the American budget deficit reduced ... but it's too alarmist to talk about a crash.' He said the outlook presented to the cabinet this week by Reserve Bank governor Ian MacFarlane was of 'pretty strong world growth' and Australia's budget was protected by the general strength of the economy and because the government ran budget surpluses. The International Monetary Fund (news - web sites) (IMF (news - web sites)), which is responsible for the stability of the global economy, has also warned that a current account deficit like that of the United States could not be sustained indefinitely. IMF managing director Rodrigo Rato told the Foreign Policy Association in New York Wednesday that while current account deficits were not in themselves necessarily undesirable, 'What is undesirable, however, is an unsustainable deficit.'

Subject: If it does get worse?
From: johnny5
To: Pete Weis
Date Posted: Sat, Feb 26, 2005 at 12:15:28 (EST)
Email Address: johnny5@yahoo.com

Message:
I-bonds? Bank CD's? Low expense ratio bear funds? More XOM? Where do you go Pete? More vanguard precious metals? Where is Pete and family gonna go to escape the bear chasing him in the forest? Johnny5 is in ibonds (can only get 30K a year) and some dividend paying dow's and adding xom but thinking about getting into some short term cd's at countrywide.

Subject: Re: If it does get worse?
From: Pete Weis
To: johnny5
Date Posted: Sat, Feb 26, 2005 at 16:24:30 (EST)
Email Address: Not Provided

Message:
I'm not an investment guru. I'm invested in a way which benefits from a falling dollar - some of it more speculative, but most of it very conservative. A well managed fund which has performed rather well over the last 5 years - through stock market bust and dollar tribulations is PERMANENT PORTFOLIO. TEMPLETON GLOBAL INCOME FUND and PRUDENT BEAR GLOBAL INCOME FUND are conservative hedges against dollar droppage. I invest in precious metals funds such as Vanguard's and Tocqueville and have invested in a junior called Novagold since before it was sold on the AMEX - these are speculative and no one should invest in precious metals if they can not deal with the volatility. My wife and I have invested in oil companies for many years and are probably overweight in oil - I believe long term (the next 10 years) they will likely have higher and higher profits although they could suffer setbacks in a broad market downturn and a recession (they'll weather it better). Commodity funds such as PIMCO's have high fees but have been well worth it. State Street Natural Resource fund has been a good investment. These are a few, but anyone who takes investment advice from me and doesn't do the research themselves, takes the responsibility of any losses upon themselves.

Subject: Benchmarks
From: Terri
To: Pete Weis
Date Posted: Sat, Feb 26, 2005 at 17:37:43 (EST)
Email Address: Not Provided

Message:
Well done. Remember you can benchmark against the Vanguard-MSCI Indexes I post. http://flagship2.vanguard.com/VGApp/hnw/FundsVIPERByName http://www.msci.com/us/indexperf/index.html Sector Indexes 12/31/04 - 2/25/05 Energy 21.6 Financials -2.5 Health Care 1.1 Info Tech -5.1 Materials 5.9 REITs -5.1 Telecoms -3.6 Utilities 4.3

Subject: Women's Voices in Rwanda
From: Emma
To: All
Date Posted: Sat, Feb 26, 2005 at 11:21:25 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/26/international/africa/26rwanda.html?pagewanted=all&position= Women's Voices Rise as Rwanda Reinvents Itself By MARC LACEY KIGALI, Rwanda - The most remarkable thing about Rwanda's Parliament is not the war-damaged building that houses it, with its bullet holes and huge artillery gashes still visible a decade after the end of the fighting. It is inside the hilltop structure, from the spectator seats of the lower house, that one sees a most unusual sight for this part of the world: mixed in with all the dark-suited male legislators are many, many women - a greater percentage than in any other parliamentary body in the world. A decade after a killing frenzy left this tiny Central Africa country in ruins, Rwanda is reinventing itself in some surprising ways. Women make up 48.8 percent of seats in the lower house of Parliament, a higher percentage than in the legislative bodies in countries like Sweden, Denmark, the Netherlands and Norway, known for their progressive policies. The rise of women stems in part from government initiatives aimed at propelling them to the upper ranks of politics. But their numbers do not necessarily add up to influence. They are more a reflection of the demographics and disillusionment spawned by the killing spree that left 800,000 or more people dead, though some lawmakers are trying to use their new place in government to enhance the lot of women in what remains a deeply patriarchal land. 'Before the genocide, women always figured their husbands would take care of them,' said Aurea Kayiganwa, the coordinator of Avega, a national organization representing Rwanda's many war widows. 'But the genocide changed all that. It forced women to get active, to take care of themselves. So many of the men were gone.' At the end of the ethnic warfare of the 1990's, women greatly outnumbered men - some estimate the ratio as 7 to 1 - a result of the wanton killing of so many men and the escape of so many others involved in the carnage. During the rebuilding of the country, then, women's anguished voices were difficult not to hear, and they became what was seen as a powerful and credible force for reconciliation. 'I used to see politics as something bad,' said Athanasie Gahondogo, a member of Parliament and executive secretary of the Forum for Rwandan Women Parliamentarians. 'It's what caused our problems and made me a refugee for so long. But now I want to have a seat at the table.' Women were a tiny percentage of those jailed for taking part in the strife between the Tutsi, who make up about 15 percent of the population, and the Hutu, who represent nearly all of the rest. One study put the portion of women involved at just 2.3 percent. A minister of family and women's affairs in the old government, Pauline Nyiramasuhukon, is on trial on genocide charges at the International Criminal Tribunal in Arusha, Tanzania, but the heinous charges attributed to her, including inciting others to rape Tutsi women, are considered by many here to be an aberration when it comes to women. 'There's a widespread perception in Rwanda that women are better at reconciliation and forgiveness,' said Elizabeth Powley, who has studied Rwandan women's political rise for Women Waging Peace, an organization based in Cambridge, Mass. 'Giving them such prominence is partly an effort at conflict prevention.' During the drafting of the country's new postwar Constitution, 30 percent of the seats in the two house of Parliament were designated for women. But an unexpected thing happened in October 2003 when voters went to the polls to elect a Parliament for the first time since the war. They chose even more women than many male politicians expected. 'Some men even complained that women were taking some of the 'men' seats,' said Donnah Kamashazi, a representative in Rwanda for the United Nations Development Fund for Women. Six of the 20 seats in the Senate are held by women, meeting the 30 percent set aside. But in the lower house, which has 80 seats, women won 39, 15 more than the number reserved for them. Taken together, women make up 45 percent of the two chambers, just below the 45.3 percent in Sweden's single-chamber Parliament. The political representation of Rwandan women is not limited to the legislative arena. There is a female chief justice of the Supreme Court, several female cabinet members, a female head of the influential National Unity and Reconciliation Commission and a female deputy police chief, to name but a few of the prominent women in Rwanda's political world. All that said, women continue to suffer profoundly in today's Rwanda. 'I try to forget what happened in 1994,' said one of the suffering ones, Cécille Mukampabuka, 64, whose leg was shattered and who lost much of her family back then. 'I would go mad if I didn't try to forget. But I can't ever forget. It's not over yet for me. I'm still suffering.' Rwanda remains a male-dominated land, far more than the gendersensitive numbers would suggest. Patriarchal traditions remain strong in the home, where experts say women continue to suffer from spousal abuse and where the notion that the man is the lord of the manor thrives. A female senator disclosed to colleagues recently that she still deferred to her husband during official functions in her home so as not to question his supremacy there. And the uppermost reaches of government remain the preserves of men. In Rwanda, President Paul Kagame, the former rebel leader whose forces quelled the mass killing of Tutsi and moderate Hutu in 1994, holds a firm grip on power, and loyalty to him remains a prerequisite for political survival, no matter one's sex. Criticism of any aspect of governing in Rwanda, including the country's promotion of women, is done at one's own risk. Recently, when the head of a women's organization questioned the effectiveness of the country's female legislators in solving women's problems and likened them to flowers, which look good but do little else, she was condemned and threatened. Shortly afterward, she fled the country. 'It was bad research,' complained Odette Nyiramirimo, an influential senator and former cabinet minister. 'She was calling the women stupid. She used the word flower to describe them. I think she was wrong.' Ms. Nyiramirimo and other women in politics here acknowledge that Parliament does not play an overly confrontation role with the executive branch, an outgrowth, they say, of the divisive politics of the country's past. Only a handful of pieces of legislation have originated in Parliament in recent years, for instance, and little if anything that Mr. Kagame suggests is rejected, or even substantially altered, before adoption. Women also agree that it has taken some time for the female legislators to get their feet wet in politics. During a recent afternoon of political debate, it was clear that the proceedings were being dominated by men. But women are making inroads. Legislation passed in 1999, before the current influx of women, liberalized the rules restricting inheritance for women, which were a major force in keeping women poor. Penalties for child rapists have been toughened, an outgrowth of the brutal treatment that women and girls suffered in 1994. 'Men are watching us,' Ms. Nyiramirimo said. 'They wonder if we'll rise up to a higher level. We're learning fast, because we have to. We say to each other that we can't be as good as the men - we have to be better.' Ms. Nyiramirimo said the true test of women's success would be how much they changed the lives of rural women, those who do not tool around the capital in chauffeur-driven vehicles and do not spend their time debating the issues of the day. 'Women in leadership are doing the little they can, but the problems are as big as the sea,' said Mrs. Kamashazi of the United Nations Development Fund for Women. 'Sometimes you just say, 'Oh, my goodness.' ' Rwanda remains a desperately poor country, where social indicators like life expectancy, child mortality and literacy lag significantly behind most of the world. Much of the day-to-day toil falls squarely on the shoulders of the nation's war-weary women. 'I grew up in a rural area, and every morning before school I had to get up early and fetch water at the river,' Ms. Nyiramirimo recalled. 'It was so painful to balance it on your head. Every time I go to my village I see girls and women still doing it.' One initiative she hopes to push her colleagues to adopt is a program to import donkeys, which are common in other parts of Africa but rather rare here. They would be bred and then distributed to villages to help relieve the loads women must bear. Talk of putting 1994 in the past is difficult for many women across Rwanda, who find themselves poor and alone, or who suffer from AIDS contracted during a violent rape then, or who are now raising many children who are not their own but who were orphaned in the killing spree. One of them is Winfred Mukagirhana, 46, who was raped repeatedly in 1994 and like so many other Rwandan women is now dying of AIDS. She lost her husband and four of her five children in 1994. Her lone surviving boy, who was 12 back then, is now an emotionally disturbed young man who cannot get the brutal attacks that he witnessed out of his head. 'What can the government do for me?' she asked, saying she could not feel much satisfaction from the statistics on women's progress that have put Rwanda so high compared with other countries in the world. 'My life is over. I'm almost dead.'

Subject: Re: Women's Voices in Rwanda
From: johnny5
To: Emma
Date Posted: Sat, Feb 26, 2005 at 12:30:09 (EST)
Email Address: johnny5@yahoo.com

Message:
So sad, she has lost all hope, maybe we will invent a cure for her disease and give her a new lease on life.

Subject: Re: Women's Voices in Rwanda
From: Emma
To: johnny5
Date Posted: Sat, Feb 26, 2005 at 17:54:45 (EST)
Email Address: Not Provided

Message:
Thank you.

Subject: Building contractors, electricians,...
From: Pete Weis
To: All
Date Posted: Sat, Feb 26, 2005 at 11:18:16 (EST)
Email Address: Not Provided

Message:
plumbers, carpenters, mortgage brokers, real estate agents, appraisors, residential insurance brokers, etc. still doing well. They, along with Home Depot, have become the heart of our economy: washingtonpost.com Foreign Investment's Flip Side U.S. Trade Deficit Swells Along With Consumption, Debt By Paul Blustein Washington Post Staff Writer Friday, February 25, 2005; Page A01 Every other night or so, the calls start pouring in from Asia to the homes of Peter Leonard and several traders he supervises at Nomura Securities in New York, jolting them awake sometimes as often as five times a night. The calls come from places such as Tokyo, Shanghai, Hong Kong and Singapore, where investors want to buy U.S. mortgage-backed securities, which are essentially giant packages of mortgages on thousands of American homes. Such sleep disturbances have roughly doubled in the past year, according to Leonard, reflecting the sizzling demand among Asian money managers for a piece of the U.S. mortgage market. The interrupted slumber of Nomura's New York mortgage traders is one small facet of the rapidly rising flow of foreign money into U.S. financial markets. This torrent of capital from overseas has become indispensable fuel for the U.S. economic engine, helping to keep interest rates low. But the influx of capital has an ominous flip side -- the ballooning U.S. trade deficit, which soared 24 percent in 2004, to $617.7 billion. The dollars spent by Americans on Japanese cars, Chinese televisions and other imported goods end up in the hands of foreigners, who plow them into U.S. Treasury bonds and other securities like the ones sold by Leonard and his fellow traders. Therein lies a serious worry for many economists: As the deficit mounts, so does America's overall indebtedness to foreigners, which now totals about $3 trillion. That would be less troubling if the money streaming in from overseas were helping to finance a boom in productive assets such as factories and machinery. But to the contrary, economic data show historic highs in the proportion of U.S. spending on consumption and housing. Not only is the United States piling up debt, it is doing so while consuming at record levels. 'It's like, 'I'm going to Bermuda with the credit I'm racking up on my credit card,' rather than, 'I'm going to school and putting my school books on my credit card,' ' said Catherine L. Mann, a scholar at the Institute for International Economics. That dark perspective is at odds with the position often taken by Bush administration officials, among others, about the trade deficit (or current account deficit, as its broadest measure is called). The gap, according to the administration, should be viewed in a more positive than negative light, given the eagerness with which foreigners supply funds to the United States. As Treasury Secretary John W. Snow put it in an op-ed piece in the Financial Times a few months ago: 'The deficit reflects foremost the strengths of the U.S. economy -- high productivity, strong U.S. growth relative to growth abroad, and the relative attraction of investing in our robust, dynamic economy, which has the deepest and most resilient capital markets in the world.' America's attraction for foreign capital can be readily discerned in the streets of Washington, where a number of buildings have been sold to foreigners in recent months. A group funded by Middle Eastern investors recently bought 901 F St. NW for $56 million, German money was behind the purchase of 2100 M St. NW for $95 million, and other foreign investors bought a portfolio of properties, including 5225 Wisconsin Ave. NW, for a sum in the $200 million range, according to Bill Collins of Cassidy & Pinkard, a real estate services firm involved in some of the transactions. A survey of global real estate investors last year showed that the United States continues to rank as the No. 1 country for 'stable and secure' property investments, with Washington as foreign investors' top city. But the administration's critics see plenty of reason to be uneasy about the trade deficit, which is approaching 6 percent of gross domestic product as measured by the current account, the highest percentage of any major industrial country in modern times. 'There's always the question when you look at a current account deficit -- is it a sign of strength, because capital is pouring into your country, or is it a sign of concern?' Lawrence H. Summers, Snow's predecessor during the Clinton administration, told a panel at the World Economic Forum in Davos, Switzerland, last month. 'If you look behind the 6 percent of GDP deficit, there's a lot to make you worry,' because foreign money 'is financing consumption, not investment' in plants and equipment. Furthermore, he added, much of the investment by businesses in the United States is going into real estate, which does not generate the production of goods for export that are needed to help shrink the trade gap. At some point, he warned, sentiment among foreign investors could turn against America's deteriorating fundamentals, triggering a sharp sell-off in U.S. stocks and bonds that would threaten to throw the economy's expansion into reverse. 'Will those risks ever come home to roost? One can't predict with great confidence,' said Summers, who is now president of Harvard University. 'Will they come home very soon? Probably not. If you keep taking them, will they eventually catch up with us? I worry that they will.' An analysis by economists at Goldman, Sachs provides data to bolster Summers's point: Consumption and spending on residential buildings are a much larger share of the U.S. economy 'than has historically been the case,' the firm noted in a report to clients last month. Taken together, spending on consumer goods and housing has totaled nearly 76 percent of GDP in the past couple of years, compared with an average of about 69 percent of GDP over the past half-century. Given that the trade deficit is also at an all-time high, 'these imbalances place the economy on a path that is ultimately unsustainable,' the report said. Among the factors helping to spur spending on housing is the same factor causing sleep deprivation among the Nomura traders -- the surge in demand from Asia for U.S. mortgage-backed securities, which has been led by China's central bank. As Asians buy these packages of mortgages from U.S. financial institutions, they effectively add to the pool of capital available for Americans to finance their homes. 'If you think about it, there are a lot of homeowners who are having money lent to them by Beijing,' said Steven Abrahams, a senior managing director at Bear, Stearns & Co. who specializes in the mortgage market. 'These are big, complex markets, but the involvement of the non-U.S. investor in the mortgage market has certainly helped keep mortgage rates lower than they would be without their presence. It means that American homeowners end up paying a little less to own a home.' That is no cause for worry, maintained Arthur B. Laffer, one of the gurus of the supply-side economics movement. 'You would clearly rather have capital lined up on our borders trying to get into our country than trying to get out,' Laffer wrote in an article on the Wall Street Journal's editorial page last month. 'Growth countries, like growth companies, borrow money, and the U.S. is the only growth country of all the developed countries. As a result, we're a capital magnet. . . . That's why we have such a large trade deficit.' But other economists argue that it all depends on how the influx of capital is used. The large trade gap the United States ran in the late 1990s posed relatively little concern because the money being borrowed from abroad was helping to fund a major surge in investment by business, said Nouriel Roubini, an economist at New York University. In 1999 and 2000, spending on buildings, structures and equipment -- the portion not spent on residential housing -- was about 13.5 percent of GDP. By contrast, in 2002 through 2004, that figure fell to about 10.25 percent of GDP. Also crucial, Roubini and others contend, is the type of capital the country is attracting. Direct investment by foreigners in U.S. companies and operations -- the building of auto plants in the South, for example, or the takeover of Chrysler Corp. by Daimler-Benz AG -- has dropped precipitously. In 1999 and 2000, foreign direct investment averaged about $300 billion annually; in 2003, it shriveled to about one-tenth that amount, and in 2004, it rebounded only to $91 billion in the first three quarters. Replacing much of the private foreign capital during the past few years has been the purchase of hundreds of billions of dollars in U.S. Treasury bonds by foreign central banks, especially Japan's and China's. Their buying of Treasurys has been motivated in large part by financial operations aimed at keeping their currencies from rising, thereby ensuring that their nations' exports remain competitive. 'Far from saying the external deficit is a sign of strength, given that it is going primarily to finance consumption, it is primarily a sign of weakness,' said George Magnus, chief economist with UBS Investment Research in London. 'And given that roughly half of the financing has come from foreign central banks, it's a classic sign of weakness.' Administration officials counter that the data for the past few months suggest that all these worrisome factors are starting to create a trend in a healthier direction. 'Investment growth has been quite strong in the U.S. over the past year,' said Kristin J. Forbes, a member of the Council of Economic Advisers, noting that although business spending on plants and equipment still isn't where it was in the late 1990s, the previous period was inflated somewhat by the technology bubble. As for capital inflows, she added, the most recent figures show that 'over two-thirds of the inflows have come through private purchases, not official sources like central banks.' Economists like Magnus remain unimpressed. 'A lot of people think this is courting some sort of financial crisis at some point,' he said. 'When that will happen, of course, is hard to say.'

Subject: Re: Building contractors, electricians,...
From: Terri
To: Pete Weis
Date Posted: Sat, Feb 26, 2005 at 11:37:06 (EST)
Email Address: Not Provided

Message:
A useful article. Real estate, commercial and residential, have been the ultimate big ticket items for this economy. Lowering interest rates has a different effect on different industries, and is especially effective for real estate. So we have a real estate boom that kept us from a deep and long recession and is helping the recovery. Since fiscal policy has only been marginally stimulative the Fed has had little choice in interest rate policy. Hopefully, if price movements have been too severe as many argue, the gradual Fed tightening will calm the real estate market but not lead to a recession.

Subject: Conservative Investing
From: Terri
To: All
Date Posted: Sat, Feb 26, 2005 at 10:15:08 (EST)
Email Address: Not Provided

Message:
There are bull markets and bear markets, but the direction of the American stock market as a while was gradually higher through a difficult century. Every stock market in a developed country has risen over 60 years. The most serious problem is currently found in Japan, for here is a bear market that has been 15 years in the making. Japan however is the exception and there is no reason to believe any other developed market will prove remotely as difficult. So, the general investment response should be to be bullish. There are times for increased conservatism, but a conservative portfolio balance is easily obtained between stocks and bonds. Professional or skilled investors may well try hedging, but using a bear fund seems costly and a way to insure losses over time.

Subject: Beautiful Minds
From: johnny5
To: Terri
Date Posted: Sat, Feb 26, 2005 at 11:59:01 (EST)
Email Address: johnny5@yahoo.com

Message:
I think many agree that the secular bear is coming - when he will get here is anyone's guess - bear funds except for just one or 2 are very expensive and costs matter a lot. http://www.321gold.com/editorials/mauldin/mauldin022605.html Initially, Garber, Dooley and Folkerts-Landau suggested the new system of fixed and quasi-fixed exchange rates would last a generation, until China's agricultural labor surplus was absorbed in a new urban industrial sector. More recently, Peter Garber backed off a bit, but he still maintained that the new Bretton Woods system would last another eight years. Michael Mussa has suggested it will not last another four years. We believe it may have difficulty lasting for another two years. '...we [that is, Roubini and Setser] argue that there is a meaningful risk the Bretton Woods 2 system will unravel before the end of 2006.' Even demographer Mr. Dent predicts a bear in 2009 after dow 40K. http://www.prudentbear.com/funds_pbfund_perform.html Timing the market is often analyzed to be a loser's game - but if you could have ridden the cheaper bear funds on the way down and the vanguard index funds on the way up your returns would allow for much earlier retirement. I was an individual stock picker from 96-2000 - I did well until the end - HAHA - then from dec 2000 til dec 2003 I used this strategy http://www.dogsofthedow.com/dogyrs.htm with an etrade account. I had some problems with etrade, switched over to scottrade and have now mostly been making monthly purchases of exxon and chevron. I don't have to get out at the top Terri, I have been looking at the 6 and 12 month cd's at countrywide and bought i-bonds the past 2 years. I have sustained losses in the past and can't afford large ones anymore. My dad has real estate in south georgia and west florida, in both those towns the big new businesses are home supply stores (home depot, lowes) and car dealers - the new car dealerships being built are kia, honda, nissan, isuzu, hyundai, and subaru - the american car lots look older and run down. The housing renovation market is built out, the asian car market is built out - what are the new big businesses gonna be in these 2 cities - I don't see any. Some of the larger restaurant chains have started to close stores and these cities are where you have a lot of retirees that only eat out and sit home and watch tv. Demographically baby boomers are tied to thier jobs right now - but when thier jobs end - either through recession or retirement - they can leave those freezing climates and come to sunny florida or arizona. Globally retirees can leave unstable political areas or poorer areas and move to the USA where we have all the great malls and shopping. What is so great about our country is exemplified right here in my little city near the beach - wether mexican, asian, latin, canadian, european - within 5 miles I have all these choices in food and products and people and culture - I ate german last week from real germans, scottish the day after from real scots, mexican the next from real mexicans, chinese from the chinaman etc etc - who wants to retire in mexico where you only get one culture and one people and the diversity is very low in most parts of the country and thier legal system is not innocent until proven guilty? Most of the rich baby boomers I talk too tell me thier plans - travel (oil and energy) eat good and have a house in switzerland or ontario or west palm beach or all three and move between them. They will have nice cars, new cellphones, and go to lots of events with all thier new free time. In the trailer park here in florida the poorer retirees have old run down trailers and ride bicycles, they don't eat out at expensive places much and thier biggest bills are AC and Cable after rent. They all play a lot of bingo and take a lot of red yeast rice pills.

Subject: Wal-Mart and Unions In Canada
From: Emma
To: All
Date Posted: Sat, Feb 26, 2005 at 09:24:16 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/26/business/worldbusiness/26walmarts.html Wal-Mart Told to End Intimidation in Canada By IAN AUSTEN OTTAWA - Wal-Mart Canada was ordered by Quebec's labor relations board on Friday to stop intimidating workers at a store in the midst of an organizing drive. The decision involves three cashiers at a store in the Quebec City suburb of St. Foy and is the second unfair labor practice ruling against Wal-Mart in Quebec since September. Earlier this month, Wal-Mart Canada, a unit of Wal-Mart Stores Inc., announced that it would close a store in Jonquiére, Quebec, where employees had unionized and were trying to negotiate the first collective agreement with the retail giant in North America. The board ordered Wal-Mart to immediately stop 'intimidating and harassing' the cashiers in St. Foy. But it imposed a relatively light penalty: Wal-Mart must post the decision in the store's lunchroom for 30 days. Nevertheless, Jossée Lemieux, president of Local 503 of the United Food and Commercial Workers' Union, said the decision was significant. 'Wal-Mart cannot violate the fundamental rights of its employees without paying any consequences,' Ms. Lemieux said in a statement. Andrew Pelletier, a spokesman for Wal-Mart Canada, which is based in Mississauga, Ontario, said the company took issue with the board's finding that its managers intimidated employees. But Mr. Pelletier added that Wal-Mart would not challenge the ruling. 'We feel the appropriate thing to do is not appeal,' Mr. Pelletier said. 'We want to comply and just move forward in St. Foy.' The labor board found that the three workers experienced varying forms of intimidation. One was taken into an office by the manager and an assistant manager who demanded the names of union sympathizers. Another was threatened with a negative job evaluation if she supported the union drive. In the third case, a manager suggested that the cashier retract a recently signed union card.

Subject: Indonesia and Oil Prices
From: Emma
To: All
Date Posted: Sat, Feb 26, 2005 at 09:20:16 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/26/business/worldbusiness/26oil.html?pagewanted=all&position= OPEC Member Burdened by High Oil Prices By KEITH BRADSHER and JAD MOUAWAD JAKARTA, Indonesia - What's good for OPEC is no longer good for one of its smallest members and its only representative from Asia. While most oil ministers, from Saudi Arabia to Venezuela to Libya, say high prices are here to stay, one oil minister may be trying to talk prices down. Purnomo Yusgiantoro, the minister of energy and mineral resources for Indonesia, said that a rough consensus had formed among oil ministers from the Organization of the Petroleum Exporting Countries that oil prices were too high. 'It has got to be lower than what we see today, because even OPEC doesn't like to see the high oil price,' Mr. Purnomo said in an interview. That consensus may not be as widely shared as Mr. Purnomo says. There are growing indications that OPEC's larger producers are actually getting more comfortable with higher oil prices. That puts Indonesia in a unique - and increasingly odd - position that reflects how its standing within OPEC has changed as Indonesian oil production declines and domestic consumption grows. For the last two years, Indonesia has not been able to meet its share of production assigned by OPEC, which stands at 1.4 million barrels a day. The country produced an average of 1.1 million barrels a day in 2004, down from 1991's average of 1.6 million barrels a day, according to figures compiled by the United States Energy Information Administration. And while the world's producers struggled last year to meet runaway demand, Indonesia suffered the final infamy for a member of the oil-exporters' club: during the last four months of 2004, the country had to import some oil. Now, the government is considering leaving OPEC. Paradoxically for an oil producer, the high international prices are hurting Indonesia's public finances because the government subsidizes its domestic fuel sales, fixing a lower price at home than on the international market. With rising costs, Mr. Purnomo said that the cabinet planned to announce a 29 percent increase in retail prices for gasoline and diesel fuel on Monday night. The measure, he acknowledged, will be unpopular and is likely to prompt protests. But these concerns are far from the minds of Mr. Purnomo's counterparts within OPEC, who are getting bolder in their public comments about where they think prices are headed. On Thursday, Ali al-Naimi, Saudi Arabia's oil minister, said he thought prices would remain at $40 to $50 a barrel in 2005. His remarks echoed a similar message from the last meeting of OPEC ministers, in January, when many said prices of $50 a barrel were not hurting the world economy. Acknowledging such sentiments, Mr. Purnomo cautioned that OPEC ministers would not necessarily agree to increase production at their next meeting, on March 16 in Isfahan, Iran. International oil demand tends to drop each spring, he said, and OPEC oil ministers will be wary of adjusting supply before seeing how big this year's drop may be. Mr. Purnomo said he personally would like to see a drop in Indonesian crude oil prices by late spring to $35 a barrel, the price assumed in the national budget for calculating the cost of domestic gasoline and diesel subsidies. Indonesian crude trades at a slight discount to the much more heavily traded West Texas Intermediate and Brent crudes. In New York, crude oil futures for April delivery rose 10 cents to $51.49 a barrel. Prices have risen 44 percent in the last year. The increase in retail prices of gasoline and diesel in Indonesia is aimed at cutting the high cost of subsidizing domestic consumption and freeing more oil for export. Gasoline now costs 75 cents a gallon in Indonesia, while diesel costs 68 cents. Last year, the government spent $6.8 billion on subsidies, a seventh of all government spending. Mr. Purnomo's comments, made in a 45-minute interview in his high-ceilinged, elegant receiving room, are nonetheless important both in terms of a rare willingness to speak so publicly about Indonesia's position and his assessment of the consensus among other oil ministers.

Subject: Indonesia and Oil Prices - 1
From: Emma
To: Emma
Date Posted: Sat, Feb 26, 2005 at 09:20:39 (EST)
Email Address: Not Provided

Message:
Current world oil prices, Mr. Purnomo said, are so high they are starting to feed inflation in industrialized countries, driving up the cost of construction equipment and other capital goods oil exporters need to buy overseas. The Indonesian government announced plans last month for huge spending increases for roads, pipelines and other infrastructure projects, including $11 billion for energy-related projects. OPEC ministers are not likely to adopt a new target range for oil prices, as this is a step that still requires considerable study, he said. OPEC set a price range, or band, of $22 to $28 a barrel in 2000 but abandoned it on Jan. 30 at the meeting in Vienna. A panel of top OPEC officials led by Saudi Arabia is studying whether to introduce a new price range, but this is unlikely to produce any specific action soon, Mr. Purnomo said. 'OPEC now is removing the price band for the time being.' Mr. Purnomo predicted that the increases in fuel prices could result in street demonstrations, but said that the government would not retreat. While government officials have said they would increase prices 30 percent to 40 percent, Mr. Purnomo is the first to specify a day for the announcement and the first minister to specify the amount. He said the 29 percent increase was 'an arithmetic average' of increases for various grades of gasoline and diesel, and declined to give specific increases by refined product. The proceeds from higher prices will be used for schools, hospitals and poverty programs, he said. Prices for kerosene, now at a quarter of world levels here, will not be changed for political reasons, he said. The poor commonly use kerosene for cooking. Mr. Purnomo said he had just received a preliminary report from an international oil company suggesting the discovery of a major new oil field in Indonesia. Declining to say what oil company had made the find or where the field was located, Mr. Purnomo said the new field looked as though it could be similar in size to the large Cepu field in eastern Java that Exxon Mobil wants to develop. Mr. Purnomo said two wells had already struck oil and had found an underground reservoir of oil roughly 300 meters thick, or 1,000 feet. More wells need to be drilled to assess the geographical area that the reservoir underlies, he said. Exxon Mobil estimates that the Cepu field could produce 170,000 barrels a day, which would increase Indonesian oil production by a fifth. Exxon Mobil has been unable to begin production at Cepu for the last three years because of a dispute with the Indonesian government over how to share the revenue from the field. Maman Budiman, the vice president for planning, commercial and public affairs at Exxon Mobil Oil Indonesia, said in an interview here on Wednesday that the company asked the newly elected government of President Susilo Bambang Yudhoyono in December to open negotiations after a preliminary deal fell through last summer, but had received no reply. Mr. Purnomo said that he personally wanted to see Cepu go into production as quickly as possible, but that the issue was up to Pertamina, the government-owned oil company, and the ministry of state-owned enterprises. Mr. Purnomo made headlines on Feb. 6 when he told a parliamentary committee that he would form a team to review whether Indonesia should pull out of OPEC, a move advocated by populists here so as to save Indonesia's nearly $2 million in annual dues. OPEC officials in Vienna declined this week to comment on Indonesia's review. While Mr. Purnomo indicated a reluctance to pull out of OPEC, he noted that the final decision would have to be made by the Indonesian cabinet. But in Friday's interview, the first he has granted to domestic or international media since that statement, Mr. Purnomo said that Indonesia's Ministry of Foreign Affairs opposed any withdrawal because it would hurt relations with Indonesian allies in the Mideast. Some in the government also feel that as one of the oldest members of OPEC, Indonesia should be wary of withdrawing. Perhaps most important, it is not clear that Indonesia will lose its status as an oil exporter, Mr. Purnomo said. Recent discoveries should add 300,000 barrels a day to Indonesia's annual production over the next several years, offsetting declines of 16 percent a year from existing Indonesian oil fields and permitting the country to maintain overall production above a million barrels a day in the coming years, he said. By comparison, output dipped to 950,000 barrels a day in December, a level Mr. Purnomo ascribed to some fields temporarily closing or reducing output for a variety of reasons.

Subject: Conservative Investing
From: Terri
To: All
Date Posted: Sat, Feb 26, 2005 at 07:25:19 (EST)
Email Address: Not Provided

Message:
Whether the year will continue positive for stocks and bonds we can not tell. We simply know where we have been. The bull market began in October 2002 and in time it will end, but I have no guess at all as to when it will end. Since the market has been rewarding conservative investors, I prefer to be conservative. But, I have no interest in trying to time the market for I do not know how.

Subject: Stabilty in Markets
From: Terri
To: All
Date Posted: Sat, Feb 26, 2005 at 06:40:09 (EST)
Email Address: Not Provided

Message:
There was a mild decline in stocks and bonds for a day this week, because of concern that the central bank of Korea might sell off American debt. The decline lasted a day, and Korean and other Asian central bankers denied there would be any such sell off. The week ended with almost every prime stock market ahead in domestic currency and dollars for the year. The lone domestic currency exception was Hong Kong which is mildly negative. Japan is negative only in dollars. American stocks turned positive. Long term bond interest rates remain low and the dollar is stronger than when the year began. What is striking is the continued positive stability of international markets.

Subject: Re: Stabilty in Markets
From: johnny5
To: Terri
Date Posted: Sat, Feb 26, 2005 at 10:39:41 (EST)
Email Address: johnny5@yahoo.com

Message:
They don't have to sell off the debt - just stop buying at ever increasing levels like they have been no? After the depression lots of people didn't have work so they watched a lot of larry, moe and curly. Buffet is ahead of the game if we have a huge deflation - all these currently occupied people are gonna sit home and watch thier comcast cause they have nothing else to do. Plus all the retirees about to stop working will want to watch thier comcast too. http://www.321gold.com/editorials/mauldin/mauldin022605.html 'Thirdly, a Chinese revaluation would have no perceptible impact on the US trade imbalance because Chinese wages are so far below America's that even a 30% or 50% revaluation of the RMB (Renminbi), would not be enough to send labour intensive industries back to the US.

Subject: USA only accounts for 16% global growth
From: johnny5
To: All
Date Posted: Fri, Feb 25, 2005 at 20:58:59 (EST)
Email Address: johnny5@yahoo.com

Message:
Is there a bull out there that sees some new holy grail catalyst? Warren Buffet is buying cable - he must see a lot of previously employed people sitting at home on their butt watching the tv. http://www.morganstanley.com/GEFdata/digests/20050225-fri.html ...Courtesy of the dollar’s decline, the US contribution to world GDP growth averaged only 16% over the 2003-04 period — down dramatically from the 98% share recorded over the 1995 to 2005 interval (all calculations expressed at market exchange rates). Will the growth come from the warlords in africa like Carly Fiorina postulated? Will china's space program give us the growth? European car markets? Saudi bio-science? New oil discoveries? What is going to drive the growth now that america has shot it's wad? Simple demographics as dent says taking us to Dow 40K?

Subject: threat to commercial aviation
From: johnny5
To: All
Date Posted: Fri, Feb 25, 2005 at 18:34:54 (EST)
Email Address: johnny5@yahoo.com

Message:
Why does denmark need stingers? U.S. Says 'Thousands' of Missiles Missing By ROBERT BURNS, AP An Afghan guerrilla handles a U.S.-made Stinger missile in late 1987 or early 1988. The U.S. has agreements with several countries to destroy shoulder-fired missiles. WASHINGTON (Feb. 25) - It has been known for years that thousands of light and lethal shoulder-fired missiles are in black-market circulation. What is not known is exactly who has them and whether many have fallen into the hands of terrorists or criminals. A worrisome puzzle, it explains why the United States and Russia signed an agreement Thursday to cooperate in destroying surplus Soviet-era SA-7s and other portable anti-aircraft missiles. The smallest of these are durable, relatively cheap and easy to smuggle. The United States also has understandings with several other countries, including Nicaragua, Bosnia, Cambodia and Liberia, for Washington to provide technical assistance or money to destroy anti-aircraft missiles. The State Department estimates that about 1 million shoulder-fired anti-aircraft missiles have been produced worldwide since the 1950s. The number believed to be in the hands of 'nonstate actors,'' such as terrorist groups, is 'in the thousands,'' the department says. 'What's driving this is concern about the threat to commercial aviation,'' said Wade Boese, research director at the private Arms Control Association. A single successful missile attack on a passenger plane could paralyze the airline industry, at enormous economic loss, he said. There has been only one known attempt against a commercial airliner outside of a war zone. In November 2002, two surface-to-air missiles barely missed an Israeli charter airliner taking off from the airport in Mombasa, Kenya, with tourists returning to Israel. Osama bin Laden's al-Qaida network claimed responsibility for the attempt. The U.S.-Russian agreement signed by Secretary of State Condoleezza Rice and Defense Minister Sergei Ivanov calls for sharing information about exports of these missiles to third countries. Of note, Boese said, is the absence of a commitment by either Washington or Moscow to halt the exports. The United States began selling its Stinger shoulder-fired missile to foreign countries in 1982. The CIA secretly transferred an estimated 2,000 to Afghanistan mujahedeen rebels in the mid-1980s, and they were used to down hundreds of Soviet helicopters and transport aircraft. When the war against the Soviets ended in 1989, the CIA began offering to buy back the Stingers for as much as $150,000 apiece. In his book 'Ghost Wars,'' author Steve Coll wrote that as recently as 1996 the CIA estimated there were about 600 Stingers still unaccounted for in Afghanistan. There also are an unknown number of SA-7 and other types of shoulder-fired missiles in the hands of insurgents in Iraq. A study published last year by the Government Accountability Office, the investigative arm of Congress, said the U.S. government's records on exports of shoulder-fired missiles are 'neither complete nor reliable.'' The GAO said the Army and the office within the Pentagon that manages arms transfers have conflicted figures on missile exports. One says 7,551 Stingers have been sold abroad since 1982 and the other puts the figure at 8,331. One says Egypt bought 89; the other says Egypt bought none. The biggest buyer over the period was Taiwan, with more than 2,200, followed by Denmark with 1,140; Japan with between 871 and 1,025, and Italy with as many as 885.

Subject: The Bull Market Continues
From: Terri
To: All
Date Posted: Fri, Feb 25, 2005 at 15:29:41 (EST)
Email Address: Not Provided

Message:
The international bull market continues. Market gains internationally seem suddued because of the strong dollar, but almost every market is positive in local currency and most are positive in dollars. The American market has turned positive as well. Long term bonds continue to hold value. Energy is the leading sector, but materials and utilities and health care are gaining strength. REITs are somewhat weak. Large cap value continues to lead large cap growth.

Subject: Davos - where are the catalysts?
From: johnny5
To: Terri
Date Posted: Fri, Feb 25, 2005 at 18:20:33 (EST)
Email Address: johnny5@yahoo.com

Message:
Global Savings Disparities in relation to sustained global growth: rtsp://video.c-span.org/15days/e022405_wef.rm 47 minutes into it Stephen Roach gives them some good questions - how do we specifically get the US deficit down without tax increases or spending cuts in the military - Robert Zoellick (US trade representative) didn't seem clear to me. And can europe help global growth and can the ECB do anything to stimulate european domestic demand - Jean-Claude Trichet didn't seem to say much either. Carly Fiorina was in the panel too complaining about too much regulation and too many meetings with legislators, lawyers and accountants - and then later says growth is gonna come from south africa. I don't see the citizens putting down the hoe's and machine guns and beating back the people stealing the shirts off thier backs to get on the internet and chat it up on thier new HP laptop at the pkarchive BBS. She is unemployed at this point :( She said 5 years ago they all had pie in the sky anticipations about growth for at least 10 years. Robert talked about cutting 'all' domestic subsidies and how that relates to europe - but keynes said in his currency union paper that domestic subsidies were good for all domestic consumption needs and you only cut subsidies for the exports I believe. Walter Kielhoz (credit swiss group) kept saying 'pushing on a rope' and no revolution like in technology 10 years ago and making money in the financial industries was going to be very hard from here on out and he doesn't see how the industry will do it and said there is no more catalysts for growth opportunity in the global markets like tech was before - he seemed the realist of the bunch. And then that poor japanese guy head of IBM japan sitting there while everyone said japan was really letting the rest of the world down - I felt sorry for the guy - he needed a stiff saki. http://www.cspan.org/VideoArchives.asp?z1=&PopupMenu_Name=Economy/Fiscal&CatCodePairs=Issue,EF; Programs 1-10 of 70 World Economic Forum Panel on Global Economy from Davos, Switzerland Robert Zoellick, then-U.S. Trade Representative, participates in a discussion of the Global Economy at this year’s World Economic Forum in Davos, Switzerland. Carly Fiorina, former Chair and Chief Executive Officer, Hewlett-Packard Company, and Matthew Winkler, editor-in-chief of Bloomberg USA, also take part. 2/24/2005: DAVOS, SWITZERLAND: 1 hr. 10 min.

Subject: National Index Returns
From: Terri
To: All
Date Posted: Fri, Feb 25, 2005 at 14:32:51 (EST)
Email Address: Not Provided

Message:
http://www.msci.com/equity/index2.html National Index Returns [Dollars] 12/31/04 - 2/23/05 Australia 2.9 Canada 0.6 Denmark 3.7 France 1.4 Germany -1.6 Hong Kong -1.9 Ireland 2.8 Japan -3.0 Norway 5.8 Sweden -0.9 Switzerland 0.7 UK 3.1

Subject: Vanguard no longer offering metals?
From: johnny5
To: All
Date Posted: Fri, Feb 25, 2005 at 13:39:34 (EST)
Email Address: johnny5@yahoo.com

Message:
Why Terri? What a racket!! They show it online but you can't even buy it - why BOGLE - we TRUSTED you! http://www.siliconinvestor.com/readmsgs.aspx?subjectid=54696&msgnum=24414&batchsize=10&batchtype=Next I would like to present this years 'DOM FOCKER' AWARD (you had to see the movie http://www.meetthefockers.com/index.php ) to the American Century Mutaul fund group. http://www.americancentury.com/index.jsp American Century in their infinite wisdom, overrode the vote of it's shareholders and dissolved their 'Global Natural Resources Fund' 11 months ago and even returned the money in form of a check to it's shareholders. They cited the reason as the fund isn't performing...never mind it was one of the few funds they offer that was even with the Y2K. You can only imagine how it would have performed over the last 11 months. Similar funds are up as much as 60-70% over the same time period. Vanguard closed it's one and only precious metals fund because it was getting too scary for them, and then later I was kicked out because they said my 403b wasn't supposed to have let buy those shares in the first place. It still shows up online as one of the funds I can buy, although if I try, it rejects it. Clowns...

Subject: Vanguard offering metals and materials
From: Ari
To: johnny5
Date Posted: Fri, Feb 25, 2005 at 15:56:27 (EST)
Email Address: Not Provided

Message:
Vanguard is offering both precious metals and materials funds.

Subject: Vanguard Returns
From: Terri
To: All
Date Posted: Fri, Feb 25, 2005 at 12:06:02 (EST)
Email Address: Not Provided

Message:
http://flagship3.vanguard.com/VGApp/hnw/FundsByName Vanguard Returns 12/31/04 to 2/24/05 S&P Index is -0.7 Large Cap Growth Index is -2.0 Large Cap Value Index is 0.6 Mid Cap Index is 0.1 Small Cap Index is -2.4 Small Cap Value Index is -2.6 Europe Index is 2.1 Pacific Index is -1.3 Energy is 14.1 Health Care is 0.7 REIT Index is -6.8 High Yield Corporate Bond Fund is 0.9 Long Term Corporate Bond Fund is 2.2

Subject: Sector Returns
From: Terri
To: Terri
Date Posted: Fri, Feb 25, 2005 at 12:06:36 (EST)
Email Address: Not Provided

Message:
http://flagship3.vanguard.com/VGApp/hnw/FundsVIPERByName Sector Indexes 12/31/04 - 2/24/05 Energy 18.8 Financials -3.5 Health Care 0.1 Info Tech -5.8 Materials 4.3 REITs -6.8 Telecoms -4.2 Utilities 2.5

Subject: 2 way street
From: johnny5
To: Terri
Date Posted: Fri, Feb 25, 2005 at 12:48:34 (EST)
Email Address: johnny5@yahoo.com

Message:
Johhny5 versus Warren Buffet: http://finance.yahoo.com/q/bc?t=3m&s=CMCSA&l=on&z=m&q=l&c=xom Don't forget your bear index funds Terri http://biz.yahoo.com/p/tops/bm.html Why doesn't vanguard offer these yet? Man if I could get a bear fund with vanguard expense ratio's I would cream my pants! http://finance.yahoo.com/q?s=RYAIX This bear fund seems to have the best expense ratio - no loads - no 12b1 fees. YTD Return*: 6.69%

Subject: Free Money floating in the air!
From: johnny5
To: All
Date Posted: Fri, Feb 25, 2005 at 09:56:37 (EST)
Email Address: johnny5@yahoo.com

Message:
http://yro.slashdot.org/yro/05/02/25/1256254.shtml?tid=158&tid=126 VISA To Push RFID Credit Cards VISA To Push RFID Credit Cards Posted by Zonk on Friday February 25, @08:46AM from the tossing-your-money-into-the-aether dept. BobPaul writes 'ZDNet is running an article about VISA's plan to incorporate RFID tags into Credit Cards so that 'consumers need only wave credit and debit cards within a few inches of a reader to complete a purchase. And for purchases of less than $25, no signature is required.' VISA claims their system is very secure, stating that 'Each transmission between card and reader has a unique code that cannot be reused even if it is intercepted,' but isn't that very similar to how TI's car RFID system was made?' One of the comments: What protects consumers from fraudulent merchants waving some kind of electronic cash-sucking wand by your back pocket which contains your wallet which contains your RFID Visa card? There's no mention of this in the article at all! It's a standard scam now for an unscrupulous merchant to charge millions of people a small amount of money fraudulently with the hopes that the vast majority won't even notice. Imagine what they will do when all they have to do is walk around a mall waving something at people purse's and backpockets!

Subject: Keynes on currency settlements
From: johnny5
To: All
Date Posted: Fri, Feb 25, 2005 at 07:51:05 (EST)
Email Address: johnny5@yahoo.com

Message:
Keynes thoughts on the subject: http://www.eco.utexas.edu/~hmcleave/368keynesoncutable.pdf The idea underlying my proposals for a Currency Union is simple, namely to generalise the essential principle of bank ing, as it is exhibited within any closed system, through the establishment of an International Clearing Bank. This principle is the necessary equality of credits and debits, of assets and liabilities. If no credits can be removed outside the banking system but only transferred within it, the Bank itself can never be in difficulties. It can with safety make what advances it wishes to any of its customers with the assurance that the proceeds can only be transferred to the bank account of another customer. Its problem is solely to see to it that its customers behave themselves and that the advances made to each of them are prudent and advisable from the point of view of its customers as a whole. In only one important respect must an International Bank differ from the model suitable to a national bank within a closed system, namely that much more must be settled by rules and by general principles agreed beforehand and much less by day-to-day discretion. To give confidence in, and understanding of, what is afoot, it is necessary to prescribe beforehand certain definite principles of policy, particularly in regard to the maximum limits of permitted overdraft and the provisions proposed to keep the scale of individual credits and debits within a reasonable amount, so that the system is in stable equilibrium with proper and sufficient measures taken in good time to reverse excessive movements of individual balances in either direction. Many countries, including ourselves, will find a difficulty in paying for their imports, and will need time and resources before they can establish a re-adjustment. The efforts of each of these debtor countries to preserve its own equilibrium, by forcing its exports and by cutting off all imports which are not strictly necessary, will aggravate the problem of all the others. On the other hand, if each feels free from undue pressure, the volume of international exchange will be increased and everyone will find it easier to re-establish equilibrium without injury to the standard of life. Now this can only be accomplished by the countries whoever they may turn out to be, which are for the time being in the creditor position, showing themselves ready to remain so without exercising a pressure towards contraction, pending the establishment of a new equilibrium. There are one or two other ways of effecting this. For example, U.S.A. might redistribute her gold. Or there might be a number of bilateral arrangements having the effect of providing international overdrafts, as for example an agreement by the Federal Reserve Board to accumulate, if necessary, a large sterling balance at the Bank of England. The objection to particular arrangements of this kind is that they are likely to be influenced by extraneous, political reasons and put specific countries into a position of particular obligation towards others; and also that the distribution of the assistance between different countries may not correspond to need and to the actual requirements as they will ultimately develop. It should be much easier, and surely more satisfactory, to persuade the U.S. to enter into a general and collective responsibility, applying to all countries alike, that a country finding itself in a creditor position against the rest o f the world as a whole should enter into an obligation to dispose of this credit balance and not to allow it meanwhile to exercise a contractionist pressure against the world economy and, by repercussion, against the economy of the creditor country itself. This would give us, and all others, the great assistance of multilateral clearing, whereby (for example) we could offset favourable balances arising out of our exports to Europe against unfavourable balances due to the U.S. or South America or elsewhere. I cannot see how we can hope to afford to start up trade with Europe (which will be of vast importance to us) during the relief and reconstruction period on any other terms. It has been suggested that we should mainly depend on the restriction or prohibition of imports as a means of preserving equilibrium in the international balance of payments. When the Bank of England felt that our gold and dollar resources were falling dangerously low, instead of raising the Bank rate to attract foreign funds or restricting domestic credit to cause a deflation of incomes, or depreciating the exchange to stimulate a more favourable balance, the Bank would notify the Board of Trade that another £25 million or £5o million or £ 100 million of imports must be cut off. Perhaps this would be the worst method of control of all, since it would have no obvious or direct tendency to reverse the forces which had led up to the dangerous situation and so permit of removal of the restrictions later on. Apart from this, the opposite remedy is surely the right one. If, indeed, we lack the productive capacity to maintain our standard of life, then a reduction in this standard is not avoidable. If our price levels are hopelessly wrong, a change in the rate of exchange is inevitable. But if we possess the productive capacity and the difficulty is the lack of markets as a result of restrictive policies throughout the world, then the remedy lies in expanding opportunities for export by removal of restrictive pressure, not in contracting imports. I believe that there is great force in Prof. Hansen's contention that the problem of surpluses and unwanted exports will largely disappear if active employment and ample purchasing power can be sustained in the main centres of world trade. The proposal differs from the existing state of affairs by putting at least as much pressure of adjustment on the creditor country, as on the debtor. This is an attempt to return to the state of affairs which existed in the nineteenth century when a favourable balance in favour of London and Paris, which were the main creditor centres, immediately produced an expansionist pressure in those markets, but which has been lost since New York succeeded to the position of main creditor, aggravated by the break-down of international borrowing credit and by the flight of loose funds from one depository to another. I did not contemplate that the sanction, proposed in the first version of this scheme, by which creditor balances in excess of a stipulated amount were confiscated, would ever come into force in practice. For obviously it would always be t6 the interest of the country concerned to find some way of dealing with the surplus other than that. The object of this and of further provisions was to make sure that some other way could be found. The main point is that the creditor should not be allowed to remain passive. For if he is, an impossible task is laid on the debtor country, which is for that very reason in the weaker position, so that the evils with which we are familiar are very likely to ensue. By making possible rules as to when changes in the rates of exchange of a national currency are allowed or prescribed, it much increases the efficacy of small changes such as 5 or io per cent. In the first place, it makes the creditor contribute to the change by appreciating his currency, which countries, left to themselves, will very seldom do. In the second place, it protects any permitted change from being neutralised by an unjustified competitive depreciation elsewhere. Thus the new system should make possible undertakings not to use protective expedients except when they are required. There should be a general agreement amongst members of the Union to the following effect against every version of discriminatory action: (1) No tariffs or preferences* exceeding 25 per cent ad valorem; * The formula I prefer for preferences is that they are permitted up to a figure of 25 per cent between members of political and geographical groups, (2) No export subsidies either direct or by supplying exporting manufacturers with raw material etc. at prices below the prices at which they are available (apart from differences in cost of transport) for export; (3) No import quotas or prohibitions; (4) No barter agreements; Keynes’ 2nd Draft on Int’l Currency Union 6 (5) No restrictions on the disposal of receipts arising out of current trade. This forswearing of discriminatory policies would apply to all states subject- (1) to their being allowed three (or five) years in which to bring the new policy into full effect; (2) to their being allowed, if they wish to do so, to fall back on the forbidden protective devices in the event of their central bank becoming a Deficiency Bank. It should be noted that no rule is proposed against subsidies in favour of domestic producers for domestic consumption, with a countervailing levy when such subsidised goods are exported. This is a necessary safety-valve which provides for protective expedients called for on political, social and industrial grounds. Such subsidies would become the approved way of giving purely domestic protection to an industry which for special reasons ought to be maintained for domestic purposes only. But control of this kind will be much harder to work, especially in the absence of a postal censorship, by unilateral action than as part of a uniform multilateral agreement by which movements of capital can be controlled at both ends. We should, therefore, urge the United States and all other members of the Currency Union to adopt machinery similar to that which we have now gone a long way towards perfecting in this country. This does not mean that the era of international investment should now be brought to an end. On the contrary, the system proposed should greatly facilitate the restoration of international credit for loan purposes in ways to be discussed below. The object, and it is a vital object, is to have a means of distinguishing (a) between movements of floating funds and genuine new investment for developing the world's resources; and (b) between movements, which will help to maintain equilibrium, from surplus countries, to deficiency countries and speculative movements or flights out of deficiency countries or from one surplus country to another. There is no country which can, in future, safely allow the flight of funds for political reasons or to evade domestic taxation or in anticipation of the owner turning refugee. Equally, there is no country that can safely receive fugitive funds which cannot safely be used for fixed investment and might turn it into a deficiency country against its will and contrary to the real facts. The following general principles are, therefore, essential: (i) All remittances must be canalised through central banks and the resulting balances cleared by them through the International Clearing Bank. (ii) No remittances in respect of the outstanding capital of existing or future assets owned by non-residents shall be made except under licence of both the central banks concerned. (iii) The ownership of such assets may be freely shifted between non-residents, and non-residents may exchange one investment for another within a country. (iv) The net current income of such assets may be freely remitted together with an annual amortisation of capital not exceeding (say) 5 per cent. (v) The offer of investments or assets to non-residents to be newly acquired by them shall require the approval of both the central banks concerned. (vi) Floating and liquid funds, apart from those required to finance current trade through bills and acceptances and in connection with current banking business approved by the central bank concerned (much as in this country under present conditions) shall only be lent and borrowed between central banks. These rules would not preclude the issue of general licences of indefinite duration by agreement between the central banks concerned. Moreover, membership would be thus established as a privilege only open to those who conformed to certain general principles and standards of international economic conduct. I conceive of the management and the effective voting power as being permanently Anglo-American. Thus it would be preferable, if it were possible, that the members should, in some cases at least, be groups of countries rather than separate units. But this provision is not essential to the scheme. We might start with mixed modes, and it might sometimes be better to begin with separate units with the intention of encouraging subsequent combination rather than to force premature inter-arrangements for which those concerned were not ready. For we have to face the fact that the pooling of balances within a limited area as against the rest of the world represents a high degree of mutual trust and dependence and might be difficult without a single central bank and uniform currency and banking within the whole group. In the second place a greater surrender of sovereign rights must be in order in the post-war world than has been accepted hitherto. The arrangements proposed could be described as a measure of financial disarmament. They are very mild in comparison with the measures of military disarmament which, it is to be hoped, the world will be asked to accept. (3) The Bank might set up an account in favour of the supranational policing body charged with the duty of preserving the peace and maintaining international order. If any country were to infringe its properly authorised orders, the policing body might be entitled to request the Governors of the Clearing Bank to hold the Clearing Account of the central bank of the delinquent country to its order and permit no further transactions on the account except by its authority. This would provide an excellent machinery for enforcing a financial blockade. (4) The Bank might set up an account in favour of international bodies charged with the management of a Commodity Control, and might finance stocks of commodities held by such bodies, allowing them overdraft facilities on their accounts up to an agreed maximum. By this means the financial problem of holding pools and `ever-normal' granaries would be satisfactorily solved. B.2. A central bank whose Clearing Account has been in debit for more than a year by an amount exceeding a quarter of its index-quota shall be designated a Deficiency Bank. A Deficiency Bank shall be allowed to reduce the value of its national currency in terms of grammor by an amount not exceeding 5 per cent within any year. A Deficiency Bank may borrow from the Clearing Account of a Surplus Bank (see below) .on any terms which may be mutually agreed. B.3. A central bank whose Clearing Account has been in debit for more than a year by an amount exceeding a half of its index-quota shall be designated a Supervised Bank. A Supervised Bank may be required by the Governors of the Clearing Bank Keynes’ 2nd Draft on Int’l Currency Union 13 to reduce the grammor value of its national currency by amounts not exceeding 5 per cent in any year; to hand over in reduction of its deficiency any free gold in the possession of itself or its Government; and to prohibit outward capital transactions except with the permission of the Governors, who may also disallow at their discretion any other requirement from it for foreign exchange. A Supervised Bank may be requested by the Governors to withdraw from the system in which event its debit balance shall be transferred to the Reserve Fund (see below) of the Clearing Bank. B.4. A Central Bank whose Clearing Account has been in credit for more than a year by an amount exceeding a quarter of its index-quota shall be designated a Surplus Bank. A Surplus Bank may increase the exchange value of its national currency by an amount not exceeding 5 per cent within any year. A Surplus Bank shall grant a general licence for the withdrawal of foreign-owned balances and investments within its jurisdiction. A Surplus Bank may make advances to the Clearing Account of a Deficiency Bank. B.5. A central bank whose Clearing Account has been in credit for more than a year by an amount exceeding a half of its index-quota shall be required by the Governors of the Clearing Bank to increase the exchange value of its national currency by 5 per cent, and the requirement shall be repeated after any subsequent year in which the average credit balance has increased by a further 10 per cent of its index-quota since the previous upward adjustment. Would keynes think today we have kept our credits and debits within a reasonable amount?

Subject: Waking up homeless in America
From: johnny5
To: All
Date Posted: Fri, Feb 25, 2005 at 07:34:05 (EST)
Email Address: johnny5@yahoo.com

Message:
Foreign Investment's Flip Side U.S. Trade Deficit Swells Along With Consumption, Debt By Paul Blustein Washington Post Staff Writer Friday, February 25, 2005; Page A01 Every other night or so, the calls start pouring in from Asia to the homes of Peter Leonard and several traders he supervises at Nomura Securities in New York, jolting them awake sometimes as often as five times a night. The calls come from places such as Tokyo, Shanghai, Hong Kong and Singapore, where investors want to buy U.S. mortgage-backed securities, which are essentially giant packages of mortgages on thousands of American homes. Such sleep disturbances have roughly doubled in the past year, according to Leonard, reflecting the sizzling demand among Asian money managers for a piece of the U.S. mortgage market. The interrupted slumber of Nomura's New York mortgage traders is one small facet of the rapidly rising flow of foreign money into U.S. financial markets. This torrent of capital from overseas has become indispensable fuel for the U.S. economic engine, helping to keep interest rates low. But the influx of capital has an ominous flip side -- the ballooning U.S. trade deficit, which soared 24 percent in 2004, to $617.7 billion. The dollars spent by Americans on Japanese cars, Chinese televisions and other imported goods end up in the hands of foreigners, who plow them into U.S. Treasury bonds and other securities like the ones sold by Leonard and his fellow traders. http://www.washingtonpost.com/wp-dyn/articles/A51650-2005Feb24.html http://www.321gold.com/editorials/daughty/daughty022305.html Thomson Financial, an information firm in New York, says that 'A boom in foreign purchases of US firms, now seen as a bargain, may have started. Last year, 1,126 US businesses were sold to foreign buyers, up from 1,032 in 2003 and 980 in 2002.' This is how Thomas Jefferson came to say something about how fiat money will ruin us and that we will, and I am quoting from memory 'Wake up homeless on the continent their forefathers gave them.' They will have strong money and we will have weak money, and thus they can buy us, lock, stock and barrel. ...Ron Paul asked Greenspan whether a gold standard would prevent the government from amassing such huge debts. He replied, 'I think we have been remarkably successful, in my judgment mimicking much of what the gold standard does I think in that context so far we have maintained a stable monetary system.' ...Then he REALLY goes bananas when he says, 'I do not think that you could claim that the central bank is facilitating the expansion of expenditures in this country' Hahahaha! I am laughing so hard in contempt and rage I am spitting up blood! What a lying moron!

Subject: Laura we can
From: johnny5
To: All
Date Posted: Fri, Feb 25, 2005 at 06:42:01 (EST)
Email Address: johnny5@yahoo.com

Message:
When a country lives on borrowed time, borrowed money and borrowed energy, it is just begging the markets to discipline it in their own way at their own time. Honey, I Shrunk the Dollar By THOMAS L. FRIEDMAN Published: February 24, 2005 http://www.nytimes.com/2005/02/24/opinion/24friedman.html? have just one question about President Bush's trip to Europe: Did he and Laura go shopping? If they did, I would love to have been a fly on the wall when Laura must have said to George: 'George, do you remember how much these Belgian chocolates cost when we were here four years ago? This box of mints was $10. Now it's $15? What happened to the dollar, George? Why is the euro worth so much more now, honey? Didn't Rummy say Europe was old? If we didn't have Air Force One, we never could have afforded this trip on your salary!' The dollar is falling! The dollar is falling! But the Bush team has basically told the world that unless the markets make the falling dollar into a full-blown New York Stock Exchange crisis and trade war, it is not going to raise taxes, cut spending or reduce oil consumption in ways that could really shrink our budget and trade deficits and reverse the dollar's slide. This administration is content to let the dollar fall and bet that the global markets will glide the greenback lower in an 'orderly' manner. Right. Ever talk to someone who trades currencies? 'Orderly' is not always in the playbook. I make no predictions, but this could start to get very 'disorderly.' As a former Clinton Commerce Department official, David Rothkopf, notes, despite all the talk about Social Security, many Americans are not really depending on it alone for their retirement. What many Americans are counting on is having their homes retain and increase their value. And what's been fueling the home-building boom and bubble has been low interest rates for a long time. If you see a continuing slide of the dollar - some analysts believe it needs to fall another 20 percent before it stabilizes - you could see a substantial, and painful, rise in interest rates. 'Given the number of people who have refinanced their homes with floating-rate mortgages, the falling dollar is a kind of sword of Damocles, getting closer and closer to their heads,' Mr. Rothkopf said. 'And with any kind of sudden market disruption - caused by anything from a terror attack to signs that a big country has gotten queasy about buying dollars - the bubble could burst in a very unpleasant way.' Why is that sword getting closer? Because global markets are realizing that we have two major vulnerabilities that this administration doesn't want to address: We are importing too much oil, so the dollar's strength is being sapped as oil prices continue to rise. And we are importing too much capital, because we are saving too little and spending too much, as both a society and a government. 'When people ask what we are doing about these twin vulnerabilities, they have a hard time coming up with an answer,' noted Robert Hormats, the vice chairman of Goldman Sachs International. 'There is no energy policy and no real effort to reduce our voracious demand of foreign capital. The U.S. pulled in 80 percent of total world savings last year [largely to finance our consumption].' That's a big reason why some '43 percent of all U.S. Treasury bills, notes and bonds are now held by foreigners,' Mr. Hormats said. And the foreign holders of all those bonds are listening to our debate. They are listening to a country that is refusing to raise taxes, and an administration talking about borrowing an additional $2 trillion so Americans can invest some of their Social Security money in stocks. If that happened, it would almost certainly weaken the dollar, further depreciating the U.S. Treasury bonds held by all those foreigners. On Monday, the Bank of Korea said it planned to diversify more of its reserves into nondollar assets, after years of holding too many low-yielding and depreciating U.S. government securities. The fear that this could become a trend sparked a major sell-off in U.S. equity markets on Tuesday. To calm the markets, the Koreans said the next day that they had no intention of selling their dollars. Oh, good. Now I'm relieved. 'These countries don't have to dump dollars - they just have to reduce their purchases of them for the dollar to be severely affected,' Mr. Hormats noted. 'Korea is the fourth-largest holder of dollar reserves. ... You don't want others to see them diversifying and say, 'We'd better do that, too, so that we're not the last ones out.' Remember, the October 1987 stock market crash began with a currency crisis.' When a country lives on borrowed time, borrowed money and borrowed energy, it is just begging the markets to discipline it in their own way at their own time. As I said, usually the markets do it in an orderly way - except when they don't.

Subject: Guckert Story
From: http://www.lasun.net
To: All
Date Posted: Thurs, Feb 24, 2005 at 23:52:25 (EST)
Email Address: johntully@gmail.com

Message:
THE JAMES GUCKERT/ JEFF GANNON, FAKE REPORTER IN THE WHITE HOUSE QUESTION IS MOOT! BY JOHN TULLYTHE LOS ANGELES SUNFEB 23 A weekend journalism-school reporter, using a fake name, was given access to the President of the United States at White House press briefings before he even worked for any news organization. He claims that he has seen a confidential, so-called C.I.A. document which reveals the name of former Ambassador Joseph Wilson's wife and shows her recommending him for the trip to Niger to investigate yellowcake uranium sales to the Iraqis. It turns out that Secret Service has been waving James Guckert by the guardhouse for two and a half years and once inside, he became Jeff Gannon. He wrote for a fake website, Talon News, run by Republican strategist Bobby Eberle and the organization GOPUSA. To understand how something like this could Not be a story, that this could happen to begin with, is to understand how The District of Columbia really runs. However, one can only watch and wait as the laws of physics begin to rear their ugly head. Try as they might and for whatever reason, The Mainstream Media (as good of a description as any) just can't keep this monster down. Howard Kurtz, the longtime and wise sage media critic with The Washington Post, trusted by little old Quaker ladies in Cleveland Park D.C. and lobbyists alike, just could not figure out what the big fuss was all about and immediately chalked it up to over-eager WWW types and their preoccupation with the salacious part of the story.Oh that.The Great Diversion and the reason why non-political junkies in America are apparently not talking about this story is that this fella' publicly advertised his services as a male prostitute on numerous sites on the Internet and registered and launched numerous gay male pornographic websites. Really. CNN's Aaron Brown, so brilliant in his earlier years on the old ABC overnight news program, pooh-poohed the scandal as a bit of 'so what'. On Wolf Blitzer's 'Hard News' program, Mr. Guckert/Gannon was treated almost softly, as if not to upset. The New York Times finally ran the story, deep in the back pages on Friday, Feb 11th, more than a week after website journalists began to fully reveal this fake journalist's deceptions.The shockjock mentality came out instantly in the groupthink mainstream media with a curious mix of apathy and frat-boy jokes. There was no outrage to be outraged over.Meanwhile , writers on web sites like The Daily Kos, David Brock's Media Matters and John Aravosis's America Blog, among others, had been doing their own journalism and found out that Mr. Guckert was not who or what he appeared to be. They started their dig after witnessing a press briefing by the President back in late January. A strange reporter asked a clearly partisan question / pronouncement that, among other things, stated that the Democrats were 'divorced from reality'. They got dirt all right. Columnists Frank Rich and Maureen Dowd finally had to write cute pieces about the mess nearing the end of last week. Katie, Matt, and The Today Show eventually did a quick three- minute story in the first hour last Wednesday. Radio man Don Imus couldn't get anyone to bite and wondered aloud about the titillating aspect of the thing. This was now more than ten days since the story had broken, or hadn't broken. No one was even discussing, outside of the Web, the nasty business of the C.I.A. memo that Mr.Guckert had claimed to have seen or knew about right there on Mr. Blitzer's show. Links to web sites where Mr. Guckert solicited clients for sex were widely available at the very same time Mr. Blitzer was tripping all over himself to give Mr. Guckert an Easypass.Ultimate Washington insider Mary Matalin, Vice President Cheney's sometimes consultant, told Imus that she just wished Ms. Dowd would just come in from the cold and get with the program. Why did President Bush and Scott McClellan, the President's spokesman, call on Mr. Guckert/Gannon so often in those two and a half years and how could other reporters not write about Talon News and GOPUSA 's illegitimacy? Veterans of the White House beat sometimes don't see a question for years. Was he a plant? But just like the high school sophomores that they are, the Washington press corps have hemmed and hawed and giggled their way for weeks now through a real-live genuine scandal unfurling at the White House. Waving their collective finger, they dismissed the whole affair in full. It was simply The Bloggers and their liberal retribution for the Rather/CBS assassination and a lurid fascination with the X-rated angle thrown in for good measure. Now the simply idiotic Bush-Tapes story, along with a long weekend and a brilliant fake-outrage campaign over a congressman's comments about Karl Rove, is threatening to bury forever a story that the entire profession of journalism would like to pretend was never born to begin with. Everyone seems to be looking around at each other and tsk-tsking the lack of outrage on each other's part, as if to say 'This is terrible. Someone do some real reporting. 'Someone did - as Mr. Bush would say, on the 'Internets'. Stay Tuned. FOR IMMEDIATE RELEASE (I need people to link to me btw) HTTP//:WWW.LASUN.NET johntully@gmail.com The Los Angeles Sun www.lasun.net

Subject: Soylent Green - new use for the old?
From: johnny5
To: All
Date Posted: Thurs, Feb 24, 2005 at 19:02:06 (EST)
Email Address: johnny5@yahoo.com

Message:
Graveyards may lose business to this in the future: $80 a barrel Oil http://www.fortune.com/fortune/smallbusiness/articles/0,15114,1018747,00.html SMALL & GREEN A Turkey In Your Tank Could poultry scraps be the next big source of fuel oil? By Ellyn Spragins One solution to america's energy crisis just may be gobbling away at a poultry farm near you. Changing World Technologies has developed a working system to convert turkey guts and scraps into fuel oil. But CWT's tribulations show how hard it is for even the most innovative green company to compete in the energy business. CWT's improbable alchemy is based on an idea that scientists have been kicking around for three decades: mimicking the earth's process for creating oil and gas. By subjecting organic materials to extreme heat and pressure, CWT produces in minutes what the planet takes thousands of years to make. The company says its process works on tires, various hazardous wastes, and plastic as well as heavy metals. The key question is whether the end products are pure enough and cheap enough to compete with other biofuels and petroleum. Until recently it seemed that turkey fuel would score big on both counts. CWT saw opportunity in the mad cow scare of December 2003. Expecting U.S. authorities to ban the feeding of animal offal to livestock—a practice linked to mad cow disease—CWT and ConAgra formed a joint venture that built a $30 million plant in Carthage, Mo. The venture assumed that nearby turkey processors would provide lots of free turkey waste. Last year the Carthage plant began selling its output to a Midwestern manufacturer, which buys it for roughly $40 a barrel (25% less than conventional fuel) and uses it to run its plant. The Carthage factory now produces 400 barrels a day. That's a drop in the ocean of U.S. oil consumption, currently running around 20 million barrels a day. But making more turkey fuel isn't as hard as nailing down its costs. It turns out that feeding animals to animals remains standard practice in the U.S., despite a modest tightening in the regulations last year. So instead of being free, turkey leftovers cost $30 to $40 a ton, a hefty expense considering that one ton of turkey yields just two barrels of oil. And turkey fuel has so far been excluded from biofuel tax breaks. In October, Congress passed a bill that gave biodiesel, which is also derived from biological material, such as soybean oil and animal fat, but has a different chemical composition, a tax incentive that translates into a $1-a-gallon break on production costs. 'The good news is that the government finally gave an incentive for producing fuel from waste,' says CWT chairman and CEO Brian Appel. 'The bad news is that it narrowly defined the kind of fuel receiving the incentive.' As a result of those two setbacks, CWT's production costs have doubled, to nearly $80 a barrel, a crippling blow given that conventional diesel sells for about $50 a barrel. CWT is staying afloat, thanks to a $10 million grant from the U.S. Department of Energy. But the company's next operation is likely to be in Europe, where food processors will pay to have CWT dispose of animal offal and where most governments offer tax incentives to biofuel producers. Appel is negotiating to license CWT's technology to Irish Food Processors, one of Europe's largest, which plans to build a biofuel facility by the end of 2006.

Subject: Flexible Investing
From: Terri
To: All
Date Posted: Thurs, Feb 24, 2005 at 17:18:43 (EST)
Email Address: Not Provided

Message:
While high price/earning ratios for the S&P Stock Index have limited gains or presaged losses, the market has been at high p/e levels for long periods. This presents the problem of having to not invest in stocks for long periods if p/e is the guideline. An investor who relied on p/e ratios would have been out of the market since 1997. The question that needs to be asked however is can suitably priced stocks be found even in a market in which general prices are high? I would suggest so. At the peaks of the general market in 1999 and 2000, there were reasonably priced sectors such as energy, health care and REITs. These sectors as a whole were reasonably priced, so that an investor did not have to buy individual stocks but could buy the entire sector in a fund. Tne need is not to let a single measure blind us to an entire market.

Subject: Re: Flexible Investing
From: johnny5
To: Terri
Date Posted: Thurs, Feb 24, 2005 at 18:01:51 (EST)
Email Address: johnny5@yahoo.com

Message:
Now you are back to stock picking or US sector picking - not global asset allocation right? What if your us centric stocks are all going to tumble no matter the sector - would it not be prudent to withdraw from the entire US market - sectors and all? What sectors have the fairest valuations? Hussman had more to say: I frequently present calculations of probable long-term stock returns by making a few assumptions about long-term peak-to-peak growth in earnings and various future P/E multiples. I generally base these P/E ratios on peak-earnings. The price/peak-earnings multiple is the ratio of the S&P 500 to the highest level of earnings attained to date, even if current earnings on the index have declined below that peak. I constructed this in order to filter out the uninformative spike in the P/E ratio that occurs when earnings plunge during recessions. The price/peak earnings ratio is equal to the raw P/E when earnings are at a new high, as they are today, and is otherwise lower than the raw P/E. This makes it a conservative measure of market valuation, so very high levels properly merit concern. Based on newly released quarterly earnings figures, the S&P 500's price/peak earnings ratio is nearly 20. Consider that level from a long-term perspective. Except for the reckless and unsustainable valuations at the 2000 peak, the current multiple has been observed only at the 1929, 1972 and 1987 market extremes and at the late 1960's market extremes. While the market plunges beginning in 1929, 1972 and 1987 are well-known, those mid-1960's valuations deserve some context as well. The Dow first approached 1000 in late 1965. It reached a durable low in 1982, seventeen years later, at 777 – a level it first achieved in January 1964. Investors forget these things if they ignore the data long enough.

Subject: 'Toys' or 'Noise' ?
From: Pancho Villa alias Green-go
To: All
Date Posted: Thurs, Feb 24, 2005 at 17:09:58 (EST)
Email Address: nma@hotmail.com

Message:
Dollar scare reveals fragile support Underlying weakness makes the dollar vulnerable to rumor Crisis over? Not really. For sure, the market overreacted to reports that the Bank of Korea wanted to reduce the share of dollars in its portfolio. What the Korean actually said was that they want to diversify out of low-yielding US Treasuries into higher yielding securities, which could include riskier US assets as well as non-US government bonds. And they intend to do so by diversifying the flow of reserves, not the $200bn stock. But while Tuesday's sell-off was founded on error, it nonetheless exposed the underlying weakness of the US currency. If the mighty dollar can be rocked by a single paragraph in a report to the Korean parliament something is amiss. That something is the dependence of the dollar on a handful of Asian central banks, which between them control $2,400bn reserves. These reserves are already large relative to the size of the Asian economies, and getting bigger by the day. As they grow so does the incentive to guard against capital loss from further dollar depreciation. Very obviously, if all the Asian central banks were to start selling their stock of dollars the US currency would plunge. But such a generalised rout would also force the Asian currencies to appreciate against the dollar. If either Japan or China were to sell dollars, the effect would probably be the same. However, the first mid-sized country to bail out of the dollar might be able to get a good price for its assets and maintain its bilateral exchange rate, encouraging others to follow. But even if Asian central banks do not sell their stock of dollars, the US currency is not safe. With private appetite for US assets inadequate and volatile, the US relies on continued purchasess by central banks to fund its current account deficit and aquisition of foreign assets by US residents. If their appetite dims, unless private flows sore, the dollar will still fall (and keep on doing so until the change in the relative price of imports and exports narrows the current account deficit to a sustainable level.) Diversification might not succed in its objective of minimising capital loss. It all depends on what currency one diversifies into. The euro is no longer obviously cheap. If and when Asia revalues the euro could even fall against the dollar. In this case the capital loss would be greater on euro holdings than on dollars. Asian countries need more Asian assets. Again, in aggregate they cannot obtain them without forcing up their currencies, though individual countries acting alone could do so. In the end the only sure way to limit capital loss is to stop intervening and allow currencies to rise. The yen and Korean won have appreciated significantly since 2002. But while others remain pegged, such appreciation disrupts intra-Asian exchange rates and trade. The optimal solution is a coordinated revaluation, led by China. But while the Chinese economy thrives and inflation stays under control, Beijing has little incentive to agree.

Subject: Sparks to light a powder keg?
From: johnny5
To: Pancho Villa alias Green-go
Date Posted: Thurs, Feb 24, 2005 at 17:30:21 (EST)
Email Address: johnny5@yahoo.com

Message:
How were tensions right before the assassination that started world war I? http://www.321energy.com/editorials/chapman/chapman022305.html February 23, 2005 War Jitters! Last week jittery waves crawled through the markets when Iranian television reported that an explosion occurred near its only nuclear reactor. The stock markets briefly roiled and oil prices jumped. Initially it was feared that a missile had hit, fired either by Israel or the United States both of who are accusing the Iranian government of secretly developing nuclear arms. Washington denied knowledge of the blast and Iranian television later reported it was a fuel tank falling from a plane and then later said it was because of a blast linked to the construction of a nearby dam. Either way the message was clear to the markets. A real strike in Iran could shake the world. A bomb of a different sort fell on Tuesday when South Korea announced that its Central Bank will diversify its currency reserves. There is talk that other central banks will back away from the US$ as well. Indeed there is evidence to suggest that this action is already underway and if that is correct then the demise of the US$ as the world’s reserve currency is already underway. This economic bomb hit the US$, then the stock markets and later oil markets soared over $51 and Gold soared $7 over $430. South Korea, who has one of the largest foreign exchange reserves in the world, has to be taken seriously. Later South Korea issued a note that the plan to diversify their foreign exchange reserves was not new and didn’t say specifically that they would sell the US$. Certainly with $200 billion in US Treasuries they are not going to do that without seriously disrupting the bond market. Markets steadied on Wednesday so the message was effectively damage control. Some other economic bombs lurking in the background are the Russians and possibly other oil producing nations demanding payment in Euros rather than US$ for oil and the birth of a nascent oil trading market in Tehran that could threaten the supremacy of London’s International Petroleum Exchange. In the case of the oil trading market the major oil producing countries are determined to take control of trading advising that the current markets in London and the NYMEX in New York do not work in their favour. Neither of these stories is new either. The potential for war of either the real or economic kind is what makes markets roil and raises the stakes for the potential of a financial meltdown. For months now the rhetoric has been rising between Tehran and Washington over the potential for Iran’s nuclear industry to produce nuclear weapons. The Europeans have been trying to cut a deal with Iran now for some time in order to keep the problem under control. The Iranians deny that they are aiming to produce nuclear weapons. And on it goes. In 1981 Israel pre-emptively struck nuclear facilities in Iraq on the basis that the Iraqis were going to produce a nuclear weapon. A strike today in Iran could trigger a global conflict as both China and Russia have significant ties to Iran through oil agreements in the case of China and Russia supplying military assistance. But Iran is seen by the US and Israel as supporting terrorism through Hezbollah and other groups. Iran has been accused of supporting the insurgents in Iraq. Tehran has close ties with groups who won the recent election in Iraq where numerous Iraqi Shiite clerics were in exile in Tehran. Conflict has existed for years between Israel and Iran and it is no secret that Israel would like to see Iran taken out. This also fits with the agenda in Washington who sees regime change as essential for the countries deemed to be anti-American or as they put it “countries of tyranny”. This includes Iran and Syria who is being accused of being behind the recent assassination of Rafik Harriri the former Lebanese Prime Minister. Iran and Syria have vowed to assist each other should they be invaded. Other countries in the Mid-East on the list include Saudi Arabia and Yemen. The Mid-East sits on the biggest oil reserves in the world and currently supplies the US with about 21% of its imports. Amongst other countries on the US hit list for regime change is Venezuela where there is no love between the US and the Chavez government. Venezuela supplies about 11% of US oil. Recent indications are that Venezuela is signing contracts to provide more oil to China and less to the US. It has been surmised that the US was behind a failed coup d’etat in 2002. Chavez was elected as President of Venezuela and as well survived a recall vote with strong majorities following the failed coup d’etat. Continuing to lurk in the background is the Israeli/Palestinian conflict. While efforts are being made to reach an accord with Yassir Arafat out of the way and the newly elected Mahmoud Abbas in charge many challenges remain that could derail the current shaky peace. Recall it was hard right Israeli settlers that derailed earlier peace efforts including the assassination of Yitzhak Rabin. As well Abbas has to deal with hard core groups such as Hamas. Any of these could derail the current process. Both Abbas and Sharon could face civil war and either could be target for assassins. Despite the great claim that democracy is breaking out in Afghanistan and Iraq we are reminded that much of Afghanistan remains under the control of war lords and is effectively a narco state with one of the lowest standards of living in the world. The Iraqi election has not ended the Sunni insurgency. The party blessed by Shiite Ayatollah Sistani with close ties to Iran won the most seats in Iraq election. Al-Jaafari a former Iranian exile stands to become President. There have been calls to institute Islamic law which would be very problematic for the US. Other groups in the Iraqi coalition are unlikely to want Islamic law and the Shiite groups that won will have to compromise or there is the risk of civil war. Calls have been made by numerous groups that now that the election is over that US should leave. So election or not in Iraq there remain very high risks. What all this is pointing to is that any incident that may have already occurred or one that has not occurred could trigger war, either of the real or economic kind. Markets do not like war. The thought of it or the outbreak of hostilities does trigger sharp drops in the markets. In this case a sharply falling US$ could also trigger a bond market collapse. This tells us that the odds of a financial accident in the upcoming months has now become real and very high. While it might not happen the question that needs to be asked is “do we feel lucky”? Given the high level of debts and leverage that exist in North America today coupled with the low level of savings this heightens the concern of a financial meltdown. We are potentially staring at a precipice or as Financial Sense (www.financialsense.com) would say “we are facing a potential perfect storm”. We thought it would be interesting to provide a short summary of US wars in the 20th century and their impact on US stock markets (using the Dow Jones Industrials as the proxy). The general observation is that threats of war or a trigger event (i.e. Pearl Harbour, 9/11) are more likely to trigger market sell offs while invasions and an appearance that the war is going well triggers huge market rallies. An unexpected escalation of the war also triggers market sell offs. The 20th century and early part of the current century has seen the US involved directly in seven wars starting with the Spanish American War that got underway at the end of the 19th century. We did not count the long Cold War (1945-1989) as that involved no direct conflict but instead proxy wars. Nor did we count the Balkan Wars of the 1990’s where the US involvement was through NATO. We follow the wars chart with a weekly chart of the S&P 500 and of Gold as we believe that Gold will be a major beneficiary of a market meltdown. We have placed some interpretations on the charts. Please keep in mind that these are interpretations only and there may be others as well. Elliott wave is subject to numerous interpretations even by serious devoted Elliott wave practioneers. We have only looked at big waves and made no attempt to interpret sub waves that can change the entire count.

Subject: Re: Sparks to light a powder keg?
From: Pancho Villa alias Gringo
To: johnny5
Date Posted: Thurs, Feb 24, 2005 at 18:03:28 (EST)
Email Address: nma@hotmail.com

Message:
'It is lamentable, that to be a good (very best) patriot one must become the enemy of the rest of mankind.' Voltaire

Subject: What is the current P/E of the market?
From: johnny5
To: All
Date Posted: Thurs, Feb 24, 2005 at 16:21:10 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.hussmanfunds.com/wmc/wmc050222.htm One of the important elements in the success of great investors like Warren Buffett is the ability to maintain what J.K. Galbraith once called a “durable sense of doom” during periods of market overvaluation. This is not easy, because investors often confuse temporary stock returns with permanent ones. They accept excessive risk in overvalued markets because they fear “leaving money on the table.” Historically speaking, advances that emerge from low valuations have typically been “permanent” in the sense that they are not erased by later market declines. In contrast, market returns from price/peak-earnings ratios over 18-19 have regularly been given back, often painfully. Though I certainly wouldn't advise it as a strategy, investors would have historically outperformed the S&P 500 with much less risk than a buy-and-hold simply by selling stocks when the S&P reached 19 times earnings and staying in T-bills until the P/E reverted to 15, even if it took years to do so. In effect, market gains (over and above T-bill yields) from P/E multiples over 18-19 have historically been purely temporary. Investors are often warned that missing a modest number of the strongest days or weeks in the market would have resulted in dismal long-term performance. Aside from the absurdly low probability of missing those specific periods while holding stocks in all the others, what's not recognized is that those strong periods don't occur randomly. If you look at market data, over two-thirds of the best 30 weeks, for example, have occurred in periods when market valuations were below their historical medians. Importantly, the converse is not true. The majority of bad weeks don't concentrate in overvalued periods. Instead, they concentrate in periods when the quality of market action has already deteriorated on the basis of yield trends, price action and so forth.

Subject: Industry Standard Reporting
From: johnny5
To: All
Date Posted: Thurs, Feb 24, 2005 at 15:38:58 (EST)
Email Address: johnny5@yahoo.com

Message:
Can some of you point me to any research on how tightening bi-monthly 401K contributions could distort markets? Something similar to this but focusing on the contribution inflows and not the transers: http://www.bc.edu/centers/crr/papers/Fifth/Agnew-Balduzzi.pdf How an individual trades in a 401(k) account has implications for both the financial security of the individual’s retirement and for the financial markets as a whole. At the individual level, the success of trading strategies can directly impact whether an individual has sufficient funds for retirement or not. At the market level, understanding 401(k) flows may provide insights into how the introduction of private Social Security accounts could affect the stability of the financial markets. Indeed, previous research has suggested that flows and certain types of trading strategies can influence the returns and volatility of financial markets (Balduzzi, Bertola and Foresi 1995; DeLong, Shleifer, Summers, and Waldmann 1990). Given that the introduction of private Social Security accounts could result in an inflow of billions of dollars into individual trading accounts, a better understanding of how these personal accounts might be traded is relevant to assessing their potential impact on the market. Unfortunately, drawing direct inferences about retirement flows from past research of portfolio flows and asset returns may not be advisable. This is because most existing papers have studied data sets that combine both non-retirement and retirement fund flows, or simply non-retirement flows. Given that previous research (Agnew, Balduzzi, and Súnden 2002; Barber and Odean 2001) has shown a marked difference in trading between individual stocks and mutual funds, this pooling may result in a misrepresentation of the retirement flows. This paper overcomes this problem and contributes to the literature by studying a new and unique data set that focuses solely on the portfolio flows within 401(k) accounts. In addition to its novelty, this data set also has the important featur e of breaking down mutual fund flows into three components: contributions, outflows, and net transfers. Separating out transfers from other flows may be important. Fant (1999) shows in his analysis of monthly mutual fund flows that only the transfer component of flows has a significant relationship with asset returns.1 Thus, this paper focuses solely on transfer activity, making it the first paper to do so using data at the daily frequency. I know people say market timing is a losers game but: http://www.usatoday.com/money/perfi/funds/2003-11-02-hearing_x.htm?csp=20 The SEC survey also found: • 'Almost 30% of ... broker-dealers indicate that they assisted market timers in some way.' Now think about 401K contributions - most of my friends get paid the 15th and the 30th/1st. http://www.webmasterworld.com/forum31/1381-3-10.htm In my experience in the US: Old-style Human Resource people in the US think that employees must be paid on Fridays because they will not come to work the day after a payday. So many pay on Friday, for no other reason. They usually hand out the checks before lunch specifically because they want to the employees to spend their own time (lunch break) online at the bank, instead of 'running out to cash the check' during company time. Of course with most salaried people choosing direct deposit these days, this doesn't make sense, but when did that bother an HR person? They process payroll after the payweek closes (often a Friday) and the checks are ready by Tuesday. The signer of the checks gloats over his power for a day or so, and the checks are generally ready by Thursday afternoon - then held for Friday morning delivery. They pay for 2 weeks of work, every 2 weeks (with the 5 day delay). http://64.233.161.104/search?q=cache:iKD25ol8X2QJ:cbs.marketwatch.com/news/story.asp?guid=%7B55D4E190-F43D-4919-851A-D3160C113D9D%7D&siteid=mktw&dist= mutual fund flow contributions 401k&hl=en Skimming the 401(k) Delayed deposits costing U.S. workers millions SAN FRANCISCO (MarketWatch) -- In an age of instantaneous electronic fund transfers, many U.S. companies are capitalizing on an outdated law that allows them to earn money off their employees' 401(k) deductions. Personal checks now clear in a day, and online payments are expedited with a click, but millions of U.S. employees still wait several days or longer for 401(k) deductions to hit their accounts, costing them tens of millions of dollars each year. A 1997 federal law gives employers up to seven weeks to deposit 401(k) deductions, when they previously had 90 days. Over that time, companies earn short-term interest on the 'float' -- the period between deduction and deposit -- or retain the cash for their own use. A senior U.S. Department of Labor official told MarketWatch Friday that the agency intends to update the law with tighter deposit deadlines. 'It would be a matter of days, a couple of weeks or so -- shorter than the current outside limit,' said Ann Combs, assistant secretary for the Employee Benefits Security Administration, the DOL unit that oversees 401(k) plans. Americans pour an estimated $80 billion a year into 401(k) and similar 'defined-contribution' plans, according to the Profit Sharing/401k Council of America. Delaying deposit for just one week after every bi-weekly payroll -- intentionally or not -- equates to $55 million in short-term interest that U.S. workers forfeit each year, according to data supplied to MarketWatch from investment research firm Ibbotson Associates. Rules and practices around 401(k) plans haven't advanced with technology. So the estimated 45 million employees who fund such accounts -- often as their sole means of retirement savings -- essentially depend on management acting fairly and responsibly to ensure deposits are made as quickly as possible. 'There's nothing a participant can do about it -- it's going to happen when it happens,' said Ted Benna, an employee-benefits expert who created the first 401(k) plan. 'The technology exists today that my contribution could be deposited just the way paychecks get direct deposited. Clearly employers could do it every pay period; it's not that big of a job.' Tightening rules Relief for workers may be in sight. In the last decade, the Labor Department stepped up the auditing and penalizing of employers for forestalling 401(k) contributions. The number of civil violations rose to 1,269 in fiscal 2004 from 34 in 1995, the first year the agency began targeting 401(k) abuse, according to the DOL. The enforcement actions have produced more than $340 million in penalties and fines through Sept. 30. The Labor Department now intends to issue new 401(k) contribution guidelines that could dramatically impact employers and employees alike. Existing law says a plan sponsor must deposit 401(k) money for employees as soon as possible, but no later 15 business days after the month in which the payroll deduction was made. At the extreme, a deduction made on Dec. 1 could land in an employee's account on Jan. 21 -- seven weeks later -- and still be legal. 'That regulation was issued years ago, before we had automated payroll systems,' said Eric Keller, an attorney with Paul, Hastings, Janofsky & Walker in Washington. 'You're expected to do it much quicker.' The Labor Department's expectations should become clearer once the agency issues a stricter definition of 'timely deposit' for employers to follow, Combs said in a telephone interview. The DOL will consider public comment before reaching a final decision, she added, but aims to create a legal safe harbor for companies that reduces the guesswork and uncertainty that plagues many companies. 'The vast majority of employers should be able to meet that much shorter deadline,' Combs said. 'In those few cases where they can't, they have to demonstrate why.' Withholding contributions may shave only about a quarter of 1 percent from the annual return on an all-stock 401(k) portfolio, but still can amount to several thousand dollars of lost gains over a 25-year savings period, according to Ibbotson. 'When it's your retirement savings, it's very important,' Combs said. 'It needs to be invested as quickly as possible so it can start to earn interest and provide retirement security.' Contributor beware The Labor Department's Web site, in fact, cites employer failure to make timely retirement plan deposits as a key warning sign that pension contributions are being misused. Most often, however, experts say that a few days' lag time suggests lax administration rather than cash flow problems. 'We don't see plan sponsors trying to game this process or hang onto employees' money,' said Scott Peterson, head of retirement outsourcing services at pension consultant Hewitt Associates. 'The vast majority of our clients are getting the money invested within three or four days of payroll, and many are doing it more quickly.' But Hewitt and other leading retirement plan administrators such as Automatic Data Processing (ADP: news, chart, profile) and mutual-fund companies The Vanguard Group and Fidelity Investments deal mostly with large companies. Such Fortune 1000 firms typically have more sophisticated payroll systems than smaller businesses, which sometimes aren't even automated. 'The smaller end of the market is where you're more likely to see periods of longer delay,' said Jim Norris, head of Vanguard's institutional retirement plan services. 'If you're a smaller company, you're less likely to have people who are dedicated to retirement plans.' Regardless of size, some companies are reluctant to speed response time, even though doing so could improve employee morale and avoid potential legal problems. 'Not a lot of money gets invested in the administrative end of a 401(k) because it generally doesn't produce any income,' said Ed Slott, a retirement plan advisor who runs the IRAhelp.com Web site. 'There's no effect on the bottom line, except if employees start griping.' Employees who are surprised to find out that 401(k) contributions are held back for days or weeks should know that complaints can produce equally surprising results, Slott added. 'Too many employees, even in the post-Enron era, have blind faith that their companies are doing the right thing,' he said. 'The law of the land is not the law of the plan. There's a set of federal guidelines, but you don't really know. The only way to know is to check your monthly statement. If it's too slow, then say something.' So they shorten 401K contribution timeframes - tightening the time in which this influx of funds are going to hit the market and funds. Now you have these 2 concepts - time weighted reporting and dollar weighted reporting - you are a market maker - you know a large percentage of investment cash is going to hit the market 2 days each month, every other friday. Now you are a crook of the most loathsome sort - when do you jack the prices to really sock it to these fools on thier systematic influx of cash into the markets through thier 401k? It seems obvious to me - every other friday or whatever model best correlates to the new tightening of 401K contribution time frames. Now you are a money manager who understands this concept - what is the best way to report performance to your 401k customers to give them the rosy colored picture of thier investing? That thier dollars are being infused into the markets when they have peaks every other friday - or time weighted reporting? institutional investor am I way off base again? please help me understand because I am confused again :(

Subject: Bush buys raymond james?
From: johnny5
To: All
Date Posted: Thurs, Feb 24, 2005 at 13:36:16 (EST)
Email Address: johnny5@yahoo.com

Message:
Notice Pres Bush has investments in raymond james from his tax filings - also vanguard and oil and timber: http://www.opensecrets.org/pfds/pfd2003/N00008072_2003.pdf I don't know who this dent guy is but I guess that throws me into the bull camp as I purchase dividend paying oil company shares with all my loose money and don't see why anyone would horde gold. I buy p/e ratios of the historical average close to 14 though and mr. buffet just bought one that had 34 so I will have to reflect on this. If the DJIA hit 40K I should do well in XOM. http://www.lewrockwell.com/french/french27.html

Subject: Ryanair announce purchase of 140 Boeings
From: Setanta
To: All
Date Posted: Thurs, Feb 24, 2005 at 13:26:55 (EST)
Email Address: Not Provided

Message:
not bad for an airline that had a few beat up turbo-prop planes on a shuttle run from Dublin to London! 24/02/2005 - 9:09:13 AM Ryanair expands with 70 new planes and 2,500 jobs No-frills carrier Ryanair today announced a major expansion involving 2,500 new jobs, 10 new bases, continuing lower fares and more than €2.9bn-worth of new planes. The Irish budget airline said it had placed an order for 70 more Boeing 737-800 aircraft with options on 70 more. The planes will arrive between 2008 and 2012 and are expected to take Ryanair’s passenger numbers up to more than 70 million a year. The new planes will help create more than 2,500 jobs – principally for pilots, cabin crew and engineering people. The airline said: “Half of these jobs will be generated at the airline’s existing 12 European bases, with the remainder at the 10 or more new bases which will be developed by Ryanair over the next seven years.” Announcing the expansion plans in London today, Ryanair’s chairman David Bonderman said: “The Boeing 737-800 series aircraft is the most efficient narrow-body short-haul aircraft in the world. 'Since its introduction into the Ryanair fleet in March 1999, it has transformed our technical reliability, making Ryanair the number one on-time major airline in Europe. “At the same time, the 737-800 has significantly reduced our unit operating costs and allowed us to reduce air fares each year for the last five years. With this new order and new pricing in place, Ryanair expects that unit operating costs (excluding fuel) will continue to fall each year for the next five years. “This will enable Ryanair to offer even lower fares and underpin our growth strategy as we plan to double traffic from 34 million passengers in 2005-06 to over 70 million passengers in 2011-12.” Ryanair began its day’s trading on the ISEQ at €6.14.

Subject: Why Is Ryanair a Success
From: Terri
To: Setanta
Date Posted: Thurs, Feb 24, 2005 at 14:33:57 (EST)
Email Address: Not Provided

Message:
Setanta, what is the secret? How were Ryanair and Virgin able to compete so easily from Europe? Are the older airlines so hopelessly inefficienct that they can not effectively compete on price? I avoid airlines, for they have been impossible investment for decades, but the success of new airlines in Europe and America is consistent and intriguing.

Subject: Re: Why Is Ryanair a Success
From: Setanta
To: Terri
Date Posted: Fri, Feb 25, 2005 at 04:59:14 (EST)
Email Address: Not Provided

Message:
Terri, its all to do with market segmentation. historically it was extremely expensive to fly within Europe with reciprocal agreements and accords dating from the 1950's governing air traffic. for every flight, for example, from London to Paris (granted to the flagship carrier of uk - british airways) there was a reciprocal flight from Paris to London (granted to the french flagship carrier - air france). with the development of the European Union came the removal of restrictions of the movement of capital and labour within the EU. this led to the rise of competition legislation which prohibited these practices. ryanair, following lufthansa's lead, embarked on the road to a low cost structure. they achieved this by the following: cutting out all the frills - no free tea, coffee, sandwich etc on the flight. limiting the bookings to the ryanair website only - cutting out the travel agents. flying into lesser known airports in the country - the parisian airport is beauvais, not charles de gaulle, and is about 40 mins from the city. decreasing the turnaround time between flights - achieved by the purchase of B737 as in the posted article above. no insignificant part of this success was down to Michael O'Leary (the businessman i admire most) and his firebrand, revolutionary management style. there is still a market for the higher end airlines, such as aer lingus, BA, British Midland, Air France etc but air travel has been opened up to millions in europe as a result of ryanair's philosophies. virgin, however, defies explanation, i think it is subsidised by richard branson's other enterprises. it is essentially an all-the-frills airline without the prices of the budget airlines. furthermore it tends to have the high profile routes to North America, Asia and Australia while leaving the short hop routes in europe to the budget airlines. (budget airlines won't fly transatlantic as it will not fit in their cost models). to place the air fare revolution in context: 10 years ago the price of a return flight from dublin to london was approximately IR£250 (Eur317) now it is possible to fly return to london, madrid or rome for Eur50 (cheaper than a return rail ticket from Dublin to Cork). you have to be willing to book in advance for awkward times and dates to avail of these prices though!

Subject: Re: Why Is Ryanair a Success
From: Terri
To: Setanta
Date Posted: Fri, Feb 25, 2005 at 12:41:44 (EST)
Email Address: Not Provided

Message:
Excellent Setanta. Makes perfect sense, and I suspect you are right about Virgin, though we both may not understand how inefficient the old airlines really were.

Subject: For the Starve the Beast Fans
From: Setanta
To: All
Date Posted: Thurs, Feb 24, 2005 at 12:10:33 (EST)
Email Address: Not Provided

Message:
spotted something here that should be of interest to those 'starve the beast' supporters. www.bbc.co.uk Living in Somalia's anarchy As Somalia's new government prepares to return to restore order after years of anarchy, the BBC News website's Joseph Winter reports from Mogadishu on life with no central control. Somalia is the only country in the world where there is no government. Seventeenth century philosopher Thomas Hobbes wrote that 'life is solitary, poor, nasty, brutish and short', if there is no central authority. Few Somalis have probably heard of Hobbes but most would agree with his description - except for 'solitary', as family and clan ties remain extremely strong. The last government, of Siad Barre, was toppled in 1991. Since then Somalia has been divided into a myriad of different fiefdoms controlled by rival warlords, who occasionally clash for territory. So what is life like after more than a decade without a government? No public spending Driving 50km (30 miles) from one of the airstrips near the capital, Mogadishu, to the city, you pass seven checkpoints, each run by a different militia. At each of these 'border crossings' all passenger vehicles and goods lorries must pay an 'entry fee', ranging from $3 - $300, depending on the value of the goods being carried - and what the militiamen think they can get away with. There is no pretence that any of this money goes on public services, such as health, education or roads. Much of it is spent by the militiamen on khat, an addictive stimulant, whose green leaves they can chew for hours on end. Those who can afford it travel with several armed guards - and then you can pass the road-blocks unmolested. Much of south Mogadishu appears deceptively calm but parts, including the north, remain too dangerous to visit. While Siad Barre is commonly referred to as a dictator and people were press-ganged into fighting wars with Somalia's neighbours, some now remember with fondness that schools and hospitals were free. It is now estimated that only about 15% of children of primary-school age actually go to school, compared with at least 75% even in Somalia's poor neighbours. In Mogadishu, many schools, colleges, universities and even government buildings, have become camps for the people who fled to the capital seeking sanctuary from fighting elsewhere. Kidnappings Makeshift shelters made from branches, orange plastic sheets and old pieces of metal cover what were once manicured lawns outside schools and offices. And since some of the militiamen started to kidnap aid workers, demanding huge ransom fees, many of the aid agencies have pulled out, leaving many of those in the camps without any assistance whatsoever. 'Some of my children sell nuts in the street to earn some money. We can't afford to send them to school,' says Ladan Barow Nur with resignation, as she cooks chapattis for the evening meal on an open fire just outside her tent. 'My husband helps shoppers carry their goods in the market but it's not enough. We're always hungry.' She lives in what was a school in Mogadishu. There are no toilets in what is now a refugee camp, and in the rainy season, diseases such as malaria, tuberculosis, diarrhoea and dysentery spread quickly. Some schools, universities and hospitals continue to operate but they are mostly privately run and charge fees. The many thousands of people like Mrs Ladan are unable to pay the $3 it costs to see a doctor and so people die of diseases which could be easily prevented or cured. Market forces 'Somalia is a pure free market,' one diplomat told me. And the central Bakara market certainly looks to be thriving. Some businesses, such as telecoms, are also doing well, with mobile phone masts and internet cafes among the few new structures in Mogadishu, a city where many buildings still bear the scars of the heavy fighting between rival militias of the early 1990s. But is a pure free market a good thing? Speaking from a theoretical point of view, some economists might say so, but in the very harsh reality of Mogadishu, it means guns and other military hardware are freely available in a market not far from the city centre. I was advised that it was too dangerous to visit, as customers were constantly firing the weapons to make sure they work before buying them. The cost of an AK-47 is the equivalent of a survey of business confidence in more stable countries. Following the election of a new president in October, the price fell, as people anticipated that militias may soon no longer be able to operate with impunity. But a month on, with a government still not named, nor a clear plan for how or when President Abdullahi Yusuf and his team will even go to Mogadishu, let alone get anything done, the price of a weapon has been creeping higher. Passports for sale The lack of a government also means that the US dollar is the currency of choice - even refugees beg in hard currency. Somali shillings are still used but the notes only come in one denomination - 1,000, worth seven US cents. Three types of notes are in circulation - some still survive from the last government, some were printed by the newly elected President Yusuf, when he was in charge of his native Puntland region, and others were commissioned by private businessmen. At first, some traders in Mogadishu refused to accept the new notes but now they are all used side-by-side. Similarly, the printing of passports has been privatised. For just $80 and in less than 24 hours, I became a Somali citizen, born in Mogadishu. As I had omitted to travel with any passport-sized photos, my supplier kindly left the laminate for that page intact, for me to stick down at home. For a slightly higher fee, I was offered a diplomatic passport, with my choice of posting or ministerial job. With passports and guns freely available, those wanting to launch terror attacks have just about everything they need. And some fear that in the absence of any other authority, terror training camps could be set up in Somalia. Although Somalis are able to survive and some are even prospering, everyone I spoke to in Mogadishu is desperate for a return to some semblance of law and order - schools and hospitals can only follow security on the new government's to-do list. 'I just want a government, any government will do,' one man told me. We all seem to enjoy criticising our governments but life in Somalia shows the alternative is far worse, as Hobbes wrote 350 years ago. A former Somali army major, now a refugee in London, summed up life without a government very well. 'There is nothing you can do when kids with guns steal everything you have, even your clothes. I'm from a small clan, so I was unable to fight back,' he said. 'Here, there are rules which people respect and so you can get on with your life in peace.'

Subject: Medical Companies Joining Offshore Trend
From: Emma
To: All
Date Posted: Thurs, Feb 24, 2005 at 11:21:28 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/24/business/worldbusiness/24offshore.html?pagewanted=all&position= Medical Companies Joining Offshore Trend By ANDREW POLLACK Bala S. Manian rarely looked back when he left India to attend graduate school in the United States. Since 1979, he has started one medical technology company after another in Silicon Valley. But Dr. Manian is now rediscovering his native country. His newest medical venture, ReaMetrix, which makes test kits for pharmaceutical research, is still based in Silicon Valley. But 20 of its 28 employees are in India, where costs for everything from labor to rent are lower. The exporting of jobs by ReaMetrix is telling evidence that the relentless shifting of employment to countries like India and China that has occurred in manufacturing, back-office work and computer programming is now spreading to a crown jewel of corporate America: the medical and drug industries. It could be a worrisome sign. The life sciences industry, with its largely white-collar work force and its heavy reliance on scientific innovation, was long thought to be less vulnerable to the outsourcing trend. The industry, moreover, is viewed as an economic growth engine and the source of new jobs, particularly as growth slows in other sectors like information technology. 'What I see in India is the same kind of opportunity I saw in the Valley in 1979,' said Dr. Manian. In the United States, he said, 'a million dollars doesn't go more than three months.' In India, by contrast, 'I can run a group of 20 people for a whole year for half a million dollars.' While life sciences jobs may be less vulnerable to outsourcing than jobs in information technology, industry officials say many companies are looking at that option as pressures mount to control drug prices and cut development costs. First toys, clothes, those kind of things, then electronics and computers and now, finally, pharmaceuticals and biotech,' said Jimmy Wei, a venture capitalist in San Francisco who helped start Bridge Pharmaceuticals, a company that is doing drug screening in Asia for American pharmaceutical companies. The outsourcing of some life sciences jobs could be seen as evidence that American biotechnology companies, like their counterparts in other industries, are doing nothing more than building global connections that help make them more competitive around the world. So far, the job movement has been small. According to the most recent data compiled by the Commerce Department, less than 6 percent of American companies with biotechnology operations employed contract workers abroad in 2002, but industry specialists say that percentage has increased in the last three years. 'It's a trend that's becoming more pronounced as people's budgets get tight,' said Riccardo Pigliucci, chief executive of Discovery Partners International, a San Diego company that does chemistry work for drug companies. He said a chemist in India made $20,000 to $40,000 a year, in contrast to $80,000 to $100,000 in the United States. Discovery Partners started a small operation in India to offer lower-cost services. In conjunction with that move it consolidated its American operations in San Diego and South San Francisco, closing a facility in Tucson and laying off 28 employees, according to its regulatory filings. Clinical trials of new drugs, for instance, are already moving to countries in Asia, Eastern Europe and Latin America, because the costs of conducting the trials are lower and human subjects can be recruited more easily. Drug manufacturing is another area that can move. India already has a thriving generic drug manufacturing sector and is moving into biotechnology. One biotechnology company, Biocon, went public in India last year. Its founder and chief executive, Kiran Mazumdar-Shaw, has been described in the news media as the richest woman in India. With revenues of more than $100 million last year, Biocon is a leading producer of generic cholesterol-lowering drugs called statins. It has designs to become a major producer of insulin and monoclonal antibodies. It also has divisions that do contract research and run clinical trials for large American and European pharmaceutical companies. Fueling the outsourcing trend are Indian and Chinese scientists who obtained graduate degrees and work experience in the United States and Europe and are now returning to their native countries. Ge Li, the founder of WuXi Pharmatech in Shanghai, for example, spent 12 years in the United States, earning a doctorate in organic chemistry at Columbia University and then co-founding Pharmacopeia, a New Jersey drug company. In 2001, Dr. Li moved to Shanghai to start WuXi, which does chemistry work for American and European companies. The company has grown to 570 employees and had revenues of $21.5 million last year, Dr. Li said. 'Essentially all of the big pharmas are our customers,' he said. PTC Therapeutics, a biotech company in South Plainfield, N.J., hires WuXi when extra help is needed for a short time. 'We can turn them on and off as needed,' said John Babiak, senior vice president for discovery technologies at PTC. But he said PTC decides which compounds to make to test as potential drugs, leaving WuXi to make them. 'We're just farming out the bench work,' he said. In that sense, what is going offshore might be called 'back laboratory' work, somewhat equivalent to the back-office information technology functions that have moved in the past. But there are signs that the biotech migration will go beyond low-level work. Roche, the big Swiss drug company, just opened a research center in Shanghai to make use of Chinese scientists returning from abroad. 'U.S. academia had been run by Chinese post-docs for the last 10 years, if not 15,' said Jonathan Knowles, head of global research for Roche. China and India are starting to invest heavily in developing biotechnology expertise. Meanwhile, Singapore has created a cluster of research centers and has attracted some top scientists. Another potential advantage for some Asian countries is their more permissive stance on embryonic stem cell research, a promising new field that is restricted in the United States. A group of British stem cell specialists that visited China, Singapore and South Korea said scientists in those countries were as talented as in Britain but better equipped and funded. 'The challenge to Western pre-eminence in stem cell science from China, Singapore and South Korea is real,' it concluded in a report. However, the life sciences industry, even without outsourcing, is not so big that it can make up for jobs lost in other sectors. By a broad definition of the industry, including medical devices, pharmaceuticals and certain parts of agriculture and chemicals, employment reaches 885,000, according to a study by Battelle Memorial Institute for the Biotechnology Industry Organization. Some 225,000 jobs, mainly in computers and back-office work, moved offshore in 2004 alone, according to an estimate by Forrester Research. There are some factors that suggest life science jobs will be slower to migrate offshore than those in information technology. For one thing, drug companies face less pressure to cut costs than, say, computer disk drive manufacturers because pharmaceuticals have relatively high profit margins. 'We're not trying to eke out another percent of operating margin,' said Kevin Sharer, chief executive of Amgen, the largest biotech company, which is based outside Los Angeles. Also, life sciences companies often prefer to be near the best university research, which, for now, is largely in the United States because of ample funding from the National Institutes of Health. Novartis, the Swiss pharmaceutical giant, for example, shifted its research headquarters from its home country to Cambridge, Mass., in large measure to be near Harvard, M.I.T. and the numerous biotechnology companies there. 'The lead the United States has built in biomedical sciences is so great that I don't think this will be lost anytime soon,' said Paul Herrling, head of research for Novartis. Moving research and development far from customers in the United States can also pose problems. Aviva Biosciences of San Diego, which makes chips for biological research, for example, was started by Chinese scientists with the idea that much of the technology would be developed in China. But now Aviva does most of its work in San Diego because the scientists in China could not grasp the needs of American researchers, said Jia Xu, vice president for research and development. 'In terms of the market we're trying to address you really need people who are from the industry,' he said. 'And that's something you cannot find in China.' These barriers to foreign outsourcing, say those in the business, are not likely to slow the trend. Besides, they argue, cost savings from outsourcing can free up resources for more drug development in the United States. Dr. Manian said ReaMetrix, for instance, can prepare material in advance so scientists in the United States can do experiments faster. 'I am not interested in replacing jobs here,' he said. 'I am interested in taking those opportunities that are compelling, and yet are not economical to do here and do them in India.' An expert in optics, Dr. Manian first started Digital Optics, which made equipment to transfer digital medical images, like CT scans, onto film. (That same technology is used to put computer-generated special effects onto movie film, earning Dr. Manian an Academy Award certificate for technical achievement.) Among the other companies he co-founded were Molecular Dynamics, which developed a DNA-sequencing machine, Surromed, a drug and diagnostics company, and Quantum Dot, which has a system for detecting biological molecules. These days, he thinks India holds big advantages, including a young population. 'The exodus of jobs in life sciences will take place,' he said. 'There's no avoiding it. There's no way that you can sustain the inefficient research and development that exists in the U.S.'

Subject: Medical Malpractice Rates?
From: Emma
To: All
Date Posted: Wed, Feb 23, 2005 at 14:19:44 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/22/business/22insure.html?ei=5070&en=436b5da09a135eba&ex=1109307600&pagewanted=all&position= Behind Those Medical Malpractice Rates By JOSEPH B. TREASTER and JOEL BRINKLEY Speaking before hundreds of doctors and medical workers in a St. Louis suburb last month, President Bush called attention to a neurosurgeon on stage with him in the small auditorium. The doctor, the president said, was paying $265,000 a year in premiums for insurance against malpractice claims. Such high prices, 'don't start in an examining room or an operating room,' the president declared. 'They start in a courtroom.' Indeed, at many recent appearances, Mr. Bush has complained about the 'skyrocketing' costs of 'junk lawsuits' against doctors and hospitals. But for all the worry over higher medical expenses, legal costs do not seem to be at the root of the recent increase in malpractice insurance premiums. Government and industry data show only a modest rise in malpractice claims over the last decade. And last year, the trend in payments for malpractice claims against doctors and other medical professionals turned sharply downward, falling 8.9 percent, to a nationwide total of $4.6 billion, according to data compiled by the Health and Human Services Department. 'There is an underlying cost push,' said J. Robert Hunter, the director of insurance for the Consumer Federation of America, who is a former insurance regulator in Texas. 'But there has not been an explosion of big jury verdicts or settlements. It's a constant drip, drip every year.' Lawsuits against doctors are just one of several factors that have driven up the cost of malpractice insurance, specialists say. Lately, the more important factors appear to be the declining investment earnings of insurance companies and the changing nature of competition in the industry. The recent spike in premiums - which is now showing signs of steadying - says more about the insurance business than it does about the judicial system. 'You get these jolts in insurance prices periodically, and they attract a lot of attention,' said Frank A. Sloan, a Duke University economist who has been following medical malpractice trends for nearly 20 years. 'They're a result of a confluence of many things.' Data compiled by both the federal government and by insurance organizations show costs for the insurance companies climbing steadily over the last decade at an average annual rate of about 3 percent, after adjusting for inflation. Over most of that period, premiums for doctors rose modestly and sometimes even dropped as the insurance companies battled for market share in a scramble to collect more money to invest in strong bond and stock markets. But when the markets turned sour and the reserves of insurers shriveled, companies began to double and triple the costs for doctors. 'The insurers were catching up, getting to where they should have been,' said Larry Smarr, the president of the Physician Insurers Association of America, a trade group of companies that provide more than 60 percent of the nation's medical malpractice insurance. While acknowledging the impact of industry forces and practices on prices, Mr. Smarr and many others in the insurance industry still regard lawsuits as their biggest problem. Claims of medical malpractice are typically complex and are rarely paid without a lawsuit or the threat of a lawsuit. If the insurance companies could find a way to limit payments for lawsuits, they say, they could significantly reduce their costs. President Bush, supported by the insurance industry and the American Medical Association, is proposing a remedy: a national limit on what juries can award in medical malpractice cases. Such a limit, or cap, has often been cited by the president as an important part of what has been called tort reform - limiting what Mr. Bush calls costly and frivolous lawsuits. The Bush administration is pushing for a $250,000 limit on jury awards to victims of medical mistakes and their families for pain and suffering. No limit would be placed on the more quantifiable payments for economic losses, including medical expenses and lost wages. Introduction of legislation calling for such national medical malpractice limits - traditionally left to individual states - is at least a month away. Still, the administration has been bolstered by stronger Republican majorities in the House and Senate and by last week's signing into law of a measure that would move many class-action lawsuits to federal court, sharply limiting their potential spread. Senate Majority Leader Bill Frist of Tennessee, who is a doctor, calls malpractice award limits 'a majority priority.' The House has passed similar proposals seven times in the last 10 years, most recently in 2003. While this Congress might be the best opportunity yet for supporters of jury award limits, there will certainly be a fierce battle from Democrats, consumer groups and plaintiffs' lawyers. Consumer advocates say such limits would mean that some of the most seriously hurt patients would not receive fair compensation. Also, they say, in the death of an infant, an elderly person or a homemaker, there would be little compensation because of the prevailing view that there could be no economic loss because no income was being earned. Trial lawyers and consumer groups have been parading heart-wrenching victims of doctors' mistakes to make their argument. Among them, the American Trial Lawyers Association says, is Alice Lloyd of North Carolina. Doctors failed to treat her blood infection for so long that finally they had to amputate both legs above her knees, her left arm and all the fingers from her right hand. She still has her right thumb. As the two sides dig in for a fight in Congress, 27 states have already adopted award limits, with caps ranging from $250,000 to $1 million. In some states, insurers have agreed to reduce, at least temporarily, premiums in exchange for limits on awards. Insurers say that caps not only promise lower costs, but greater predictability on potential payouts. 'It takes an unknown entity, which is the pain and suffering component, and makes it quantifiable and estimate-able,' said Mr. Smarr of the Physician Insurers Association of America. Insurers acknowledge that they consider several factors besides claims costs in setting prices for doctors. In the 1990's, even as their costs were rising, malpractice insurers held firm on prices, even lowering them in some years to hold or win a share of the market. 'You always try to say you're not chasing market share,' said Donald J. Zuk, the chief executive of Scipie, a medical malpractice insurer that does business in about 30 states. 'On the other hand, you have to have a certain market share, you have to show a certain amount of growth, or you don't survive.' But by the late 1990's, some insurers discovered that they had dropped prices well below the cost of paying claims. Several went out of business. One of the biggest insurers, the St. Paul Companies, now Travelers St. Paul Companies, stopped offering medical malpractice coverage. The surviving companies 'had to raise prices or go out of business,' Mr. Smarr said. In 2000, about the same time that under-pricing and other market conditions began to push up prices in medical malpractice, the much larger world of commercial insurance was also going through a cycle of higher prices. The Sept. 11 terrorist attacks cost insurers $40 billion and accelerated the upward pressure of the latest premium cycle. Martin D. Weiss, the chairman of Weiss Ratings Inc., an independent financial rating agency, said the cyclical nature of the insurance business and a drop in insurers' investment earnings when markets fell had been among the strongest forces behind the rise in medical malpractice premiums. Over the last year, insurance analysts say, prices for most lines of commercial insurance appear to have peaked and have begun to decline. While prices for medical malpractice coverage are not yet falling, they rose less steeply in 2004. Costs for most doctors last year rose between 6.9 percent and 24.9 percent compared with increases of between 10 percent and 49 percent in 2003, according to The Medical Liability Monitor, a newsletter published in Chicago. The most expensive place in the country is South Florida, where some obstetricians and general surgeons paid nearly $280,000 for coverage last year, according to The Monitor. Obstetricians in Illinois paid as much as $230,428, The Monitor said, while in Nebraska, the least expensive place in the country for malpractice insurance, obstetricians paid $16,194. Florida adopted a cap on awards of $500,000 to $1 million in 2003. Illinois has no cap and Nebraska has a cap of $500,000. The recent jump in premiums shows little correlation to the rise in claims. According to the National Practitioner Data Bank of the Health and Human Services Department, the total paid out by insurance companies for claims against doctors and other medical professionals rose 3.1 percent annually, on average, between 1993 and 2003 and then declined last year. The average payment in 2003 for malpractice, the data bank said, was $268,605, up from $197, 753 in 1993, after adjusting for inflation. In 2004, the average payment fell to $262,486 and the number of payments made for medical malpractice cases dropped to 17,696 from 18,996 the year before. What may muddy the public picture is that while claims are rising at a measured pace, there have been more headline-grabbing big awards. Data compiled by the Physician Insurers Association of America show a distinct rise in payments of more than $1 million to victims of medical mistakes. In 1993, the organization said, 2.9 percent of the payments made by its companies exceeded $1 million. A decade later, 8.5 percent of the payments were for more than $1 million. Many insurers regard the $250,000 limit in California as a model for Mr. Bush. They see it as largely responsible for California's shift from being one of the most expensive places for medical malpractice insurance to one of the least expensive. Consumer advocates, however, say the main reason costs for doctors have fallen in California has been a 1988 law that prohibits insurers from raising rates more than 15 percent a year without a public hearing. And some researchers are skeptical that caps ultimately reduce costs for doctors. Mr. Weiss of Weiss Ratings and researchers at Dartmouth College, who separately studied data on premiums and payouts for medical mistakes in the 1990's and early 2000's, said they were unable to find a meaningful link between claims payments by insurers and the prices they charged doctors. 'We didn't see it,' said Amitabh Chandra, an assistant professor of economics at Dartmouth. 'Surprisingly, there appears to be a fairly weak relationship.'

Subject: Re: Medical Malpractice Rates?
From: johnny5
To: Emma
Date Posted: Wed, Feb 23, 2005 at 14:36:35 (EST)
Email Address: johnny5@yahoo.com

Message:
This doctor is critical of the couch potatoes and smokers but is privatization the answer? http://www.lewrockwell.com/orig6/armstrong1.html February 22, 2005 Within the past few years I have read repeatedly in the opinion sections of newspapers the call for the federal government to provide a 'single payer' system for America’s medical care. These proposals are classics of left-wing thinking – they work out beautifully in the heads of those doing the proposing. The comedy occurs when they are subjected to the scrutiny of reality; the tragedy when they become reality. Government involvement in medicine exacerbates rather than alleviates its ills. HMOs and the government are pre-paid systems that are the cause of the financial crisis facing health care (I mean in addition to the contribution of greedy lawyers and irrational juries). A caller on a talk show recently commented: 'The rest of the world has a one-payer government system, so why don’t we?' The answer: Because then we’ll have the same quality of care of the rest of the world. Socialized medical care is a disaster worldwide for patients who need attention now or tomorrow or by next week, especially if that attention entails a procedure or surgery. I offer the perspective of a practitioner who has lived through the changes in the system. The cost of health care has increased alarmingly during the decades of my career because of third-party payer systems: HMOs and the government. Health care costs will increase and quality decrease with every increase in government involvement. The working citizen pays for health care regardless of the system: entirely government, entirely private, or HMO. Therefore, we the people should have access to the most efficient system possible, 'efficient' meaning the most cost-effective and most free in terms of the patient's right to choose. It’s a happy coincidence that such a system would also be the most health-efficient (health-promoting) and most fair – the best plan from both moral and practical standpoints. In the HMO system, the patient has turned over to the HMO – or rather the employer has done so for the employee-patient – what would have been the employee’s larger salary. That is, the employee pays by forgoing a larger salary or another benefit. That’s because employers are not in the business of printing money. They can pay the employee one way or another, but not both. The HMO must then ration care in order to make a profit – profit being a requisite for the survival of a private business. The employee, the patient, is naturally motivated to squeeze what he or she can from the third-party payer. Under a 'single payer' system (rhetorical code for federal socialized medicine), the citizen pays through taxes. Government and HMO are third-party, pre-paid payers. The patient’s position is, under those two systems, 'I have already paid, so I want only the most and the best – and today.' That demand is independent of medical need, independent of fairness, and independent of any thought about the effect on overall cost. That’s all natural; it is not a reflection of sinister attitude. Under a pre-paid system, seeking attention for trivialities or requesting a sub-specialist for a problem that can be handled quite competently by a physician’s assistant or a nurse-practitioner is only natural. Thirty years of experience have led me to the following conclusions on how to solve existing problems of health care and forestall new ones. Under a sensible – meaning private – plan, the patient can go anywhere he or she wants. Private insurance is 'third party,' but it is a mutually voluntary contract negotiated to cover whatever the patient selects and pays for. The patient’s premiums depend upon – or should depend upon – his or her life-style. That is, the cost to the patient of the protection from medical expenses should depend on the patient’s health habits, and his or her premiums should be adjusted accordingly. The patient can request and pay for all the benefits and 'rights' he or she chooses, from catastrophic to weekly drop-ins for reassurance. Catastrophic would be the least expensive, weekly visits the most expensive. The patient would be free to go to a sub-specialist at any time for any problem that could be handled quite handsomely at the primary-care office. But the patient usually would not, since the cost will be multiples of the cost of primary-care, and the patient will pay this out of pocket or his or her premiums will rise accordingly. Under a sane system, instead of pressuring the doctor for an expensive procedure under the slightest pretext, the patient would ask what the chances are of this procedure (say an MRI) being positive. When the doctor answers, 'Approximately five percent,' then the patient will respond, 'Then I’ll take your suggestions for treatment and get back with you if any of the symptoms or criteria you listed occur.' The numerically most significant (the most common) killers are diseases that are by and large self-inflicted – caused by lifestyle. The vast majority of cardiovascular disease (heart disease, stroke, peripheral vascular disease), and a significant amount of (and perhaps most) cancer, kidney disease, osteoporosis and large-joint arthritis are self-inflicted by smoking, dietary malfeasance, obesity, lack of exercise, alcohol and other substance abuse, and by their resultant, intermediate disorders – hypertension, hyperlipidemia (blood fats, including cholesterol), and diabetes (90% of diabetics have the self-inflicted Type 2, which is exclusive to overweight people). Not only life-threatening diseases are self-inflicted. Numerous others less deadly but as costly in lost productivity and needless suffering are also, including disorders of the gallbladder, back – muscular and spinal – and those transmitted sexually. If you believe people with bad health-habits are motivated by longevity, you are clearly someone with good health habits. People with bad habits are motivated only by cost. If we reward people for irresponsible behavior we reap a bumper harvest of irresponsible behavior. Paying people (by a 'third-party' system) to continue their bad health habits negates any potential motivation to live healthfully. When we physicians bring up the subject of making crucial changes in behavior, most patients who live unhealthfully listen with the face of the deer whose eyes are fixed on the headlights; they look at us – or respond – with the thought, 'If this guy doesn’t quit hassling me about the way I live, I’m going to switch to a real doctor who will cut out the prevention noise and give me my pills.' Why live healthfully when you get pre-paid care and can take free or subsidized medications? The HMO and government systems serve as 'enablers' by rewarding and subsidizing those bad habits, thus reinforcing them. The employee who lives responsibly pays for the expenses of his or her fellow employee who lives irresponsibly by foregoing what would have been a bigger salary but was withheld so that the employer can pay the HMO for the care of the irresponsible. This increases costs both by the exacerbation of the illnesses, and by patients’ tendencies to abuse the prepaid system. Six to twelve times per day at the clinic where I work in Ventura-Oxnard, California I hand out to obese patients a copy of my one-page detailed diet protocol: physical work-out daily, low-fat, high-fiber diet including just say no to the cheeseburgers and other fast foods. Regularly another patient comes in to announce that his or her insurance no longer covers the cost of prescription drugs. 'Therefore, may I have another copy of the diet and exercise protocol you gave me last year?' Translation: 'As soon as I exited your clinic last year I dumped your guide in the trash. Now that I have to pay for my medicines, I believe I just might be interested after all in getting rid of my diabetes, my high blood pressure, and my [go down the list].' I recall suggesting to one obese couch potato that he take and live by my diet protocol. 'Those are fighting words, doctor.' Well fine, live and die as you desire, but the idea of responsible taxpayers paying for that attitude and behavior is unfair, immoral, and counterproductive in terms of health and economics. A) Infinite and arbitrary demand because of third-party payer, and B) just as arbitrary bureaucratic rationing to control the resulting mushroom cloud of costs – these are the reasons Medicare’s budget is (adjusted for inflation), let’s see, about twelve or fifteen times that predicted by its founders, and would be much worse if it were not for bureaucratic restrictions placed upon the patient – call that the deletion of the patient’s freedom. These faults would increase geometrically under a government system-for-all because of infinite demand and ever-expanding bureaucracy to deal with the inevitable rationing. The only effective approach is a system in which the doctor can say, 'Mr. Lipidus, aren’t you tired of paying $5 or $10 per pill? Aren’t you tired of your insurance premiums going up annually because of your medical-care outlay? If you will eat properly and exercise daily as we discussed, you probably won’t need these pills at all, and you certainly won’t require this frequency of office-visits and hospital admissions, and your premiums are going to plummet.' I have never heard this crucial factor in the cost of medical care discussed on Capitol Hill. Genuine reform would provide that a patient's pay-in per year would depend on his or her habits – automobile insurance style. In the movie As Good as It Gets (I don’t recall the names of the characters, so we’ll call them Jack Nicholson and Helen Hunt), Jack has funded a rescue of Helen’s asthmatic eight-year-old son from the 'greedy' restrictions of the 'evil' corporate HMO. Helen makes a disgusted reference to the HMO, to which the audience responds with spirited approbation for her sentiments and derision for the HMO. HMOs were resorted to by employers as a means of controlling costs, which is to say rationing under the euphemism of 'managed care.' It’s private socialism, so to speak and it’s the wrong approach since it costs the patient his or her freedom and penalizes those who live healthfully as they pay for it with smaller salaries and restricted access to care. Let’s sing the refrain one more time: Costs should be controlled by coupling patient cost to patient behavior. Do away with government and HMO involvement. Provide the needy with the means to buy private insurance. Have laws against price conspiracies and monopoly by the insurance companies. People with unhealthy habits, now faced with high premiums and expensive pills, are going to find themselves suddenly very interested in Prevention. Costs will plummet. Now those with innocent bystander diseases such as asthma (except that some asthmatics smoke; no, I’m not kidding) will not have to call upon Jack to bail them out. California’s Medi-Cal program is a huge microcosm – a paradox that helps make the point – of the bane of federal involvement in medicine. The average wait for a patient at the clinic where I work is about 90 minutes and is often several hours because the waiting room is overrun with Medi-Cal moms bringing in their children with stuffy noses and stubbed toes. Whenever I see two or three charts waiting at the same treatment-room door, I know it’s a Medi-Cal family. One of the kids seems sick, so why not bring in all the kids? Another of them had a touch of diarrhea a few days ago. Still another bruised his knee last week. Bringing one? Bring them all. Why not?! Service is 'free.' Demand skyrockets. To compound the tragi-comedy, Medi-Cal is rife with ridiculous and costly rules. Government further escalates the cost of medical care as bureaucrats require procedures for those who don’t need them. If the primary-care physician wants a $150 referral to a specialist, the rules dictate that a $1000 MRI is required in advance, when part of the point of the referral was to obtain the specialist’s agreement that the MRI is not needed. With unlimited demand and irrational rules, no wonder it takes several weeks for the patient to reach the specialist she should have seen within a day or three of the referral. How are costs of demand and diktat to be controlled? Here’s how: by the arbitrary rationing of those same bureaucrats, who place restrictions on procedures for those who do need them. Welcome to the land of buronic wisdom. How does the new plan to have Medicare pay for the pharmacy costs of seniors affect a young working couple? Let’s suppose he is a heating-air conditioning specialist and she the manager of a store, both living responsibly and healthfully and doing their best to raise a child or two. Along comes the government and confiscates their income to pay for the $5 per pill medicines for a well-to-do 68- or 78-year-old who refuses to cure his diabetes, or to give up his cigars, or to walk from tee to green at the country club, or even to use the exercise room on the cruise ship. Nice going, government! How’s that for social justice? The same principles hold if the patient with bad habits, instead of enjoying a cruise, is on Medicaid or Medi-Cal. The system is just as pragmatically backward and morally reprehensible whether the one who refuses to change his or her habits is rich or poor. This subsidy of destructive habits, this enabling and rewarding those who choose not to live healthfully, is grossly unfair to those who live responsibly – who live healthfully. It escalates demand; it escalates costs. In short, it is counterproductive in every respect of health and cost. The third-party payer system is a disaster for everyone concerned except for HMOs and politicians who derive power from citizen dependency upon government. The more prevalent the HMO or government pre-pay system, the greater the demand. The only way a 'single-payer' (Medicare for all) universal government system is going to control stratospheric demand and costs is rationing that will make HMOs look like a genie fulfilling your every wish. Private medical savings accounts would beat the Medicare system in every respect. MSAs are pro-choice: seniors would have more freedom to select their care; they would be motivated to live healthfully, since the excess MSA money would be theirs to enjoy; and there would be greater availability of care since demand would be determined by need as agreed to by patient and physician. The best system for poor and marginal-income people would be state-provided vouchers or cash with which to buy private insurance. As the recipient’s health habits improve, he or she would be allowed to keep the difference (for a certain number of years) as the insurance premiums decreased because of those improved health habits. There could be decreasing coverage for every year the individual refuses to cooperate by living healthfully. Now you’re going to see smokers, substance-abusers and couch-potatoes suddenly discovering a new life style. This plan increases individual choice and decreases dependency on the government and will therefore be fiercely opposed by left-wing political forces, their politicians, and certain lobbies. By financing health care through a private patient-controlled system, the cost of health care will be as high or as low as the public wants. If the American public has a lapse of intellect and judgment serious enough to elect the politicians who want to socialize our medical care, I have a health advisory for you: get rich, or don’t get sick. On second thought, don’t bother getting rich: there will probably be laws against going outside the system – unless, of course, you’re a member of Congress. Charles L. Armstrong, MD [send him mail], is a practicing physician in Oxnard, California.

Subject: Re: Medical Malpractice Rates?
From: Setanta
To: johnny5
Date Posted: Thurs, Feb 24, 2005 at 09:36:13 (EST)
Email Address: Not Provided

Message:
thank god i live in europe! private medical savings accounts sound like anarchy. those that can take care of themselves are ok and damn anyone who can't.

Subject: Insurance for 'Good' Patients
From: Terri
To: Setanta
Date Posted: Thurs, Feb 24, 2005 at 11:06:49 (EST)
Email Address: Not Provided

Message:
Setanta That was surely a frightening essay, but the idea of such medical insurance for 'good' patients is completely absurd and will never be seriously entertained. Happily I have never know such a physician.

Subject: Re: Insurance for 'Good' Patients
From: johnny5
To: Terri
Date Posted: Thurs, Feb 24, 2005 at 11:48:23 (EST)
Email Address: johnny5@yahoo.com

Message:
I normally have voted republican - after recent events I knew I had to get bush out of the stewardship of our country. Never underestimate what a bunch of near sighted closed minded individuals can do to unravel the bright points of human compassion. The idea may be completely absurd but there is a lot that is seriously entertained and executed that is even more absurd - economic hit men - political assassinations - support for tyranny as long as they are USA friendly. Terri where all have you lived in your life? What classes of people have you intermingled with? I read a lot here from the NYtimes but the blues have lost the country to hypocritical oreilly's and limbaughs and bush's - absurd as it is. http://www.latimes.com/news/opinion/commentary/la-oe-scheer22feb22,0,744296,print.column?coll=la-news-comment-opinions Of, by and for Big Business Robert Scheer February 22, 2005 Watching the 109th Congress, one would be forgiven for thinking our Constitution was the blueprint for a government of Big Business, by Big Business and for Big Business. Forget the people — this is Robin Hood in reverse. Here's the agenda, as laid out by the president and the Republicans who control Congress: First, limit people's power to right wrongs done to them by corporations. Next, force people to repay usurious loans to credit card companies that make gazillions off the fine print. Then, for the coup de grace, hand over history's most successful public safety net to Wall Street. Of course, the GOP and the White House use slightly different language for this corporate-lobbyist trifecta: 'Tort reform,' 'eliminating abuse of bankruptcy' and 'keeping Social Security solvent' are the preferred Beltway phrasings for messing with the little guy. The first installment came last week with the passage of a law that will make it more difficult for consumers to win class-action lawsuits against private companies. Because state courts, which are closer to the people, have proved sympathetic to the liability claims of ordinary folks, the new legislation puts many class-action suits in federal courts, which turn out decisions more attuned to the heartfelt pleas of corporate attorneys. What is so phony about the much ballyhooed tort reform is that it aims not at overzealous lawyers but only at those who happen to represent poorer plaintiffs. Corporate lawyers are very much in play in writing this new legislation. Which is why we should expect severe limits on the amount of damages that can be collected by those harmed by asbestos exposure or by medical malpractice. Memo to would-be Erin Brockoviches: Don't give up your day job. Next on the corporate wish list is savaging Chapter 7 bankruptcy relief, which is offered to individuals who can't pay their debts. It allows them to give up nonessential assets in exchange for a fresh start. Chapter 7 has been a tool for family and societal stability for decades; torquing it in the favor of credit card companies has been a fantasy of the industry for almost as long. Never mind that it is obvious to everybody who gets junk mail that lenders should be far more responsible about how they hand out credit cards. The credit industry's sleazy come-ons, onerous interest rates and frantic marketing to teenagers go unaddressed by Congress; it is only consumers who are expected to be conscientious. Is 'onerous' too strong? Hardly. It's way beyond onerous when a struggling parent puts back-to-school expenses on an 'introductory rate' credit card and then sees the interest rate surge toward 30% when she's two days late with her payment. Now $500 in books and clothes are going to cost her thousands by the time she can afford to finish paying for them. Ironically, considering the number of senators and representatives who love to quote Scripture, such outrageous usury was explicitly condemned in the Old Testament as what it is, 'extortion.' And while the story of Jesus in the temple is also being roundly ignored, so is that other once- sacred pillar of the Republican philosophy, states' rights. Nearly all states have reasonable limits on interest rates, which have been trumped by D.C. politicians in the thrall of corporate lobbies. Sure, business interests deserve some clout in a democracy, but this is ridiculous. In fact, the GOP's legislative calendar looks like a wish list sent over to the White House from the Chamber of Commerce across the street. Senate Republican Majority Leader Bill Frist (Tenn.) dropped in there the other day after a breakfast meeting with the president to assure the chamber that its wishes would soon be law. After all, the chamber spent $168 million to push the anti-class-action lawsuit bill along. Still to come this session: raising allowable emissions standards on major pollutants, oil drilling in the Arctic National Wildlife Refuge and the granddaddy of all corporate payouts, privatization of Social Security. So what's the big revelation? That, almost 2,000 years after Jesus routed those scoundrels, the money changers have not merely reentered the temple — they are the temple.

Subject: Re: Medical Malpractice Rates?
From: Alfred E. Neuman
To: johnny5
Date Posted: Wed, Feb 23, 2005 at 22:49:24 (EST)
Email Address: ziggystardust@aol.com

Message:
People honestly think the government can straighten out the healthcare industry? Yeah right, just like they fixed the airline and S&L industries. Mr. Krugman and his leftist bretheren need to quit expecting more government and less free market forces to be the answer.

Subject: Commercial Real Estate
From: Emma
To: All
Date Posted: Wed, Feb 23, 2005 at 13:53:32 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/23/business/23real.html A Lexington Ave. Deal Is Now Looking Up By JOHN HOLUSHA When SL Green Realty paid $480 million last summer for two buildings occupying the block bounded by Lexington and Third Avenues and 46th and 47th Streets, some real estate executives wondered what was going on. Green is a publicly traded real estate investment trust, and as such is required to pay out 90 percent of its earnings each year to shareholders. As a result, most REIT's tend to buy buildings that are almost like annuities - fully rented with leases that extend into the distant future. But TIAA-CREF, a giant pension fund for educators, which sold the buildings that SL Green bought at 485 Lexington and 750 Third Avenues, is planning to leave them by the end of the year, throwing 1.1 million square feet of office space on the market. That made the transaction look quite speculative, with the risk that the buildings would be a drag on SL Green's financial performance if it took a long time to find tenants. In addition, the interiors of the 1950's buildings were built for TIAA-CREF's specialized needs and will require substantial additional investment to attract tenants looking for modern office space. Indeed, Green has said it will invest $90 million to upgrade the buildings and convert them into a single 1.7-million-square-foot entity to be called Grand Central Square. Lately, however, the investment has been looking a lot less speculative. The vacancy rate for Midtown Manhattan has declined below 10 percent, the proportion that most real estate executives consider the dividing line between a surplus of space and a scarcity. And the rate is likely to keep declining because no major new office buildings are scheduled to open for a few years. The number of blocks of lease space over 125,000 square feet - which are attractive to a corporation seeking to establish a visible headquarters - has declined from 28 at the end of 2003 to 22 at the end of last year. And with buildings in Manhattan trading recently at an average of $350 a square foot, the $282 a square foot that Green paid for the two buildings is looking more like a bargain, real estate executives said. 'With the vacancy rate in the high 8's now, it looks like a very shrewd purchase at this point,' said Mitchell S. Steir, chief executive of Studley, a brokerage firm that represents tenants in negotiations with landlords like Green. 'You probably could not have picked a better time in the last 20 years to come on line with a block of space like that.' Others said the purchase fits well with Green's basic strategy of buying well-located, but tired, buildings and than refurbishing them to something approaching Class A status, the category of the most modern and best-situated properties. 'SL Green does a good job of fixing up buildings and jacking up the rent,' said Ruth Colp-Haber, of Wharton Property Advisors, a commercial brokerage. 'This purchase will have synergy because they have so much property in the area.' According to SL Green executives, the office space market in Midtown had tightened to the extent that they were forced to make a move. 'By the end of 2003, we realized that we were 95 percent leased,' said Marc Holliday, the president and chief executive of SL Green, whose chairman is Stephen L. Green. 'Office space is our fundamental product, and we realized we would not have enough vacant space to meet demand in '05 and '06,' Mr. Holliday said. The strong demand for the REIT's space went largely unnoticed because there was not a flood of new tenants to the Midtown area, Mr. Green said. 'It was our existing tenants who renewed their leases and expanded, adding 5,000 or 10,000 feet,' he said. The 900,000-square-foot 485 Lexington, which is to be empty by the end of the year, presents an opportunity for a major corporation to establish a headquarters without having to wait years for a new tower to be built, as Bloomberg L.P., the financial information company, did at the former Alexander's department store site on Lexington Avenue and 58th Street, or as Bank of America is doing at One Bryant Park at 42nd Street and the Avenue of the Americas, Mr. Green said. 'This is a branding opportunity within a block and a half of Grand Central,' he said. 'We can plan, execute and have someone in within a year.' The remaining 200,000 square feet of space to become available is in the tower of 750 Third Avenue, on the 18th to 33rd floors. The lower floors are occupied by long-term tenants. The renovations to the building will include replacing all 4,000 clear glass windows with tinted ones and replacing silver-covered outdoor trim at 485 Lexington to create a uniform dark blue look. The lobby and retail space in the buildings will be remodeled and clad in light-colored stone, producing the look of a dark mass over a light one. The company has already demolished and partially rebuilt the fifth floor of the Lexington Avenue building to demonstrate how the space can be divided and equipped. 'This is our marketing floor; this is how we put a new face on the building,' said Gerard T. Nocera, the chief operating officer of SL Green. TIAA-CREF occupied the Lexington Avenue building for so long that most brokers and prospective tenants are not familiar with it, he said. 'There was a single tenant in here, so it has not been part of the commercial market for 25 years,' Mr. Nocera said. 'We have to reintroduce it to the brokers and put it back onto the market.' SL Green executives clearly hope to attract a financial services company as the anchor tenant at 485 Lexington. They say they are prepared to remove a floor slab to create a 20-foot-high space that could be used for securities trading. Mr. Nocera said the buildings already had the back-up generators that financial companies require to maintain essential services in the event of power blackouts, and there was the capacity to add more if a company wanted its own independent power supply.

Subject: Your paper about Currency Crises
From: Flor Pereda
To: All
Date Posted: Wed, Feb 23, 2005 at 11:42:02 (EST)
Email Address: fpereda@cantv.net

Message:
Dear Dr. Krugman: I work in my master's tesis on currency crises. I read your paper title Currency Crises but I don't appear the date in which you have wrote it. In other to put it to the references correctly or completly, please inform me when was. Best Regard, FLOR PEREDA CARACAS-VENEZUELA

Subject: Re: Your paper about Currency Crises
From: Jennifer
To: Flor Pereda
Date Posted: Wed, Feb 23, 2005 at 12:26:47 (EST)
Email Address: Not Provided

Message:
What is the exact title and wheree was the essay published? Then we can look on Google to find the date.

Subject: Re: Your paper about Currency Crises
From: Flor Pereda
To: Jennifer
Date Posted: Wed, Feb 23, 2005 at 15:34:00 (EST)
Email Address: fpereda@cantv.net

Message:
What is the exact title and wheree was the essay published? Then we can look on Google to find the date.
---
The title is 'Currency Crises' and it is publicated in the Krugman's web site at MIT and in this too. It is in the last position of the list with a '?'. Thank! FLOR PEREDA

Subject: Re: Your paper about Currency Crises
From: Pancho Villa alias El Gringo
To: Flor Pereda
Date Posted: Wed, Feb 23, 2005 at 16:48:16 (EST)
Email Address: nma@hotmail.com

Message:
Hope this will help: # Hardcover: 356 pages # Publisher: University of Chicago Press (September 1, 2000) # ISBN: 0226454622 # Product Dimensions: 9.3 x 6.2 x 1.1 inches

Subject: Re: Your paper about Currency Crises
From: Jennifer
To: Pancho Villa alias El Gringo
Date Posted: Wed, Feb 23, 2005 at 19:44:16 (EST)
Email Address: Not Provided

Message:
http://www.press.uchicago.edu/cgi-bin/hfs.cgi/00/14111.ctl Krugman, Paul, editor Currency Crises. 356 p., 49 line drawings, 41 tables. 6 x 9 2000 Series: (NBER-C) National Bureau of Economic Research Conference Report Cloth $47.00spec 0-226-45462-2 Fall 2000 There is no universally accepted definition of a currency crisis, but most would agree that they all involve one key element: investors fleeing a currency en masse out of fear that it might be devalued, in turn fueling the very devaluation they anticipated. Although such crises--the Latin American debt crisis of the 1980s, the speculations on European currencies in the early 1990s, and the ensuing Mexican, South American, and Asian crises--have played a central role in world affairs and continue to occur at an alarming rate, many questions about their causes and effects remain to be answered. In this wide-ranging volume, some of the best minds in economics focus on the historical and theoretical aspects of currency crises to investigate three fundamental issues: What drives currency crises? How should government behavior be modeled? And what are the actual consequences to the real economy? Reflecting the latest thinking on the subject, this offering from the NBER will serve as a useful basis for further debate on the theory and practice of speculative attacks, as well as a valuable resource as new crises loom. .... Paul Krugman wrote the Introduction, and a comment on an essay by Robert Gordon.

Subject: Re: Your paper about Currency Crises
From: Flor
To: Jennifer
Date Posted: Thurs, Feb 24, 2005 at 06:08:06 (EST)
Email Address: fpereda@cantv.net

Message:
Jennifer: Thank you very much!! FLOR PEREDA Caracas-Venezuela

Subject: Flor on Currency Crises
From: Jennifer
To: Flor
Date Posted: Thurs, Feb 24, 2005 at 11:08:12 (EST)
Email Address: Not Provided

Message:
Flor Pereda Please post your essay when you are done. I would like to read it.

Subject: Re: Your paper about Currency Crises
From: Jennifer
To: Pancho Villa alias El Gringo
Date Posted: Wed, Feb 23, 2005 at 19:37:22 (EST)
Email Address: Not Provided

Message:
Ah, the book, the book. I passed right by, looking for an essay. Thanks Pancho.

Subject: Sending Money to Mexican Families
From: Emma
To: All
Date Posted: Wed, Feb 23, 2005 at 11:06:40 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/23/international/americas/23migrants.html?pagewanted=all&position= Mexico's Migrants Profit From Dollars Sent Home By GINGER THOMPSON VALPARAÍSO, Mexico - Less than two months after he was elected, Mayor Alberto Ruiz Flores climbed in his truck and set out on a 26-hour road trip across the border to Southern California, carrying a wish list of public works projects to a backyard barbecue in Oxnard. The reason? To solicit money from some of the 400,000 Mexicans who abandon their country each year for work in the United States, including half his town in Central Mexico. Those who have left Valparaíso send home an estimated $100,000 a day, as much money in one month as the municipality will spend all year. A week later, Mr. Ruiz was at a restaurant in Aurora, Ill., for a meeting with a Mexican factory worker and billboard painter who has raised hundreds of thousands of dollars for Valparaíso. The week after that, he invited migrant leaders from Dallas and Las Vegas to join him at home for the annual crowning of the municipal beauty queen. 'I consider myself the mayor of Valparaíso, and the mayor to those, like you, who had to leave Valparaíso in search of a decent life,' Mr. Ruiz said at the start of each encounter. 'You have shown with your generosity that you are still a part of Mexico. Without you, who knows where we would be.' For Mr. Ruiz, politics does not stop at the United States border. The same is true across Mexico, the Caribbean and Latin America, where more and more officials like him answer to cross-border constituencies made up of the people at home who cast ballots and the ones abroad who pull the purse strings. Today more than ever, the remittances sent home by immigrant workers, both legal and illegal, are translating into political clout, and their communities in the United States, better organized and more vocal than before, have become social and political forces too important to ignore. It is a phenomenon that has made Washington a principal battleground to lobby support among Salvadorans for the Central American Free Trade Agreement; New York a crucial state in elections in the Dominican Republic, which allows its citizens to vote from the United States; and Chicago a mandatory campaign stop for Mexican politicians. On Tuesday, in Mexico City, migrant power was further consolidated when the lower Chamber of Deputies passed legislation allowing the migrants to cast absentee ballots from the United States, which will allow Mexicans with American citizenship to vote in both places. The measure opens the way for an estimated 10 million Mexicans and Mexican-Americans to vote in presidential elections next year, in a potential tidal wave that could have significant impact on this country's fledgling democracy. Other countries including Venezuela, Colombia, Brazil and Honduras also allow their migrants to cast absentee ballots. For Mexico, the logistics of the huge endeavor remain unclear; legislators estimated that operating polls in the United States could cost at least $50 million. The measure, which was passed by an overwhelming majority and is expected to win easy passage by the Senate, also provides money for Mexican political parties to campaign in the United States. However, it prohibits them from receiving foreign campaign donations. Already, the economic influence of the migrants is undeniable. The Inter-American Development Bank estimates that migrants sent more than $45 billion to Latin America and the Caribbean last year, exceeding foreign investment and official development assistance for the third year in a row. Mexico - where people compete with oil as the country's chief export - received some $17 billion in remittances, almost twice the amount of just four years ago. Óscar Chacón, of the immigrant advocacy group Enlaces América, calls the phenomenon a quiet revolution led by an expanding network of more than 500 mom and pop organizations that are filling in where more than a decade of free trade and foreign investment has failed to narrow the gap between the rich and poor. Today those immigrant groups are using the power that comes with their remittances to place ever greater demands on politicians at all levels. Their leaders have met with advisers to President Bush to push for sweeping immigration reform, and with presidents across Latin America to demand everything from the power to cast absentee ballots and run for office in their homelands, to universal health insurance and college scholarships. 'Once the voices of immigrants were weak,' said Efraín Jiménez, a former auto mechanic who now oversees multimillion-dollar infrastructure projects in Zacatecas, financed by immigrants in California. 'We had money, but we had no organizations. 'Now we have hundreds of organizations,' he said. 'No president can ignore us.' So far, migrants have lost more of those political battles than they have won, especially in the United States, where Mr. Bush's plans have stalled for a guest worker program. It would offer temporary legal status to an estimated three million Mexican laborers. Still, says Mr. Chacón, migrants are raising money for public works, forming political action committees to support candidates at home and, in small but growing numbers, returning home to run for public office themselves. Some are serving as mayors, city council members and state legislators, bringing fresh perspective and ideas from their time spent in the United States and new demands for accountability from governments long regarded as corrupt or ineffective. Like Mexico, most countries prohibit political parties from receiving foreign campaign donations. But in recent years, migrants in the United States have formed political action committees to sponsor campaign trips to America for candidates from their home countries. And they send delegations of campaign workers back home to help candidates press the pavement, more and more of which they have paid for. Few places understand the changes better than Zacatecas, the Central Mexican state where Mr. Ruiz serves as mayor. More than a century of migration has inextricably linked Zacatecas to the United States. Today more than half of the state's people live north of the border, mostly in California, Illinois and Texas. The Political Process Expands While the rest of Mexico debates whether to give migrants the power to cast absentee ballots, Zacatecas is already allowing its migrants to come home and run for office. Two migrants, including Andrés Bermúdez, a wealthy California grower known as the Tomato King, won mayoral races. Two other immigrants won seats in the state legislature. The governor of Zacatecas, Amalia García, has traveled to the United States at least four times since she was inaugurated in September. She spent a weekend in November in Los Angeles, listening to migrant complaints at the Mexican Consulate, discussing investment opportunities with Mexican business leaders, and helping to crown the new Miss Zacatecas at the annual Zacatecano Ball. When asked during her whirlwind visit to explain why she gives so much attention to Mexicans thousands of miles away, Ms. García said: 'I consider Zacatecas as a binational state. Although the reasons our people have migrated are painful, these people have guaranteed our social stability.' Southern California is the capital of the Mexican diaspora, and a hotbed of Mexican politics, led by the Federation of Zacatecan Clubs and men like Guadalupe Gómez. The federation meets in a drab gray building in the City Terrace section of East Los Angeles that looks more like an abandoned warehouse than a transnational seat of power. And its leaders are auto mechanics, postal workers, hospital administrators, real estate agents and tax consultants. Nearly everybody who wants to be anybody in Zacatecan politics has walked through its doors. Presidential agreements have been signed there. Political campaigns have been started. The federation proclaims that it is apolitical. But it is precisely its close ties to the government of Zacatecas that have helped it grow out of its members' garages into one of the most successful migrant fund-raising groups in the United States - and helped men like Mr. Gómez change from a mild-mannered tax consultant to a high-powered, cross-border political operative. Today in his lobbying efforts, he rubs shoulders with President Fox as well as President Bush. To spend time with the 44-year-old father of four is to glimpse a world without borders, where Spanglish is the first language. One day he is in Los Angeles addressing a ballroom full of Guatemalan mayors seeking his advice on how to get their own migrants to invest in public works projects back home. The next, he is giving the same advice to a room full of Mexican mayors in Zacatecas. In 1998, Mr. Gómez established a migrant political action committee that was key to electing the first opposition governor of Zacatecas, helping the state break free of nearly seven decades of authoritarian rule by the Institutional Revolutionary Party. Two years later he helped Mr. Fox win the support of Mexican migrants in his historic bid to become this country's first democratically elected opposition president. In an agreement negotiated by Mr. Gómez and other federation leaders, every dollar sent home was matched by three more dollars from the local, state and federal governments in a program called Tres por Uno, or Three for One. Mr. Gómez then negotiated with President Fox to nationalize the program. For the first time, Mexican migrants were not only sending money home, but also had a say in how the money was spent. 'We do not want anyone deciding for us what our communities need,' Mr. Gómez said. 'We are not going to Mexico asking for help. We are offering help. We want to play a key role in the future. 'If Mexico is ever going to get out of the third world,' he said, 'then we need to be a part of that.' Balancing Needs and Wants All it takes is one night at a federation meeting to understand that the relationship between Mexican elected officials and the migrants is not all love and happiness. Negotiations are far from easy. The street outside at a recent meeting was packed with sport utility vehicles. Inside, the meeting hall looked like a small sea of cowboy hats. Seated on the dais was a federal senator, two state legislators and at least seven members of Governor García's cabinet, including the ministers of economic development and agricultural industry, and the director of migrant affairs. In the audience sat at least 16 mayors from municipalities across Zacatecas. Each one got up to address the crowd. And they seemed to have one common plea. 'Many clubs have come to us offering to build rodeo arenas or to renovate churches in areas that do not have electricity or potable water,' said Mayor Rodolfo Monreal of the municipality of Fresnillo. 'We are asking you to consider projects with greater social impact. 'I understand that the migrants should have a voice in what we do in Mexico,' he went on. 'But we know better than anybody what our communities need, and those needs should come first.' The room began to grumble. Some of the migrant leaders whispered that the mayors did not care so much about 'projects with greater social impact' as they did about projects aimed at making the government look good to voters. Other mayors argued back that the migrants had fallen out of touch with Mexican realities, and that they wanted to remake Mexico in the image of the United States. 'The migrants want to have here the lives they have over there,' Mr. Monreal said. 'They do not listen to what we want.' Mr. Jiménez, who manages the federation's public works spending, stepped to the microphone with a diplomat's demeanor. It is true, he told the mayors, that migrants might start out renovating churches. Many of them want to show thanks to God for their success in the United States. But if local authorities support their churches, the migrants will come around and support local authorities to build roads and schools and clinics. Mr. Gómez watched from the back of the room. He said he had been listening to this debate since the federation began. For a while, he said, the staunchly secular government refused to contribute public funds to help renovate churches - almost all of them Roman Catholic - or build recreation facilities. But when migrants threatened to withdraw from Tres por Uno, the government relented, and in the last four years it has helped renovate more than 100 churches in Zacatecas alone. 'Those are the projects that inspired us to organize,' Mr. Gómez said. 'And if the government says no to what we want, then we are not going to support the projects the government wants.' Hardships and Homecomings Christmas in Valparaíso is one of the best times and places to get a look at what drives immigrant politics, and at the hardships and homecomings that make this cross-border phenomenon what it is. In November, villages like Boquilla del Refugio were almost empty. By the first weekend of December, they had come back to life as immigrants came home from the United States for the holiday. Lights turned on in houses that are vacant the rest of the year. Expensive sport utility vehicles with license plates from Arizona, Oklahoma, Colorado, Texas, California and Illinois roared through the streets. Local stores extended their hours and doubled their prices. Lines of people wearing American-style T-shirts and baseball caps crawled up the aisles of a nearby chapel and the walls around the sanctuary were sprinkled with photos of Mexicans and Mexican-Americans in the United States armed forces, who had returned safely from duty in Iraq. Almost every night there was a dance, flowing with beer and tequila. And when there was no dance, the immigrants hired street musicians to follow them as they paraded, swigging tequila, through town. There were success stories among the throngs who had come home. Román Cabral, the state legislator from Valparaíso, lived 30 years in California and Oregon. He started out as a dishwasher, and when he left last year to run for office, he was earning millions from his construction company and used-car lots. But more common were men like the president of the hometown club from Boquilla del Refugio, a 54-year-old metal worker named Rosendo Rivera. The club was started by a dozen working-class immigrants in the Chicago area, and in the last three years it has raised more than $350,000 for projects in a town where the population has dropped to nearly 600 people from 2,000. In Aurora, Mr. Rivera lives a working-class life, supplementing the income from his factory job by selling expensive cowboy attire. In Boquilla del Refugio, he is received like a hero. Mayor Ruiz said: 'If you listen to the migrants, all you will hear are success stories. They never talk about how hard their lives are in the United States. All of them say they have made it, and they spend money as if they are rich. 'So people here admire them,' Mr. Ruiz said. 'They have tremendous influence.' But after decades of watching the phenomenon up close, Mr. Ruiz said he saw immigrants and their remittances as more of a mixed blessing. The more people go, the more money flows back. But the more money that flows back, the more people go. And once everyone is gone, he said, immigrants will not have any reason to send more money. There are already places in Zacatecas, he said, where remittances have peaked and are beginning to decline. Boquilla del Refugio seems headed toward the same fate. Florencio Herrera, treasurer of the village's hometown association and a resident of Elgin, Ill., says the elementary school buses in children from other communities so the government will keep it open. There are so few people left to worship in the village's church, lovingly renovated with remittances from the United States, that Mr. Herrera calls it an 'empty palace.' Still, the club raises money. On the first Saturday night of December, it held a dance that would help pay to install a sewage system in Boquilla del Refugio. When asked why he keeps raising money for a ghost town, Mr. Rivera seems stuck at first for an answer. 'I ask myself that sometimes,' he said. 'I guess because I lived here and suffered here, and I want to make things better. But no matter how much we try to make things better, it's not going to stop people from leaving.' 'I guess it's just a matter of pride,' he concluded. 'It's our way of making something of ourselves, and making a difference in the world.'

Subject: Re: Sending Money to Mexican Families
From: johnny5
To: Emma
Date Posted: Wed, Feb 23, 2005 at 14:23:54 (EST)
Email Address: johnny5@yahoo.com

Message:
If the dollar falls a lot and all our jobs leave to asia or india - what would be the incentive to being broke and unemployed here as compared to anywhere else?

Subject: Re: Sending Money to Mexican Families
From: Harry Paranuts
To: johnny5
Date Posted: Wed, Feb 23, 2005 at 23:01:07 (EST)
Email Address: harryp@mindspring.com

Message:
All of our jobs are not leaving to Asia and India - quit believing all that drivel that Lou Dobbs is spewing.

Subject: India: Having the Vote and Little Else
From: Emma
To: All
Date Posted: Wed, Feb 23, 2005 at 10:51:47 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/23/international/asia/23india.html?pagewanted=all&position= In a Corner of India, They Have the Vote, but Little Else By SOMINI SENGUPTA PATNA, India - On the next-to-last day of the toughest election race of his career, Laloo Prasad Yadav, one of India's canniest and most caricatured politicians, is wrapped up in a rambunctious campaign caravan known here as a 'road show.' Laloo-ji, as he is universally called, sits in the cab of his forest-green campaign bus, eats sugar-cane candy out of a plastic bag and promises factories and bridges to the roaring crowds outside. Marigold garlands are tossed at him in adoration; campaign fliers are tossed out to the crowds; his fans practically stampede for a chance to touch his outstretched hand. Mr. Yadav, scion of lower-caste farmers, self-fashioned champion of the downtrodden, now a federal cabinet minister who rules India's third most populous state, Bihar, worships them in return. 'I salute you, I pay my respect to you,' he bellows. 'The government of India is yours.' As dusk turns to dark, on the edges of the road, Laloo loyalists display his party symbol in a show of support: they hold up lanterns to light up the road. Actually, they do not have much of a choice. Only 5 percent of households in Bihar have electricity, compared with 40 percent nationwide, according to the World Bank. On virtually every other development indicator, from infant mortality to literacy to its share of people below the poverty line, Bihar and its 82 million people sit at or near the bottom. Many of its politicians, jailed on criminal charges, are campaigning from behind bars. Unemployed Biharis leave the state in droves to seek work across India. And a spate of widely publicized kidnappings of doctors, businessmen and, lately, schoolchildren has prompted one of Mr. Yadav's political rivals, Ram Vilas Paswan, to remark, 'Except kidnappings, there is not a single industry in Bihar.' At a time when other parts of India are experiencing remarkable economic growth and optimism, Bihar is a stark reminder of an India left behind. In this respect, Bihar's state assembly race, the results of which will be announced Sunday, offers an object lesson in Indian elections - one that upends conventional wisdom on what democracy yields in poor countries. Democracy here, as Mr. Yadav's ascent amply demonstrates, has empowered those on the lower rungs of the social ladder. But it has not necessarily delivered material gains, like roads, hospitals and drinking water, nor a longer, healthier life. 'If you expect democracy to deliver development, governance, there's nothing of the sort,' observed Yogendra Yadav, a sociologist who studies elections and is no relation to Mr. Yadav, the politician. 'It's paradoxical.' Mr. Yadav has never cast himself as Bihar's Mr. Pothole. Yet for 15 years he has worked the arithmetic of Bihar's identity politics in his favor: with a coalition of voters most threatened by upper-caste Hindu rule, mainly Muslims and lower-caste Biharis, he and his party have consistently won over one-third of the electorate, enough to choose the chief minister of the state. (While Mr. Yadav does not technically hold the post - he is forbidden to, after his role in a corruption scandal a few years back - he still rules through his wife, Rabri Devi, whom he picked as his successor.) However, that coalition is now widely believed to be eroding. Middle- and low-caste voters could splinter among Mr. Yadav and his two main rivals, who come from the low-end of the caste ladder. Muslims no longer have a Hindu nationalist government in Delhi to fear. Therein, as many analysts see it, lies the test of these elections: how long can India's most infamous populist milk his folksy brand of identity politics without dispensing other material benefits to his people? Not much longer, his critics and rivals say. Nitish Kumar, the candidate aligned with the Hindu nationalist Bharatiya Janata Party, has been trumpeting the need to restore law and order. An independent lower-caste candidate in Rabri Devi's home district has cast herself as the 'nokrani against the maharani,' the housemaid against the queen. Anwar Ali, the spokesman for a group that represents lower-caste Muslims (in India, caste divisions are not restricted to Hindus), has urged Muslim voters to think independently instead of reflexively backing Mr. Yadav out of fear. Among Mr. Yadav's claims to fame is having checked Bihar's long and ugly history of Hindu-Muslim riots. 'The question of bread, the question of the stomach remains,' Mr. Ali argued. Mr. Paswan, who is stumping on behalf of a candidate who happens to be in jail right now, has promised a raft of services for the poor: interest-free loans, free school lunches, a financial bonus for parents with girl children, jobs. 'My fight is not for caste, not for religion,' Mr. Paswan told a campaign rally Monday evening. 'My friends, I fight for development.' On the edges of the rally, Surendar Jha, an upper-caste farmer who had voted for Mr. Yadav in previous elections, said this time he would defect. 'In the last 15 years, he has eaten flesh from our bodies,' Mr. Jha said. 'If we vote for him again, he'll eat our bones.' For his part, Mr. Yadav remained unbowed about his victory. 'Every election I face is a tough fight,' he said in an interview on his shaded patio, as one of his uniformed attendants came running up with a fistful of tobacco. Mr. Yadav disgorged into the spittoon, before tucking a fresh bunch into his mouth. 'Always Laloo versus all,' he added. 'Everybody 'gherao' me, and I escape.' (In Hindi, to 'gherao' means to corral.) At a Laloo rally on Sunday, a group of men sat in the shade of a tree strung with loudspeakers and waited for his helicopter to arrive. Asked what he has gained from Laloo's 15-year reign, Ganesh Thakur, 48, a farmer from the Yadav caste, said it was neither electricity nor jobs, the two things his village needs badly, but something else altogether. 'He gave us self-respect,' Mr. Thakur said. 'We walk with our heads high.' Cries of 'Laloo jindabad!' - 'Long Live Laloo!' - rose up from the fields. Mr. Yadav's helicopter arrived, kicking up clouds of dust. Dressed head to toe in white, waving a sky-blue hand towel, Mr. Yadav boomed from the stage. 'All the poor people, they have given a lot of strength, a lot of power for Laloo to conquer Delhi,' he cried. 'Now we can do development in Bihar. The Treasury is open to us.'

Subject: Interest Rates
From: Terri
To: All
Date Posted: Wed, Feb 23, 2005 at 10:23:12 (EST)
Email Address: Not Provided

Message:
Notice that the consumer inflation report showed no inflation to worry about, and the long term Treasury note is yielding a low 4.24%. The long term bond market is showing remarkable stability, and this is a positive sign indeed. Whoever is buying is not worried about inflation increasing from here. Surprising, but nonetheless the bond market is stable at healthy interest rates.

Subject: Re: Interest Rates
From: johnny5
To: Terri
Date Posted: Wed, Feb 23, 2005 at 10:33:42 (EST)
Email Address: johnny5@yahoo.com

Message:
I thought it had been pointed out by the BIS and IMF and several others when looking at post bubble dynamics - it is not CPI you must concern yourself with - but asset inflation - as in the 2 biggest bubbles of this past century - the america of the late 20's and the japanese of recently - CPI was not high?

Subject: Asset Prices
From: Terri
To: johnny5
Date Posted: Wed, Feb 23, 2005 at 12:39:53 (EST)
Email Address: Not Provided

Message:
There are selectively high prices for certain assets, such as real estate in several urban and related areas or oil, but I find no reason to compare this to the American in 1929 or Japan in 1989. Conditions in Japan in 1989 and America in 1929 were also far different. For the present, I think long term interest rates are telling.

Subject: Saving and Debt
From: Terri
To: Terri
Date Posted: Wed, Feb 23, 2005 at 14:08:30 (EST)
Email Address: Not Provided

Message:
The guess is that the problems we may face will be due to lack of household saving and government debt as a result of a decline in tax revenue from high income households and corporations. So, long term interest rates may be a proper guide to our health. We can wish Paul Krugman will write extensively on these issues should they seem pressing enough.

Subject: Fund Managers understating risk by 40%?
From: johnny5
To: All
Date Posted: Wed, Feb 23, 2005 at 09:06:55 (EST)
Email Address: johnny5@yahoo.com

Message:
Isaac Asimov's 'machines' still aren't there yet. http://www.wilshire.com/Company/Fund_Managers.pdf January 26, 2005 US – The conventional quantitative methods of portfolio analysis widely used by fund managers could systematically understate the risks in both passively managed and actively managed investment portfolios, Wilshire Associates has warned. According to research by the consulting firm, excess value at risk in retirement equity portfolios could be as high as 5% of the portfolio. Robert Kuberek, a senior managing director at Wilshire, commented: “The biases are such that the standard deviation of return in a pension fund’s equity portfolio may be understated by 40% or more. “As a result, the excess value at risk for a conventional equity portfolio may be as much as 5% of the portfolio. For a typical individual investor with a US$500,000 retirement nest egg, this could amount to an unintended exposure to loss of as much as US$25,000 during a one year period.” http://www.pionline.com/article.cms?articleId=49234 Getting a Handle on Risk--Really Pensions & Investments (02/07/05) Vol. 33, No. 3, P. 8 ; Chernoff, Joel Portfolio managers often use optimizers in investment decisions, but these tools underestimate risk, leaving many portfolios open to exposures up to 5 percent of the value of the portfolio in a given year. Some managers that rely merely on risk ratings are also at risk for taking on too many unknown exposures because those ratings are often based on similar biases. Wilshire Associates Inc. stated its new ShaPTSE estimator has been created to eliminate a majority of those biases, including those segments unrelated to geographic location and industry. http://uk.biz.yahoo.com/050125/81/fb0wn.html Wilshire Associates' Research Concludes Excess Value at Risk in Retirement Equity Portfolios as High as Five Percent SANTA MONICA, Calif., Jan. 25, 2005 (PRIMEZONE) -- Research announced today by Wilshire Associates Incorporated, a global leader in investment technology, investment consulting and investment management, concludes that conventional quantitative methods of portfolio analysis in wide use by fund managers can systematically understate the risks in both passively managed and actively managed investment portfolios. 'The biases are such that the standard deviation of return in a pension fund's equity portfolio may be understated by 40% or more. As a result, the excess value at risk for a conventional equity portfolio may be as much as five percent of the portfolio. For a typical individual investor with a $500,000 retirement nest egg, this could amount to an unintended exposure to loss of as much as $25,000 during a one year period,' noted Robert Kuberek, a senior managing director at Wilshire Associates who supervises quantitative research and software development for the Equity Management, Fixed Income Management, Total Fund Management and Asset Allocation products offered by the firm. To reduce or eliminate these kinds of biases in risk estimation, Wilshire Analytics, a business unit of Wilshire Associates that develops and markets asset allocation, risk management and accounting analytical solutions, has developed sophisticated, new technology and has incorporated it into the most recent versions of Wilshire's analytical systems provided to investment professionals, Mr. Kuberek said. Among the technology solutions utilizing the new technology are The Wilshire Atlas, The Wilshire Axiom, The Wilshire Spectrum and The Wilshire iQuantum, the next generation in analytical solutions. Traditionally, portfolio managers estimate risk in a portfolio using the statistical notion of variance, a measure of randomness in the dispersion of payoffs that was pioneered in the 1950's by Nobel laureate Harry Markowitz. Since the mid-1970's analytics firms like Wilshire have used this powerful and highly successful idea to measure investment risk in institutional portfolios such as pension funds that focus on total return. Since the early 1990's, J. P. Morgan has used an essentially equivalent approach, characterized Value-at-Risk, for financial institutions such as banks and brokerage firms that focus on dollar exposure. Both approaches are based on the same underlying mathematics and measure essentially the same thing. According to Mr. Kuberek, a critical step in the risk measurement process is estimation of the variances and covariances for the variables that drive changes in portfolio value. This set of numbers, arranged in an array called a matrix, summarizes the risk level of the underlying variables, taking into account the tendency of some of the variables to move together. Frequently, the matrix of variances and covariances is estimated using historical returns. However, he noted that when historical returns are used to estimate variances and covariances, noise in the particular sample employed results in errors in the estimated covariance matrix. This means that some of the sample covariances will be smaller, and some larger, than they really are. 'On average, these errors in the sample covariance matrix will tend to cancel: the sample covariance matrix is said to be an unbiased estimator for the true covariance matrix. However, if optimization is applied to the portfolio with the objective of minimizing risk, using the sample covariance matrix as an input, the resulting 'optimized' portfolio will almost always appear to be less risky than it really is: optimization tends to favor portfolios for which risk is underestimated,' said Peter Matheos, Ph.D., a managing director at Wilshire and the lead researcher for this study. 'The amount of the bias will depend on the number and magnitudes of the underlying true covariances and on the length of the historical sample used to estimate them.' 'The tendency for optimization to result in portfolios for which estimation errors are greatest is known. However, what may not be as well appreciated is that even if optimization is not used to construct portfolios explicitly, it could often be the case that optimization is used implicitly. This would happen if in considering trades portfolio managers cannot resist the temptation to 'peek' at their risk estimates,' said Mr. Kuberek. 'The tendency would be to attribute higher reward/risk ratios to trades which produce value-added at what appears to be low marginal risk. Since such trades appear attractive, chances are good that the trades will be executed, and the resulting positions will reflect a preponderance of the trades. However, unless the portfolio manager has a lot of data from which to estimate variances and covariances, what is 'low risk' will likely depend on exactly the same covariance matrix that is used to report risk on the portfolio after the trades are done. This more insidious form of risk estimation bias may be less pronounced than in the case where optimization is used explicitly, but likely will still be present.' Using mathematics that have only been known for a few years, Wilshire's SHaPTSE estimator explicitly corrects for the bias in the estimate of portfolio risk that results from the use the sample covariance matrix. (SHaPTSE stands for Structured Hadamard Product Target Shrinkage Estimator.) The SHaPTSE estimator works by adjusting the sample covariance matrix in a way that takes account of things that are known (or can be assumed) about the true covariance matrix. In this respect, the SHaPTSE estimator resembles a Bayesian estimator. 'From the point of view of the ultimate investor, the issue is a technical one,' Mr. Kuberek acknowledged. 'However, it is a little like a computer virus: the technical details of how computers are infected with a virus and how a virus works are obscure to many of us, but the effects are obvious, and sometimes disastrous, to most of us.' 'For investors the main concern likely will be the possibility of underestimating risk in the portfolio -- in particular, being caught off-guard by portfolios whose true risks are large but whose estimated risks are small. SHaPTSE directly addresses that possibility by optimally adjusting the measured risk in the portfolio and offering a better characterization of that risk. This is a material step forward in practical modern risk management,' said Dr. Matheos. About Wilshire Associates Wilshire Associates is a leading global investment technology, investment consulting and investment management firm with four business units including Wilshire Analytics, Wilshire Funds Management, Wilshire Consulting, and Wilshire Private Markets. The firm was founded in 1972 revolutionizing the industry by pioneering the application of investment analytics and research for investment managers in the institutional marketplace. Wilshire also is credited with helping to develop the field of quantitative investment analysis that uses mathematical tools to analyze market risks. All other business units evolved from Wilshire's strong analytics foundation. Wilshire developed the index now known as the Dow Jones Wilshire 5000 Total Market Index, the first asset/liability models for pension funds, the first U.S. equity style metrics work and many other 'firsts' as the firm grew to more than 300 employees serving the investment needs of institutional and high net worth clients around the world. Based in Santa Monica, CA, Wilshire provides services to clients in more than 20 countries representing in excess of 600 organizations with assets totaling more than $12.5 trillion. With eight offices on four continents, Wilshire Associates and its affiliates are dedicated to providing clients with the highest quality counsel, products and services. For more information go to www.wilshire.com

Subject: The Dollar
From: Emma
To: All
Date Posted: Wed, Feb 23, 2005 at 06:24:14 (EST)
Email Address: Not Provided

Message:
These past 2 years the stock and bond markets have not reacted adversely to the government deficit, the balance of trade deficit, the decline in value of the dollar, or even the rise in energy costs. We may now find if a change in central bank dollar policy has such market impacts.

Subject: Re: The Dollar
From: emma
To: Emma
Date Posted: Wed, Feb 23, 2005 at 07:26:09 (EST)
Email Address: Not Provided

Message:
Markets to watch adjust to a currency value change should the change continue are Europe, Canada, Australia.

Subject: A Decline in Dollar Value
From: Emma
To: All
Date Posted: Wed, Feb 23, 2005 at 05:52:32 (EST)
Email Address: Not Provided

Message:
What puzzles me is why a central bank would discuss a change in reserve policy before the policy is implemented. Why should the Korean central bank tell us of policy before there has been significant diversification? Currency traders will simply play off the information. Curious.

Subject: Good question
From: Pete Weis
To: Emma
Date Posted: Wed, Feb 23, 2005 at 09:21:47 (EST)
Email Address: Not Provided

Message:
Not sure either unless they are sending a public message to the US administration and Congress as they are about to go into budget discussions. Here is more: Dollar Declines as Bank of Korea Plans to Diversify Reserves Feb. 22 (Bloomberg) -- The dollar fell the most in more than four months against the yen and dropped versus the euro, Korean won and at least 30 other currencies after the Bank of Korea said it plans to diversify its reserves. South Korea's central bank, which has a total of $200 billion in reserves, said in a Feb. 18 report to a parliamentary committee it will increase investments in assets denominated in currencies such as the Australian and Canadian dollars. The country's reserves are the world's fourth biggest, behind Japan, China and Taiwan, according to data compiled by Bloomberg. ``The market will now be looking to other central banks and what they will be doing, including the European central banks and Middle Eastern banks,'' said Mansoor Mohi-Uddin, head of currency strategy at UBS AG in London. ``The market has got nervous and has continued selling the dollar.'' The dollar weakened 1.3 percent to 104.26 yen at 8:51 a.m. in New York, from 105.54 late yesterday in Toronto, according to EBS, an electronic foreign-exchange dealing system. It dropped to as low as $1.3227 per euro, from $1.3068. U.S. markets were closed yesterday for President's Day. UBS forecasts the dollar will fall to a record $1.40 per euro by year-end. Australia's currency climbed as high as 79.57 U.S. cents today, the strongest in more than a year. Canada's dollar reached 81.71 cents, the highest in a month. ``Support for the dollar is quickly disappearing,'' said Kenichiro Ikezawa, who manages $1 billion in overseas debt at Daiwa SB Investments in Tokyo. Korea's report ``feeds into suspicion that others are also seeking to cut their exposure to the dollar.'' Pimco's Call The dollar has dropped for the past three years against the euro and the yen, in part on concern demand for U.S. assets will fail to match a widening current-account deficit. The gap was a record $164.7 billion in the third quarter, meaning the U.S. must attract $1.8 billion a day to fund the shortfall and support the dollar's value, according to Bloomberg calculations. ``I'd prefer not to own dollars,'' said Andrew Bosomworth, a former European Central Bank economist and a fund manager at Pacific Investment Management Co. in Munich. Pimco manages about $415 billion in assets. ``The list of fundamentals doesn't add up to a stack of positives for the U.S. currency.'' Korean investors, including the central bank, are the fifth- biggest foreign holders of U.S. Treasuries, with $69 billion as of December, the most recent figures available, according to the Treasury Department. Japan, the largest, has $711.8 billion. The Bank of Korea report was given to some legislators on Feb. 18 and reported by Reuters yesterday. `The Anti-Dollar' ``The likes of Thailand, Taiwan and smaller, medium-sized central banks may follow suit'' in diversifying their reserves, said Stephen Jen, global head of currency research at Morgan Stanley in London. ``The euro is going to be the anti-dollar,'' he said. Japan and China, the second-biggest holder of Treasuries, probably won't shift out of the dollar, Jen said. They ``cannot diversify while the dollar is under pressure.'' China has kept its currency pegged to the dollar since 1995. Japan sold a record amount of yen in the first quarter of last year to help stem its advance. ``In the long run I still have faith in the U.S. dollar,'' said Jen, who raised his forecasts for the currency on Feb. 10. Jen predicts the dollar will trade at $1.24 per euro and 96 yen at year-end, up from previous estimates of $1.32 and 92 yen. Other currency strategists, including Meg Browne at Brown Brothers Harriman & Co. in New York, also said they expect the dollar to regain momentum after today's slide. ``There has been an overreaction'' to the Korean report, she said. Browne said the dollar may rebound to $1.30 per euro. The Bank of Korea report, distributed to members of the parliament's finance and economy committee in advance of a debate scheduled for Feb. 24, also said the bank will expand investments into assets with lower credit ratings than the South Korean government. The plan must be approved by parliament. `Sheer Size' ``The sheer size of Korea's reserves makes it unignorable,'' said Tetsu Aikawa, currency sales manager in Tokyo at UFJ Bank Ltd., a unit of Japan's fourth-largest lender. ``That revives the memory in people's minds how badly the dollar was sold when Russia said it was diversifying.'' The dollar fell to a then-record against the euro on Nov. 23 after Russia's central bank said it may increase the amount of euros in its reserves. The dollar slid as much as half a percent against the euro on Jan. 24, after a survey sponsored by Royal Bank of Scotland Plc showed central banks boosted euro holdings. Almost 70 percent of the 56 central banks surveyed said they increased exposure to the 12-nation currency, according to the survey conducted by Central Banking Publications Ltd., a London- based publisher, between September and December 2004. `Good to Diversify' U.S. Treasuries were the second-worst-performing major government market in the world last year, returning 3.5 percent to investors, according to Merrill Lynch & Co. indexes. Only Japanese bonds, which returned 1.3 percent, did worse among the world's largest government bond markets. ``To have a high proportion in U.S. assets is far from ideal, so it's good to diversify,'' said Mark Austin, head of currency strategy at HSBC Holdings Plc in London. HSBC forecasts the dollar will fall to a record $1.40 per euro and to 98 yen, the weakest in a decade, by the end of the year. ``South Korea wants to start picking up higher yields, so that includes moves in to the Australian currency and sterling, and they'll be buying government bonds,'' said Austin. The yen's advance began earlier today on speculation Japan's economy will recover from its fourth recession since 1991. Traders may renew bets on the yen after it retreated 3 percent from a five-year high of 101.69 on Jan. 17, said Sabrina Jacobs, a currency strategist at Dresdner Kleinwort Wasserstein. Japanese Economy ``Investors are increasingly realizing that the second-half recession in 2004 was the low point in Japan and that it's most likely getting better,'' said Singapore-based Jacobs. ``That's helping the yen.'' Finance Minister Sadakazu Tanigaki said on Feb. 20 Japan's economy will ``improve in the latter half of this year,'' after it contracted at an annualized 0.5 percent pace in the fourth quarter. The economy contracted for three straight quarters. Japan's Cabinet office kept its assessment that the economy is recovering, in its February report released today. The government removed currency moves as a risk for the economic outlook in its report. A stronger currency may slow export growth by making Japanese goods more expensive abroad.

Subject: A Decline in Dollar Value - 1
From: Emma
To: Emma
Date Posted: Wed, Feb 23, 2005 at 06:00:33 (EST)
Email Address: Not Provided

Message:
Does OPEC have the intent and market impact to increase the price of oil in line with any decline of the value of the dollar?

Subject: OPEC
From: Pete Weis
To: Emma
Date Posted: Wed, Feb 23, 2005 at 15:06:57 (EST)
Email Address: Not Provided

Message:
OPEC ministers have talked about demanding Euros instead of US dollars for their oil, but so far its only talk. What they have done at times is cut production when they feel they are getting too few dollars for their oil. They've stated that at least part of the reason for production cuts has been the falling dollar.

Subject: Re: OPEC
From: johnny5
To: Pete Weis
Date Posted: Wed, Feb 23, 2005 at 17:41:47 (EST)
Email Address: johnny5@yahoo.com

Message:
But Pete, as he opens a new pier for oil trading he promises he will stabilize prices! http://www.nasdaq.com/asp/quotes_news.asp?cpath=20050223\ACQDJON200502230432DOWJONESDJONLINE000315.htm&selected=9999&StoryTargetFrame=_top&mkt=WORLD&chk=unchecked&lang=&link=&headlinereturnpage=http://www.international.nasdaq.com/asp/gmWorldNews.asp&headl OPEC President: OPEC Will Act To Stabilize World Oil Market MANAMA, Bahrain -(Dow Jones)- The president of the Organization of Petroleum Exporting Countries said Wednesday that OPEC won't allow the prices to 'surge to record levels' and will work to stabilize the global oil market. Sheik Ahmad Fahad al-Ahmad al-Sabah, who is also Kuwait Oil Minister, was reacting to an increase in oil prices Tuesday when crude oil futures for March in New York ended up nearly $3 a barrel to a more than three-month high. Front-month light, sweet crude futures on the New York Mercantile Exchange settled up $2.80 at $51.15 - the highest settlement price this year. Al-Sabah said there will be an OPEC reaction to help cap any surge in oil prices, but gave no specific details. 'Oil prices rose again yesterday. It's premature to say that we will support or reject a production increase but I can say that we will act to stabilize the market as we did in 2004', he said. 'This is our policy which is part of OPEC strategy,' he added. Tuesday, al-Sabah said that OPEC was unlikely to cut output at its upcoming March 16 meeting in Isfahan, Iran. 'Until now, we don't have to cut. The price is very high and we have to respect that price and cooperate with others for oil market stability,' he said. Al-Sabah was speaking to reporters in Kuwait on the sidelines of a function marking the opening of a new pier at al-Ahmadi oil export terminal. -By Abdulla Fardan, Dow Jones Newswires; (973) 17530758; abdulla.fardan@ dowjones.com

Subject: Right
From: Pete Weis
To: johnny5
Date Posted: Wed, Feb 23, 2005 at 19:44:46 (EST)
Email Address: Not Provided

Message:
Right Johnny5. You notice he does not say they will act to reduce pricing, but rather 'stabilize'. They don't like it when the pricing is erratic, especially when it falls steeply. What they like is a 'stable', steady increase in pricing.

Subject: Smooth it out!
From: johnny5
To: Pete Weis
Date Posted: Thurs, Feb 24, 2005 at 05:38:29 (EST)
Email Address: johnny5@yahoo.com

Message:
How they word things keeps noam chomsky up at night. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=476981 I can't help but think of terri when I read this - I don't know why that is so however - I just do: Irrational Optimism ELROY DIMSON London Business School - Institute of Finance and Accounting PAUL MARSH London Business School - Institute of Finance and Accounting MIKE STAUNTON London Business School - Institute of Finance and Accounting December 2003 LBS Institute of Finance and Accounting Working Paper No. IFA397 Abstract: We address the tendency of many investors to overestimate the rewards and underestimate the risks of investing in stocks over the long term - that is, investors' irrational optimism. In particular, we examine the widely held belief that stocks are a 'safe' investment for the long run. The probability of experiencing a real loss on equities depends on the expected real return and standard deviation of stocks. Judgments about the future magnitude of these two parameters typically involve extrapolating from history. We use a global database of real equity returns from 16 countries during the 103-year period from 1900 through 2002 to confront the optimism of investors with the reality of history. Since 1900, the worldwide real return on equities averaged close to 5 percent a year (before costs, fees, and taxes). This is appreciably lower than is frequently quoted from historical averages, a difference that arises because we use a longer time frame than other studies and adopt a global focus. Prior views on the long-run safety of equities have been overly influenced by the experience of the United States. Furthermore, the US evidence that, over the long haul, stocks have beaten inflation over all 20-year periods is based on relatively few nonoverlapping observations and is hence subject to large sampling error. To counteract this dependency on projections of the US experience, we examine the histories of other countries. We find only three non-US equity markets (with a fourth on the borderline) that never experienced a shortfall in real returns over a 20-year period. The worst 20-year real returns of 11 countries were negative. Historically, in 6 of the 16 countries, investors would need to have waited more than 50 years to be assured of a positive return. We also analyze the future shortfall risk of an equity portfolio. The base case for the projections is a worldwide historical volatility level of 20 percent and mean real return of 5 percent, and we also examine a lower return of 4 percent. The projected shortfall risk exceeds the historical risk of shortfall - partly because of the lower assumed real returns, and partly because, even though volatility was projected to be the same as in the past, the shortfall analysis focuses on the full range of possible future returns rather than a single historical outcome. By construction, historical returns converged on long-term realized performance, but the forward-looking analysis shows that there is always risk from investing in volatile securities. Although the probable rewards from equity investment are attractive, stocks did not and cannot offer a guaranteed superior performance over the investment horizon of most investors. Furthermore, their prospective returns are lower than many investors project, whereas their risk is higher than many investors appreciate. Investors who assume that favorable equity returns can be relied on in the long term or that stocks are safe so long as they are held for 20 years are optimists. Their optimism is irrational. Keywords: Portfolio management, asset allocation, long-run returns, shortfall analysis JEL Classifications: F30, G12, G15, G23, J26, N20 Working Paper Series Abstract has been viewed 7399 times

Subject: Steadfastly positive
From: Pete Weis
To: johnny5
Date Posted: Thurs, Feb 24, 2005 at 10:16:09 (EST)
Email Address: Not Provided

Message:
While I do agree with what this article has to say, I don't think of Terri when I read it. I believe Terri is not irrationaly optimistic. Rather I see Terri as the kind of steadfastly positive human being whom makes this world a better place in which to live. If we are truely in a mess, Terri would be the first to say there is a way to get out of this mess. It's great to have a diversity of opinion on this board, because it improves the quality of the board. Johnny5, you and I keep hammering away at what we see as the threats and risks to our economic wellbeing and I believe with you that it's important to do so. But just as important are those who say 'yes but...' to our 'no-it's-absolutely-this-way'. So I probably would do well to tone it down and listen more - something I haven't always been that good at.

Subject: Yah - what you said!
From: johnny5
To: Pete Weis
Date Posted: Thurs, Feb 24, 2005 at 11:29:31 (EST)
Email Address: johnny5@yahoo.com

Message:
I would hate for you to tone it down as much as I would hate for Terri to do the same. Without both of you dueling it out - many would lose the education you 2 are giving them. Terri while maybe not preventing you from a loss will be there to make life better after the reality hits and get you up out of the collapse much faster than otherwise - I think if hunter s thompson had friends like terri around, whatever was troubling him would have mattered less. I think in the past the optimists did not avoid the 29 crash or other bubbles - many great people were sucked into them - that is a part of life - but after those things dealt thier psychological damage if you didn't have terri's around to give you hope the loss would have killed your soul - I have seen this happen first hand to people that didn't have terri's in thier life. Terri's hopeful spirit a few others are truly the life blood that keeps things so interesting here. If they toned things down - bear or bull - what are the rest of us dummies gonna learn without good debate and opposing discussions. Although I don't share terri's 'feelings' or hope about the immediate future - without terri slinging away your gloom Pete - this place just wouldn't be any fun at all and certainly not educational. You are right, the major points of the bears have been made and now it is time to give the fingers a rest a let terri educate us some more and expand our horizons but please don't tone it down Pete, the debate itself is perhaps more important than the conclusions it arrives at. If everyone sits around in agreement with nothing left to discuss - how sad that will be.

Subject: Agree
From: Pete Weis
To: johnny5
Date Posted: Thurs, Feb 24, 2005 at 11:48:56 (EST)
Email Address: Not Provided

Message:

Subject: Thank you, Pete.
From: Terri
To: Pete Weis
Date Posted: Thurs, Feb 24, 2005 at 11:12:11 (EST)
Email Address: Not Provided

Message:
Thank you, Dear Pete.

Subject: America's Senior Moment - Paul Krugman
From: Emma
To: All
Date Posted: Wed, Feb 23, 2005 at 05:37:46 (EST)
Email Address: Not Provided

Message:
http://www.nybooks.com/articles/17771 America's Senior Moment By Paul Krugman - New York Review of Books Posted Below In This Section....

Subject: Re: America's Senior Moment - Paul Krugman
From: Javier Penos
To: Emma
Date Posted: Wed, Feb 23, 2005 at 23:10:19 (EST)
Email Address: jp6794@hotmail.com

Message:
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Subject: Paul Krugman's New Essay
From: Emma
To: Emma
Date Posted: Wed, Feb 23, 2005 at 08:33:55 (EST)
Email Address: Not Provided

Message:
http://www.nybooks.com/articles/17771 America's Senior Moment By Paul Krugman - New York Review of Books Posted Below In This Section....

Subject: New bush faith based financial products
From: johnny5
To: All
Date Posted: Tues, Feb 22, 2005 at 23:04:42 (EST)
Email Address: johnny5@yahoo.com

Message:
Build it and they will come... Islamic Indexing http://www.wilmott.com/messageview.cfm?catid=3&threadid=20919 Islamic hedge fund won't be caught short By William Wallis Published: October 11 2004 03:00 | Last updated: October 11 2004 03:00 The launch yesterday of the first hedge fund deemed to comply with 'Shariah'law is a landmark for thefast-growing Islamic financial industry. Demand in the Muslim world for financial instruments that can compete with conventional ones while complying with Islam's strict rules on money and risk-taking has driven rapid growth and innovation at a time of surging liquidity in oil-producing Middle Eastern states. Islamic banking has been growing by 25 per cent a year since 1998, according to Ezzedine Khofa, secretary-general of Bahrain-based General Council for Islamic Banks and Financial Institutions. He says the industry, for which Bahrain is the Middle Eastern hub, controls $300bn in assets. But until now the creation of an Islamic hedge fund allowing long-term institutional investors to seek higher returns than those provided by Islamic bond markets, for example, was deemed near impossible. The Koran prohibits both interest (riba) and speculation (gharar) as well as investing in companies with debt to equity ratios of more than a third. Islamic finance recognises the value of money only when backed by economic activity - in other words tangible assets or profits. Savings accounts, therefore, derive equivalent returns to interest through commodity trades. But the biggest challenge for the US-based fund manager, Eric Meyer and the Islamic scholars and legal experts he assembled to create the Shariah Equity Opportunity Fund was to find an equivalent of selling short. Selling short appears to run against the Koran as well as prohibiting the sale of what you do not own. Mohamad Toufic Kanafani, chief executive of Noriba, Islamic banking arm of UBS Warburg and project adviser, says the team devised ways round this by enforcing a downpayment towards each transaction, which must be detailed in writing. While in conventional hedge funds, investors place money towards borrowing shares, in the Islamic fund they would advance the money towards buying them, he said. Meanwhile, new software developed as part of the project will screen companies for compliance with Koranic law. This precludes businesses that are highly leveraged, are polluters, and are involved in selling weapons, tobacco, alcohol, and pornography. The Shariah Equity Opportunity Fund, based in the US, will target high net-worth individuals and institutional investors in the Muslim world with more than $10m. Its nature will be defensive. But Islamic bankers see this as one of the advantages their industry provides. 'I myself once thought that Islamic banking was window dressing,' Mr Kanafani said. 'But look what has happened to the Nasdaq in the last few years. Compare that to the Dow Jones Islamic market where the index has risen by 2.7 per cent.' While us yanks smoke it up in our 8MPG hummer and invest in the vicefund.com What a crazy world.

Subject: The future generation of risk managers
From: johnny5
To: All
Date Posted: Tues, Feb 22, 2005 at 22:48:50 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.wilmott.com/messageview.cfm?catid=3&threadid=8393 Some of the new up and comings in risk manangement - they are arguing about Schweser's cliff notes for the test being too complicated - these are the people that control our financial world?? Huh? If nobel prize winners can fail - what chance do they have?

Subject: Setser on recent events
From: Pete Weis
To: All
Date Posted: Tues, Feb 22, 2005 at 21:12:35 (EST)
Email Address: Not Provided

Message:
From Brad Setser's blog site: February 22, 2005 Korea, enough said It looks the remarks of Korea's Central Bank President last week were a leading indicator of today's big news: Korea plans to diversify its reserves away from the dollar! Bloomberg is right: the real question is who [formerly, how -- oops] else follows suit -- Thailand already has shifted out of the dollar (look at how its reserves moved in January, when the dollar rose v. the Euro), Russia too. But most central banks are still massively overweight dollars. ``The market will now be looking to other central banks and what they will be doing, including the European central banks and Middle Eastern banks,'' said Mansoor Mohi-Uddin, head of currency strategy at UBS AG in London. ``The market has got nervous and has continued selling the dollar.'' ... ``Support for the dollar is quickly disappearing,'' said Kenichiro Ikezawa, who manages $1 billion in overseas debt at Daiwa SB Investments in Tokyo. Korea's report ``feeds into suspicion that others are also seeking to cut their exposure to the dollar.'' It will be interesting to see how far Korea is willing to let the won appreciate. Diversification in the context of rapidly growing reserves is a bit different than diversifying your existing holdings. If a country's reserves are growing faster enough, their dollar holdings can go up even as the share of dollars in their overall portfolio goes down. I suspect that is what happened with Russia last year, for example. The other big question, of course, is how much additional pressure this all places on China: the Bretton Woods 2 system of central bank financing of the US current account deficit increasingly hinges on the People's Bank of China's willingness to keep adding to its dollar reserves at an accelerating rate. The more other central banks shift out of the dollar, the weaker the dollar -- and the weaker the renminbi. And the weaker the renminbi, the more reason to bet on its eventual revaluation ...

Subject: Re: Setser on recent events
From: johnny5
To: Pete Weis
Date Posted: Tues, Feb 22, 2005 at 22:53:31 (EST)
Email Address: johnny5@yahoo.com

Message:
I hope this equilibrium krugman predicted comes soon - I have some depreciating dollars I will invest when the good deals come around. (hehe)

Subject: Africans Entering America
From: Emma
To: All
Date Posted: Tues, Feb 22, 2005 at 20:56:03 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/21/nyregion/21africa.html?ei=5094&en=5dd1d3d870037d78&hp=&ex=1109048400&partner=homepage&pagewanted=all&position= More Africans Enter U.S. Than in Days of Slavery By SAM ROBERTS For the first time, more blacks are coming to the United States from Africa than during the slave trade. Since 1990, according to immigration figures, more have arrived voluntarily than the total who disembarked in chains before the United States outlawed international slave trafficking in 1807. More have been coming here annually - about 50,000 legal immigrants - than in any of the peak years of the middle passage across the Atlantic, and more have migrated here from Africa since 1990 than in nearly the entire preceding two centuries. New York State draws the most; Nigeria and Ghana are among the top 20 sources of immigrants to New York City. But many have moved to metropolitan Washington, Atlanta, Chicago, Los Angeles, Boston and Houston. Pockets of refugees, especially Somalis, have found havens in Minnesota, Maine and Oregon. The movement is still a trickle compared with the number of newcomers from Latin America and Asia, but it is already redefining what it means to be African-American. The steady decline in the percentage of African-Americans with ancestors who suffered directly through the middle passage and Jim Crow is also shaping the debate over affirmative action, diversity programs and other initiatives intended to redress the legacy of slavery. In Africa, the flow is contributing to a brain drain. But at the same time, African-born residents of the United States are sharing their relative prosperity here by sending more than $1 billion annually back to their families and friends. 'Basically, people are coming to reclaim the wealth that's been taken from their countries,' said Howard Dodson, director of the Schomburg Center for Research in Black Culture, in Harlem, which has just inaugurated an exhibition, Web site and book, titled 'In Motion,' to commemorate the African diaspora. The influx has other potential implications, from recalibrating the largely monolithic way white America views blacks to raising concerns that American-born blacks will again be left behind. 'Historically, every immigrant group has jumped over American-born blacks,' said Eric Foner, the Columbia University historian. 'The final irony would be if African immigrants did, too.' The flow from Africa began in the 1970's, mostly with refugees from Ethiopia and Somalia, and escalated in the 1990's, when the number of black residents of the United States born in sub-Saharan Africa nearly tripled. Combined with the much larger flow of Caribbean blacks, the recent arrivals from Africa accounted for about 25 percent of black population growth in the United States over all during the decade. Nationally, the proportion of blacks who are foreign born rose to about 7.3 percent from 4.9 percent in the 1990's. In New York City, about 1 in 3 blacks are foreign born. According to the census, the proportion of black people living in the United States who describe themselves as African-born, while still small, more than doubled in the 1990's, to 1.7 percent from about 0.8 percent, for a total estimated conservatively at more than 600,000. About 1.7 million United States residents identify their ancestry as sub-Saharan. Those numbers reflect only legal immigrants, who have been arriving at the rate of about 50,000 a year, first mostly as refugees and students and more recently through family reunification and diversity visas. Many speak English, were raised in large cities and capitalist economies, live in families headed by married couples and are generally more highly educated and have higher-paying jobs than American-born blacks. There is no official count of the many others who entered the country illegally or have overstayed their visas and who are likely to be less well off. Kim Nichols, co-executive director of the African Services Committee, which directs newcomers to health care, housing and other services in the New York region, estimates that the number of illegal African immigrants dwarfs the legal ones. 'We think it's a multiple of at least four,' she said. Africans' reasons for coming echo the aspirations of earlier immigrants. 'Senegal became too small,' said Marie Lopy, who arrived as a student in 1996, worked as a bookkeeper in a restaurant and earned an associate degree in biology from the City University of New York. After winning a place in an American immigration lottery that his secretary had entered for him in 1994, Daouda Ndiaye recalls being persuaded by his six children to leave Senegal, where he was working as a financial manager. 'I said, 'I'm 45, I'd have to build a whole new life, I'd have to go to school to learn English,' ' he recalled. 'They said, 'We want you to go and we want you to send for us because there's more opportunity in the U.S. than here.' ' His wife and two of his children have joined him in the United States, where he has worked as a sporting goods store manager and is now a translator. That the latest movement of black Africans arriving voluntarily surpasses the total who disembarked in chains before the United States outlawed international slave trafficking is a bit of a statistical anomaly. That total, most historians now agree, was about 500,000, with an annual peak of perhaps 30,000, compared with the millions overall who were sold into slavery from Africa. Many died aboard ship. Most were transported to the Caribbean and Brazil, where they were vulnerable to indigenous diseases and to the rigors of raising sugar cane, which was harder to cultivate than cotton or rice, the predominant crops on plantations in the United States, where the slave population was better able to survive and reproduce. Moreover, black Africans represented a much higher proportion of the population then than they do today. In 1800, about 20 percent of the 5 million or so people in the United States were black. Among nearly 300 million Americans today, about 13 percent are black. Still, with Europe increasingly inhospitable and much of Africa still suffering from the ravages of drought and the AIDS epidemic and the vagaries of economic mismanagement, the number migrating to the United States is growing - despite the reluctance of some Africans to come face to face with the effects of centuries of enduring discrimination. In the 1960's, 28,954 legal immigrants were admitted from all of Africa, a figure that rose geometrically to 80,779 in the 1970's, 176,893 in the 1980's and 354,939 in the 1990's. In 2002, 60,269 were admitted, including 8,291 from Nigeria, 7,574 from Ethiopia, 4,537 from Somalia, 4,256 from Ghana and 3,207 from Kenya. To many Americans, the most visible signs of the movement are the proliferation of African churches, mosques, hair-braiding salons, street vendors and supermarket deliverymen, the controversy over female genital mutilation and the election last year of Barack Obama, son of a native Kenyan, to the United States Senate from Illinois. Especially in New York City, the shooting deaths of two unarmed African immigrants, Amadou Diallo from Guinea in 1999 and Ousmane Zongo from Burkina Faso in 2003, come to mind. Immigrants arrive with their own perceptions and expectations, from countries where blacks constitute a majority at every level of society, only to discover that whether they are professors or peddlers, they may be lumped together here by whites and even by American-born blacks. 'You have the positive impact that race is not seen to be an absolute definer of people's opportunities,' Kathleen Newland, director of the Migration Policy Institute, a nonpartisan research group, said, 'but that begs the larger question of what does it mean to have a black skin in the United States.' Agba Mangalabou, who arrived from Togo in 2002, recalls his surprise when he moved here from Europe. 'In Germany, everyone knew I was African,' he said. 'Here, nobody knows if I'm African or American.' Ms. Lopy, who now works as a medical interpreter for the African Services Committee, describes herself as 'African, first and foremost,' though the identity of her children will depend on whom she marries and where. 'I'll raise them to be African-something,' she said, 'but ultimately they'll define it for themselves.' Sylviane A. Diouf, a historian and researcher at the New York Public Library's Schomburg Center and Dr. Dodson's co-author of 'In Motion,' said that Americans have a more positive view of immigrants in general than they do of American-born blacks. Referring to African immigrants, she said: 'They are better educated, they're here to work, to prosper, they're more compliant and don't pose a threat.' Dr. Dodson added, 'They're not politically mobilized as yet and not as closely tied to the African-American agenda.' While the ancestors of most Caribbean-born blacks were enslaved, and slavery also victimized the forbears of many African-born blacks, the growing proportion of immigrants may further complicate the debate over programs envisioned to redress the legacies of slavery. 'I think there is a legitimate set of specific claims by persons born in the United States that don't necessarily apply to Caribbean or African populations that have come here subsequently,' Dr. Dodson said. 'African-born and Caribbean-born brothers and sisters have realized that the police don't discriminate on the basis of nationality - ask Amadou Diallo,' said Professor Charles J. Ogletree Jr., who teaches at Harvard Law School and has warned colleges and universities that admitting mostly foreign-born blacks to meet the goals of affirmative action is insufficient. 'Whether you are from Brazil or from Cuba, you are still products of slavery,' he continued. 'But the threshold is that people of African descent who were born and raised and suffered in America have to be the first among equals.' French-speaking Haitians do not necessarily mix with English-speaking West Indians, much less with Africans, and competition for jobs has been another source of tension. 'The Africans tend to be quite industrious and entrepreneurial and often take advantage of opportunities that might have been here for others before,' said Kim Nichols of the African Services Committee. 'We're talking about very profoundly different cultures,' Kathleen Newland said. Analyses by the Department of City Planning, and by the Lewis Mumford Center for Comparative Urban and Regional Research, in Albany found recent immigrants often segregated from other blacks. The census found Nigerian clusters in Flatlands and Canarsie in Brooklyn and Ghanaians in Morris Heights and High Bridge in the Bronx. 'As with European ethnics at the turn of the century,' Joseph J. Salvo, the director of the population division of the Department of City Planning, and Arun Peter Lobo, the deputy director, wrote recently, 'ethnicity has been a powerful force in shaping black residential settlement in New York.' Immigration may also shift some of the nation's focus from racial distinctions to ethnic ones. 'Certainly, South Africa showed us that minority status does not necessarily correlate to one's position in society, but rather that power and its uses are the issues,' said Samuel K. Roberts of Columbia, a history professor who is also on the faculty of the university's Institute for Research in African-American Studies. 'That being said, increasingly distinguishing between black Americans and black Africans may produce conditions in which we will be less prone to think of a fictional construct of 'race' as the distinguishing factor among all of us in North America.' How long might those distinctions last? 'I guess one of the questions will have to be what happens in the next generation or two,' said Professor Foner of Columbia. 'In America, marriage is the great solvent. Are they going to melt into the African-American population? Most likely yes.'

Subject: Re: Africans Entering America
From: johnny5
To: Emma
Date Posted: Tues, Feb 22, 2005 at 22:48:06 (EST)
Email Address: johnny5@yahoo.com

Message:
I just watched o'reilly tonight, he said the hispanics have taken all the african americans political power away - they are now the largest minority and now the black americans have to compete with native africans. One of the guests said we can't assimilate these people fast enough and thier culture was too different from the euro centric culture of immigrants past to be absorbed quickly. It is going to be interesting to see the civil strife this will create in certain areas - we better prepare. America is a great melting pot - we will grow strong from all this diversity - IDIC.

Subject: Efficient Markets and Indexing
From: Terri
To: All
Date Posted: Tues, Feb 22, 2005 at 17:42:51 (EST)
Email Address: Not Provided

Message:
Efficient market theory posits markets as reacting rapidly to known changes in an economy. If the stock market is efficient it should be difficult to find stocks that are significantly mis-priced. Now, the will be some mis-pricing, but reasonably little. So the proper course for most investors is simply to buy the entire market and hold forever. Portfolios will gain in time as the economy grows. Bonds can similarly be indexed for investors. Since indexing is highly efficient over time, it is a nuisance to advisors who have an interest in promoting other more expensive investment vehicles. There are then continual attacks on indexing. After all, it is a market of stocks and not a stock market. Duh. There is no reason not to try active management, but indexing works and will continue to work as long as America is healthy over time. The criticisms of indexing are continual but typically distorted or worse.

Subject: 33% value, growth, small cap?
From: johnny5
To: Terri
Date Posted: Tues, Feb 22, 2005 at 19:01:32 (EST)
Email Address: johnny5@yahoo.com

Message:
OK granted - so put it all into one vanguard index fund - but having a vanguard s&p 500 is not diversified enough - the US stock market is not representative of the entire world? http://library.dfaus.com/articles/new_indexing/ More interesting is when old-fashioned indexers advocate putting lighter-than-market proportions of money into international stocks. Clements recommends 25% when the actual non-US stock universe is more like 60% of world markets. If you really believed in indexing every publicly traded security in proportion, you'd invest 60% of your assets overseas. Most indexers only want to mimic markets within countries, but not across countries—which is reasonable. Unless there's evidence of a common engine driving expected returns for stocks across all countries, there's no obvious reason to hold them in market proportions. Markets are not unified around the world (as Japanese investors witnessing the recent US bull markets can attest), so it makes sense for different investors to have different exposures to overseas indexes. The same logic works within the US market. Suppose market volatility is only one of several factors that drives US portfolio returns. In such a world the market would no longer be the only legitimate indexing solution. Academic research over the last ten years by Eugene Fama and Ken French, among others, suggests that market risk is only one of three distinct risk factors in stock investing. Small company stocks expose investors to a completely different form of volatility. Distressed stocks with poor earnings prospects, usually mislabeled 'value' stocks, also have unique risk-return characteristics. Each of these three risk 'flavors' is unrelated to the others. Small stocks can do well when the overall market does poorly and value stocks can have dreadful returns when small stocks do well, and so on. Yet each of the three risk factors has as much potential for increasing investment returns (the extra return expected for taking each of these risks is about 5% per year on average). That's why it's reasonable, as in the international case, to consider indexing a portfolio with other-than-market weights. Large growth stocks, especially in the wake of the recent boom, dominate the market. If this situation reverts, the market portfolio might not be diversified enough into small cap and value sectors to suit many investors. It's a question of preference. If you work at a large growth company like, say, Cisco, you may want to diversify your career exposure with the stocks of small value stocks. If you work at some dinosaur value company, you might similarly opt for less than the market share of value stocks. Managing factors this way is a technological advancement over the market portfolio. In the presence of more than one risk factor, the goal of indexing switches from diversification across the available stocks to diversification across the available risk-return dimensions. This might seem like 'sector betting' to traditional indexers like Vanguard founder John Bogle, who still believe that market risk primarily determines performance and that small stocks and value stocks aren't separate sources of risk and return. The academic community is arriving at a different consensus, one that recognizes multiple independent risks. Investors might even have natural combinations of the different risk exposures that best suit their individual time horizons and preferences. As long as the portfolios they use to gain these exposures are index funds, and as long as the exposures are consistent and not timed to predict markets, this sort of portfolio structuring is not a 'sector bet'—it's the new face of indexing.

Subject: Indexing and Market Efficiency -terri?
From: johnny5
To: All
Date Posted: Tues, Feb 22, 2005 at 16:48:47 (EST)
Email Address: johnny5@yahoo.com

Message:
Buffet buys value - not indexes 7 things to think about - great charts in this analysis - what are your comments Terri? http://www2.cfapubs.org/rf/Seven_Risks_TFAP.pdf 1. Market Index Funds are subject to “Irrational Exuberance” It would be hard to believe that all investors were rational in the bidding up of Internet stocks (with little or no earnings) to their stratospheric prices in early 2000 (See Exhibit III). Some investors would buy a stock merely because it had a “.com” in its name or had some affiliation with the Internet. The rising prices of technology and internet-related stocks had a significant effect in boosting the performance of market index funds relative to “rational” portfolio managers. As a result, many active portfolio managers (particularly, managers with a valuation discipline) significantly underperformed the index funds from 1998 through first quarter 2000. Some portfolio managers “threw in the towel,” rationalizing that this time the market was different and that stock valuations no longer mattered. 2. Indexing: Overvalued Stocks Are Overweighted If value stocks continue to outperform growth stocks in the future as they have in the past, an actively managed portfolio with a greater weighting towards value stocks should provide the investor with a higher return and less downside volatility than market index funds. A value style bias also appears prudent when considering the currently high price/earnings ratios of large cap growth stocks 3. Index Funds Favor Large Cap Stocks Another argument against overweighting larger stocks is based on the long-term historical performance of small cap stocks versus large cap stocks. An analysis of historical returns from Ibbotson Associates indicates superior long-term performance of small cap stocks. In exhibit XI, small cap stocks have provided an annual compounded return of 12.4% versus 11.0% for the S&P 500 since 1925. 4. Index Funds Have Become Less Diversified Index funds are attractive to individual investors as an inexpensive way of owning a well-diversified portfolio of stocks. However, the dominance of large cap growth stocks in recent years has led the index funds to have a greater exposure in fewer stocks with potentially higher volatility. As of December 31, 1995, the top ten stocks represented about 18% of the S&P 500 Index, and the 40 largest stocks accounted for about 42% of the index. By year-end 1999, the top 10 stocks, including six technology stocks, had grown to a 25% market share of the index and the top forty stocks accounted for more than 54% of the index. However, the sell-off of technology stocks in 2000 caused a reduction in their market capitalizations and their share of the S&P 500 Index. As of yearend 2000, the ten largest stocks represented a 23% weight of the S&P 500 Index, although the 40 largest stocks still accounted for more than half of the index (51%). 5. Index Sector Weightings Are Volatile At its peak in early March 2000, technology stocks represented more than 38% of the market capitalization of the S&P 500.8 The broader market indices like the Wilshire 5000 also reflected similar weightings in technology stocks by including the high valuations of smaller Internet companies. As a result, investors in market cap-based index funds owned more volatile equity portfolios and were subject to greater downside risk. By year-end 2000, index fund investors suffered from the decline in technology stocks to a 21% share of the S&P 500. Exhibit XIII depicts the fluctuation of S&P sector weightings over the last 20 years. At year-end 1992, the technology sector was less than 7% of the S&P 500 versus about 14% in 1984. Energy stocks represented the largest sector in the early 1980s while consumer stocks dominated in the early to mid-1990s. 6. Index Funds Are Not Really Tax Efficient The comparatively low turnover of index funds has usually rewarded the investor with higher aftertax returns versus most active managers with greater turnover. However, index funds do not recognize the investor’s unique tax situation. An active manager can reduce the client’s income taxes by differentiating the tax lots of equity holdings to be sold. They can also defer short-term capital gains and take advantage of tax loss harvesting opportunities in which short-term capital losses can be used to offset long-term capital gains. Another potential risk of indexing for a taxable investor is the accumulation of unrealized gains in index funds. During the bull market of 1990s, an increasing number of individuals invested in index funds and many index stocks appreciated significantly in valued. As a result, mature index funds have built up a significant base of unrealized capital gains. This can have a potential negative tax consequence to index fund investors, especially new or recent investors. If any investor redeems their investment in the index fund, all investors in the fund will be subject to the realization of capital gains. As more investors pull out of the index fund, greater capital gains would be realized, 17 creating an even larger tax burden to all fund participants. If we were to experience an extended bear market with a large number of individuals leaving index funds, remaining investors would experience significantly lower after-tax returns. In an individually managed portfolio, the investment manager has the advantage of controlling the realization of capital gains for the client’s best interest. 7. Excessive Indexing Can Lead To An Inefficient Market Investors appetite for index funds has grown dramatically in recent years from about $50 billion in 1995 to $363 billion at year end 2000. The $272 billion in S&P 500 index funds as of year-end 2000 accounted for about 4% of the total market capitalization of the S&P 500.9 The growth in index funds has been supported by their strong return performance in the 1990s.The S&P 500 with five consecutive years of 20% returns outperformed most active equity managers. But, it should be noted that the superior performance of index funds was reflective of their inherent bias towards large cap growth stocks which outperformed value and smaller cap stocks during this period. In addition, lower fees and transaction costs of index funds had contributed to their favorable performance. But, as indexing continues to gain in popularity and active managers are increasingly pressured to control their performance tracking error relative to benchmark indexes, the equity market may become less efficient and potentially subject to increased risks. In the extreme case, if investors only invested in equity index funds, individual equity prices would move solely based on their relative weight in the index. Individual stocks returns would not be differentiated based on new company releases such as earnings reports, new product developments or management changes.

Subject: Time-Weighted performance reporting?
From: johnny5
To: All
Date Posted: Tues, Feb 22, 2005 at 13:25:30 (EST)
Email Address: johnny5@yahoo.com

Message:
Is this ethical?? If part of the asset allocation strategy is to move the portfolio into and out of cash and you stop analyzing how cash deposits affect overall performance haven't you lost something? http://www.raymondjames.com/invbrf/04q4_statement_change.htm Statement Change: Portfolio Performance Reporting by Joseph A. Meyer Senior Business Systems Specialist As part of our ongoing commitment to clear communication about your account, Raymond James is pleased to announce that many statements will now include performance reporting. Qualified accounts should see the change beginning with this year-end statement, then on a quarterly basis. The type of account you have with Raymond James will dictate which type of performance calculation you receive. Time-Weighted Performance Reporting Passport, Ambassador, Opportunity, PPA, MIP and Freedom accounts will generally receive time-weighted performance reporting. Raymond James Consulting Services, Eagle and outside managed accounts will also be provided with this type of reporting, although the change will occur later in the calendar year. Time-weighted performance reporting attempts to eliminate the impact of cash flows and produces a more appropriate measure of investment manager performance. For example, if an investor earns a 5% rate of return in Year One and an 8% return in Year Two, and deposits $50,000 in assets into the account at the end of Year One, this method would give equal weight to each year when calculating total return, although there were more assets in the account during Year Two. Dollar-Weighted Performance Reporting All Elite accounts, as well as household accounts with an aggregate account balance greater than $50,000, will receive dollar-weighted performance reporting. Dollar-weighted performance reporting represents the return on a portfolio’s assets and is therefore impacted by the timing of deposits and withdrawals. Using the same example, if an investor earns a 5% rate of return in Year One and an 8% return in Year Two, and deposits $50,000 in assets into the account at the end of Year One, the dollar-weighted calculation would weight the second year more heavily due to the $50,000 contribution at the beginning of the second year to arrive at the total two-year return. For those who have received performance reporting in the past, the report now provides current quarter, year-to-date, and one, three, five and 10-year performance (as applicable), as well as since-inception return. We are confident that this added information will be a valuable tool as you assess your portfolio’s performance. If you have any questions about this change or your account in general, please contact your financial advisor. http://www.raymondjames.com/invbrf/04q4_expectations.htm Realistic Expectations and Asset Allocation: Important Factors for Long-Term Success by Chet Helck President & Chief Operating Officer Raymond James Financial As the markets continue their recovery, investor expectations are on the rise. According to a survey of investors conducted by the Securities Industry Association (SIA), the average expected rate of return for equities is 14.1% for 2005. While this is closer to being realistic than expectations of above 30% in 2000, the number has risen from last year and may continue to increase as we look ahead. That can be problematic, since an overly optimistic outlook could translate into losing sight of lessons learned during recent years. For example, the SIA study for 2001 showed that investors expected their investments to earn 19% on average. That year, the S&P 500 – the unmanaged index of 500 widely held stocks generally considered to be representative of the U.S. stock market – finished down more than 20%.

Subject: Re: Time-Weighted performance reporting?
From: Institutional Investor
To: johnny5
Date Posted: Wed, Feb 23, 2005 at 19:09:09 (EST)
Email Address: Not Provided

Message:
'Is this ethical??' yes, its the industry standard. There are a ton or reasons why you should time weight vs dollar weight. Go read some journals on performance measurement if you would like information about it. 'If part of the asset allocation strategy is to move the portfolio into and out of cash' thats not part of asset allocation. Timing the market historically gives you below market returns. Johnny, I'd hihgly suggesting taking an into investment class or some other type of finance educational course because a lot of your basic fundamental questions should/would be covered in it.

Subject: Being standard = ethical?
From: johnny5
To: Institutional Investor
Date Posted: Wed, Feb 23, 2005 at 23:54:18 (EST)
Email Address: johnny5@yahoo.com

Message:
'yes, its the industry standard. There are a ton or reasons why you should time weight vs dollar weight.' BWAHA - the best one I can see is so that you might can show your clients they are making more money when in fact they aren't as the example shows can easily happen. Don't take it from me though, read Bogle's testimony before congress of how the mutual fund people have bilked the hard working citizens of this country out of billions upon billions with reporting that is industry standard and industry standard fees that have risen while his fees have went down. He specifically mentions time - weighting versus dollar weighting in several of his speeches before congress in 2003-2004. I fully admit I have not had the training, education, 'thought control' that is part of the quantitative financial industry - all I have is a good ole southern boy instinct that probably isn't worth much more than a pig in a poke. I have found articles from mr. spaulding himself where the very people 'in the know' of thier own vendor systems and software do not understand the difference between linkage or attribution or the terms geometric or arithmetic - mistakes that have and will probably continue to cost them business and money. I have provided discussions from a risk management bulletin board where new students are wanting the quick and easy 'cliff notes' to pass the FRM test instead of really studying, comprehending and learning the material at a fundamental level so well they breathe it in thier sleep. I have also provided where the wilshire 'experts' recently admitted there are basic flaws in thier own modeling that have caused a majority of managers to possibly understate risk by as much as 40% in this industry. And then to top it all off me and all the other tax payers got to bail out the smartest nobel prize winners in the world from LTCM - so at my core I distrust the industry and doubt taking a class to answer questions are going to alter my feelings about ethics even if they alter my knowledge of quantitative finance - notice I don't distrust the invidual 'people' but the industry as a whole. Then after reading Bogle's testimony to congress about his industry I really feel sad for our citizens and the stewards of thier financial future. I expect much better from the industry standards than what I am seeing because this industry really can affect the outcome of the entire planet in very crucial ways. I think people that mean well can easily be led astray and hurt others thinking they are doing a contstructive good just like american investors such as prescott bush did when he gave german parties lots of investment money and time while they forced poor jews at auschwitz to work for free to dig out the coal. I hear this term efficient market hypothesis bantered about and today I went to carmax with my uncle and they tried to give him 6K for a 1998 infinity QX4 that he is hopefully selling tomorrow for 9k and they offered him 4.7k for a 1998 ford e-150 conversion van that he sold shortly after leaving carmax for 10K to a buyer after parking it on HWY US19 for a few hours - but the salesmen at carmax assured him thier prices were fair and they would only make a few hundred to 1K off of each vehicle and he would not get much more than they were offering. If he believed all market participants in the car market made for a highly efficient market and the pro's buy/sell prices were honest and they were only going to make a little bit of money - then that large difference would be non-existant no? Maybe there is some formula where my uncle was high on the delta or black-scholes numbers - I don't know - but he would have lost a lot of money if he had let the pro's at carmax handle things for him - maybe they really believed he could not get much more than he did - but they were very wrong. Unfortunately he does not apply the same logic to his buddy at raymond james and earlier today he gave them 250K of his 500K so they could make him money with thier 3% fees. I have met his advisor at this company and fully feel this person is honest and trying to do what she believes is 'helping' my uncle and take care of him because she believes in all the industry 'standard' things like others and that they are right and correct and 3% fees are worth it - but Bogle has a lot to say negatively about her industry and her fees and people in congress seem to be agreeing with him. All of us can do invidual benevolent things that in it's totality is very dark and foreboding - too many people forget this today. Thier may be times when time weighted is better than dollar weighted - but if I am an investor with raymond james - I want to know if I made money - thats it - I don't want averages that distort the weightings of my uncle's investment and may make it appear he made different returns than he really made - this starts us down a slippery slope where 'industry standards' can get further and further away from helping the individual investor even though there are many situations when they are correct - I can in no way fathom how they are ever 'correct' for my uncle if they don't paint an honest picture of wether he made more money or not - no matter how standard they are in the industry. If he lost money and dollar weighted would show this - but time weighted would not - I ask the same question again - is it ethical even though it may be an industry standard?

Subject: Moving Money
From: johnny5
To: johnny5
Date Posted: Thurs, Feb 24, 2005 at 00:26:22 (EST)
Email Address: johnny5@yahoo.com

Message:
I do believe a lot of research shows that timing the market is a loser strategy and moving cash in and out of the market is doomed to failure. I can't help but to feel that the times I have used scottrade to purchase shares of XOM and the timings I used to do this and the money I moved in or out over time were profitable. The research shows I have good chances to turn out a net loser over the long term - we shall see. Perhaps I have simply been lucky with low fees and a good stock - the research talks about this too. Perhaps in the future behavioral modeling will show some people simply would rather lose money on thier own and 'feel' right than make money but 'feel' wrong with someone else. When the equations can begin to predict human emotion from irrational individuals up to entire societies - I may 'feel' better about the research - but right now I don't - even though I should.

Subject: Could you help me?
From: Yann
To: All
Date Posted: Tues, Feb 22, 2005 at 12:35:54 (EST)
Email Address: Not Provided

Message:
Please would you know one or two little clear articles by PK about “new trade theory”? Thanks.

Subject: New Trade Theory
From: Terri
To: Yann
Date Posted: Tues, Feb 22, 2005 at 14:56:54 (EST)
Email Address: Not Provided

Message:
Use the 'Search' on the top left of the page. The references and articles are there.

Subject: Re: New Trade Theory
From: Pancho Villa alias El Gringo
To: Terri
Date Posted: Tues, Feb 22, 2005 at 17:03:17 (EST)
Email Address: nma@hotmail.com

Message:
Peddling Prosperity (p.233-234) 'The New Trade Theory Not every industry is like the aircraft industry. The ability of a country to grow wheat cheaply depends mostly on climate and soil. A big subsidy can turn a wheat importer into a wheat exporter, as European nations have done with their Common Agricultural Policy, but it cannot create an advantage where none existed: remove the subsidies and European wheat output would crash. In other words, comparative advantage is still alive and well, and still governs much of trade. On the other hand, not every industry is like wheat. Between 1978 and 1985, a group of economists (Krugman, Dixit & Co.) hammered out what has come to be known as the 'new trade theory', a theory that says, in effect, that a lot of world trade is in goods like aircraft rather than goods like wheat. The new trade theory picture of the world looks something like this: Each country has, at any given time, a set of broad resources - land, skilled labour, capital, climate (see Edward Denison), general technological competence. These resources define up to a point the industries in which the country can hope to be competitive on world markets. Japan is not going to make it in the world wheat market: Canada will not be a successful exporter of tropical fruit; Brazil is not ready to compete in supercomputers (but already in jets). But a country's resources do not fully determine what it produces, because the detailed pattern of advantage reflects the self-reinforcing virtuous circles, set in motion by the vagaries of history. At a broad level, then, trade reflects resources. A country with a highly skilled labour force will, in general, export goods whose production requires a high ratio of skilled and unskilled labor, and import goods for which the reverse is true. But precisely which goods the country exports cannot be determined from its sources alone. That final determination rests in the realm of chance and history, in the land of QWERTY. This may sound a little vague, and if the ideas of new trade theory had only been expressed in this general way, they would probably not have had much impact. What the new trade theorists did, however, was to package this vision of trade in extremely sharply focused mathematical models. These models served two puroposes. First, they helped to pin down the concepts in a way that dispelled a fog of confusion that had previously surrounded these ideas. Second, they legitimized QWERTYish ideas for other economists, by showing that they could be expressed with the same degree of clarity as more traditional app-Roach-es. It's all a nice example of intellectual progress. Still, does it matter? (Of course it does matter) Does knowing that much of world trade is in goods like aircraft, not goods like wheat, change our opinions about economic policy? (The earth is 'not!' flat) Yes - maybe. And then again, maybe not.'

Subject: Big Oil and Alaska
From: Emma
To: All
Date Posted: Tues, Feb 22, 2005 at 12:31:32 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/21/politics/21refuge.html?ei=5070&en=beb2ec20a30c3010&ex=1109653200&pagewanted=all&position= Big Oil Steps Aside in Battle Over Arctic By JEFF GERTH WASHINGTON - George W. Bush first proposed drilling for oil in a small part of the Arctic National Wildlife Refuge in Alaska in 2000, after oil industry experts helped his presidential campaign develop an energy plan. Five years later, he is pushing the proposal again, saying the nation urgently needs to increase domestic production. But if Mr. Bush's drilling plan passes in Congress after what is expected to be a fierce fight, it may prove to be a triumph of politics over geology. Once allied, the administration and the oil industry are now far apart on the issue. The major oil companies are largely uninterested in drilling in the refuge, skeptical about the potential there. Even the plan's most optimistic backers agree that any oil from the refuge would meet only a tiny fraction of America's needs. While Democrats have repeatedly blocked the drilling plan, many legislators believe it has its best chance of passage this year, because of a Republican-led White House and Congress and tighter energy supplies. Though the oil industry is on the sidelines, the president still has plenty of allies. The Alaska Congressional delegation is eager for the revenue and jobs drilling could provide. Other legislators favor exploring the refuge because more promising prospects, like drilling off the coasts of Florida or California, are not politically palatable. And many Republicans hope to claim opening the refuge to exploration as a victory in the long-running conflict between development interests and environmentalists. The refuge is a symbol of that larger debate, said Senator Lisa Murkowski, an Alaska Republican who is a major supporter of drilling. Opponents agree. 'This is the No. 1 environmental battle of the decade,' said Representative Edward J. Markey, Democrat of Massachusetts. Whether that battle will be worthwhile, though, is not clear. Neither advocates nor critics can answer a crucial question: how much oil lies beneath the wilderness where the administration wants to permit drilling? Advocates cite a 1998 government study that estimated the part of the refuge proposed for drilling might hold 10 billion barrels of oil. But only one test well has been drilled, in the 1980's, and its results are one of the industry's most closely guarded secrets. A Bush adviser says the major oil companies have a dimmer view of the refuge's prospects than the administration does. 'If the government gave them the leases for free they wouldn't take them,' said the adviser, who would speak only anonymously because of his position. 'No oil company really cares about ANWR,' the adviser said, using an acronym for the refuge, pronounced 'an-war.' Wayne Kelley, who worked in Alaska as a petroleum engineer for Halliburton, the oil services corporation, and is now managing director of RSK, an oil consulting company, said the refuge's potential could 'only be determined by drilling.' 'The enthusiasm of government officials about ANWR exceeds that of industry because oil companies are driven by market forces, investing resources in direct proportion to the economic potential, and the evidence so far about ANWR is not promising,' Mr. Kelley said. The project has long been on Mr. Bush's agenda. When he formulated a national energy policy during the 2000 campaign he turned to the oil industry for help. Heading the effort was Hunter Hunt, a top executive of the Hunt Oil Company, based in Dallas. The Bush energy advisers endorsed opening a small part - less than 10 percent of the 19-million-acre refuge - to oil exploration, an idea first proposed more than two decades ago. The refuge, their report stated, 'could eventually produce more than the amount of oil the United States now imports from Iraq.' The plan criticized President Bill Clinton's energy policies, both in the Middle East, where most of the world's oil lies, and in the United States. In 1995 Mr. Clinton vetoed legislation that authorized leasing in the Alaska refuge. An earlier opportunity to open it collapsed after oil spilled into Alaskan waters in 1989 from the Exxon Valdez. Subsequent efforts, including one in Mr. Bush's first term, also failed. Mr. Hunt, through an aide, declined an interview request. Others who advised Mr. Bush on his energy plan said including the refuge was seen as a political maneuver to open the door to more geologically promising prospects off the coasts of California and Florida. Those areas, where tests have found oil, have been blocked for years by federal moratoriums because of political and environmental concerns. 'If you can't do ANWR,' said Matthew R. Simmons, a Houston investment banker for the energy industry and a Bush adviser in 2000, 'you'll never be able to drill in the promising areas.' Shortly after assuming office, Mr. Bush asked Vice President Dick Cheney to lead an examination of energy policy. A May 2001 report by a task force Mr. Cheney assembled echoed many of Mr. Bush's campaign promises, including opening up part of the refuge. The report called for further study of the Gulf of Mexico and other areas. The next year, Mr. Bush said 'our national security makes it urgent' to explore the refuge. By then, the industry was moving in the opposite direction. In 2002 BP withdrew financial support from Arctic Power, a lobbying group financed by the state of Alaska, after an earlier withdrawal by Chevron Texaco. BP, long active in Alaska, later moved its team of executives to Houston from Alaska, a company executive said. 'We're leaving this to the American public to sort out,' said Ronnie Chappell, a BP spokesman, of the refuge. About a year ago, ConocoPhillips also stopped its financial support for Arctic Power, said Kristi A. DesJarlais, a company spokeswoman. Ms. DesJarlais said her company had a 'conceptual interest' in the refuge but 'a more immediate interest in opportunities elsewhere.' Other companies have taken similar positions. George L. Kirkland, an executive vice president of Chevron Texaco, said a still-banned section in the Gulf of Mexico, where the company has already drilled, was of more immediate interest. ExxonMobil also has shown little public enthusiasm for the refuge. Lee R. Raymond, the chairman and chief executive, said in an television interview last December, 'I don't know if there is anything in ANWR or not.' For the Interior Department, however, the refuge is the best land-based opportunity to find new oil. Any lease revenues, estimated by the department to be $2.4 billion in 2007, would be split between the federal and state governments. Advocates say oil production could reach one million barrels per day. In a decade from now, when the site might be fully developed, that would be about 4 percent of American consumption, according to federal forecasts. David L. Bernhardt, deputy chief of staff to the secretary of the interior, cited a 1998 study by the United States Geological Survey estimating that the refuge might hold 10.4 billion barrels of recoverable oil. (The estimate for offshore oil is 76 billion barrels.) But that study has significant weaknesses, which Mr. Bernhardt acknowledged. Its estimates are of 'petroleum resources' - potential oil deposits - instead of 'petroleum reserves,' which refers to oil that has been discovered. Ken Bird, a geological survey official who worked on the study, said the federal geologists did not have access to test data from the only exploratory well drilled on the refuge, by Chevron Texaco and BP in the 1980's. An official with one of the companies, speaking anonymously because of the confidentiality of the test, said that if the results had been encouraging the company would be more engaged in the political effort to open the refuge. There has not been much discussion about the refuge between the companies and the Bush administration, according to industry and government officials. 'I don't think I've talked to the oil industry over the last several years about the economic potential of ANWR,' Mr. Bernhardt said. The relationship between the administration and the oil industry has been a flashpoint for critics of Mr. Bush. Democrats, upset that Mr. Cheney refused to disclose information about his task force meetings with industry executives, see a cozy alliance. Their concerns are heightened because of the former ties between the industry and Mr. Bush and Mr. Cheney and the administration's stance on issues like climate change. The president once headed a small exploration company, and Mr. Cheney previously was chief executive of Halliburton. 'Big oil,' Senator John Kerry said in last year's presidential campaign, now calls 'the White House their home.' Some industry executives say their views are more aligned with those of Republicans on a broad range of issues including regulation, the environment and energy supply, and they were heartened by the initial pronouncements of the Bush administration. But some say they feel let down by Mr. Bush's inability to lift bans on oil exploration. 'When this administration came in, the president and the vice president recognized there was a problem of energy supply and demand,' said Tom Fry, the executive director of the National Offshore Industries Association. But Mr. Cheney's task force, Mr. Fry said, talked only about offshore drilling as something to be studied. 'They never say they will lift the moratoria,' he said.

Subject: Raymond James being sued by the SEC
From: johnny5
To: All
Date Posted: Tues, Feb 22, 2005 at 11:46:31 (EST)
Email Address: johnny5@yahoo.com

Message:
Great - now my uncle is giving his money to crooks. If this trial turns out bad for raymond james - what do you think the effects will be for them and for mutual funds in general? http://registeredrep.com/news/Herula-jail-sentence/ From Brokerage House to the Big House By John Churchill Feb 17, 2005 2:56 PM Dennis Herula, the 59-year-old former Raymond James Financial Services broker who lavished himself with homes and other gifts using millions of dollars stolen from clients, was sentenced to 16 years in federal prison on Friday. “My greed and total disregard put my career into a new league—that of a thief,” said Herula in a Denver federal court before being sentenced by U.S. District Judge Robert Blackburn. The judge concluded that 16 years was appropriate, saying Herula’s stealing would not have stopped if it weren’t for his capture in Boston in May 2004, where he’d been living under an assumed name. Herula pleaded guilty in November 2004 to conducting a fraudulent scheme that promised big returns to investors with “no risk.” Along with his wife, Mary Lee Capalbo, and the son of the former co-owner of the New England Patriots, Charles Sullivan, he solicited funds for a bogus venture called Brite Business, raising $44.5 million between 1999 and 2000, which he then kept in a RJFS brokerage account. Herula used much of the money to buy expensive homes and other gifts for himself and his wife, including a $200,000 Bentley and a 13.5-carat diamond ring. In a rare move, the SEC filed a civil-fraud case in September 2004 against not only Herula’s supervisors, but also RJFS itself. J. Stephen Putnam, former president and COO, and David Ullom, the former branch manager at the Cranston, R.I., office, were charged with failure to supervise. The SEC complaint alleges the firm knew of the suspicious nature of Herula’s activities in mid-2000 but didn’t fire him until December, thus allowing him to continue the fraud. RJFS refused to settle with the SEC and denies all charges. The firm’s trial in front of an administrative law judge began Jan. 31 in Boston

Subject: Latin America Fails On Basic Needs
From: Emma
To: All
Date Posted: Tues, Feb 22, 2005 at 10:10:46 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/22/international/americas/22bolivia.html?pagewanted=all&position= Latin America Fails to Deliver on Basic Needs By JUAN FORERO EL ALTO, Bolivia - Piped water, like the runoff from the glaciers above this city, runs tantalizingly close to Remedios Cuyuña's home. But with no way to pay the $450 hookup fee charged by the French-run waterworks, she washes her clothes and bathes her three children in frigid well water beside a fetid creek. So in January, when legions of angry residents rose up against the company, she eagerly joined in. The fragile government of President Carlos Mesa, hoping to avert the same kind of uprising that toppled his predecessor in 2003, then took a step that proved popular but shook foreign investors to their core. It canceled the contract of Aguas del Illimani, a subsidiary of the $53 billion French giant Suez, effectively tossing it out of the country and leaving the state responsible. 'For us, this is good,' Ms. Cuyuña said, voicing the sentiment in much of El Alto. 'Maybe now, they will charge us less.' That is far from certain. Even less certain is how she and 130 million other Latin Americans will get clean water anytime soon in a region where providing basic services remains among the most pressing public health and political issues. Governments like Bolivia's tried the task themselves before, abandoned it as too costly, and turned to private companies in the 1990's. Today as privatization is rejected, foreign investment is plummeting across the region and the challenge is being returned to states perhaps less equipped than a decade ago. The trend is not unique to Bolivia, where a lack of clean water contributes to the death of every tenth child before the age of 5, and it has presented Latin American leaders with a nettlesome question: what now? 'The decisions that have to be made are stark and difficult,' said Riordan Roett, director of Latin American studies at Johns Hopkins University. 'They're going to have to make some sort of compromise, and that compromise often means buying back and taking over those services - and then, of course, making them efficient in the hands of the state. Their track record doing this in the past was miserable.' Indeed, the heated backlash against free-market changes - fueled by the sense that they promised more than they delivered while offering overpriced, often flawed services - has at once left governments vulnerable to volatile protests and forced foreign companies to retreat. No companies have been more buffeted than those running public utilities offering water, electrical and telephone services, or those that extract minerals and hydrocarbons, which, like water, are seen as part of a nation's patrimony. In Peru, despite major economic growth, foreign investment fell to $1.3 billion last year from $2.1 billion in 2002. Ecuador has also seen investments sag, as oil companies that once saw the country as a rosy destination have faced the increasingly determined opposition of Indian tribes and environmental groups. Argentina, which has taken a decidedly leftist path in the economic recovery following its 2001 collapse, has recouped only a fraction of the investments it attracted just a few years ago. Across the region, companies are more than ever weighing political risks when considering expansion plans. Political leaders, meanwhile, are having to weigh the need for foreign investment against the demands of citizens who are increasingly quick to hit the streets. 'In the last decade, non-economic factors have become even more important in affecting investments,' said César Gaviria, former secretary general of the Organization of American States. 'Political risks have grown to a great degree,' added Mr. Gaviria, now chairman of Hemispheric Partners, a firm based in the United States that provides political and economic risk analysis to investors. 'There's no doubt about it.' The fall in foreign investment is perhaps most pronounced in Bolivia, where in 1999 it totaled $1 billion as gas companies flocked here to mine newly discovered fields. Last year, it fell to $134 million, as companies proved skittish after President Gonzalo Sánchez de Lozada was ousted in uprisings set off by his plans to permit multinational companies to export Bolivia's natural gas. Those who resist the trends of globalization have been emboldened by what they see as the success of local people in asserting their control over resources. 'It has been phenomenal to see a movement largely made up of the indigenous and peasant farmers fight and win,' said Deborah James, who directs campaigns against American-led globalization efforts at Global Exchange, a San Francisco group. 'What you see is a massive popular rejection of transnational companies owning essential services.'

Subject: Latin America Fails On Basic Needs - 1
From: Emma
To: Emma
Date Posted: Tues, Feb 22, 2005 at 10:11:34 (EST)
Email Address: Not Provided

Message:
Others, less enthusiastic, see a troubling degree of political instability and a perfect storm of uncertainty on the horizon. 'You see, in country after country, that the battle lines are being drawn over utility questions,' said Michael Shifter, a senior fellow who closely tracks the Andes for the Washington policy group Inter-American Dialogue. 'It builds a great resentment and rage that things so essential to people, like water, like electricity, are not being delivered in a fair and equitable way. That's a formula for rage that leads to mobilization, and that's why we're seeing a convulsed region.' In Uruguay, a referendum in October guaranteed public control over water resources, enshrining water as a 'basic human right.' In Chile's central valley region, 99.2 percent of voters in a plebiscite in 2000 rejected privatization of the state-run water company. (The government privatized anyway.) In Argentina, another French water provider was tossed out in 1998, while Ecuador's government has repeatedly failed to privatize telecommunications and electricity generating companies. In Peru, protests against plans to privatize electric utilities have been persistent, while as far north as Nicaragua and Mexico, activists have fought efforts to battle privatization plans for water systems. The battle surrounding Aguas del Illimani, which provided water for El Alto, is revealing of the anger over privatizations that many here say they were never consulted about and never asked for, but were put in place as a condition for loans from the World Bank and International Monetary Fund. Indeed, Aguas del Illimani was not the first company to get a taste of Bolivians' fury. In 2000, in the midst of angry demonstrations, the state annulled a contract with Bechtel, a multinational based in San Francisco that had doubled fees on being granted the concession in Cochabamba. In 2003, in the face of protests and instability, a consortium of companies signaled that it had all but called off a $5 billion pipeline project to transport natural gas to the Pacific, from where it would have been shipped to the United States. Under continuing pressure, the government of President Mesa is now moving forward with legislation that would raise taxes and increase government control of energy projects in Bolivia. So the stage was set for the outburst against Aguas, which grew out of a decision by Mr. Mesa to raise subsidized fuel prices on Dec. 30, even though the company did not seem a likely target before now. The Bolivian government had in fact welcomed Aguas in 1997 to turn around an inefficient public system that provided water to El Alto and the adjacent capital, La Paz. After it arrived, Aguas says it met its contractual obligations and expanded services, and even government officials concede that the company did an admirable job at first. Potable water, offered by the state water company to 152,812 households in the two cities in 1997, rose by 81,180 households in seven years. Sewage service was expanded to more than 160,000 households by last year from 95,995. But eight years into its contract, Aguas ran into problems. Profits were never as high as the company would have liked, since the former country people who flocked to El Alto, a mostly indigenous city of 750,000, were used to conserving and never consumed much water. When company officials asked state regulators for permission to increase monthly fees, their request was rejected. But the company won permission to increase the hookup fees, to $450 from just over $300. It was a fee most people here - where the average monthly wage is about $55 - could never hope to pay. 'It was contractual, so I cannot blame Aguas del Illimani,' said José Barragán, the government's vice minister of basic services, in charge of water service. 'But a prudent administrator would not have taken that road.' Mr. Barragán says that the government 'is not accusing Aguas for not complying with the contract.' Instead, he said, the company avoided government efforts to renegotiate so that service could be expanded, a contention the company denies. The lack of a resolution effectively left 200,000 people without any real chance of obtaining water service, Mr. Barragán said. 'That's completely false,' said Alberto Chávez, Aguas's general manager, emphasizing that the company had shown a willingness to meet with both the government and the leaders of Fejuve, an El Alto group that organized protests. Still, Mr. Chávez conceded that 70,000 people in Aguas's concession area in El Alto still had no water. Now, with Aguas's contract canceled, the question in El Alto remains how to expand and improve service. No one believes that the state or the city of El Alto, both cash poor, will be able to do so. 'Ultimately, if Bolivians are going to get real access for water it's going to have to be subsidized,' said Jim Shultz, director of the Democracy Center, a policy group in Cochabamba, Bolivia's third-largest city, that studies the effects of free market reforms. 'And it's going to have to be subsidized in some form of foreign assistance.' That, he noted, is not a realistic proposition, because Bolivia cannot afford to seek more loans and foreign governments are not so willing to make big cash outlays to a state they view as increasingly erratic. Many residents, like Franz Choque, 31, a construction worker, are worried. He said that he was not philosophically opposed to a private company running the water system. He only wanted the costs to be just and the service to be effective. 'It is O.K. for a foreign company to be here, but they should charge the Bolivian rate, not like in the country where they come from,' said Mr. Choque, as he worked on a new school that will have running water only because residents have pooled resources to pay for the hookup. 'Not everything can be free. We can pay a little. But we just want a fair price.'

Subject: Japan's Ties to China
From: Emma
To: All
Date Posted: Tues, Feb 22, 2005 at 10:08:28 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/22/international/asia/22japan.html Japan's Ties to China: Strong Trade, Shaky Politics By JAMES BROOKE TOKYO - Just as China's state news agency was berating Japan for its 'wild behavior' in joining the United States to express their 'common strategic objectives' in Taiwan, the news came Monday that Japanese trade with China jumped 27 percent last year, hitting a record high of $168 billion. It was only the latest example of a troubling dynamic in the countries' relations: white hot economics and deep freeze politics. The joint United States-Japan declaration on Taiwan, buried last week in a long, seemingly bland statement of cooperative security objectives, left many Chinese analysts outraged. 'Japan colonized Taiwan for half a century,' one Chinese expert based here said Monday, hardly containing his anger. 'When Japan talks about Taiwan, we think they have no right to talk.' He asked to remain unidentified because he did not want to criticize Japan publicly. But others say Japan's mention of Taiwan in its list of goals for a safer Asia was part of a larger effort to stand up to China's expanding power. Japan's growing economic dependence on China would seem to point toward a greater deference from Tokyo. But political and military affairs have risen in importance in the region, and for Japan's government they may now be edging out economic concerns. As a result, many here say, it makes sense for Tokyo to bolster Taiwan, a convenient buffer state that absorbs the military hostility and expansive energy of its rival. To the east of Taiwan, Japanese islands already feel Chinese pressure: Chinese drilling last fall for gas in an area claimed by Japan, a Chinese submarine caught in November trying to slip through Japanese territorial waters, and a continuing effort by China to have a Japanese island declared a rock, a legal strategy that would deprive Japan of thousands of square miles of economic rights. Discarding the language of diplomacy, Hatsuhisa Takashima, the spokesman for the Foreign Ministry of Japan, said in an interview on Monday that the inclusion of Taiwan in the security list was a consequence of those actions. China has been increasing its military budget by 10 percent annually for the past 10 years, continued Mr. Takashima, whose government is actually cutting its defense spending this year. Fear of a rising China prompted Hiroyuki Hosoda, the government's chief cabinet secretary, to ask the European Union on Monday to retain its embargo on arm sales to China. 'The sale of advanced weaponry would fuel tensions and is a concern for Japan,' he said. The Chinese argue that Japan must adapt to a new reality in Asia. Recalling Japan's occupation of Taiwan and its depredations on the mainland, the Chinese analyst, a graduate of American and Chinese universities, said: 'For almost two centuries, Japan had a weak and divided China. Now we have a nearly integrated, strong China. The Japanese are not ready for that.' For Taiwan, which was delighted by Tokyo's surprise announcement, the best strategy is to form an alliance to check China. Taiwanese officials note that South Korea recently renewed direct flights between Seoul and Taiwan, a link broken over a decade ago. And they eagerly endorse the stalled six-party talks on North Korea's nuclear weapons, which aim to preclude North Korea from even considering a military option. 'With regards to China, we hope that there is a military encirclement so China will not go for a military adventure as well,' Koh Se-kai, Taiwan's representative to Japan, said in an interview on Monday. Speaking fluent Japanese acquired during a three-decades-long exile here that ended in the 1990's, he added: 'The United States and Japan announced their interest in the Taiwan straits issue. We welcome it for it seems to be the first step for such an encirclement.' The Japanese see themselves as moving cautiously. The Taiwan statement may have set off fire alarms in Chinese newsrooms, but to Japanese eyes it was so subtle that it received light mention on Monday in the Japanese press. Briefing reporters in Washington on Saturday, Mr. Takashima, the Japanese spokesman, said that in the event of war between Taiwan and China, Japan would limit itself to providing logistical support, saying: 'Surely, Japan would support American action, but we wouldn't join the military action itself. It is prohibited by the Constitution.' Yet, one observer left Tokyo last week with words of caution for Japan and China. 'The biggest challenge to Japan is going to be how it arranges its relationship with China,' Howard H. Baker Jr. said Wednesday at a small news briefing before stepping down as American ambassador here. 'Japan is a superpower. China is on its way to being a superpower. They are both rich, they both have a history and tradition in this region. And they don't much like each other.'

Subject: The Dollar
From: Emma
To: All
Date Posted: Tues, Feb 22, 2005 at 06:12:15 (EST)
Email Address: Not Provided

Message:
BBC is reporting that Korea has announced they will diversify currency reserves. We will find how that effects the Euro and dollar, and the bond market. This may be the quiet beginning of an Asian change in holding reserves, but Korea is only a marginal holder of reserves.

Subject: Transition
From: Emma
To: Emma
Date Posted: Tues, Feb 22, 2005 at 06:34:10 (EST)
Email Address: Not Provided

Message:
The hope is the transition to diversified reserves as it comes will be gradual, and there is reason to believe that will be the case.

Subject: Free Riders
From: Pete Weis
To: Emma
Date Posted: Tues, Feb 22, 2005 at 10:09:23 (EST)
Email Address: Not Provided

Message:
It's interesting to note, at this time, Nouriel Roubini's and Brad Setser's fine paper regarding the possibility of a 'hard landing' for the dollar sometime in the 2005-2006 time frame. Today we have reports of Korea shedding dollars and also oil producers doing the same. This is one of the triggers Roubini and Setser pointed to when they talked about 'free riders'. They mentioned - whether or not Japan or China began to shed assets, free riders like small Asian countries and oil producers would be tempted to dump dollars for, say, Euros thinking they were too small to make a difference. But acting together they would have a similar effect as a very large dollar asset holder divesting. This then could start a dollar rout. We'll see what happens.

Subject: Re: China urged to drop dollar peg
From: Pancho Villa alias El Gringo
To: Pete Weis
Date Posted: Tues, Feb 22, 2005 at 14:12:50 (EST)
Email Address: nma@hotmail.com

Message:
FT, Tuesday Feb. 22 2005 China urged to drop dollar peg China should be moving towards greater exchange rate flexibility and the US must put its economic house in order to mitigate against the kind of market turbulance that buffeted east Asian economies over the past year, according to South Korea's central bank governor. Defending the Bank of Korea's record intervention in currency markets last year, Park Seung advocated global exchange rate adjustment to allow for a gradual fall in the dollar. 'In order to develop its economy further, the time has come for China to consider whether it should continue to peg to the dollar.' Mr Park said in an interview with Central Banking journal. 'I do not think that a change in its foreign exchange regime would have a major impact on China's economy. Ultimately the government has the instruments to control the situation.' China has come under international pressure to revalue the renmimbi, which has remained artificially low as the US dollar has fallen. This has left other currencies to absorb the impact of the weak dollar,particularly the Korean won, which rose by 15 % last year, more than any other Asian currency. Mr Park said he agreed that Asian countries needed to adopt more flexible exchange rate systems to absorb shocks to the domestic economy and help correct external imbalances. 'But in a country whose economic framework has not become firmly based, or whose financial system is fragile, this may leave it easily exposed to speculative attack,' Mr Park said. The US needed to help redress global imabalances, exacerbated by its twin budget and payments deficits, by adopting policies to lower domestic demand 'both by pursuing soundness of its government's finances and by raising its private saving ratio' (could this explain the privatisation of the Social Security system?), Mr Park said. 'This should be followed by global exchange rate adjustment and co-operation in economic policy. The dollar needs to weaken gradually within a range of values that is sustainable for east Asian countries.' South Korean authorities have intervened relatively heavily in the foreign exchange markets as the dollar weakened, with the country's foreign foreign exchange reserves rising by 23% over the past year to breach the $200bn mark this month. Mr Park nevertheless repeated the government's line that South Korea's exchange rate policy should be decided freely in the market. The Bank of Korea said yesterday it would diversify its foreign exchange reserves, Asia's fourth largest, away from government bonds into high yielding papers and a greater variety of currencies, Reuters reports from Seoul. A large chunk of South Korea's foreign exchange reserves have been held in US Treasuries.

Subject: Dollar strain worsening
From: Pete Weis
To: Pancho Villa alias El Gringo
Date Posted: Tues, Feb 22, 2005 at 15:12:31 (EST)
Email Address: Not Provided

Message:
Not sure what the Chinese are thinking. If they don't unpeg we will continue to have serious imbalances. The only other way we get a quick reduction in the current account would be significantly higher long term rates. This would cut into cheap borrowing and therefore consumption. This would also likely cause a recession and could possibly stress our financial system to the brink if long term rates rose too fast. Oil exporters' shift to euros hurts dollar By Mona Megalli, Reuters JEDDAH, Saudi Arabia, — Moves by Middle East oil exporters and Russia to switch some revenue from dollars to euros lie behind the U.S. currency's weakness, and a further rise in crude prices could prompt more declines, billionaire investor George Soros said Monday. Soros told delegates to the Jeddah Economic Forum that the dollar's fall should help to lower the U.S current account and trade deficits, but warned that a fall beyond an unknown 'tipping point' would severely disrupt markets. The U.S. current account deficit is more than five percent of gross domestic product despite the dollar's three-year slide. The currency, however, has staged a comeback recently, gaining about 3.6% against the euro and three percent versus the yen this year. 'The oil exporting countries' central banks ... have been switching out of dollars mainly into euros, and Russia also plays an important role in this. That is, I think, at the bottom of the current weakness of the dollar,' Soros said. Soros, dubbed 'The Man who broke the Bank of England' for his role in betting the pound would drop in 1992, said he was not predicting further falls in the value of the dollar. But he linked its fate to the price of oil. 'The higher the price of oil, the more the dollars there are to be switched to euro (so) the strength of oil will reinforce the weakness of the dollar,' he said. 'That is only one factor, but I think there is such a relationship.' U.S. crude hit a record $55.67 a barrel late last year and prices remain close to $50 a barrel. In later comments to Reuters, Soros said the U.S. current account deficit could be financed at the current level of the dollar. 'There are willing holders of the dollar. There are the Asian countries that are happy to accumulate dollar balances in order to have an export surplus and a market for their dollars,' he said. Soros would not make detailed comments on why long-term borrowing costs in the USA have fallen in the face of short-term interest rate increases, a development U.S. Federal Reserve Chairman Alan Greenspan said on Wednesday he found difficult to explain. 'A flattening of the yield curve is usually an indication of a slowing economy, but here I don't know,' Soros said. The Hungarian-born financier, a critic of U.S. involvement in Iraq, said he is considering backing an Arab foundation to promote the ideals of civil and open societies in the Middle East.

Subject: China no like Soros
From: johnny5
To: Pete Weis
Date Posted: Tues, Feb 22, 2005 at 15:42:18 (EST)
Email Address: johnny5@yahoo.com

Message:
I think the chinese might be thinking the only thing that saved them in the past was not having people like Soros speculate in their currency - why give him the chance now?

Subject: Confidence, the J(LO)-Curve(s), and ...
From: Pancho Villa
To: All
Date Posted: Mon, Feb 21, 2005 at 20:23:29 (EST)
Email Address: nma@hotmail.com

Message:
EXCHANGE RATE POLICY The J-Curve, the Fire Sale, and the Hard Landing By Paul Krugman II. Confidence, the J-Curve, and the Exchange Rate Suppose that international investors were suddenly to lose confidence in the US. What it means to “lose confidence” is a slightly problematic issue; perhaps investors start to demand a risk premium on US assets, perhaps the revise downward their views about the long-run equilibrium real exchange rate, or perhaps they start to have a “peso problem,” viewing a catastrophic fall in the dollar as a possibility though not probability. Whatever the precise nature of the loss of confidence, the important point is that we suppose that investors become unwilling to hold claims on the US at their current rates of return. What happens next? Investors cannot simply pull their money out of the US, since there would be nobody on the other side of the transaction. When everybody wants to sell, the result is not a lot of sales but a fall in the price. The immediate result of a loss of confidence in the US, then, is not a sudden flight of capital but a sudden fall in the dollar. The textbook view of what happens next is that the fall in the dollar leads to a reduction in the US CA-deficit. This deficit reduction has its counterpart a decline in the rate of capital inflow, so this is the channel through which a decline in confidence leads to a cutoff of capital flows. The move toward CA-balance also reduces the supply of savings domestically, driving up the interest rate; equilibrium is reached when the interest rate is driven up sufficiently to make investors willing to hold US assets again. This textbook view is consistent, and correct as a description of the medium run. As a short-run story, however, it overlooks a crucial point: the sluggishness with which the trade balance responds to the exchange rate. As a recent experience has confirmed, the response of trade flows to the exchange rate takes years, both because consumers are slow to change habits and, even more important, because many changes in supply and sourcing require long-term investment decisions. As a result o this sluggishness, a fall in the dollar does not lead to any immediate reduction of the US trade deficit, and indeed probably leads to a temporary rise in that deficit. Since the rate of capital inflow is by definition equal to the CA-deficit., we have a paradoxical result: capital markets cannot determine the rate of capital inflow. All they can do is determine the value of the dollar, which itself can influence the rate of capital flow only with a long (very long?) lag. This may at first sight appear to leave the dollar with no bottom. As the dollar drops, however, it falls relative to its expected long-run level, and thus offers foreign investors a higher expected rate of return. At some point this will be enough to induce these investors to hold on to US assets. And since the CA-deficit remains, foreign investors will actually continue to put funds into the US; indeed, thanks to the J-curve they (under normal circumstances) may be putting capital in at a greater rate than before. Only over time does a textbook answer emerge, as a weak dollar gradually reduces the trade deficit. Eventually the result is a smaller external deficit on one side, and a rise in interest rates on the other. But this result takes time, and meanwhile foreigners continue to finance the deficit. In this not entirely hypothetical story, we see some aspects of the US story of the past few years emerge. The loss of confidence by foreigners is initially reflected in a decline in the currency, not in a decline in the rate of capital inflow; someone who looked only at the CA financing would conclude that foreigners were as willing to invest here as ever. What attracts the foreigners is precisely the fire sale of US assets: the fall in the dollar makes the assets cheap, thus presenting foreigners with a higher expected rate of return. This fire sale is not, however, a windfall presented to foreigners by a arbitrary decline in the dollar; both the decline in the dollar and the fire sale result from the unwillingness of foreigners to keep investing in the US, which requires that they be offered a higher expected rate of return. Finally, notice that a hard landing – a financial squeeze brought about by a cutoff of foreign financing – does occur in this story, but not immediately. Because the loss of confidence by foreign investors cannot immediately show up in a reduce capital inflow, the hard landing takes time to develop. It would clearly be a mistake, however, to look at the absence of financial strain in the immediate aftermath of dollar decline and conclude that there will never be a financial problem.

Subject: Where and When
From: Emma
To: Pancho Villa
Date Posted: Tues, Feb 22, 2005 at 08:25:57 (EST)
Email Address: Not Provided

Message:
Pancho Villa, Where is this fine article from and whenwas it written? Thank you for the reference.

Subject: Re: Where and When
From: Pancho Villa alias Gringo
To: Emma
Date Posted: Tues, Feb 22, 2005 at 09:21:18 (EST)
Email Address: nma@hotmail.com

Message:
Dear Emma here are the references: The J-Curve, the Fire Sale, and the Hard Landing (in Exchange Rate Policy) Paul Krugman The American Economic Review, 79 (2), Papers and Proceedings of the Hundred and First Annual Meeting of the American Economic Association, May 1989, pp. 31–35. http://math.stanford.edu/~lekheng/krugman/

Subject: Re: Where and When
From: johnny5
To: Pancho Villa alias Gringo
Date Posted: Tues, Feb 22, 2005 at 09:44:38 (EST)
Email Address: johnny5@yahoo.com

Message:
So where does Paul say we should invest? The assets like gold and housing have already had significant increases. China is going to contract. Oil is going to fall to 25 a barrel. The dollar is going to have a hard fall. Do we short the dollar like Mr. Gates? Isn't that unamerican - I don't think raymond james offers my uncle a way to short markets - they must think things are always going to only head in one direction.

Subject: China Credit crunch coming?
From: johnny5
To: All
Date Posted: Mon, Feb 21, 2005 at 19:36:48 (EST)
Email Address: johnny5@yahoo.com

Message:
Hoye said in the late 1890's the usa was subject to available credit from london, and that today china would follow that model and be vulnerable to available credit from today's financial capital. http://www.bizjournals.com/houston/stories/2005/02/21/newscolumn1.html Stratfor's scenario: Economic woes in China will deflate oil prices Monica Perin Houston Business Journal An Austin-based intelligence research firm with a strong reputation for on-target forecasts sees the world price of oil will dropping to under $30 a barrel later this year. The price decline will coincide with economic collapse in China, according to Strategic Forecasting Inc., referred to in the information industry as 'Stratfor.' The private company defies the traditional 'liberal' and 'conservative' think-tank labels by using 'zero-based' analytical methodology. A partial client list of government, corporate and private entities includes the U.S. Navy, the U.S. International Trade Commission, the U.S. House of Representatives, Halliburton, UBS Financial Services Group, the World Bank and the United Nations. 'Geopolitical assessment is what we do,' says Peter Zeihan, a Stratfor economics analyst. 'We look for geopolitical drivers,' he explains. Current signs all point toward the China scenario, he says. 'We see China's economic model -- which is a variation of the Asian model that failed in 1989 in Japan, and again in 1997 across the Asian Rim -- coming to a head in the latter half of this year.' The root of the problem, Zeihan says, is that in China and other countries with state-controlled companies, money is lent to these monopolies regardless of their profitability or quality of asset management. 'The only way they survive is with an ongoing supply of cheap capital in large amounts,' he says. But in China today, anywhere from 14 percent to 40 percent of the country's Gross Domestic Product is 'locked up in bad loans,' Zeihan says. By comparison, the savings and loan debacle that hit the United States in the 1980s cost the country about 3 percent of GDP over a period of several years, Zeihan says. And the United States 'recognized the problem early on and dealt with it.' But China, Zeihan says, has 'made this a way of life.' China owes creditors far more than the country's entire foreign currency reserves and doesn't have the capability to pay down debt. So when the cost of capital credit goes up -- which is already happening with the Federal Reserve's raise in interest rates -- it will force a credit crunch that will, in turn, raise the cost of the loans for China, Zeihan says. Such an economic disaster would lead to a steep drop in demand in a country with a voracious appetite for oil and gas. China's cutback in consumption would put downward pressure on the price of oil -- repeating a scenario that also took place in 1997-98 during the last Asian economic crisis. But this time Zeihan thinks the price of oil will still stay well above $25 a barrel. At that level 'Texas producers will still do well, although they won't have the kind of year they had in 2004,' Zeihan says. Anticipated lower oil prices are factored into another Stratfor forecast for 2005 -- a strengthening U.S. economy. Again, the Asian financial crisis of 1997-98 is instructive. 'When everyone realized that Asia was going down, the foreign money all came here to the U.S. as a safe haven,' Zeihan explains. 'We see the U.S. as the No. 1 destination for foreign investment by the end of the year.' In conjunction with that forecast is this week's pronouncement by the Russian Ministry of Natural Resources banning all foreign-owned companies from bidding on Russia's licenses to produce that country's huge oil and gas reserves. The new ruling could have a significant impact on major producers such as ExxonMobil, ChevronTexaco, Shell and ConocoPhillips. All have operations in Russia and will not be able to bid on new or expanded projects if they have stakes greater than 50 percent. 'Russia is a dead letter for foreign investment in 2005,' Zeihan says. The country that stands to lose the most in a Chinese economic collapse could be Venezuela. President Hugo Chavez has decided to cut off U.S. access to Venezuelan oil, which currently accounts for 15 percent of U.S. oil imports. In addition to denying renewal of contracts with U.S. producers, Zeihan says, Chavez has 'made a strategic decision to sell' Citgo Petroleum Corp., the Houston-based oil refiner owned by Venezuela's state oil company, PDVSA. To replace U.S. producers, Chavez recently signed a raft of oil and other trade agreements with China and is courting Russia. 'The time of Venezuelan crude in the U.S. is at an end,' Zeihan predicts. But Chavez's strategy 'will hurt Venezuela more than the U.S.,' he says. 'Chavez has bet the farm on China, and when China's crunch comes, Venezuela will be left out in the cold.' Who has international investments in Venezuela?

Subject: On Hedge Fund Management
From: Terri
To: All
Date Posted: Mon, Feb 21, 2005 at 18:08:33 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2004/12/09/business/09scene.html?ei=1&en=0ec382040be1c14d&ex=1110026994&pagewanted=all&position= Hedge Funds Better at Managing Data Than Managing Money By ALAN B. KRUEGER HEDGE funds have grown at supersonic speed. In 1990, about $50 billion was invested in hedge funds; today, the amount is estimated at $1 trillion. Does superior performance explain the rapid growth? No, says Burton G. Malkiel, a professor of economics at Princeton University, and Atanu Saha, a managing principal at the Analysis Group, a consulting firm. The researchers recently completed a study that challenges the often-made claim that hedge funds, in general, produce lofty returns. Hedge funds are a diverse set of investment funds that typically cater to wealthy clients and institutions. The funds pursue various strategies, like holding both long and short positions, and often employ substantial leverage. Their fees are usually much higher than those charged by mutual funds or other financial assets. Data on the performance of hedge funds comes from indexes like the CSFB/Tremont Index or the Van Hedge Fund Index. Those indexes are generated by companies that advise investors and operate funds. 'Hedge funds in aggregate,' Van Hedge Fund Advisors boasts on its Web site, 'in most multiyear periods, have provided both superior returns and lower statistical risk than the S.& P. 500 or mutual funds.' The catch, according to Professor Malkiel, is that the information on performance is voluntarily provided to the organizations who track the funds. Because a good record helps attract investors, funds have a tendency to start reporting results only after they have achieved some success. Funds that are losers right out of the gate may never be represented in the database. Furthermore, when funds start reporting, they have the option of 'backfilling' their data, or providing information on returns for previous months. If a fund was successful in preceding months, it has an incentive to backfill its data to increase its attractiveness to investors. This process creates a 'backfill bias,' because better results are overrepresented in the database. It is as if the Boston Red Sox waited until 2004 to report their World Series success, while the Yankees started in 1923; both franchises would look like smashing successes. By analyzing statistics from TASS Research, which is owned by Tremont Capital and has perhaps the most comprehensive data on returns, Mr. Malkiel and Mr. Saha have shown that the backfill bias is substantial. The returns that were backfilled for a given year were 5.8 percentage points higher than the returns of other funds whose results were contemporaneously reported for that year. 'I think there are a lot of people in the financial community who have a vested interest in showing only those pieces of data that help them sell products,' said Professor Malkiel, who is also a director for the Vanguard Group. Another problem he noted, called survivor bias, is a tendency for funds to stop reporting their monthly returns when they suffer losses and are on the verge of closing. Long-Term Capital Management, for example, did not report its losses to any of the database services from October 1997 to October 1998, a period when it lost 92 percent of its capital. (Long-Term Capital never reported to the TASS database.) Looking only at the past returns of hedge funds that are in existence today - that is, the surviving funds - it does appear as if hedge funds do produce generous returns. But this is tantamount to judging the success of a war by ignoring all the casualties. Mr. Malkiel and Mr. Saha have found that the funds that cease reporting their data, so-called dead funds, tend to have weak returns in the months before they cease reporting. The average annual return for dead funds was 7.4 percentage points less than that of surviving funds for the same years. And hedge funds have a tendency to die - more than 10 percent stop reporting to the database each year. Although it is possible that some of these funds withdrew because they were so successful that they no longer desired further investors, the researchers found that smaller and underperforming funds were the most likely to cease reporting - not a profile of successful funds that were turning away business. Using data from 1996 to 2003, Mr. Malkiel and Mr. Saha found that correcting for backfill and survivor biases reduced the average annual return on hedge funds, after deducting fees, from 13.5 percent to, at most, 9.7 percent, which is almost three percentage points less than the return on the Standard & Poor's 500-stock index for that time period. The lower return could be justified if hedge funds helped to diversify portfolios by providing an investment that did not move in lock step with other investments, and the researchers did find that hedge funds do not move closely with the stock market over time. Yet they also found that choosing a particular hedge fund entailed considerable risk because the funds exhibited enormous variability in performance in any given year. The best funds perform extraordinarily well, but the worst ones perform extremely poorly, with the spread between the best and worst greatly exceeding the spread between the best and worst equity or bond funds in a typical year. 'Clearly, there is a risk in investing in hedge funds that is far greater than the risk of investing in the other asset classes,' the researchers said. Even the so-called fund of funds hedge funds, which try to diversify risks by investing in other hedge funds, display nearly as much variability in performance across funds in a given year as is exhibited across the entire universe of mutual funds. Moreover, from 1995 to 2003, the average fund of funds yielded only a 7 percent annual rate of return after deducting fees, well below that of the average mutual fund. Picking a good fund is also dicey because there is little persistence in performance from one year to the next. The chance that a hedge fund that performed in the top half of the universe of funds in one year would do so again the following year is no better than 50-50, which raises the question of how the funds can command such high fees. Most hedge funds will be required to register and provide data to the Securities and Exchange Commission beginning in February 2006. While some people have argued that the S.E.C. already has too much to do, it would seem that collecting and disclosing information on performance is a small burden for the commission, and a great potential benefit to investors. 'As a free market person, I think markets work better when there is fuller and more accurate information,' Mr. Malkiel said. Alan B. Krueger is the Bendheim professor of economics and public affairs at Princeton University. E-mail: akrueger@princeton .edu.

Subject: lawyers derivatives = FUN
From: johnny5
To: All
Date Posted: Mon, Feb 21, 2005 at 17:58:06 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.reuters.com/newsArticle.jhtml;jsessionid=S5ZHO520V20SWCRBAEZSFFA?type=topNews&storyID=7689767 By David Wigan LONDON, Feb 21 (Reuters) - A decline in credit markets could prompt a wave of lawsuits against investment banks, as investors ratchet up losses on risky credit derivatives, lawyers said on Monday. The warnings come after Barclays Capital (BARC.L: Quote, Profile, Research) last week settled a claim by Germany's HSH Nordbank over a $151 million CDO, while Italy's Banca Popolare di Intra (PINI.MI: Quote, Profile, Research) sued Bank of America Corp. (BAC.N: Quote, Profile, Research) for selling credit-linked notes at what it called an 'excessive price with respect to their risk level'. Low volatility in the past two years has encouraged investors into highly-leveraged investments such as collateralised debt obligations (CDOs). But many do not understand the pitfalls, say lawyers, and will blame their bankers should the bets go wrong. 'Spread reversal will produce large losses which inevitably will lead to lawsuits,' said Claude Brown, a partner in the CDO group at Clifford Chance. 'The value of these transactions means many will regard litigation as a tool in the negotiation toolbox.' European and U.S. credit spreads are hovering near record tight levels after a sustained period of low interest rates and stable ratings. With global growth slowing, however, and interest rates predicted to rise, spreads could widen in coming months, analysts say. Collateralised debt obligations are structured assets that can be divided into tranches. Returns are higher than on single-name investments but lose more when spreads widen or underlying credits default. Further, says Brown, their complexity makes them fertile grounds for legal machinations. 'Litigants will argue either they were sold something they didn't want, were sold a toxic product or were exposed to some risk that was hidden from them,' he said. Already many cases are thought to have been settled out of court. Those reported include the European Bank for Reconstruction and Development settling a claim against Barclays, while Prudential Bach last year paid out on an unspecified $40 million claim for misselling. 'The vast majority of cases are dealt with without ever reaching court,' said Simon Hart, a solicitor at Richards Butler. 'The volume of disputes is impossible to estimate but where complex products are developing quickly there is always scope for litigation.' Among innovations heavily marketed this year are CDO squared - or CDOs of CDOs - and options on credit default swaps. The credit derivatives market reached $5 trillion at the end of 2004 and is expected by the British Bankers Association to hit $8 trillion by December 2006. REGULATOR CONCERN Such is the level of concern among regulators that the Bank for International Settlements last month warned investors to beware credit ratings on structured products. 'Market participants, in using ratings, need to be aware of their limitations,' the BIS said. 'The one-dimensional nature of credit ratings ... is not an adequate (matrix) to gauge the riskiness of these instruments.' The main concern for investors, however, is not inaccurate ratings but ratings volatility. The cases currently making the headlines had their origins in structures made before the economic downturn in 2001 and 2002, which saw many companies lose their investment grade status. The CDOs owned by HSH, for example, had initial ratings of AAA to BBB, but subsequently dropped by at least 11 levels to as low as CC as credit quality worsened. Still, Moody's Investors Service, while recognising that deals are becoming more complex, said in January it expects greater stability in 2005 in terms of rating migration, with an increase in the number of deals upgraded. 'The obvious ingredients for improved credit exposure in existing deals are already present, including older deals with reduced average lives and the relatively healthy underlying corporate markets,' said Moody's vice-president Katherine Frey. Meanwhile, bankers have mixed views on the question of responsibility, with some focusing on the need for investor education and others reluctant to shoulder the blame for potential losses. 'You are getting paid a lot more on these products so if you think there is no risk you are stupid,' said the head of derivative research at a major U.S. bank. 'If you are in charge of investing billions of dollars of other people's money you shouldn't turn round and say you didn't understand what you were getting into.'

Subject: We now invest in a very different...
From: Pete Weis
To: All
Date Posted: Mon, Feb 21, 2005 at 17:39:34 (EST)
Email Address: Not Provided

Message:
time than that of our past. Investment strategies (such as index investing) which worked well in our previous life's experience may not work well in the coming decade. Views from the 2004 AIMR Conference William Hester, CFA March 2004 In February some of the most respected academics and practitioners in the investment management business met in New York City to discuss the industry's future. The message of the conference: times have changed. As an attendee, it felt like an emergency meeting on the deck of a ship that was thrown off course by nasty weather. The storm began to brew last summer when investment consultant and historian Peter Bernstein wrote an article detailing the changes that can be expected in the field of money management 1 . There are few people in the business as respected as Mr. Bernstein, who is the founding editor of the Journal of Portfolio Management and the author of several books including Against the Gods: The Remarkable Story of Risk . His words were a jolt to an industry that had become comfortable with its own dogma. Things are different this time, says Mr. Bernstein. The mental models and industry standards that were created during the great bull market are outdated and will be ineffective for the type of asset returns of the next decade or so. “What we have been doing has begun to outlive its usefulness; the world in which we invest today bears too little resemblance to the world of yesterday.” In the original article Mr. Bernstein focused on four areas where he expects to see substantial change: indexing, benchmarking, long only equity management, and soft dollar research. At the conference in February he expanded and defended these ideas. He also discussed how the demands of mutual fund shareholders could be creating inefficiencies in the market. Here are some of his thoughts both from the original article and his discussion at the conference. Indexing Indexing will lose its luster, says Mr. Bernstein. The power of equity indexing is broad diversification at a low cost. But the dynamic US economy undermines both attributes. In 2000 there were 57 additions to the S&P 500 index, the most heavily indexed benchmark. Harley Davidson replaced Fleetwood Enterprises, Starbucks stepped in for Shared Medical Systems, and JDS Uniphase took the place of Rite Aid. Even since the market's peak, 23 changes a year have been made, according to Bloomberg data. “New companies come along all the time to threaten and then overthrow the dominance of older companies. Creative destruction is our trademark,” says Mr. Bernstein. Since the pace of technological advancement continues unabated, he thinks turnover will likely remain high. He also points out that many of the most popular benchmarks are weighted by market value. This makes them top-heavy and strains the benefits of diversification. For example, the 10 largest companies in the S&P 500 index – only 2 percent of the total number – account for about 20 percent of its market value. The top 25 companies account for 35 percent of its value. This concentration can increase the volatility of the index, as was seen at the peak of the bubble. Even though the larger indexes, such as the Wilshire 5000 Index and the Russell indexes, are spread out over more stocks, the largest companies affect the behavior of those benchmarks as well. These indexes have their own problems, too. “Strictly speaking, they are not investable pools of securities; they are floating crap games because their membership is much more fluid than even the membership of the S&P 500”. So funds that attempt to index these benchmarks are saddled with the costs of frequent rebalancing. Mr. Bernstein also pointed out that in the world of double-digit returns, beating the market was nice, but not mandatory to meet investment objectives. When investors begin to compare their expected future liabilities with the returns they can realistically earn on their assets, active investing may become “more attractive, even essential.”

Subject: Re: We now invest in a very different...
From: johnny5
To: Pete Weis
Date Posted: Tues, Feb 22, 2005 at 09:47:47 (EST)
Email Address: johnny5@yahoo.com

Message:
long only equity management, Right, markets move in 2 directions - but raymond james seems to think they will always go one way - there is no way to short anything in thier investment philosophy from what I can tell. Over the 200 year history of the US stock market - have the majority of firms went up or went down? Haven't a lot went both ways?

Subject: Are Hedge Funds the Answer?
From: Terri
To: Pete Weis
Date Posted: Mon, Feb 21, 2005 at 18:06:59 (EST)
Email Address: Not Provided

Message:
The gist of Peter Bernstein's discussion was that we would be better off with hedge funds than mutual funds, and especially index funds. There is no reason to believe this yet. I will post an article by Alan Krueger of Princeton on the issue.

Subject: Re: Are Hedge Funds the Answer?
From: johnny5
To: Terri
Date Posted: Tues, Feb 22, 2005 at 13:44:21 (EST)
Email Address: johnny5@yahoo.com

Message:
Mr. Bogle speaks again: http://www.investorscoalition.com/BogleJune18testimony.pdf Shareholder Returns vs. Stock Market Returns: During the past 20 years, the U.S. stock market has earned a return of 13% per year, while the average mutual fund investor has earned a return of approximately 2% per year. An initial investment of $10,000 in the stock market, then, would have earned a profit of $105,000, while the average fund owner would have earned a profit of just $5,000. Is that a scandal, or is it not?

Subject: Re: Are Hedge Funds the Answer?
From: Pete Weis
To: Terri
Date Posted: Mon, Feb 21, 2005 at 22:25:55 (EST)
Email Address: Not Provided

Message:
Terri. I don't know that hedgefunds are the answer. I just know that broad market index funds carry more risk against expected return than I'm willing to accept. I see all investments which are vulnerable to a fall in the dollar as risky. I see all investments which are least vulnerable to a fall in the dollar and which are the most conservative as probably the most prudent for the vast majority us at this time. It won't always be this way - but I think we need to wait for the 'equilibrium' which Pancho Villa points to in his post regarding the Paul Krugman piece above - and as Paul Krugman seems to be saying - equilibrium could be a long ways off. At this time its all about safety and preserving capital.

Subject: Alternate Indexes
From: Terri
To: Terri
Date Posted: Mon, Feb 21, 2005 at 18:27:54 (EST)
Email Address: Not Provided

Message:
Turnover of the Vanguard S&P Index in the last 12 months was 4%. Vanguard Large cap Index had a turnover of 2%. The top 10 companies in the indexes make up about 20% of the portfolio, since the indexes are weighted by size. The Dow however is price weighted. Value Line simply gives equal weight to companies.

Subject: Turnover TOO HIGH
From: johnny5
To: Terri
Date Posted: Tues, Feb 22, 2005 at 13:51:39 (EST)
Email Address: johnny5@yahoo.com

Message:
Bogle has many negative things to say about turnover Terri This is from testimony given to congress during the recent mutual fund hearings. http://www.investorscoalition.com/boglefeb26testimony.pdf 4. Turnover Goes Through the Roof Together, the coming of more aggressive funds, the burgeoning emphasis on short-term performance, and the move from investment committees to portfolio managers had a profound impact on mutual fund investment strategies—most obviously in soaring portfolio turnover. At M.I.T. and the other funds described in that Fortune article, they didn’t even talk about long-term investing. They just did it, simply because that’s what trusteeship is all about. But over the next half-century that basic tenet was turned on its head, and short-term speculation became the order of the day. Not that the long-term focus didn’t resist change. Indeed, between 1950 and 1965, it was a rare year when fund portfolio turnover much exceeded 16%, meaning that the average fund held its average stock for an average of about six years. In the Go-Go era, that figure nearly tripled, to 48% (a two-year holding period), only to fall back to an average of 37% (a three-year holding period) after the 1973-74 market crash. But that was just the beginning. With the elimination of fixed commissions on stocks in 1975 and the later burgeoning of electronic trading networks, the unit costs of buying and selling plunged. Turnover rose accordingly, averaging about 80% from the early 1980s through 1999. And it’s risen even further since then, with fund managers turning their portfolios over at an astonishing average annual rate of 110%(!). Result: Compared to that earlier six-year standard that prevailed for so long, the average stock is now held for just eleven months. The contrast is stunning. At 16% turnover, a $1 billion fund sells $160 million of stocks in a given year and then reinvests the $160 million in other stocks, $320 million in all. At 110%, a $1 billion fund sells and then buys a total of $2.2 billion of stocks each year—nearly seven times as much. Even with lower unit transaction costs, it’s hard to imagine that such turnover levels aren’t a major drain on shareholder assets. When I say that this industry has moved from investment to speculation, I do not use the word speculation lightly. Indeed, in my thesis I used Lord Keynes’ terminology, contrasting speculation (“forecasting the psychology of the market”) with enterprise (“forecasting the prospective yield of an asset”). I concluded that as funds grew they would move away from speculation and toward enterprise (which I called “investment”), focusing, not on the price of the share but on the value of the corporation. As a result, I concluded, fund managers would supply the stock market “with a demand for securities that is steady, sophisticated, enlightened, and analytic.” I was dead wrong. Mutual fund managers are no longer stock owners. They are stock traders, as far away as we can possibly be from investing for investment icon Warren Buffett’s favorite holding period: Forever

Subject: Re: Alternate Indexes
From: Terri
To: Terri
Date Posted: Mon, Feb 21, 2005 at 18:36:37 (EST)
Email Address: Not Provided

Message:
Peter Bernstein is telling us the investing world has changed, but why? Why should I leave indexing which has been a successful strategy for decades? Why should I believe markets are suddenly inefficient and so easily beaten by many managers? I want more evidence and argument. Also, the Value Line Fund has badly trailed the S&P over 10 years. Why should this be if the Value Line Indexes and system are so efficient?

Subject: Shell had the BEST system EVER!
From: johnny5
To: All
Date Posted: Mon, Feb 21, 2005 at 17:18:11 (EST)
Email Address: johnny5@yahoo.com

Message:
BWAHAHA! This would be funny if so many REAL people weren't hurt! How did they MISS it? Why did people lose jobs? They had the best system in the WORLD?? http://www.spgshop.com/product.asp?0=264&1=265&3=400 What calculation method is your performance attribution system based on? The authors say it's most likely one developed by Brinson and Fachler, Allen, or Karnosky and Singer. However, these methods aren't always the best choice, say the authors, because they 'do not follow the investment decision process exactly.' As you might suspect, they have their own model to offer--The Investment Decision Process Model. The Investment Decision Process Model http://www.ortec.com/us/case_shell.php In 1993, the management company of the Shell Pension Fund in the Netherlands evaluated different options for a performance measurement system. However, given the firm's profound internal investment and performance measurement knowledge and consequent information needs, none of the available products met its requirements. Therefore, Shell turned to ORTEC, a leading provider of optimization and decision support solutions and services, to match Shell's visionary views on performance evaluation with ORTEC's unique modeling expertise. As Shell's Finance Manager, Paul Gerla stated: 'In ORTEC we found the partner to really put our concepts of decision based performance evaluation to work'. In turn, the firms worked closely together for years to develop a model that would exactly track Shell's investment process. The result is the revolutionary PEARL solution. Traditionally, measuring performance had been about portfolios or composites and attributing performance to arguable market factors. From this time on, the challenge was increased to comprehensively decompose excess returns into sources that really mattered for Shell. As with every investment decision process that is more complex than just security selection, Shell's decisions were interrelated in a hierarchical manner. Furthermore, all decisions were expected to adhere to certain guidelines and should be measured against global risk and performance benchmarks provided by the plan sponsor. The (long-term) liabilities formed the ultimate benchmark and had to be outperformed by the aggregated returns of all isolated investment decisions, while also maintaining control of the individual and overall risk; daily challenges for every asset manager. Decision Based Performance Evaluation Based on the concepts that were researched in the 80's and 90's by experts including Brinson & al. and Karnosky & Singer, PEARL took performance measurement to the next level with the unprecedented Investment Decision Process Model (IDP). This model transferred arbitrary measurement factors into decision-based performance evaluation by stacking strategic, tactical and operational decisions according to Shell's true investment process. With the IDP, ORTEC was in a position to mimic Shell's daily operations, thereby enabling Shell to really evaluate its entire organization and at the same time measure the added value of every decision taken. Prior to PEARL, linking performance attribution up to an entire investment process was unheard of, measuring the value added of each and every decision, and relating it to exposures and risks. A unique system was born, but the market did not yet fully understand the new concepts. New ideas about increased flexibility and faster implementation of other investment processes for helping this education process, led to a complete revision of the system. The new PEARL system was recently completed for Shell, with perfect timing for current market needs. Equipped with the newest version of the IDP model, PEARL is now optimally prepared to make the difference in a new era of performance measurement. Needless to say - Paul Gerla no longer works at Shell but still doing portfolio management. http://www.kempen.nl/home/kco/pers/Media/2004/20041018_Focus_Kempen_ligt_op_midcaps.asp?ComponentID=18653&SourcePageID=18659 Paul Gerla (ex-Shell Finance in Azi?wordt director give control portfolio management

Subject: Risk not important?? Huh?
From: johnny5
To: All
Date Posted: Mon, Feb 21, 2005 at 16:22:50 (EST)
Email Address: johnny5@yahoo.com

Message:
I appeal to the more cerebral out there but if just using the Brinson Model don't you lose the ability to calculate for currency affects which Pete says we need to be very FOCUSED on for the future. Could it be that only 17% of firms are using the BHB model because they are shifting out of USA centric investment views and 36% are using the brinson-fachler model because they foresee problems in the USA and want to diversify away from this nation? Why isn't raymond james using karnosky-singer to analyze with currency effects? I am so confused. 2 G. Brinson, N. Fachler, “Measuring non-US Equity Portfolio Performance”, Journal of Portfolio Management, Spring 1985 This is to say nothing about a lot of firms that don't even use proper risk analysis and can't afford the IT systems or spend the time to do the work? Huh? They use equity models for fixed income investments? Huh? http://www.pwcglobal.com/ch/ger/ins-sol/publ/bank/download/pwc_spps_survey_03e.pdf Similar to the 2001 results, the majority of respondents use external vendor systems for performance attribution analysis. The following systems were most frequently named: Factset, FMC Sylvan, Russell/Mellon and Triple A. Quite a large share of respondents work with internally developed applications, which may be due to special needs that external systems do not provide and to cost-benefit considerations. When choosing an attribution model, firms should obviously select one which best represents their investment decision process. However, the choice is very often influenced by limitations of the IT systems and complexity of models. The majority of respondents (62%) apply the Brinson model, which exists in various variations (e.g. the Brinson-Hood-Beebower model1, the Brinson-Fachler model2). The wide popularity of these models can be explained by the fact that they are intuitively straight-forward and feasible to apply (even in spreadsheets). Although designed for equity attribution analysis, the Brinson model is in practice sometimes also applied for fixed income portfolios. Further considering the equity attribution, some respondents (14%) also apply the Karnosky-Singer approach3, which in addition to the Brinson model specifically accounts for the currency effects and thus, is used for globally invested portfolios. Specific fixed income attribution models appear to be less spread than those for equity portfolios. The results show that the following approaches for attribution of fixed income portfolios are mostly applied: 1 G. Brinson, L. Hood, G. Beebower, “Determinants of Portfolio Performance”, Financial Analysts Journal, July-August 1986 2 G. Brinson, N. Fachler, “Measuring non-US Equity Portfolio Performance”, Journal of Portfolio Management, Spring 1985 3 D. Karnosky, B. Singer, „Global Asset Management and Performance Attribution“, the Research Foundation of the Institute of Chartered Financial Analysts, 1994 4 see P. Dietz, H. Fogler, D. Hardy, “The Challenge of Analyzing Bond Portfolio Returns”, Journal of Portfolio Management, Attribution effects calculated for subperiods (e.g. months) need to be linked to present results for longer periods (e.g. years). Doing this, one would expect that the sum of the linked attribution effects equals the sum of the linked excess returns. However, if excess returns are derived in the arithmetic way (see the previous question), regardless how linking is performed (arithmetically or geometrically), the expected equation will not work. There are various methodologies available to “smooth” or adjust the linking process to overcome the above problem.The survey results show that the overwhelming majority of respondents do not employ any additional adjustment algorithms to the linking process. The reason for that could be that most linking adjustment methods are quite complex and need to be supported in IT systems, i.e. firms are dependent on their IT providers in this respect. 57. Do you perform risk attribution analysis? Risk attribution identifies the sources of a portfolio’s risks, both ex-post (historic) and ex-ante (predicted), both in the absolute terms and relative to the selected benchmark. Risk attribution helps to evaluate how various factors (e.g. industry, value, growth, etc.) affect a portfolio’s risk. Risk attribution often implies applying standard risk statistics (e.g. volatility, tracking error, Value-at-Risk, etc.) to the excess returns against a benchmark attributed to each investment decision.Risk attribution appears to enjoy a much lower grade of acceptance among the Swiss investment managers than return attribution (only 9% of respondents do not intend to implement performance attribution, but the whole 35% do not plan to implement risk attribution). The reasons for that are provided in the following question. 58. Why do you not produce/plan to produce risk attribution? Similar to the analogous question on performance attribution, the respondents named costs and quantity of work as the main reason for their reluctance to introduce risk attribution analysis. In addition, quite a few respondents also think that risk attribution is not important. The majority of respondents use external vendor systems for performance attribution analysis. However, quite a large share of respondents work with internally developed applications, which may be due to special needs that external systems do not provide and to cost-benefit considerations.The following external vendor systems were most frequently named: Barra (57%) Wilshire (29%) Performance contribution is basically a process of determination how individual securities or other portfolio components have contributed to the overall portfolio return. In Switzerland performance contribution is often a part of the standard client reporting. As the results show, the most popular is a contribution analysis on an asset-class and security level. So because of the quantity of work and the costs involved they are not doing risk analysis - it took my uncle 40 years of work to make 500K but they can't do the work to properly analyze his risk? They can't afford to buy the systems to do complex computing. My uncle is not gonna be happy about this.

Subject: Re: Risk not important?? Huh?
From: Institutional Investor
To: johnny5
Date Posted: Mon, Feb 21, 2005 at 20:42:59 (EST)
Email Address: Not Provided

Message:
I think you are a little confused with attribution reporting. For the most part it is used to explained past performance, not future returns. Attribution reports typically break down a portfolio and show how it performed against a benchmark on a sector and security level. One would be able to see if the under/out performance was attributable to picking good/bad stocks or just being in the right/wrong sector. This approach can be used for fixed income as well, althoughmodel designed for a fixed income portfolio will be more accurate. My feeling is that you believe its something else from your posts. As for using different models, its a matter of cost/benefit to the firm. Now new models may be more exact in terms of attributing performance to sectors, security selection, etc, but that is not to say older models are inaccurate. You also have to weigh how much value it is adding to a firm. It not like attribution reporting systems are cheap. ' don't see how he is going to make money long term and since they have him in 65% stocks - if things go bad - he will lose a lot.' When does he plan to retire, or is he already retired. If he isn't retiring for 10-15 years, I can't see him making much money in any other type of investment. Also, its hard to judge a person's allocation, without knowing what type of risk they are willing to take and what type of return the person needs to retire successfully. Its pretty easy to say a person is over/underweighted in a particular asset class, but unless you have specific details (which the financial planner most likely will have) in my opinion, its hard to give a qualified answer.

Subject: Costs matter and there are no gaurantees
From: johnny5
To: Institutional Investor
Date Posted: Mon, Feb 21, 2005 at 21:11:28 (EST)
Email Address: johnny5@yahoo.com

Message:
I am very confused II, thanks for taking the time to clear things up for me. I read how shell had this good model and they busted, and raymond james is telling my uncle this BHB model is how they make good investment decisions and this is why he needs to pay them 3% annual expenses and like you pointed out - it is NO GAURANTEE of tomorrows performance - only used to analyze a manager or an investment policy - but that is all hindsight. He is retired - he sold his business for 500K and will not be earning income from any work - only what he makes on his investments. At 3% they will get 15K a year out of him, but vanguard said for 500K they would only charge 4.5K. I don't know how to convince him that those costs will eat up his investment - he just doesn't believe internet companies like vanguard with cheap costs can compete with raymond james and thier annuities and plush offices and Safeguard 7 fees. I want to help the guy, he always took care of me at christmas - but I have regulated myself to the fact he is from a different 'era' and this new math doesn't register with him. Bogle and the telephone doesn't make sense to him, paying high fees but having a face to face person to talk too seems to make him 'feel' better.

Subject: Re: Risk not important?? Huh?
From: Institutional Investor
To: johnny5
Date Posted: Mon, Feb 21, 2005 at 17:29:58 (EST)
Email Address: Not Provided

Message:
johnny, I think you are misunderstanding the use of both attribution models. Its not a matter of investing in US vs Intl stocks. If currency effects are a concern, they would have shown up in the capital market assumptions when projecting future returns and volatility of each asset class. Side note: I have actually been to a couple of david spauldings seminars regarding attribution. If you have serious and specific concerns regarding the models, my guess is that there is a high probability that he would respond to you if you e-mailed. Or you just buy his book on performance measurement, which is the more or the less 'standard' for performance measurement.

Subject: Re: Risk not important?? Huh?
From: johnny5
To: Institutional Investor
Date Posted: Mon, Feb 21, 2005 at 17:49:27 (EST)
Email Address: johnny5@yahoo.com

Message:
I would not want to trouble him - Mr. Spaulding already commented that he doesn't know why the BHB model is down to only 17% use in responding firms and the BF model is up to 36% use in 2004 - if HE doesn't know - and he is one of the worlds experts - who can know? As my uncle is about to put 500K - the totality of his life's financial work into a company's annuity that uses a model that only 17% of firms are using as of 2004 - I worry. I am very thankful to you and the other members of this board for all your insight and to terri for pointing out bogle and vanguard - but even after telling my uncle about fees and expenses he still will not listen. I really don't want my uncle investing with this jackson national life/raymond james outfit - further reading of thier material I found out they are going to charge him a 'Safeguard 7' fee of .4% - this is on top of the 1.5% expense and 12b1 fees and 1.1% mortality risk fee - so he is up to 3% in fees - and using a BHB model that is on the decline and being used by less and less firms each year. I don't see how he is going to make money long term and since they have him in 65% stocks - if things go bad - he will lose a lot.

Subject: Linkage - attribution - whats the difference?
From: johnny5
To: johnny5
Date Posted: Mon, Feb 21, 2005 at 16:36:44 (EST)
Email Address: johnny5@yahoo.com

Message:
Are you kidding me? Is this a joke? I sit here listening to the last chapter of my I, Robot audiobook by Isaac Asimov thinking the machines have the economy covered - but the dumb managers are gumming it up!! http://www.spauldinggrp.com/Oct03Newsletter.pdf I recently learned a lesson (or, perhaps more correctly, was reminded of a lesson): don’t assume that the person who completes the RFP knows everything they’re talking about. This doesn’t mean “don’t trust what is said.” While I’m aware that some vendors resort to hyperbole when they respond to questions, I am referring to the accuracy of what is shared. We recently were engaged by a client to help them with a search for an attribution system. In our Attribution class, I mention how this type of a search is more complex because it requires you to give some thought to the model attributes [sorry about the pun]. But when you ask a question, such as “does your system support the Brinson-Fachler model,” you tend to expect the vendor to give you a correct answer. Well, this didn’t happen all the time. To this question, for example, one vendor responded “no.” Well, had they said “yes,” we might want to insure that they actually are able to support this model, but a response of “no” should require no validation. Well, this particular vendor did warrant such a check, as I was pretty sure that they did support this model. So, I reached out to someone other than the sales person (someone who actually works with the design of the system) to check, and I was told “That’s a funny response to the RFP question (indicating somebody here doesn’t know what Brinson Fachler is!). To answer your question: Yes, we do use Brinson-Fachler, with the interaction effect thrown into the stock selection.” We asked the vendors if they provide arithmetic (additive) or geometric (multiplicative) attribution. One firm responded “geometric.” Since I wasn’t that familiar with their system, I initially accepted this response. And, because I felt that our client would prefer arithmetic, was considering excluding them from further consideration. But, to make sure I sent an e-mail: “I want to confirm that you only provide a geometric approach, not arithmetic.” Their response to this question left it unclear, so to make sure we were talking apples-to-apples, I sent another e-mail, stating “A key difference between the two is how you view excess return; with arithmetic, it’s Rp-Rb (portfolio return minus benchmark return); w/geometric, it’s [(Rp 1)/(Rb 1)]-1,” and again asked “Does your system calculate the excess returns geometrically?” Now, we got to the truth: “Perhaps I confused the issue. I spoke with some colleagues to make sure I wasn’t mixing terms and I guess I was. One colleague, cleared things up a bit. The system name, like most of our wellknown domestic competitors, applies an Arithmetic method for calculating excess returns, based on the definition you provide. I used the term ‘geometric,’ perhaps confusingly, to describe how we link multiple period returns.” This individual, unfortunately, isn’t alone when it comes to confusing “geometric attribution” with “geometric linking.” However, we would generally expect the vendor to know the difference, wouldn’t we? There’s always the fear that a vendor will stretch the truth, exaggerate, or even use some hyperbole when they market their system. However, when a vendor provides erroneous information because of their own ignorance or lack of familiarity with either terminology or their systems, that complicates things in a whole different way. How can you guard against this? It’s difficult. Knowing when a vendor may be making a mistake (even unintentionally) is quite a challenge. I guess it reinforces the need to rely not just on the vendor responses, but also on your own familiarity with the product, as a result of input you get from others in the industry, conference exhibits, etc. If a response doesn’t jibe (i.e., agree) with your expectations, then confirmation is needed. http://www.imf.org/external/np/mae/ferm/2003/eng/part2a.pdf 439. Attribution analysis is performed by Axiom using its multi-factor model for each of the risk factors at the following levels: security, asset classes, countries, currencies, portfolio and composites. This model offers an attribution measurement that goes beyond the traditional approach33 since it allows an integrated analysis of return and risk factors which determines the efficiency of the overall investment strategy. 33 The Brinson-Fachler model measures attribution in terms of asset allocation, security selection and an interaction effect. It appears to me the people programming the machines are sometimes confused by terms like geometric or arithmetic - and that brinson alone does not take into account currency affects but this is all that is being used by several firms. Eternal vigilance my friends.

Subject: The Social Security Scam fine tuning
From: Saul Berger
To: All
Date Posted: Mon, Feb 21, 2005 at 14:35:38 (EST)
Email Address: sberger2@erols.com

Message:
Hi Paul, I read your review titled the Social Security Scam and appreciated the clarity of the discussion as well as the motives. As talking points in response to Bushes point in attempting to sell off Social Security to the private sector investment companies. It would be useful to: 1. Spell out the names of the wall street investment firms behind this lobbying effort 2. Compare the current cost to administer the Social Security program as compared to 401’s, England & Chile. 3. Spell out the rate of return a retiree receives on their investment. I understand you already made the point that Social Security and a 401 k are not comparable because Social Security should be considered as an insurance program, but defining the rate return underscores the efficient fiscal performance of Social Security. I look forward to your comments. Saul Berger Email: sberger2@erols.com

Subject: America's Senior Moment - Paul Krugman
From: Emma
To: All
Date Posted: Mon, Feb 21, 2005 at 14:06:16 (EST)
Email Address: Not Provided

Message:
March 10, 2005 America's Senior Moment By Paul Krugman - New York Review of Books The Coming Generational Storm: What You Need to Know About America's Economic Future by Laurence J. Kotlikoff and Scott Burns 1. Two Problems, Not One America in 2030 will be 'a country whose collective population is older than that in Florida today.' It will be in 'desperate trouble' because the expense of caring for all those old people will cause a fiscal crisis. The nation will be plagued by 'political instability, unemployment, labor strikes, high and rising crime rates.' That's the picture painted in The Coming Generational Storm by Laurence Kotlikoff and Scott Burns, a book that has helped to feed a rising tide of demographic alarm. But is that picture right? Yes and no. America does have an aging population, and a responsible government would take preparatory action while the baby boomers are still in the labor force. America also has very serious long-run fiscal problems. But these issues aren't nearly as closely linked as much of the discussion would lead you to believe. The view of demography as destiny is only a half-truth, and in some ways it's as damaging as a lie. In this essay I'll try to set the record straight. Unfortunately, I can't do that by following Kotlikoff and Burns closely. Kotlikoff is a fine economist, one of the world's leading experts on long-run fiscal issues. His book with Burns is full of valuable information and sharp insights. Yet in their effort to grab the lay reader's attention, Kotlikoff and Burns do little to alert readers to the distinction between two quite different issues—an aging population and rising spending on health care. And their failure to make that distinction grossly distorts their discussion. The demographic problem is, of course, real. It is, however, of manageable size—exaggerating the problem by confounding it with the problem of medical costs just gets in the way of dealing with it. The problem posed by rising medical costs, on the other hand, would be there even if the population weren't aging—and misrepresenting the problem as one of demography gets in the way of confronting it. I'll start here by looking at the demographic problem—the aging population—which mainly concerns Social Security, then at proposals for Social Security 'reform'—the scare quotes are there because the scheme currently under discussion would undermine our social insurance system, not save it. At the end I'll talk briefly about the much bigger, more intractable issue of paying for the expanding quality and quantity of health care, and the current state of political debate. 2. Social Security and the Demographic Challenge Chapter 1 of Kotlikoff and Burns's book is called 'From Strollers to Walkers'—a catchy way to describe the aging of the US population. It's followed with a chapter called 'Truth Is Worse Than Fiction,' centered on a chart familiar to everyone who has looked at this issue: long-run projections from the Congressional Budget Office showing the combined expense of Social Security, Medicare, and Medicaid rising from less than 8 percent of GDP now to more than 20 percent by 2075. It seems natural to assume that the grim cost projections follow directly from the aging of the population, and the book doesn't tell you that this assumption is wrong. One way to describe the truth is to say that there is no program called Socialsecuritymedicareandmedicaid: these are separate programs with separate problems. Look at the accompanying chart which shows the same CBO projection that Kotlikoff and Burns present, but breaks it down by program. Yes, the total rises drastically—but Social Security, although it is the biggest of the programs now and the only one of the three programs whose costs are driven mainly by demography, accounts for only a small part of that rise. That tells us that demography is not the main driver of these long-run projections. How big is the demographic challenge? Pundits who want to sound serious love to contrast Social Security as it was in 1950, when sixteen workers were paying in for every retiree drawing benefits, with Social Security as it will be once the baby boomers have retired, with only two workers per retiree. But most of the transition from sixteen to two happened a long time ago. Since the mid-1970s there have been about three workers per retiree —and Social Security has been running a surplus. The real issue is what happens when three goes to two. How big a problem is that? The answer is, medium-sized. As you can see in the chart, the aging of the population will cause Social Security spending to rise from its current level of 4.2 percent of GDP to a little over 6 percent by 2030, at which point it will stabilize. If demography were the only factor driving rising Medicare spending, it would rise in roughly the same proportion, from 2.7 to around 4 percent of GDP. So if demography were the whole story, we'd be looking at an eventual demography-driven rise in spending of between 3 and 3.5 percent of GDP by 2030, and no further increase after that. That's not a trivial increase, but it's also not overwhelming; a tax increase big enough to cover that rise in spending would still leave overall taxation in the United States well below the average for other advanced countries. Still, a responsible government would prepare for the aging of America. Textbook fiscal economics says that when a government knows that its expenses will rise in the future, it should start running a surplus now. At first, this surplus should be used to pay off debt, which reduces the government's future interest costs. If the government runs out of debt to pay off, it can start to invest in assets such as stocks and bonds, which will yield future income. That's exactly the path the Social Security system, though not the government as a whole, has been following.
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-- Social Security has its own budget, with its own dedicated revenue base. In 1983, following the recommendations of a commission headed by Alan Greenspan, Congress tried to prepare the program to deal with the baby boomers: it raised the payroll tax, so that Social Security would run a surplus, with the express intention of building up a trust fund to help pay benefits once the baby boomers had retired. At first, it seemed that this action, together with some changes in benefits, had done the job: 'For the next 75 years, the OASDI program is estimated to be in close actuarial balance,' declared the Social Security trustees in their 1985 report.[1] Later, the trustees lowered their estimates; the public's impression of a looming Social Security crisis largely dates from the mid-1990s, when they were predicting exhaustion of the trust fund by 2029. But the trustees have lately become more optimistic again: they now say the trust fund will last until 2042. The Congressional Budget Office says 2052, and many economists now think that the original optimism was right after all: if the economy grows as fast over the next fifty years as it did over the past fifty years, Social Security will be sound for the foreseeable future. And if the economy doesn't grow that fast, by the way, the high rate of return on stocks needed to make privatization work can't possibly materialize, either. At this point a loud chorus on the right insists that such estimates are irrelevant, because the Social Security trust fund is just a meaningless piece of bookkeeping: it's a claim by one part of the government on another part of the government. The real crisis will come much earlier than 2042, that chorus says, because payroll tax receipts will no longer cover the full cost of providing Social Security benefits as early as 2018.
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-- Let's take this argument a step at a time. There are two ways to look at Social Security: you can view it as a stand-alone program with its own funding, or you can view it as just part of the federal budget. These aren't mutually exclusive views. On one side, Social Security has always been run as an independent program, and the independence of its budget has considerable legal and political force. On the other side, Social Security is, of course, part of the federal government, and its benefits must ultimately be paid out of the government's revenue. Depending on the question, it's sometimes useful to focus either on Social Security's specific finances or on its role in overall budgeting. What one can't do, however, is switch views in mid-argument. If you want to discuss the budget of the Social Security system, the trust fund and the interest paid on that fund must be part of the picture. If you want to discuss Social Security's role in the overall federal budget, well, you have to talk about the federal budget as a whole; the fact that one particular tax brings in less revenue than one particular category of spending has no significance. What the crisis-mongers do, however, is switch between views to suit their convenience. For example, in his magisterial survey of Social Security issues in The New York Times Magazine of January 16, Roger Lowenstein caught Michael Tanner of the Cato Institute red-handed. Mr. Tanner's estimate of a $26 trillion deficit for Social Security turned out to be the result of a calculation based on the principle of heads I win, tails you lose: when Social Security runs a surplus, Mr. Tanner doesn't count it, because the system is just part of the government, but when Social Security runs a deficit, he treats Social Security as an independent entity. If all this seems metaphysical, let's put it this way: What will actually happen when payroll tax receipts no longer cover 100 percent of benefits? The answer, quite clearly, is nothing. There are only two ways Social Security could be unable to pay full benefits in 2018. One would be if Congress voted specifically to repudiate the Social Security trust fund, that is, not to pay interest or principal on the trust fund's bonds, which would in effect be a decision not to honor debts to retirees. In 2018 the payments on the trust fund's bonds would be sufficient to cover Social Security benefits. Repudiation of those payments is pretty much inconceivable as a political matter; writing in the periodical The Economists' Voice, David Kaiser of the National War College suggests that such a repudiation might even violate the Constitution. In that sense, the trust fund is as real an obligation of the US government as bonds held by Japanese pension funds. The other way would be if the United States found itself in a general fiscal crisis, unable to honor any of its debt. Given the size of the current deficit and the prospect that the deficit will get much bigger over time, that could happen. But it won't happen because of Social Security, which is a much smaller factor in projected deficits than either tax cuts or rising Medicare spending. The grain of truth in questions about the meaning of the trust fund is that the rest of the federal budget has not been run responsibly. The Social Security surplus should have been kept in a 'lockbox.' Although this term has come in for a lot of derision, it was a useful shorthand way of saying that the federal government as a whole should in an average year run budget surpluses at least equal to the surplus of the Social Security system. And this in turn was a shorthand way of saying that the federal government as a whole should do the responsible thing and try to prepay some of the costs of an aging population. In the 2000 campaign both candidates pledged to honor the lockbox. President Bush clearly never had any intention of honoring that pledge; his first tax cut would have broken the lockbox all by itself, and his insistence on pushing through another major tax cut after launching the Iraq war made it clear that this wasn't a fluke. But that's not a Social Security problem. Viewed on its own terms, Social Security has been run responsibly and is a sustainable system. And the policy implication of that observation is also clear: the problem isn't with Social Security, it's with the rest of the budget. Social Security has already taken the steps needed to cope with an aging population; at most, it needs some minor tinkering. The main thing we need to do to cope with the demographic challenge is for the rest of the federal government to do its part, by dealing with the huge deficit we already have in the general fund. 3. What About Privatization? Let's now turn to the sort-of plan ('sort-of' because the administration still hasn't provided key details) to partially privatize Social Security, diverting part of payroll taxes from their current uses, paying benefits and building up a trust fund, and placing them in private accounts instead. The administration's rationale for privatization is that it is needed because Social Security is in crisis. As we've seen, that's a huge exaggeration, and many of the things President Bush says—such as his assertions that the system will be 'flat broke, bust' when the trust fund runs out—are just plain false. Also, the administration pretends that the core of our failure to prepare for an aging population resides in the finances of Social Security; again, as we've seen, Social Security has actually done a lot to prepare for the baby boomers. Mr. Bush's own actions— above all, his insistence on cutting taxes while waging war—are largely responsible for the real problem, the huge deficit in the general fund. But even if a drastic change in how Social Security operates isn't necessary, there's still the question of whether such a change is a good idea. When they aren't warning that only privatization can save us from doom, privatizers often make their case with the argument that people can do better investing their own money than the deal they get from Social Security. Here's a classic example of the genre: during the 2000 campaign, then-candidate Bush urged his listeners to 'consider this simple fact: even if a worker chose only the safest investment in the world, an inflation-adjusted US government bond, he or she would receive twice the rate of return of Social Security.' Vice President Cheney made a similar comparison, although he spoke about investing in stocks rather than bonds, just a few weeks ago. As I pointed out at the time Mr. Bush made his remarks: That's an amazing fact; it's even more amazing when you realize that the Social Security system invests all its money in, you guessed it, US government bonds. But the explanation—which Mr. Bush's advisers understand very well, even if [Bush himself] does not—is that today's workers are not only paying for their own retirement, but are also supporting today's retirees. Or to put it a different way, you could equally well say that my family would have more cash on hand if we took all my mother-in-law's money and let her starve. Somebody must pay the cost of caring for retirees and older workers, whose own payroll taxes went to support a previous generation. If the payroll taxes of younger workers are no longer available for that purpose because they are being placed in private accounts, some other source of money must be found. This problem is often summarized with the deceptively innocuous term 'transition costs,' but it's an enormous one. Kotlikoff and Burns offer a privatization plan that doesn't try to fudge the issue of transition costs. They call for a 12 percent national sales tax to pay benefits to current retirees and older workers. This tax would gradually be reduced as the beneficiaries of the current system died off, but it would remain high for a long time. That should give you an idea of what a responsible privatization scheme would entail. I'd argue that even if we had some way to pay the transition costs, it would be a mistake to privatize Social Security: it was always intended to be an insurance program, not a 401(k), and we need that insurance more than ever in the face of growing economic insecurity. In any case, however, Mr. Bush isn't about to propose a tax increase on that scale or any other. Instead, he proposes covering the costs of paying benefits to older Americans by borrowing the money. Private accounts would be created using payroll taxes that are currently used to pay for benefits; the government would therefore have to borrow to make up for lost revenue. The government would offset this loss of revenue in the long run by gradually reducing benefits relative to those under current law. These future benefit cuts supposedly wouldn't hurt workers, however, because they would be more than offset by the growth in their personal accounts. Such schemes come wrapped in fine phrases about the 'ownership society,' but stripped down to their essence they are equivalent to an investment adviser telling you that you won't have enough money when you retire, but that you should make up for this shortfall not by saving more but by borrowing a lot of money, investing it, and trusting in capital gains. Even if this strategy were successful, the payoff would be a long time coming. A Congressional Budget Office analysis of 'plan 2' from Mr. Bush's social security commission, which is widely believed to be what Mr. Bush will eventually propose, found that it would increase the budget deficit every year until 2050. A similar analysis in last year's Economic Report of the President concluded that the debt incurred to establish private accounts, which would peak at almost 24 percent of GDP, wouldn't be paid off until 2060. It's likely that financial markets would be made very nervous by borrowing on that scale, with the prospect of repayment so far in the future. Bear in mind that the debt incurred during the four decades of increased deficits would be a real, legally binding promise to repay, while the claim that privatization would save money in the long run depends on the assumption that whoever is running America half a century from now will follow through on benefit cuts, even if private accounts have performed poorly and left many retirees in poverty. In the real world, the bond market would consider the solid fact of soaring debt a lot more significant than projections of savings through politically determined benefit cuts many decades in the future. In practice, privatization would significantly increase the risk that international investors will stop lending to the United States, provoking a fiscal crisis, sometime in the not too distant future. Even if we ignore the danger of provoking a fiscal crisis, the claim that borrowing to create private accounts will somehow benefit everyone is a remarkable exercise in free-lunch thinking. If nobody suffers any pain, where does the gain come from? If private accounts were invested in government bonds, as Mr. Bush suggested back in 2000, there would be no possible gain; the interest earned by private accounts would be completely offset by the interest paid on the government borrowing to fund these accounts. So the claim that there will be gains from privatization always comes down to this: part of the private accounts will be invested in stocks, and privatizers insist that stocks are more or less guaranteed to yield a much higher rate of return than the government bonds issued to pay for the creation of those accounts. As Michael Kinsley of the Los Angeles Times has pointed out, there's something very peculiar about that assertion: if stocks are a clearly better investment than government bonds, why would anyone out there be willing to sell all the stocks that would end up in private accounts, and buy all the bonds the government would have to issue along the way? Are politicians pushing for privatization asserting that they know more about future rates of return than investors making decisions about where to put their own money?
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-- In response to such questions, privatizers duck the conceptual issue, and take refuge in history: stocks have, in fact, been a much better investment than bonds in recent decades. But as the mutual fund ads say, 'Past performance is no guarantee of future results.' Stocks are much more expensive relative to underlying profits than they were in the past, which means that they can be expected to yield a lower return. The best bet, suggested both by a look at the numbers and by basic economic theory, is that prospective returns in the form of dividends and capital gains on stocks are somewhat higher than those on bonds, but not much higher—and that the higher expected return on stocks is offset by higher risk. That's why prudent investors hold portfolios containing both stocks and bonds, and why borrowing to buy stocks—which is, to repeat, what Bush-style privatization boils down to—is a very bad idea. Taking away the assumption that stocks will yield very high rates of return fatally undermines the arithmetic of privatization. Again, consider the analogy of borrowing and using the money to buy stocks: if those stocks end up yielding a lower rate of return than the interest rate on the loan, you've made yourself worse off. Even if your best guess is that the return on stocks will somewhat exceed the interest rate, you can't be sure of that, and you'll be in a lot of trouble if your guess proves wrong. Most privatizers assume, when selling their schemes, that stocks will yield about 7 percent a year on average after inflation, while the interest rate after inflation will be only 3 percent. If the equity premium —the spread between the average return on stocks and the average return on bonds—really were that large, borrowing to buy stocks wouldn't be a sure thing, but the odds would be strongly in favor of coming out ahead. But if the expected rate of return on stocks is only 5 percent or less, which many economists think is more reasonable, the chances that borrowing to buy stock will end up being a los-ing proposition are quite high—especially if one takes mutual fund fees into account. Privatizers hate it when you talk about fees—about the fact, for example, that the much-touted Chilean system has administrative costs about twenty times those of Social Security, or that according to Britain's Pensions Commission, 'providers' charges' in that country's privatized system reduce the size of retirement nest eggs by between 20 and 30 percent. But when we're talking about the narrow equity premium produced by realistic expectations of future yields, fees become a central issue. The plan of Kotlikoff and Burns for personal accounts is useful as an example of what would be necessary to keep fees minimal: it calls for a system in which workers have no control at all over how their personal accounts are invested. Instead, all accounts would be placed in a global index fund administered by the government: 'a single computer, situated in the Social Security Administration, would be programmed to buy and sell securities.' In essence, the government, not individuals, would be doing the investing, and the personal accounts would simply be an accounting device. The administrative costs of running this system would be very low.
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-- But it's very unlikely, if Social Security is privatized, that the system will look like that. For one thing, the advertising for privatization stresses 'choice.' In fact, in 2002 the Cato Institute quietly renamed its Project on Social Security Privatization the Project on Social Security Choice (focus groups said that 'privatization' had negative connotations). It's hard to see how to reconcile that advertising with a system in which a computer programmed by bureaucrats does all the choosing. Also, as a matter of political reality, the investment management industry isn't going to accept the idea that a huge pool of money and potential profits is off-limits. Investment companies gave lavishly to the inaugural celebrations, and are major contributors to the lobbying organizations that have been set up to push privatization. They aren't spending that money simply because they think privatization is in the public interest. Suppose that we end up with a system like that of Britain or Chile, in which mutual funds compete to attract private accounts. In that case, there's every reason to believe that fees will take a large bite. In 2003, the average 'expense ratio' on US stock funds— the ratio of all the various fees charged by management to the amount invested —was 1.5 percent. In Britain, providers' charges used to take more than 2 percent off the return of the average retirement account; new regulations have reduced that, but only to about 1.1 percent. Put fees of that magnitude plus a realistic rate of return on stocks into a typical numerical model of privatization, like the one in the CBO report on plan 2, and privatization quickly turns into a sure-fire losing proposition: the government borrows to establish private accounts that if anything yield an expected rate of return lower than the rate the government pays on its bonds; yet those accounts introduce a major new element of risk. If Bush-style privatization actually goes through, the end game is fairly predictable: it's what is happening in Britain now. A couple of decades from now, it will be obvious to everyone that the returns on private accounts have fallen far short of expectations, and that America is about to experience a resurgence of poverty among the elderly. There will be irresistible demands for the government to call off cuts in benefit levels. (Remember, the over-sixty-five population will be an even larger share of the electorate than it is now.) And the result will be to make the fiscal outlook much worse than it would have been without privatization: the government will have borrowed trillions of dollars with the promise of future budget savings, but those savings will never materialize. 4. Medicare, Medicaid, and the Health Care Challenge If demography is only a medium-sized problem, why do long-run federal budget projections look so scary? The answer is that they assume that the long-term historical tendency of health care spending to rise faster than gross domestic product will continue. That trend has not reflected runaway government spending: private spending on health care has risen almost as fast as government spending. (In 1980, private health spending was 5 percent of GDP, and government health spending was 3.8 percent. By 2003 the numbers were 8.3 and 7.0, respectively.) Nor is it a case of runaway inflation: rising medical costs have not historically been driven by rising prices for existing medical procedures. There is plenty of gouging and waste in the US health care system, but there always has been, so that's not a big factor in the trend. The main reason health care is continuing to absorb a larger share of the economy is innovation: that the range of things that medicine can do keeps increasing. A good example of what drives rising health care spending is the recent decision by Medicare to pay for implanted cardiac devices in many patients with heart trouble, now that research has shown them to be highly effective. Should this be considered a cost increase? Only if we're careful about what we mean by 'cost.' It doesn't increase the cost of providing the same care as before; Medicare is spending more to take advantage of a new opportunity to save lives. Because rising health care spending is, for the most part, driven by increased opportunities, it's not clear that a rising share of health care spending in the economy should be considered a bad thing. Here's what the Congressional Budget Office, the source of those frightening long-term projections, had to say: Although the rise in health care costs is a serious concern for many policymakers, it largely reflects private choices.... As income rises, consumers may prefer to allocate a larger share of their resources to health care and a smaller share to other goods and services.[2] Still, there is a problem—but it is social and moral as much as economic: How much inequality in the human condition are we prepared to accept? In Charles Dickens's Britain there were huge class differences in health and longevity, because only the well-off had access to adequate nutrition and, if living in urban areas, to a more or less sanitary environment. Today those differences still exist but are much narrower, in part because of economic growth (which means that more people can afford an adequate diet), but also in large part because of public spending on sanitation, disease control, and health insurance systems that try, however, imperfectly, to provide essential care to everyone.
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-- But what do we do as medical advances make it possible to extend lives or greatly improve their quality, but only at a very high cost? Today we expect the public sector to pay for essential care when individuals cannot pay, and we do so for good reason. Imagine the inequalities that would already exist in America if Medicare wasn't there: high-income Americans would receive hip replacements and bypass surgery in their old age, while low-income Americans would find themselves crippled or dead. Yet the cost of preventing fundamental inequalities in medical care will grow over time. This isn't just, or even primarily, a question of whether we are prepared to raise federal taxes to pay for rising Medicare and Medicaid spending. The clear and present dangers, health econ- omists tell me, are the inability of state governments to pay their share of Medicaid, and the threat to private health insurance, which is gradually unraveling in the face of rising costs. Between 2001 and 2004, according to the Kaiser Family Foundation, the percentage of American workers receiving health insurance through their employers fell from 65 to 61, and this decline will continue unless the government starts helping out. (John Kerry's plan to have the government pay catastrophic health costs was an example of the sort of thing that may be required, but even that would have provided only limited relief.) The problem of rising medical costs is much harder to resolve than that of an aging population. In the long run, in fact, it may be impossible to resolve. But there are things we could do to postpone the day of reckoning. One would be to prepay some of those future medical costs; at the very least, we ought to be building up a Medicare trust fund to deal with the demographic component of rising costs, i.e., the increase resulting from the rising proportion of people over sixty-five. Another would be to find ways to make the US health care system more efficient. For the most part, that's a subject for another essay, but it seems worth making one point: when it comes to health care, the free-market ideology that currently dominates American political discourse seems utterly wrong. Systems that provide universal coverage, like those of France or Canada, are much cheaper to run than our market-based system, yet they yield better results with respect to life expectancy and infant mortality. Or if you don't trust foreign examples, consider the remarkable renaissance of the Veterans' Administration hospital system, described in an important article by Phillip Longman in the February Washington Monthly: he shows that the VA system's centralization of information and control over resources allow it to provide better care at lower costs than any private system.[3] In other words, whatever the current administration and congressional majority propose to deal with the health care crisis—you can be sure they'll declare a crisis as soon as they're done with Social Security— will actually move our system in the wrong direction. 5. Back to the Future Unless something very unexpected happens, Kotlikoff and Burns's vision of an America that in 2030 has an older population than Florida today will come to pass. It's also quite possible that the state of the nation will be as bad as they suggest in their opening account. But one won't be the result of the other, and in a perverse way exaggerating the demographic challenge makes that grim future more likely. Here's how the debate is really playing out, in four easy steps: 1. Talking heads and other opinion leaders perceive the issue of an aging population not as it is—a middle-sized problem that can be dealt with through ordinary changes in taxing and spending—but as an immense problem that requires changing everything. This perception is, alas, fueled by books like The Coming Generational Storm, which blur the distinction between the costs imposed by an aging population and the expense of paying for medical advances. 2. Because the demographic problem is perceived as being much bigger than it really is, the spotlight is off the gross irresponsibility of current fiscal policy. As you may have noticed, right now everyone is talking about Social Security, and nobody is talking about the stunning shift from budget surplus to budget deficit since Bush took office. 3. The focus on Social Security— the one part of the federal budget that is actually being run responsibly—is, in practice, offering the architects of our budget deficit an opportunity to do even more damage. 4. Finally, we're not having a serious national discussion about the bigger problem of paying for health care, and we probably can't in today's ideological climate. Four years ago, I and many other economists urged policymakers to think about the future cost of Social Security benefits, not because we thought there was anything wrong with Social Security itself, but because we regarded the future costs as a compelling reason not to cut taxes even if the overall budget was in surplus. Today, with the overall budget deep in deficit, and the administration considering 'tax reform' that will amount to even more tax cuts for the well-to-do, it all seems a moot point. The first priority is to do something about the fiscal crisis we have right now, not worry about the fiscal crisis we might face a generation from now. —February 10, 2005 Notes [1] See www.ssa.gov/history/reports/trust/ trustyears.html, pp. 2–3. [2] See www.cbo.gov/showdoc.cfm?index= 4916&sequence=2. [3] Phillip Longman, 'The Best Care Ever,' Washington Monthly, February 2005.

Subject: Re: America's Senior Moment - Paul Krugman
From: Saul
To: Emma
Date Posted: Mon, Feb 21, 2005 at 14:33:30 (EST)
Email Address: sberger2@erols.com

Message:
Hi Paul, I read your review titled the Social Security Scam and appreciated the clarity of the discussion as well as the motives. As talking points in response to Bushes point in attempting to sell off Social Security to the private sector investment companies. It would be useful to: 1. Spell out the names of the wall street investment firms behind this lobbying effort 2. Compare the current cost to administer the Social Security program as compared to 401’s, England & Chile. 3. Spell out the rate of return a retiree receives on their investment. I understand you already made the point that Social Security and a 401 k are not comparable because Social Security should be considered as an insurance program, but defining the rate return underscores the efficient fiscal performance of Social Security. I look forward to your comments. Saul Berger Email: sberger2@erols.com

Subject: Paul Krugman's Review
From: Jennifer
To: Saul
Date Posted: Mon, Feb 21, 2005 at 19:21:02 (EST)
Email Address: Not Provided

Message:
This is easily the best critique of the 'aging' problem I have found. Thanks Emma.

Subject: Ten years after: Leeson looks back
From: Setanta
To: All
Date Posted: Mon, Feb 21, 2005 at 13:42:15 (EST)
Email Address: Not Provided

Message:
Ten years after: Leeson looks back 20 February 2005 By Nick Leeson “In no circumstances enter the derivatives trading market without first agreeing it in writing with me at some time in the future; it could bring the world's financial system to its knees.” - Sir Julian Hodge memo, dated November 1990, to senior executives of the Cardiff-based Julian Hodge Bank, quoted in the Western Mail, February 28, 1995, after the collapse of Barings. “We view them as time bombs, both for the parties that deal in them and for the economic system. In our view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.” - Warren Buffett, ‘the Sage of Omaha' and the world's greatest stock-market investor, in his chairman's letter in the Berkshire Hathaway 2002 annual report. These warnings represent the soundest advice, but it is not clear how many of the world's financial institutions have really taken note. Evidently not all of them. I wish someone had given me a similar warning before I set foot in Singapore. Ten years ago this week, Barings Bank collapsed. It was possibly the greatest financial scandal of the 20th century. My role in the bank's collapse is well chronicled - perhaps more so than many of the warnings that followed. My own calamitous mistakes were spectacular enough; they were clearly the most illegal that were perpetrated at the time, but the multiple oversights by the bank's managers were equally spectacular. Amazingly, I never realised quite how bad the situation had become. I blundered on in the forlorn hope that one day I could eventually rectify the situation. Displaying extreme stupidity, I would glance at the positions in BSS account number 88888 and sneak a quick look at the margins that we had deposited from the London office. But I would always refrain from doing the simple computation that would spell out loud and clear the worsening financial picture. Anyone could have done the computations. No complex algorithm was needed. A rudimentary understanding of mathematics was all that was required. This wasn't the week that I had planned to abscond; nothing was ever planned, I was holding on, one day at a time, hoping for that eureka moment when all the markets would fall into line. But it wasn't until the morning of February 20, 1995, that people finally started to ask some sensible questions. Tony Railton, a manager from the London office, had found a massive hole in the balance sheet, a $1.4 billion black hole that ridiculed the balance sheets that were sent to London on a monthly basis. Group treasurer Tony Hawes was on a tour of south-east Asia looking at funding requirements and was due to arrive in Singapore on my birthday, February 25. Still I managed to fob them off, disappearing from the trading floor as soon as I could and turning off all the phones when I got home. I can only believe that they were all so desperate to believe in my success for personal reasons: their bonuses depended on it, and there were only a number of days before the bonuses were due to be signed off. Still I could not tell anybody; I had avoided the situation for so long that it was now the only coping strategy at my disposal. But it all became too much on February 23, a Thursday that will be imprinted on my mind forever. My ex-wife Lisa and I packed a couple of small suitcases and made our way rather sedately to the airport in the eye of a hurricane that was shortly to leave havoc in its wake. Derivatives markets remain the Achilles' heel of the financial markets: they continually evolve into new hybrid forms and many industry professionals still understand little about how they are structured and work. The consequences of this are immeasurable. But some financial institutions seem to treat this threat with the same cavalier disregard that they usually treat risk management and compliance. The beginning of 2005 saw another set of liquidators trying to resolve the fallout from China Aviation Oil's disastrous foray into the derivatives market. A Chinese state-run newspaper reported that the former head of China Aviation Oil (Singapore) Corp said he was unaware that the company was involved in potentially ruinous speculative trading until nine months after it began. He blamed an Australian trader for $550 million in losses. This type of story seems only too familiar. The derivatives markets were set up to take the uncertainty out of the future for traders and financial institutions alike. But they have grown to such an extent that the total value of the derivatives markets far outstrips the value of most leading economies. Since the stability of these markets is crucial to the “new global age'‘ referred to by the British chancellor, Gordon Brown, you would imagine that risk management and compliance would have kept pace with these developments. Unfortunately that is not the case. Unlike Buffett, the Welsh banker Julian Hodge issued his apocalyptic warning three years before the first rash of derivatives disasters involving Metal lgesel lschaft, Orange County, Sears Roebuck and Procter & Gamble broke out in 1994. More was to come in 1995 with Barings. None of these, taken on their own, threatened to bring the world financial system to its knees. The crisis that has come closest to doing so occurred in September 1998 and involved hedge fund Long-Term Capital Management. But could a new mega-catastrophe lie around the corner? With the British economy already in a rather fragile state, a pension crisis looming and personal debt at record levels, how much more of a knock to confidence is needed before we start leaving the banks wholesale? The knock-on effect of such a move on the global economy would be calamitous. Last year started with another rogue-trading scandal at National Australia Bank in Melbourne. This was followed by the overstating of oil and gas reserves at Shell and irregular accounting at the Italian food company Parmalat, which forced it out of business. It is clear that, regardless of the warnings and implications, the warnings don't strike a chord with everyone. The banks foolishly believe they are beyond reproach. My own actions in Singapore caused the collapse of Barings, but other institutions that have recently suffered similar rogue-trading episodes just dust themselves off and carry on regardless. Losses at AIB (Allied Irish Banks Plc) subsidiary Allfirst and National Australia Bank were quickly absorbed, and the banks swiftly returned to the business of making money. Maybe not all the lessons were learned. AIB is a case in point. The case of John Rusnak, the rogue currency-trader who lost the bank $691 million in 2002, combined with the eight-year period of overcharging on foreign exchange transactions should have hit the bank's bottom line - but they didn't. Instead, the bank's profits go from strength to strength. Paying back overcharged customers cost about €34 million, which amounts to roughly four days' profits for the bank. In fact, AIB posted profits of more than €1 billion in its most recent financial year, so it does not need to be too concerned about €34 million. The fact that AIB continued to make such large profits suggests that these were isolated incidents. But the number of irregularities raises questions about the lack of control at the bank. Meanwhile, two shareholder lawsuits are being aimed at Allfirst, the Baltimore-based bank that suffered one of the largest bank frauds in history. The suits, which allege fraud among top executives, will be merged this week into a single complaint in a federal court in New York. Shareholders say bank executives should have known about, and policed, the $691 million trading scandal. In January 2003, AIB's Rusnak was sentenced to more than seven years in jail after pleading guilty to criminal charges. But the Allfirst suit marks the first fraud accusations directed at bank executives since Rusnak's sentence. The case, experts say, has the potential to re-examine how much AIB executives knew, or should have known, about Rusnak's activities. I don't think anyone can have any doubt that, if the Allfirst executives didn't know about the scandal, they should have. Many of the bank's employees should have been involved on a daily basis in ensuring that the risks being taken in the Baltimore office were within prescribed limits. A similar number of employees should have been involved in ensuring that all the contracts undertaken by Rusnak were bona fide and that all monies were accounted for. These are commonsense measures. Imagine running a multinational company with $691 million of your capital risked by one trader in a small remote subsidiary of the bank. Wouldn't you want to know where it was and what it was being used for? This doesn't diminish what Rusnak or I did. Our custodial sentences were justified. But it is only after a reasonable period of time that the full story starts to unfold. The Board of Banking Supervision report that swiftly followed my arrest was a work of almost total fiction. Alarmist and sensational stories at the onset of such a scandal are carefully managed by the banks to focus blame on the individual, thus deflecting attention away from their own shortcomings and buying time to put their house in order. The lawsuits that are to be heard in New York may focus attention on several individuals within the bank's hierarchy but, with the passage of time, the fallout is likely to be minimal. For the record, I don't bank with AIB. Leeson, 37, was jailed for six and a half years in Singapore following the collapse of Barings. He was released from prison in 1999 and now lives in Galway, Ireland.

Subject: Short memories
From: johnny5
To: Setanta
Date Posted: Mon, Feb 21, 2005 at 14:49:03 (EST)
Email Address: johnny5@yahoo.com

Message:
'Leeson, 37, was jailed for six and a half years in Singapore following the collapse of Barings. He was released from prison in 1999 and now lives in Galway, Ireland' How quickly we forget: http://www.economist.com/agenda/displaystory.cfm?story_id=2440313 ...Rest assured that he is far from the only one being told this at Goldman Sachs, or anywhere else for that matter, even though it was only a few years ago that many banks specifically eschewed punting as a good way to make money. Earlier this month UBS, a big Swiss bank, said that “with markets and investor sentiment starting to improve” it would gradually increase credit and trading risks. Even the likes of Citigroup, which stopped explicitly trading for its own account a few years back, and HSBC, a bank that used to think of trading as rather common, both announced recently that they too are increasing the amount of trading they do with their own money. Having previously scaled back its own trading, CSFB is also now increasing the amount of money it devotes to trading, though it claims that it will no longer “bet the ranch”. Allied Irish Banks, which you might have thought had had more than its fair share of trading fiascos, having lost nearly $700m thanks to activities of John Rusnak, one of its foreign-exchange traders, is trying to hire another 20 traders in Dublin.

Subject: Shiller advocated derivates for housing
From: johnny5
To: Setanta
Date Posted: Mon, Feb 21, 2005 at 14:31:57 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.project-syndicate.org/commentaries/commentary_text.php4?id=1815&m=series Homeowners around the world effectively gamble on home prices. Their risks today are often big due to real estate bubbles in such glamour cities as London, Paris, Madrid, Rome, Istanbul, Moscow, Shanghai, Hangzhou, Sydney, Melbourne, Vancouver, Los Angeles, Las Vegas, Boston, New York, Washington, D.C., and Miami. Those bubbles may keep expanding, or may burst, leaving many homeowners mired in debt. The risk to home prices in the aftermath of a bubble is real and substantial. In the last cycle of real estate busts, real (inflation-corrected) home prices fell 46% in London in 1988-95, 41% in Los Angeles in 1989-1997, 43% in Paris in 1991-98, 67% in Moscow in 1993-97, and 38% in Shanghai in 1995-1999. All of these drops were eventually reversed, and all of these markets have boomed recently. But this does not guarantee that future drops will have a similar outcome. On the contrary, the future real value of our homes is fundamentally uncertain. Most homeowners are not gambling for pleasure. They are just buying real estate because they need it. But, because they do nothing to protect themselves against their real estate price risks, they are unwitting gamblers. In fact, home buyers in most countries do nothing to protect themselves – short of selling their homes – because there is nothing to be done. A market for real estate derivatives that can help balance these risks is only just beginning to appear. Well-developed markets for real estate derivatives would allow homeowners to kick the gambling habit. A liquid, cash-settled futures market that is based on an index of home prices in a city would enable a homeowner living there to sell in a futures market to protect himself. If home prices fall sharply in that city, the drop in the value of the home would be offset by an increase in the value of the futures contract. That is how advanced risk management works, as financial professionals know. But the tools needed to hedge such risks should be made available to everyone. Attempts to set up derivatives markets for real estate have -- so far -- all met with only limited success. In May 2003, Goldman, Sachs & Co. began offering cash-settled covered warrants on house prices in the United Kingdom, based on the Halifax House Price Index and traded on the London Stock Exchange. In October 2004, Hedgestreet.com began offering “hedgelets” on real estate prices in US cities – contracts that pay out if the rate of increase in home prices based on the OFHEO Home Price Index falls within a pre-specified range. My former student Allan Weiss and I have been campaigning since 1990 for better risk management institutions for real estate. In 1999, we co-founded a firm, Macro Securities Research, LLC, to promote the development of such institutions, working with the American Stock Exchange to create securities that would allow people to manage real estate as well as other risks. These will be long-term securities that pay regular dividends, like stocks, whose value is tied – either positively or negatively ­– to a real estate price index. Early this month, the Chicago Mercantile Exchange announced that it will also work with us to explore the development of futures markets in US metropolitan-area home prices. We hope to facilitate the creation of such markets in other countries as well. Because even many financially sophisticated homeowners will find direct participation in derivative markets too daunting, the next stage in the development of real estate risk management will be to create suitable retail products. For example, the derivative markets should create an environment that encourages insurers to develop home equity insurance, which insures homeowners not just against a bust but also against drops in the market value of the home. Such insurance ­should be attractive to homeowners if it is offered as an add-on to their existing insurance policies. Derivatives markets for real estate should also facilitate the creation of mortgage loans that help homeowners manage risks by, say, reducing the amount owed if a home’s value drops. Such products should appeal to homebuyers when the mortgage is first issued. Insurance companies and mortgage companies ought to be willing to offer such products if they can hedge the home-price risks in liquid derivative markets. Creating these retail products will require time, experimentation, and some real innovation. Over the next decade, we might expect that a broad spectrum of insurance, lending, and securities companies will become involved. As these retail products start to take shape, they will spur increased activity in the derivative markets. As the new risk-management industry develops, its components will gradually boost each other. These developments offer hope that current and future homeowners will be spared the agony of worrying about the vicissitudes of the real estate market. They will be able to leave the game of real estate speculation to professionals and rest assured about the value that they have accumulated in their homes. That is good news, because there is a pretty strong chance that we are going to see major price declines in a number of cities around the globe in the next few years, and these price declines will cause real pain to many homeowners. But if the momentum toward better risk management continues, it will be the last real estate cycle in which homeowners are unable to protect themselves. Robert J. Shiller is Professor of Economics at Yale University, and author of Irrational Exuberance and The New Financial Order: Risk in the 21st Century.

Subject: Re: Shiller advocated derivates for housing
From: Setanta
To: johnny5
Date Posted: Tues, Feb 22, 2005 at 04:08:45 (EST)
Email Address: Not Provided

Message:
Johnny, this post scares me... a market for individual 'real estate' futures would be a disaster for homeowners. where the price of oil futures affects the price at the pump, this idea will have an impact on the price of houses (with the value of derivatives built into the price of the house whether or not there is a derivative in place or not) which will not be understood by 90% of house buyers.

Subject: What's in your wallet?
From: johnny5
To: Setanta
Date Posted: Tues, Feb 22, 2005 at 09:39:04 (EST)
Email Address: johnny5@yahoo.com

Message:
I am confused and don't understand and I have all you guys trying to help me learn. Some have said all that saved china in the 97 crisis was that their currency was not open to speculation. Why so many smart people think derivatives are the magic that will protect everyone I don't know - history sometimes shows a different opinion. Even now we are hearing that the lawyers are grinding thier axes to attack the banks for bad derivatives. I can't help but be reminded of that commercial where all the viking warriors are coming to kill the credit card user as he pulls out his plastic. Maybe shiller is onto something - he is a professor at yale. I can't imagine how an insurance contract on the price of your house is going to alter financial markets - won't it smooth out boom/bust cycles in housing the same way it has smoothed out oil - oh that's right - oil just had a price shock :(

Subject: The Alternative Minimum Tax
From: Emma
To: All
Date Posted: Mon, Feb 21, 2005 at 11:49:24 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/21/business/21tax.html?pagewanted=all&position= Case of Vanishing Deductions: Alternative Tax Called Culprit By DAVID LEONHARDT The valuable federal tax deductions that people receive for paying local and state taxes have quietly started to vanish for many households, raising the cost of living in places like New York, Massachusetts and California, already among the nation's most expensive. The culprit is a once-obscure federal tax provision known as the alternative minimum tax, which was created in 1969 to ensure that a relatively small number of wealthy people did not use loopholes to avoid paying taxes. But it is increasingly being applied to families with incomes of $75,000 to $250,000 a year who claim relatively high deductions - like the ones for property taxes, state and local income taxes - and the exemption for children. When it does apply, it cancels some of those deductions. The impact is about to mushroom. Barring a change in the law, almost 19 million taxpayers will be subject next year to the alternative minimum tax, or A.M.T., up from roughly 3.4 million this year and 1.3 million in 2000, according to the Tax Policy Center, a Washington research group whose calculations on this issue are widely accepted. The shrinking of the deduction for local taxes for millions more families in the next few years has the potential to cool price increases in thriving real estate markets, particularly in the Northeast and on the West Coast. About half the people paying the alternative minimum tax in recent years live in one of four states - California, Massachusetts, New Jersey and New York - accounting for almost a quarter of the nation's population. 'If you're just talking about a rank-and-file working couple, they're getting hit in these towns,' said Timothy F. Allen, a tax preparer in Belmont, Mass., about many of the middle- to upper-middle-class two-income families he serves in the Boston suburbs. 'It grabbed me in 2004, and I was kind of surprised.' The A.M.T. effectively sets up a parallel tax system for all households, in which few deductions are allowed. Taxpayers whose alternative tax is higher than their regular federal income tax must pay the alternative one. The taxes that people pay to their local and state governments become a deduction in the standard federal system but not in the alternative one. The higher those deductions, the more likely a household is to fall into the A.M.T. A commission appointed by President Bush to make recommendations for overhauling the tax system met Wednesday in Washington for the first time, with a deadline of July 31 to issue a report, meaning there will not be a change before this year's deadline for filing 2004 taxes. While many powerful members of Congress have called for a change, the administration's proposed budget did not offer one. Almost any plan to ease the tax without raising other taxes would cost the Treasury hundreds of billions of dollars in revenue over the next decade, worsening the federal budget deficit. Some tax experts say the relative simplicity of the A.M.T. offers a good model for tax reform. The problem, people of almost all political viewpoints say, is the combination of the A.M.T. and the regular federal income tax. 'It makes the system completely opaque,' said Pamela F. Olson, an assistant Treasury secretary for tax policy in Mr. Bush's first term and now a partner at the law firm of Skadden, Arps, Slate, Meagher & Flom. 'People have no idea what their taxes are going to be, and it takes back things we put in the code.' The interplay between local taxes and the A.M.T. has in effect become a face-off between two forces that many economists consider unsustainable: the rising federal budget deficit and the continuing leaps in home prices. Left unchanged, the alternative tax would produce more revenue by 2009 than the ordinary federal income tax, according to the Tax Policy Center, a joint venture of the Brookings Institution and the Urban Institute. 'It's an enormous issue,' said Connie Mack, a former Republican senator from Florida who heads the commission Mr. Bush appointed to study tax reform, 'and one we're clearly going to take a look at.' If the tax remains, living in many localities will become more expensive, potentially curtailing the growth in home values that has been a major boon to the economy recently. It could also create pressure to cut property taxes, the major source of public education funding in many communities. Without a change in the A.M.T., 30 million taxpayers are likely to face it five years from now, many of them concentrated in high-tax states. 'Taxes do affect the market,' said Raymond G. Russolillo, who oversees tax-consulting services at U.S. Trust in New York. 'I suspect it will affect behavior at some point.' Michael Levin, 52, is an anesthesiologist in Manhattan, married, with a daughter in high school and a son in college. He does not use tax shelters or take big deductions from investments, he said. But his income, while not outsize by New York standards, is relatively high and he owns a condominium in the West Village section of Manhattan. As a result, he fell into the A.M.T. last year, costing him almost $5,000 in additional taxes. 'When I first heard about it,' Dr. Levin said, 'my understanding was that the concept was to prevent fat cats from not paying any taxes. Well, that's fair. Everybody should pay something. But it's killing the middle class as well.' The alternative minimum tax began in 1969, after Joseph W. Barr, the departing Treasury secretary under President Lyndon B. Johnson, told Congress that 155 wealthy families had used loopholes to avoid paying any federal income tax in 1967. Mr. Barr warned of the possibility of a middle-class taxpayer revolt in response. Congress, deluged with letters, created the tax soon after, and President Richard M. Nixon signed it into law. When Congress overhauled the tax code in 1986, it changed the provision so that it no longer offered tax breaks for local taxes, among other things. Today, it exempts a standard amount of income - as much as $58,000 for a married couple this year - and allows further deductions for mortgage interest and contributions to charity. It then taxes nearly all other income at a flat rate of at least 26 percent. Though the calculation usually remains hidden, tax-preparation software figures out both the regular income tax and the alternative one for all households, and they must pay whichever is higher. The surcharge for the tax appears on a single line - Line 43 - of the Form 1040. The triggers for the alternative tax have not kept up with inflation, causing it to capture many people whose main deductions come from nothing more exotic than children and local taxes. People in towns with high property taxes sometimes face the A.M.T., while others with similar incomes in the next town do not. The average property tax in Belmont, Mass., for example, will exceed $7,500 this year. In Arlington, the next town north, the average is $4,500. In parts of Fairfield County, Conn., homeowners pay $10,000, said Alan J. Clavette, an accountant there. In Montclair, N.J. - a town with many New York commuters, in the state with the highest per-capita property taxes in the nation - the typical bill is about $12,000. Over all, people from Connecticut, New York and New Jersey have the highest average deductions for local taxes, which are mainly property taxes and state and local income taxes, according to the Internal Revenue Service. Local taxes have risen in recent years, as both property values and local tax rates have increased. Consider a married couple with three children, living in Massachusetts and making $100,000 a year. With a typical-size home equity loan and $9,000 in property taxes, the couple would face an A.M.T. surcharge of almost $700, increasing their federal tax bill to nearly $11,000, from $10,300, according to Ernst & Young. A similar couple paying significantly less in property taxes would not fall under the alternative tax. The tax falls hardest on states that are overwhelmingly Democratic, including Connecticut, Maryland and Oregon. Some Dermocrats say the uneven effect is one reason that the provision has not yet been changed. 'The Republican majority may not be acting on it because they see it as a red state-blue state issue,' Representative Carolyn B. Maloney, a New York Democrat, said. 'But it is really a middle-class issue, and the middle class is everywhere.' Republicans said that Congress, under their leadership, had created temporary fixes - including one for 2005 - that reduced the number of people subject to the extra tax. They said they expected to devise a long-term solution by overhauling the tax code in the next two years. The A.M.T. is just one of many factors influencing the housing market; the effect of mortgage rates and the ups and downs of the economy certainly outweigh it in importance. But specialists foresee taxes becoming a more prominent factor in real estate markets as the alternative tax affects many more homeowners. 'It's not until people sit in front of their Quicken program and find out that in fact some of their deductions have been in a sense disallowed that they might come to understand this issue,' said Eric S. Belsky, executive director of the Joint Center for Housing Studies at Harvard University. 'As it does affect more and more people, there is an argument that it will have some influence on people's willingness to take on mortgage debt and pay property taxes.' Many of the families who have already been hit by the A.M.T. make enough money that its cost is not a hardship. Barring a change, though, the tax will cover more than half of all households with incomes of $75,000 to $100,000 five years from now, the Tax Policy Center forecasts. Nearly all families who have children and make more than $100,000 would fall into it. Many would lose some or all the tax cuts they have received since President Bush took office. Of course, many also live in houses that are worth much more than they were a few years ago. Someone who sold a home and moved to a less expensive one would easily make up for any additional taxes they had paid as a result of the alternative minimum tax. But extracting the value from a home is not easy. To make a significant gain, a homeowner often must move to a much cheaper region or a far smaller house. Carlo and Chris Marano bought their home in Danbury, Conn., for $265,000 in 1992. After its value had more than doubled, they put it up for sale a year ago and looked into moving. Their three children are grown, Ms. Marano said, and 'we have significant space we don't need.' But the Maranos - he is self-employed, helping design employee benefit plans, and she works for an accounting firm - could not find any house around Danbury that they wanted and that was inexpensive enough to make a move seem worthwhile. So they stayed put, and they paid the A.M.T.

Subject: Blue States
From: johnny5
To: Emma
Date Posted: Mon, Feb 21, 2005 at 14:23:02 (EST)
Email Address: johnny5@yahoo.com

Message:
Connie Mack, a former Republican senator from Florida who heads the commission Mr. Bush appointed to study tax reform BWAHAHA! This makes me laugh! She is gonna take care of your blues - literally!

Subject: The signs don't look good!
From: Setanta
To: All
Date Posted: Mon, Feb 21, 2005 at 11:29:00 (EST)
Email Address: Not Provided

Message:
http://www.financialsense.com/Market/archive/2004/0223.html

Subject: Is There Inflation?
From: Ari
To: Setanta
Date Posted: Mon, Feb 21, 2005 at 11:40:25 (EST)
Email Address: Not Provided

Message:
The analyst reports that liquidity is increasing internationally, but there is deflation in Japan, low inflation in Europe and America, Australia and Canada. Inflation has been a middling problem in China, but appears to be lessening. Interest rates can easily be tightened further and faster to check inflation. So, I am not sure there is a problem of too much liquidity. The Federal Reserve stopped using money supply targets 15 years ago, for the finding was that growth of the money supply was not directly related to general price changes.

Subject: Re: Is There Inflation?
From: johnny5
To: Ari
Date Posted: Mon, Feb 21, 2005 at 13:59:05 (EST)
Email Address: johnny5@yahoo.com

Message:
I thought the problem according to mr. hoye was that there is no where to stick all the money and investment in PPE is gone so according to roach we are left with a megawave of restructuring that will deflate everything and put serious downward pressure on the consumer. Businesses stop spending, banks stop lending, and down we go and all the carry trade unravels because there is no more growth. Cash is at a 35 year high. Institutional Investor points out that domestic and international growth are getting more heavily linked - doesn't this increase the systemic risk for the whole world to be correlated so heavily? If a killer flu virus is about to descend on the world - isn't species survival better in a world of isolated islands than one overcrowded mainland? Weren't the aztecz A ok until the europeans started getting linked to them?

Subject: Re: Is There Inflation?
From: Setanta
To: Ari
Date Posted: Mon, Feb 21, 2005 at 13:51:54 (EST)
Email Address: Not Provided

Message:
while CPI inflation is low in europe, asset inflation is a different matter. you have a situation where property has increased in value by about 300% in the past 6-10 years. at the moment the CPI is running at about 3% whereas asset inflation has been 'scaled' down to 8-10%.

Subject: Asset Inflation or General Inflation
From: Terri
To: Setanta
Date Posted: Mon, Feb 21, 2005 at 14:10:29 (EST)
Email Address: Not Provided

Message:
There is reason for concern when asset prices climb so rapidly, but I am not sure this will translate to general inflation. We must think.

Subject: Re: Is There Inflation?
From: johnny5
To: Setanta
Date Posted: Mon, Feb 21, 2005 at 13:59:30 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.economist.com/surveys/displayStory.cfm?Story_id=242138 And asset-price inflation can be even more harmful to growth than ordinary inflation. Indeed, there is reason to believe that financial bubbles may be more likely to develop during periods of low CPI inflation. The two biggest bubbles this century—America’s in the 1920s and Japan’s in the 1980s—both developed when inflation was modest. When interest rates are low, people are also able to borrow a much bigger multiple of their incomes to finance speculative investment Flemming Larsen, the deputy director of research at the IMF, pointed out in a recent speech that there was much evidence that an economy can overheat even at a time of price stability as conventionally defined. Excess demand shows up instead in balance sheets and asset prices. Traditional indicators of inflation may mislead monetary policymakers. By describing America’s economy as a bubble in early 1998, The Economist made few friends for itself in that country. Optimists claim that the surge in share prices reflects the “new era” of rapid growth in productivity and profits, brought about by new technology and corporate restructuring. This, they argue, justifies the high share prices recently seen. The p/e ratio of the S&P 500 currently stands at 33, compared with an average of 14 over the past century. By every standard method of valuation, Wall Street is now more overvalued than it was on the eve of its crashes in 1929 and 1987.

Subject: Africans Entering America
From: Emma
To: All
Date Posted: Mon, Feb 21, 2005 at 11:09:22 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/21/nyregion/21africa.html?ei=5094&en=5dd1d3d870037d78&hp=&ex=1109048400&partner=homepage&pagewanted=all&position= More Africans Enter U.S. Than in Days of Slavery By SAM ROBERTS For the first time, more blacks are coming to the United States from Africa than during the slave trade. Since 1990, according to immigration figures, more have arrived voluntarily than the total who disembarked in chains before the United States outlawed international slave trafficking in 1807. More have been coming here annually - about 50,000 legal immigrants - than in any of the peak years of the middle passage across the Atlantic, and more have migrated here from Africa since 1990 than in nearly the entire preceding two centuries. New York State draws the most; Nigeria and Ghana are among the top 20 sources of immigrants to New York City. But many have moved to metropolitan Washington, Atlanta, Chicago, Los Angeles, Boston and Houston. Pockets of refugees, especially Somalis, have found havens in Minnesota, Maine and Oregon. The movement is still a trickle compared with the number of newcomers from Latin America and Asia, but it is already redefining what it means to be African-American. The steady decline in the percentage of African-Americans with ancestors who suffered directly through the middle passage and Jim Crow is also shaping the debate over affirmative action, diversity programs and other initiatives intended to redress the legacy of slavery. In Africa, the flow is contributing to a brain drain. But at the same time, African-born residents of the United States are sharing their relative prosperity here by sending more than $1 billion annually back to their families and friends. 'Basically, people are coming to reclaim the wealth that's been taken from their countries,' said Howard Dodson, director of the Schomburg Center for Research in Black Culture, in Harlem, which has just inaugurated an exhibition, Web site and book, titled 'In Motion,' to commemorate the African diaspora. The influx has other potential implications, from recalibrating the largely monolithic way white America views blacks to raising concerns that American-born blacks will again be left behind. 'Historically, every immigrant group has jumped over American-born blacks,' said Eric Foner, the Columbia University historian. 'The final irony would be if African immigrants did, too.' The flow from Africa began in the 1970's, mostly with refugees from Ethiopia and Somalia, and escalated in the 1990's, when the number of black residents of the United States born in sub-Saharan Africa nearly tripled. Combined with the much larger flow of Caribbean blacks, the recent arrivals from Africa accounted for about 25 percent of black population growth in the United States over all during the decade. Nationally, the proportion of blacks who are foreign born rose to about 7.3 percent from 4.9 percent in the 1990's. In New York City, about 1 in 3 blacks are foreign born. According to the census, the proportion of black people living in the United States who describe themselves as African-born, while still small, more than doubled in the 1990's, to 1.7 percent from about 0.8 percent, for a total estimated conservatively at more than 600,000. About 1.7 million United States residents identify their ancestry as sub-Saharan. Those numbers reflect only legal immigrants, who have been arriving at the rate of about 50,000 a year, first mostly as refugees and students and more recently through family reunification and diversity visas. Many speak English, were raised in large cities and capitalist economies, live in families headed by married couples and are generally more highly educated and have higher-paying jobs than American-born blacks. There is no official count of the many others who entered the country illegally or have overstayed their visas and who are likely to be less well off. Kim Nichols, co-executive director of the African Services Committee, which directs newcomers to health care, housing and other services in the New York region, estimates that the number of illegal African immigrants dwarfs the legal ones. 'We think it's a multiple of at least four,' she said. Africans' reasons for coming echo the aspirations of earlier immigrants. 'Senegal became too small,' said Marie Lopy, who arrived as a student in 1996, worked as a bookkeeper in a restaurant and earned an associate degree in biology from the City University of New York. After winning a place in an American immigration lottery that his secretary had entered for him in 1994, Daouda Ndiaye recalls being persuaded by his six children to leave Senegal, where he was working as a financial manager. 'I said, 'I'm 45, I'd have to build a whole new life, I'd have to go to school to learn English,' ' he recalled. 'They said, 'We want you to go and we want you to send for us because there's more opportunity in the U.S. than here.' ' His wife and two of his children have joined him in the United States, where he has worked as a sporting goods store manager and is now a translator. That the latest movement of black Africans arriving voluntarily surpasses the total who disembarked in chains before the United States outlawed international slave trafficking is a bit of a statistical anomaly. That total, most historians now agree, was about 500,000, with an annual peak of perhaps 30,000, compared with the millions overall who were sold into slavery from Africa. Many died aboard ship. Most were transported to the Caribbean and Brazil, where they were vulnerable to indigenous diseases and to the rigors of raising sugar cane, which was harder to cultivate than cotton or rice, the predominant crops on plantations in the United States, where the slave population was better able to survive and reproduce. Moreover, black Africans represented a much higher proportion of the population then than they do today. In 1800, about 20 percent of the 5 million or so people in the United States were black. Among nearly 300 million Americans today, about 13 percent are black. Still, with Europe increasingly inhospitable and much of Africa still suffering from the ravages of drought and the AIDS epidemic and the vagaries of economic mismanagement, the number migrating to the United States is growing - despite the reluctance of some Africans to come face to face with the effects of centuries of enduring discrimination. In the 1960's, 28,954 legal immigrants were admitted from all of Africa, a figure that rose geometrically to 80,779 in the 1970's, 176,893 in the 1980's and 354,939 in the 1990's. In 2002, 60,269 were admitted, including 8,291 from Nigeria, 7,574 from Ethiopia, 4,537 from Somalia, 4,256 from Ghana and 3,207 from Kenya. To many Americans, the most visible signs of the movement are the proliferation of African churches, mosques, hair-braiding salons, street vendors and supermarket deliverymen, the controversy over female genital mutilation and the election last year of Barack Obama, son of a native Kenyan, to the United States Senate from Illinois. Especially in New York City, the shooting deaths of two unarmed African immigrants, Amadou Diallo from Guinea in 1999 and Ousmane Zongo from Burkina Faso in 2003, come to mind. Immigrants arrive with their own perceptions and expectations, from countries where blacks constitute a majority at every level of society, only to discover that whether they are professors or peddlers, they may be lumped together here by whites and even by American-born blacks. 'You have the positive impact that race is not seen to be an absolute definer of people's opportunities,' Kathleen Newland, director of the Migration Policy Institute, a nonpartisan research group, said, 'but that begs the larger question of what does it mean to have a black skin in the United States.' Agba Mangalabou, who arrived from Togo in 2002, recalls his surprise when he moved here from Europe. 'In Germany, everyone knew I was African,' he said. 'Here, nobody knows if I'm African or American.' Ms. Lopy, who now works as a medical interpreter for the African Services Committee, describes herself as 'African, first and foremost,' though the identity of her children will depend on whom she marries and where. 'I'll raise them to be African-something,' she said, 'but ultimately they'll define it for themselves.' Sylviane A. Diouf, a historian and researcher at the New York Public Library's Schomburg Center and Dr. Dodson's co-author of 'In Motion,' said that Americans have a more positive view of immigrants in general than they do of American-born blacks. Referring to African immigrants, she said: 'They are better educated, they're here to work, to prosper, they're more compliant and don't pose a threat.' Dr. Dodson added, 'They're not politically mobilized as yet and not as closely tied to the African-American agenda.' While the ancestors of most Caribbean-born blacks were enslaved, and slavery also victimized the forbears of many African-born blacks, the growing proportion of immigrants may further complicate the debate over programs envisioned to redress the legacies of slavery. 'I think there is a legitimate set of specific claims by persons born in the United States that don't necessarily apply to Caribbean or African populations that have come here subsequently,' Dr. Dodson said. 'African-born and Caribbean-born brothers and sisters have realized that the police don't discriminate on the basis of nationality - ask Amadou Diallo,' said Professor Charles J. Ogletree Jr., who teaches at Harvard Law School and has warned colleges and universities that admitting mostly foreign-born blacks to meet the goals of affirmative action is insufficient. 'Whether you are from Brazil or from Cuba, you are still products of slavery,' he continued. 'But the threshold is that people of African descent who were born and raised and suffered in America have to be the first among equals.' French-speaking Haitians do not necessarily mix with English-speaking West Indians, much less with Africans, and competition for jobs has been another source of tension. 'The Africans tend to be quite industrious and entrepreneurial and often take advantage of opportunities that might have been here for others before,' said Kim Nichols of the African Services Committee. 'We're talking about very profoundly different cultures,' Kathleen Newland said. Analyses by the Department of City Planning, and by the Lewis Mumford Center for Comparative Urban and Regional Research, in Albany found recent immigrants often segregated from other blacks. The census found Nigerian clusters in Flatlands and Canarsie in Brooklyn and Ghanaians in Morris Heights and High Bridge in the Bronx. 'As with European ethnics at the turn of the century,' Joseph J. Salvo, the director of the population division of the Department of City Planning, and Arun Peter Lobo, the deputy director, wrote recently, 'ethnicity has been a powerful force in shaping black residential settlement in New York.' Immigration may also shift some of the nation's focus from racial distinctions to ethnic ones. 'Certainly, South Africa showed us that minority status does not necessarily correlate to one's position in society, but rather that power and its uses are the issues,' said Samuel K. Roberts of Columbia, a history professor who is also on the faculty of the university's Institute for Research in African-American Studies. 'That being said, increasingly distinguishing between black Americans and black Africans may produce conditions in which we will be less prone to think of a fictional construct of 'race' as the distinguishing factor among all of us in North America.' How long might those distinctions last? 'I guess one of the questions will have to be what happens in the next generation or two,' said Professor Foner of Columbia. 'In America, marriage is the great solvent. Are they going to melt into the African-American population? Most likely yes.'

Subject: Buffet's WMD's
From: johnny5
To: All
Date Posted: Mon, Feb 21, 2005 at 10:33:00 (EST)
Email Address: johnny5@yahoo.com

Message:
Barclays Opens Up a Pandora's Box of Derivatives: Mark Gilbert Feb. 18 (Bloomberg) -- A Pandora's box threatens to creak open in the derivatives market, as aggrieved investors seek compensation from banks that sold them collateralized debt obligations whose ratings and value subsequently plummeted. HSH Nordbank AG, a Hamburg-based lender, sued Barclays Plc over $151 million of collateralized debt it bought in 2000. The German bank said the bonds ``if saleable at all, have become worth a very great deal less.'' The London trial was set for Feb. 21. The case raised the tantalizing prospect of a whole basket of dirty derivatives laundry airing in public. Pre-trial document teasers included claims that Barclays invested HSH's notes in another Barclays issue called Taunton, which invested in a Barclays issue named Flavius, which itself invested in Barclays notes called Savannah II, which bought part of two more issues, Dorset and Tullas, from (you guessed it) Barclays. ``Contrary to its duty and to its promises, Barclays substituted poorly performing assets,'' including buying aircraft- lease securities after terrorist attacks destroyed the World Trade Center on Sept. 11, HSH said in an outline of the case filed in the U.K. High Court in December. Barclays said it did nothing wrong in its selling or management of the HSH bonds, which were named Corvus. The case notes said the London-based bank ``blames the fall in value of the Corvus notes primarily upon market conditions.'' Undisclosed Settlement On Feb. 14, Barclays and HSH issued a joint press statement saying they'd reached a settlement. The terms of the accord weren't released. Given that HSH said it invested a further $420 million in two other collateralized debt sales managed by Barclays, the accommodation could have been for anything from zero to $571 million. It looked like those of us hoping to see a car crash in the derivatives market would be disappointed. Later that day, though, Italy's Banca Popolare di Intra Scrl said in a statement through the Italian exchange that it's suing Bank of America Corp. in the U.K. courts for selling it ``securities having a higher risk than was represented by the seller and for an excessive price with respect to their risk level.'' The Italian bank, based in Verbania, wants the U.S. lender to either rewind the sales, which took place in 2000 and 2001, or pay it 40 million euros ($52 million) in compensation. Bank of America said ``the allegations are unfounded.'' $350 Billion Question So here's the question: How many other owners of the $350 billion of collateralized debt that was in the market by mid-2002 are forming a line to sue their bankers? To make a collateralized debt obligation, you bundle together a package of other securities, such as corporate bonds or credit- default swaps tied to company creditworthiness. By splitting the package into slices of differing quality, you make the riskiest portions absorb any losses first, cushioning the higher-rated pieces. Yet, just as the collateralized debt market started to take off at the start of the decade, global creditworthiness plunged. Some 16 percent of securities that had AAA ratings in January 2002 lost their top grade in the next few years. The newfangled securities soured much more rapidly than other, similar asset- backed bonds had done in the past. The collateralized debt owned by HSH, for example, started life with ratings of AAA to BBB from Fitch Ratings, all above investment grade. By the end of last year, they had dropped by at least 11 levels, to between BBB- and CC, well below investment grade. Booming Market The credit derivatives market has boomed in recent years, becoming very lucrative for the banks and traders involved. Recruitment consultants estimate that bonuses for U.S. derivatives professionals climbed as much as 20 percent last year as banks paid up to stop top performers from jumping on the hedge-fund bandwagon. Barclays, for example, said in its 2004 earnings report that it held more than 191 billion pounds ($360 billion) of credit derivatives last year, a fourfold increase from the previous year, as measured by notional value. Moody's Investors Service said last month it rated $56 billion of European collateralized debt backed by default swaps in 2004, a 20 percent gain from the previous year. As the credit derivatives market has grown, standards have improved. Everyone uses the same standard documents, and the rules governing changes in the baskets of assets underlying collateralized debt have been tightened. That wasn't the case at the start of the decade, when banks were still experimenting. The decision by Barclays to settle with HSH will have given heart to any investor that's considering going to court to seek compensation. It's easy to see why even a bank convinced of its own innocence would rather pay off a litigant than see details of its derivatives dealing pored over in a lawsuit. Maybe there won't be a flood of similar complaints. Still, as Dennis Gartman, editor of the daily market strategy report Gartman Letter, often points out, there's never only one cockroach.

Subject: Simple Sound Asset Allocation
From: Terri
To: All
Date Posted: Mon, Feb 21, 2005 at 10:15:27 (EST)
Email Address: Not Provided

Message:
Efficient markets mean that an ideal allocation strategy an investor is to buy the entire stock and bond markets. This can be done with 2 American funds, the Vanguard Total Stock Market Index and the Total Bond Market Index. All that needs to be done is selected an proportion for each fund. A conservative proportion ranges from 60% stocks to 40% bonds to 40% stocks and 60% bonds. If an investor wishes to own international market, then there is the Total International Stock Index. So, 2 or 3 funds is all the is needed to cover America or the globe. An investor who wishes to be highly conservative could opt for 40% stocks and 60% bonds, or even 30% stocks and 70% bonds for an extremely conservative investor. An investor who wishes to be far from conservative can choose 80% or even more stocks.

Subject: Re: Simple Sound Asset Allocation
From: johnny5
To: Terri
Date Posted: Mon, Feb 21, 2005 at 11:30:38 (EST)
Email Address: johnny5@yahoo.com

Message:
I recall during the election months the pundits were talking to ben stein and mr. forbes and one of them said Mrs. Kerry had ALL her wealth in tax free municipal bonds - how has she not been educated to the benefits of asset allocation spread out in different areas like Bogle says?

Subject: Municipal Bonds
From: Jennifer
To: johnny5
Date Posted: Mon, Feb 21, 2005 at 12:45:34 (EST)
Email Address: Not Provided

Message:
John Kerry has long been a Senator. There is every reason for Teresa Kerry to invest in municipal bonds for just this reason. There is every reason for any person to invest in municipal bonds if they choose. If you are comfortable with an investment in municipal bonds, then there is no reason anyone should be critical.

Subject: Asset allocation increasing in stocks
From: johnny5
To: All
Date Posted: Mon, Feb 21, 2005 at 06:22:16 (EST)
Email Address: johnny5@yahoo.com

Message:
This report praises HIGH cash companies - but I have already provided several links that say having HIGH cash is a sign of coming deflation and contraction just like in Japan and is very bad for future growth. Cash is at a 35 year high right now. Companies are not reinvesting in growth or PPE and wall street insiders are not buying thier own stock. So are these wall street experts wrong or is financial history wrong when analyzing high levels of cash and what that means for future growth? 'Stocks could overtake housing' BY GAIL MARKSJARVIS Posted on Sun, Feb. 20, 2005 Pioneer Press During the last five years, skyrocketing home values salved the wounds of investors who lost fortunes in the stock market. The average home price climbed nearly 57 percent in the Twin Cities in that time, while the devastation from the market crash of 2000 left some investment portfolios in worse condition than five years ago. A person who put money into the stock market (the Standard & Poor's 500) at the end of 1999 would still be down 17.5 percent, and an investment in the average stock mutual fund would be up just 0.46 percent, according to Lipper. The difference in performance between housing and the stock market is even more pronounced if you consider how people invest in homes. Typically, people put only a small amount of money into a home purchase. So if a person made a $20,000 down payment on the average Twin Cities home five years ago, the homeowner would have enjoyed almost a 400 percent return on their money, says Lawrence Yun, senior economist for the National Association of Realtors. Whether you look at it that way or not, it's no wonder that financial planners such as David Hoelke have been talking clients back to reality when they've insisted: 'The only thing that doesn't go down is real estate.' The scars remaining from 2000 and 2001 have left some people 'repulsed by the stock market,' says Hoelke of Minnetonka. If investment managers from throughout the world are correct, average investors might come to see reality differently during the next year. In a monthly survey of the world's fund managers, Merrill Lynch found that two-thirds of investment professionals think stocks will deliver returns that are better than, or at least as good as, housing in the next 12 months. The world's managers are increasingly optimistic about the stock market — boosting their investments, while cutting back on bonds. Of course, the managers are in the business of investing in stocks and bonds, so that could be coloring their view of housing. Yet, to select the best performing stocks and bonds, professional investors must analyze the economy and various industries worldwide. If the pros are correct, people who have avoided the stock market and invested in homes instead could end up rethinking their strategy. Last year, counting on homes was definitely the right move in certain markets. The prices of homes in Las Vegas climbed 48.7 percent — one of the hottest markets in the nation. But nationwide, home appreciation was slightly behind the stock market's returns: The market was up 8.9 percent and homes added 8.3 percent to their value. Home appreciation in the Twin Cities was neck and neck with the S&P 500's 8.9 percent return. The National Association of Realtors is predicting 5 percent growth in U.S. home values for 2005. The fund managers in Merrill's survey did not predict either home or stock market returns specifically, but 96 percent are expecting the Federal Reserve to raise rates. Rising rates can restrain business profits and stock market returns, as well as slow the housing market. When companies must pay more to borrow money, their costs of doing business go up. But the fund managers are not worried about that. Instead, Merrill Lynch chief investment strategist David Bowers said in a report, 'What is striking this month is just how positive asset allocators are on equities.' 'Asset allocators' decide how much money to invest in stocks, bonds and cash. When they are nervous about stocks, they increase the percentage of money they put into bonds and cash and decrease their exposure to stocks. But for the sixth month in a row, those surveyed have increased their exposure to stocks. Typically, if they kept the money in their funds in balance, they would hold 50 percent in stocks and 50 percent in bonds. But one in four managers is so optimistic about stocks they've boosted stock holdings to 65 percent of their portfolios. Interestingly, the managers see risks ahead for corporate profits. But their enthusiasm for stocks remains high anyway because of one key fact: During the last four years, companies have put a lid on spending and have used cash to pay down debts and build up a war chest of savings. Now, the managers say companies have so much cash available that they can make purchases or expand their businesses by dipping into their own coffers or using their strong financial position to borrow at low rates. It's a luxury that deeply indebted consumers might not have when buying homes. http://www.twincities.com/mld/twincities/business/columnists/10938321.htm

Subject: Sector Stock Indexes
From: Terri
To: All
Date Posted: Sun, Feb 20, 2005 at 21:00:55 (EST)
Email Address: Not Provided

Message:
http://flagship3.vanguard.com/VGApp/hnw/FundsVIPERByName Sector Indexes 12/31/04 - 2/18/05 Energy 15.8 Financials -2.8 Health Care 0.1 Info Tech -5.6 Materials 2.9 REITs -3.9 Telecoms -4.8 Utilities 3.5

Subject: International asset allocation a waste?
From: johnny5
To: All
Date Posted: Sun, Feb 20, 2005 at 17:07:56 (EST)
Email Address: johnny5@yahoo.com

Message:
From the same journal - one paper for international diversification - one against it. http://www2.cfapubs.org/cp/issues/v2002n4/abs/p0020012a.html Global Diversification Is [Still] Good for Your Clients Many people, including the author of an article that appeared in the New York Times, are arguing that international diversification is no longer a good strategy for investors because of the rising correlation between U.S. and non-U.S. markets. But is this argument truly based on a strategic call, or is it a tactical call? The evidence points to it being a tactical call in strategic 'clothing.' http://www2.cfapubs.org/cfam/issues/v14n4/abs/p0030040a.html With domestic and foreign markets increasingly moving in the same directions, investors lose some of the diversification benefits of going outside their own borders. Yet consultants and asset managers report that investors continue to commit assets to global equities. There are several possible explanations: perhaps recent events narrowed differences only for the near term, or the expanded opportunity set is critically important, or possibly the focus on sector and industry investing demands a worldwide view. This article explores how the reasons for investing beyond one's borders have changed, but the move to global investing continues to grow. All this contradiction by the pro's makes my brain hurt - it's just easier to stick the cash into a dividend paying oil stock in scott trade.

Subject: Focused Investment.....
From: Pete Weis
To: johnny5
Date Posted: Sun, Feb 20, 2005 at 19:31:02 (EST)
Email Address: Not Provided

Message:
combined with a base of low risk investment such as short duration government bonds issued by nations with strong currencies or funds which invest in fixed income securities found in these same countries. The focus has to be the falling US dollar. So clearly commodities and natural resource companies are good hedges against dollar droppage. Precious metals funds such as Vanguard's excellent fund call for a strong stomach for the volatility involved with the ups and downs of the dollar. Anyone who invests in precious metals must have strong convictions in doing so or they will get out at the bottom of one of those periodic selloffs just at the time when more experienced precious metals investors are increasing their positions. I tend to not like US pharmaceuticals simply because their stocks are dollar denominated so overseas pharmaceuticals look more attractive to me. Those who are not bearish when it comes to US markets and indeed world stock markets in general must believe at least four things - (1)the US housing market which is propping up the US consumer will continue for sometime to come; (2) foreign central banks will continue to buy US treasuries near or at the same levels they have been doing so that long term rates can remain low; (3) there will be no major financial collapse (Fannie Mae, Freddi Mac); and (4) oil will drop from its near $50 price per barrel presently, rather that increase from here. We could add other events which might have negative effects on worldwide markets, but if anyone or more of these four things don't pan out for the bulls, we will have some very tough times ahead. IMO, the risk is too high to have a non-focused or non-conservative (meaning very conservative) investment strategy. We should have learned from the 2000-2002 period and we should remember that the first wave of a tsunami is followed by another.

Subject: Re: Focused Investment.....
From: johnny5
To: Pete Weis
Date Posted: Mon, Feb 21, 2005 at 04:38:12 (EST)
Email Address: johnny5@yahoo.com

Message:
Greenspan says we have a bubble that won’t collapse Greenspan And His Bubble http://www.forbes.com/home_asia/strategies/2005/02/18/cx_da_0218topnews.html 'I think we're running into certain problems in certain localized areas. We do have characteristics of bubbles in certain areas but not, as best I can judge, nationwide,' Greenspan told the House Financial Services Committee. He added: 'I don't expect that we will run into anything resembling a collapsing bubble,' though it's 'conceivable that we will get some reduction in overall prices as we've had in the past, but that is not a particular problem.' meanwhile...... The number of homes being constructed in the United States is increasing at nearly twice the rate as the number of households. http://www.siliconinvestor.com/readmsgs.aspx?subjectid=54696&msgnum=23926&batchsize=10&batchtype=Next Greenspan admits a housing bubble in some areas, but not Nationwide? Hmmm ... the recent FDIC report says that 40% of Americans live in 'boom' areas. That is the largest housing boom they have ever measured. NOTE: FDIC defines a 'boom' as 'a 30 percent or greater increase in inflation-adjusted (or real) home prices during any three-year period'. Even most of the other 60% (outside of Detriot ) have seen some housing price appreciation over the last 3 years - just not 30%. Where I live, housing is up close to 30% in just the last year! As someone familiar with real estate Pete - if a contraction in real estate does come - how is greenspan supposed to prevent the systemic risk that fannie and freddie may cause? Take over the mortgages even though fannie and freddie aren't backed and stick another bill on the backs of the us tax payer? I read another article that if the price of oil goes up world GDP will fall in relation and still has to fall in relation to how much it has already went up because a lot of things have been priced with the expectations it would go back down to 20-30 a barrel. XOM thinks it will go down and we are in a business cycle but chevron doesn't. This confuses me further that 2 of the largest companies cannot agree on future oil prices for the world market.

Subject: GNMA and Value Stocks
From: Terri
To: Pete Weis
Date Posted: Sun, Feb 20, 2005 at 20:54:39 (EST)
Email Address: Not Provided

Message:
The Vanguard GNMA fund has a 2.5 year duration, and a 4.9% yield. GNMAs are government backed, so there is no credit risk. Even a 2 percentage point rise in interest rates will not be a problem for a reasonably patient investor. Seems perfect if you anticipate rising interest rates. As for stocks, it makes sense to lean to value. I still like the Value Stock Index. But, there are several interesting managed value funds at Vanguard and there is Energy for a value choice,

Subject: Re: International asset allocation a waste?
From: Terri
To: johnny5
Date Posted: Sun, Feb 20, 2005 at 19:28:51 (EST)
Email Address: Not Provided

Message:
Remember the Vanguard Energy Fund, which offers immediate diversification and long term safety. Also, the long term returns of the S&P and Europe stock indexes have been remarkably close and I expect they will be close in future. But, for a few years the indexes may well diverge so there is a smoothing of near or intermediate term returns likely with the added diversification. Japan has limited the returns of the Pacific Index since 1989.

Subject: Alpha and Omega
From: johnny5
To: Terri
Date Posted: Mon, Feb 21, 2005 at 05:16:27 (EST)
Email Address: johnny5@yahoo.com

Message:
So for proper asset allocation we need a little energy, and some stocks and bonds and maybe put some cash on the side. Now how do you determine the proper mix? 10% energy, 30% stock index, 60% bond index? 15% energy, 35% stock, 50% bond? If you expect many years of higher oil prices - 30% energy, 30% stock, 60% bond? How are these ratios determined by the professionals? Is there a magic formula in an academic paper with lots of calculus and derivatives and greek symbols? I have read where Bogle frequently says about 50%stocks/50% bonds - but where is the mathematical science to back that up? http://library.iea.org/dbtw-wpd/textbase/papers/2004/high_oil_prices.pdf Similarly, the boost to economic growth in oil-exporting countries provided by higher oil prices in the past has always been less than the loss of economic growth in importing countries, such that the net effect has always been negative. The growth of the world economy has always fallen sharply in the wake of each major run-up in oil prices, including that of 1999-2000. This is mainly because the propensity to consume of net importing countries that lose from higher prices is generally higher than that of the exporting countries. Demand in the latter countries tends to rise only gradually in response to higher prices and export earnings, so that net global demand tends to fall in the short term. ...The economic impact of higher oil prices varies considerably across OECD countries, largely according to the degree to which they are net importers of oil. Euro-zone countries, which are highly dependent on oil imports, suffer most in the short term (Figure 3). Job losses would be particularly large, aggravating current high unemployment levels across the region. Japan’s relatively low oil intensity compensates to some extent for its almost total dependence on imported oil. GDP losses in both Europe and Japan would also exacerbate budget deficits, which are already large (close to 3% on average in the euro-zone and 7% in Japan). The United States suffers the least, largely because indigenous production still meets over 40% of its oil needs. Unemployment, a major current policy concern, would nonetheless worsen significantly in the short term. ...The adverse economic impact of higher oil prices on oil-importing developing countries is generally more pronounced than for OECD countries. The economic impact on the poorest and most indebted countries is most severe. The Sub-Saharan African countries within this grouping, with more oil intensive and fragile economies, would suffer an even bigger loss of GDP, of more than 3%. So it looks like africa and friends are going to go into even more poverty :(

Subject: Re: Alpha and Omega
From: Institutional Investor
To: johnny5
Date Posted: Mon, Feb 21, 2005 at 10:57:08 (EST)
Email Address: Not Provided

Message:
Johnny, it appears that you have taken a wrong turn somewhere as I think you have a couple of misconstrued ideas about Asset Allocation. The main article you cited regarding AA was not so much a critique of the BHB paper as it was an attack on the press/industry and their use of the paper. I think you could do that with anything the press uses. The main point of contention is the use of the word variation, or non-use in this case. Aside from all the semantics that reminded me of a Luskin article, the author (Nuttall a physics professor) makes a significant point in that the paper researched the variation of returns of portfolios. He believes that you can’t say AA determines the returns of the portfolio, because that is not what the data says. While he is correct in his statement, it’s really a matter of taking it to the next level and saying because AA determines the variation of its returns, does it explain the actual returns. Most people I know believe the answer is yes, although you shouldn’t use that 93% as proof. Nuttall doesn’t prove or disprove anything, he just argues how people are using the report. You made a point earlier saying that everyone is basing their work on just the BHB paper, this really isn't the case. I can think of many consultants that evaluate their own clients’ returns using this type of analysis and come to the same conclusions. Its not like people are lemmings and just believe the first thing they read, this has been tested in the real world and is consistently monitored. Ok, as for asset allocation. The links below shed some light on this “science/art”. The first link has Wilshire’s capital market assumptions as of 2001. The first link has 10-year forward-looking capital market assumptions with return and volatility expectations. Since these are 10-year projections, they shouldn’t be used if you are looking to invest for the 3-5 years only. The main data missing are the correlation between assets. This touches on your point regarding Intl stocks in your portfolio. Even though intl is becoming more correlated with domestic equity, its still far from 1.0. More like .7 or .8, therefore when you use an optimizer you’ll most likely see intl being included in your efficient frontier. As you see, there are no energy asset classes. Most people consultants wouldn’t put such an overweight in sector like that. You could if come up with your own capital market assumption should you have such a strong belief in its returns, but in general you won’t see that. You may see TIPS as their own asset class, but for most institutional investors, it’s not because of the illiquidity of the market. Its just fine for retail investors, but it needs more time to grow for all these multi-billion dollar funds to be heavily invested in it. The second link is a software program used by many investment consultants. It uses a combination of MPT in determining your efficient frontier, based on using your capital market assumptions. The main thing most people don’t seem to understand is that they need to determine a expected rated of return and how much volatility are they willing to accept. That is going to have the biggest impact on the make up of the portfolio. If you can’t handle a 20% one-year loss, chances are you’ll have a low exposure to equities. If you just looking to make money and not determining a rate of return, these models probably won’t be helpful for you, but then again, I can’t think of any model that would be. After coming up with your AA using MPT, you can test that portfolio and its expected returns using Monte Carlo simulation. I believe it runs 1000 trials of each portfolio and then comes up with ranges of expected returns. http://www.wilshirecompass.com/PDFs/winter2000-2001.pdf http://www.wilshirecompass.com/assetallocation.htm I hope this helps. If you are really interest in this stuff, why not try and get a CFA charter or an advanced degree in finance. I think you’ll be better off than trying to just piece everything together based on various journals that are out there.

Subject: Nice Set of Posts
From: Terri
To: Institutional Investor
Date Posted: Mon, Feb 21, 2005 at 14:53:32 (EST)
Email Address: Not Provided

Message:
Nice set of posts, Institutional Investor.

Subject: Re: Alpha and Omega
From: johnny5
To: Institutional Investor
Date Posted: Mon, Feb 21, 2005 at 12:45:44 (EST)
Email Address: johnny5@yahoo.com

Message:
Thanks for the link, it is interesting reading - this is mostly to help my uncle. Some of his friends had to leave retirement after what happened in 2000 and the subsequent fall of enron and worldcom. If that happens to him he will be bugging me all the time and whining. I just want to prevent myself some stress - HAHA. The marketing material given by raymond james/jackson national life only makes reference to one academic paper - the determinant of portfolio performance http://www2.cfapubs.org/faj/issues/v51n1/pdf/f0510133a.pdf And there was an article presented in forbes called False Prophets showing how asset allocators did much worse than a general index fund. Your arguements are compelling. I suppose it comes down to your belief in the future of energy prices. Unless oil prices continue to rise most of the profit in oil stocks has already been realized in the first year according to the earlier link so having that in the portfolio now may not help much. Why do you think most consultants do not have the energy sector in thier portfolios? What other assets have such an effect on global GDP as energy? In the profile put together for my uncle there is NO investment in the energy sector fund they have even though that is about the only positive one on the page. Chevron fully expects bidding wars and higher prices but then exxon thinks it is just the normal business cycle - how can they be in disagreement?

Subject: Re: Alpha and Omega
From: Institutional Investor
To: johnny5
Date Posted: Mon, Feb 21, 2005 at 12:56:10 (EST)
Email Address: Not Provided

Message:
regarding energy, it is in most portfolios. I think you are missing the point that the Wilshire 5000 contains the entire domestic equity market, thats every single stock, energy, tech, consumer durables, etc. The reason why most consultants don't have a seperate energy sector is because it would require predicting the actual return of energy vs every other sector of the Wilshire 5000, not to mention you would have to come up with a correlation of each sector, and if you get that far, there is a good chance your model will be worthless due to garbage in, garbage out. In your uncle's profile, I would be very surprised if there were no 'energy' stocks in his S&P 500 benchmarked products, or more specifically value funds. Just because someone like vanguard has a sector fund, doesn't mean its not included in the total stock market index.

Subject: Re: Alpha and Omega
From: johnny5
To: Institutional Investor
Date Posted: Mon, Feb 21, 2005 at 13:27:12 (EST)
Email Address: johnny5@yahoo.com

Message:
Of Course!! Why do you think the use of the BHB model decreased to only 17% in 2004? This fully leaves my uncle in the very small minority if raymond james is using this model while 36% use the other. http://www.spauldinggrp.com/Jan05NL.pdf The number of firms using the Brinson-Fachler model has increased, while the number using the Brinson-Hood-Beebower has decreased: 2002 2004 Brinson-Fachler 6% 36% Brinson-Hood-Beebower 21% 17% Why? We don’t know. Perhaps the respondents better understand what model they’re using? Or, they have consciously made a change?

Subject: Re: Alpha and Omega
From: Institutional Investor
To: johnny5
Date Posted: Mon, Feb 21, 2005 at 12:47:24 (EST)
Email Address: Not Provided

Message:
One more thing on AA. Another way to look at it is if you break down your equity or fixed income portfolio. I’ll use equity as an example since it’s easier to show. For the most part, most pension plans target their equity exposure to look like the Wilshire 5000. This is usually based on looking at 3 and 5 year rolling return history of the r3k growth vs. r3k value and seeing there is no clear winner when looking at historical returns. If you used a static point right now, most people would say historically value stocks were your best investment, but when you look at rolling returns (including Sharpe ratios) there is no consistent winner. Now lets imagine two portfolios with 2 managers each. Portfolio A invests in two Morgan Stanley Funds, one is benchmarked to the S&P 500 the other is benchmarked to the Wilshire 4500. Assume equal weightings for Portfolio A. Portfolio B invests in two Vanguard Funds with the same benchmarks, but with 80% in the S&P 500 fund and 20% in the Wilshire 4500 fund. Now, imagine the Morgan Stanley funds return 4% for the S&P 500 product and 12% for the Wilshire 4500 Product. The Vanguard funds return 6% for the S&P 500 product and 14% for the Wilshire 4500 product. Portfolio A (Morgan Stanley Funds) will have a return of 8%, while portfolio B (Vanguard Funds) will have a return of 7.6%. Even though both fund Vanguard funds outperformed there counterpart, the asset allocation is what determined which portfolio had the higher return. Portfolio A’s overweight in small/mid cap is the reason why they outperformed Portfolio B. That is the point people are trying to make when saying Asset Allocation is responsible for the portfolio’s return, and manager selection comes a distant second. Now if you have managers who aren’t correlated to their benchmark, this wouldn’t hold, but in actuality, most managers are managing against a benchmark and typically have a high correlation with it.

Subject: Procter & Gamble Goes After Men
From: Emma
To: All
Date Posted: Sun, Feb 20, 2005 at 15:35:57 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/01/29/business/yourmoney/30sund-web.html?ex=1109048400&en=352ac545e4a0987d&ei=5070 Procter & Gamble Goes After Men By LAURA RICH PROCTER & GAMBLE made its own contribution to a month of mega-merger announcements on Friday when it said it planned to buy Gillette in a deal initially valued at $57 billion. In addition to making Procter the largest consumer products firm by a long shot, the deal would expand its stable of personal care products, a relatively new area for the company known for Tide, Coast and Ivory. On the day of the announcement, Davis Dyer, the founding director of The Winthrop Group consulting firm in Cambridge, Mass., and the lead author of “Rising Tide: Lessons from 165 Years of Brand Building at Procter & Gamble” (Harvard Business Review Press, 2004) spoke about the company’s strategy and its growing clout. Following are excerpts from the conversation. Q. Procter & Gamble is already the world’s biggest advertiser by a large margin. What benefit does the company get as a marketer of brand-name products from the deal? A. There are a number of benefits. Perhaps the biggest is that it’s a complementary set of products that it would be getting, most notably in personal care products. P.&.G. in the last 10 to 15 years has built up a major business in beauty care. They have a few brands, such as Old Spice, for men, but, really, not much of a position there for men. And of course Gillette is one of the preeminent personal care products companies for men. So combining what P.&.G. has with what Gillette has makes this a real powerhouse in that industry. Q. Does Procter & Gamble need to be in men’s products? A. To the extent that P.&.G. aspires to become a major global leader in personal care products, it’s a pretty big hole in the portfolio not to have men’s products. The other thing about it is, P.&.G. is already, has been for some time, the market leader in its other big brands such as baby care products, specifically disposable diapers; paper towels; detergents; oral care products. Those growth opportunities are finite, so the company has to continually develop big new businesses to graft on to what it has. Otherwise its growth slows. Q. Where do you see the weak links in Gillette’s brand lineup? A. Well, I think they’re obviously a leader in men’s personal care products: deodorants, shaving creams, shaving supplies and razors, of course. And they have a number of other brands, and they’re obviously extremely skilled at consumer marketing in those lines. The line that has always stood out is Duracell Batteries. The fit with the rest of Gillette’s portfolio isn’t as obvious there. It’s a question mark. Q. Do you see similar consumer marketing styles between the two companies, or do you expect Procter, which has been the standard-bearer for the way consumer products are marketed, to change the way Gillette products are promoted? A. I would expect that P.&.G. will add a few things to Gillette. P.&.G. does have a very powerful formula and a strong culture and a strong conviction about ways of effective consumer marketing. So I think that over time, that will spread into Gillette. But I’ll qualify that by saying P.&.G. is also very good at absorbing companies it has acquired and learning from them. With Gillette, Gillette’s a sophisticated, older, experienced company and it’s also very good at what it does. So, the likelihood that P.&.G. would massively reorder how Gillette goes about marketing is pretty slight. Q. Are there things that Procter could learn from Gillette? A. Oh, sure. Especially about marketing to men. And, who knows, when you get down into the details of brand management, I’m sure there are best practices at Gillette that will back into P.&.G. Q. There are a couple of areas where the two companies have overlapping or competing products, like oral care and deodorant. Should P.&.G. jointly promote those brands? A. That would be consistent. Assuming that there are no S.E.C. or antitrust issues there, and if there are, I don’t know. That to one side, P.&.G. has a history of maintaining multiple brands in the same category. In detergents, they have Tide and Cheer and Ariel and so forth. And in soaps, they have Ivory, Camay and Zest. And even in disposable diapers, they have two major brands in Pampers and Luvs. So, the fact of having two toothbrush brands is not a particular concern. The Oral-B brand has a lot of equity behind it, I’m sure P.&.G. wants to preserve it. Q. Would this merger give Procter more leverage in the ad market? A. I would say so. If you’re thinking about an overall ad buy and the relationship P.&.G. has with that media — and it already has a lot. It has more now. Q. Do brands lose their impact when companies merge into mega-corporations, such as this one? A. I believe not. Part of it is that branding is the way these companies make their money. So they have every incentive in the world to make sure those brands remain strong, so they’re not going to under-invest in them. And if they continue to keep them contemporary and relevant to consumers, there’s no reason they shouldn’t be successful for a long time.

Subject: Bogle makes me depressed
From: johnny5
To: All
Date Posted: Sun, Feb 20, 2005 at 13:37:10 (EST)
Email Address: johnny5@yahoo.com

Message:
The final value of 1,000 bucks invested from 1950 to 1999 after expenses and taxes is 10K - and bush is going to turn our retirees onto these wolves :( http://www.vanguard.com/bogle_site/december042000.html When we consider that annual data through the remarkable magnifying glass we call compounding, we can describe the investment returns earned by the fund—on cost and tax assumptions that I think we can all agree are hardly excessive—as shocking. The investor lost 63% of the market's cumulative return to the intermediaries, 66% of that to taxes, and 85% of that to inflation, ending up with just $10,000, or less than 2% of the $514,000 compound market return. Yes, the U.S. mutual fund industry is an expensive home for long-term investors.

Subject: The Way to be Happy
From: Terri
To: johnny5
Date Posted: Sun, Feb 20, 2005 at 14:51:51 (EST)
Email Address: Not Provided

Message:
Bogle went a bit too far. A thousand dollars invested in stocks in 1959 would be 514,000 dollars in 1999 in the S&P Index. In a typical mutual fund the return would be 193,000 dollars, while in the S&P Index fund the return would be 471,000. This is after costs and before taxes. Of course there is inflation, but so what? We would be happy indeed to be in the S&P Index over 40 years.

Subject: Re: The Way to be Happy
From: johnny5
To: Terri
Date Posted: Sun, Feb 20, 2005 at 16:02:42 (EST)
Email Address: johnny5@yahoo.com

Message:
I just got sadder. He talked about mortality risk fees with tax deferred annuities in that article - well I just read some more of my uncle's raymond james jackson national life paperwork and in very small writing there is a 1.10% mortality risk fee - on top of the 12b-1 and expense fees - so that is like 2.5% off the top every year. Some of the funds have 5.5% loading and 35 dollar transaction fees. Why they want to sell him a tax deferred annuity with all those fees when there is so much data showing that is robbing him makes me distrust his planner. He won't even give vanguard a chance - how many other people make this decision terri? Going to their local office because they want to sit down with someone and not trusting 'internet companies?' Just how many people are falling prey to this wall street swindle? It breeds inefficiency and waste on a grand scale. And Bush is going to take SS from people and send them to these wolves in sheeps clothing. Is this common at other financial planner offices? What is hilarious is I have read prudential is recommending energy stocks as part of thier asset allocation strategy 2005 - jackson national life is tied to prudential and this financial planner isn't including energy in her recommended stock mix. I wish I could trust more easily terri - but I had too many older friends that were retired in 2000 that are now working and miserable in thier golden years because they went broke. One of them a pharmacist, one a retired boeing employee, one an army captain - all busted. One of my friends from IBM lives on the bench on hwy 19 in st pete - he is smart and could make a lot of money but all his hope was crushed after he lost his job in 95 and lost his stocks in 2000. I hope greenspan and bush understand that too many big losses in life and people just give up - after that you can give them all the free housing and money in the world and it just doesn't fix em.

Subject: Re: The Way to be Happy
From: Terri
To: johnny5
Date Posted: Sun, Feb 20, 2005 at 16:32:59 (EST)
Email Address: Not Provided

Message:
The 10 year return of the Vanguard S&P Index is 11.43%, even through the bear market period. There is no reason for any person to have been severely hurt by the bear market if they were sensibly invested. Any older person who was sensibly invested should have had no problem at all, for bonds have been fabulous. With any balanced portfolio a person near or in retirement would have been fine.

Subject: Re: The Way to be Happy
From: johnny5
To: Terri
Date Posted: Sun, Feb 20, 2005 at 16:57:11 (EST)
Email Address: johnny5@yahoo.com

Message:
2 were invested with smith barney and for some reason were over weighted in MSFT, worldcom and enron. Without those cost savings from being in a vanguard fund - they just didn't stand a chance I guess and they got in near the top 99-2000 - the army captain has 2 daughters that had college dreams for thier kids off grand daddy. I don't know if they were in annuities and had the 2.5% to 3% a year expeneses and fees - but probably.

Subject: When is a Stock Priced Well?
From: Terri
To: All
Date Posted: Sun, Feb 20, 2005 at 13:10:32 (EST)
Email Address: Not Provided

Message:
Whether a stock is a reasonable investment has to do with current price relative to future earning potential. But, future earning potential will wary depending on competition and costs. There are companies that may be securing themselves from competition and justify a higher price. Other companies may have current costs that will grow more slowly the earnings and justify a higher price. We have to be flexible in deciding when a stock is priced attractively. There is a difference between the entire market having a price earning ratio of 30, and an individual corporation having the same p/e. Comcast has good revenue, but high expenses for improving cable capability. When improvements taper off you are left with lower costs and the fine revenue stream. So, the price earning ratio is higher now than it will be. That is the thinking. The cable franchise has competition, but not much. Debt is moderate. A reasonable investment. Comcast by the way has management that is reliable and trusted. We have to think flexibly.

Subject: The UNIVERSAL hedging formula
From: johnny5
To: Terri
Date Posted: Sun, Feb 20, 2005 at 14:22:32 (EST)
Email Address: johnny5@yahoo.com

Message:
ANOTHER article saying to invest internationally in the SAME Financial Analysts Journal that the determinant of portfolio performance paper was released in - yet raymond james wants my uncle to have 90% investments in USA stocks and bonds. Aren't they scamming my relatives by making all investment decisions on one paper published in this journal instead of all the rest? http://www2.cfapubs.org/faj/issues/v51n1/abs/f0510161a.html Universal Hedging: Optimizing Currency Risk and Reward in International Equity Portfolios Fischer Black Investors can increase their returns by holding foreign stocks in addition to domestic ones. They can also gain by taking the appropriate amount of exchange risk. But what amount is appropriate? Assume that investors see the world in light of their own consumption goods and count both risk and expected return when figuring their optimum hedges. Assume that they share common views on stocks and currencies and that markets are liquid and there are no barriers to international investing. In this perfect world, it is possible to derive a formula for the optimal hedge ratio. This formula requires three basic inputs—the average across countries of the expected returns on the world market portfolio; the average across countries of the volatility of the world market portfolio; and the average across all pairs of countries of exchange rate volatility. These values can be estimated from historical data. The formula, in turn, gives the circumstances for three rules. (1) Hedge foreign equity. (2) Hedge less than 100 percent of foreign equity. (3) Hedge equities equally for all countries. The formula's solution applies no matter where an investor lives or what investments are held—which is why it is called 'the universal hedging formula.'

Subject: Real Estate Agents Represent Whom
From: Emma
To: All
Date Posted: Sun, Feb 20, 2005 at 11:13:53 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/20/business/yourmoney/20view.html?ex=1109048400&en=5c8fb890f3afbcb9&ei=5070 Why a Real Estate Agent May Skip the Extra Mile By DANIEL GROSS AS housing prices keep rising year after year, real estate has become a national obsession - and a more powerful economic engine. Sales of homes and condominiums totaled an estimated $2.17 trillion in 2004, said Lawrence Yun, senior economist at the National Association of Realtors. The industry couldn't function without the armies of agents who help buyers and sellers reach mutually agreeable terms on those four-bedroom, center-hall colonials, and who generally collect hefty 6 percent commissions for their trouble. But a recent study by two University of Chicago economists suggests that home sellers should regard agents with some caution. The study does not suggest that agents are inherently untrustworthy. Rather, it says, the housing market remains inefficient, and the incentives for agents to maximize profits for their clients aren't powerful enough. The study was instigated by Steven D. Levitt, a self-described 'rogue economist' who has applied the analytical tools of his trade to everything from sumo wrestlers to drug-dealing gangs; his work is cataloged in the forthcoming book 'Freakonomics,' written with Stephen J. Dubner. Professor Levitt had fixed up and sold several houses in Oak Park, Ill., a suburb of Chicago. When working with real estate agents, he said, 'I got the impression they weren't working solely in their clients' best interest.' Along with a colleague, Chad Syverson, Professor Levitt set out to prove it by comparing data on homes that agents sold on behalf of others with those that they owned and sold for themselves. They analyzed sales from 1992 to 2002 of 98,000 homes in suburban Chicago, of which 3,300 were owned by real estate agents. When the economists constructed an analysis that controlled for amenities, location and the adjectives used to describe the houses, they found that agent-owned homes, on average, stayed on the market 9.5 days longer and commanded median prices that were 3.7 percent higher than comparable homes owned by clients. Of course, agents may just know how to position homes for sale better than other people do. It's their job, after all. And, being human, they may work harder selling their own homes, the way a dentist may take extra care cleaning her own child's teeth. But these explanations don't square with the data. 'If that were the case, you'd expect the clients' homes to stay on the market longer than the brokers' homes,' Professor Levitt said. The two professors conclude that poorly designed incentives bear some of the blame. 'You have to keep in mind that the agent's incentives don't line up perfectly with your own,' Professor Syverson said. Real estate agents have a better sense than others of the best price a home can command. But when they work for others, they don't have the financial incentive to pursue it. Most home sales generate a 6 percent commission, split between the brokerage firms representing the buyer and seller. The agent generally receives half of the firm's draw, or 1.5 percent of the sale. So if a home sells for $500,000, the agent personally receives $7,500. Not bad for what may be just a few days of work. If the agent works for an additional week and urges the seller to hold out for $515,000, that's an extra $15,000 for the seller, but only an extra $225 for the agent. Because every additional dollar throws only a penny and a half into the pocket of the agent, the economists reason, the agent may push clients to accept lowball offers. Of course, price is just one factor motivating sellers to accept offers. Many are in a hurry, maybe because they are relocating for new jobs, or want to be in their new city by the time the next school year starts. So they may feel compelled to accept the first offer. Most agents who sell their own homes, by contrast, aren't leaving the area. 'The brokers may be in a situation where they can be more patient,' said Mr. Yun of the National Association of Realtors. Armed with this knowledge, what should home sellers do? 'You cannot completely trust the advice your broker gives you,' said Christopher J. Mayer, a professor of real estate at Columbia Business School. 'You have to become more educated as a buyer.' In fact, the economists concluded that sellers, empowered by the Internet, are already eroding agents' advantage. Sites like Realtor.com and domania.com allow anyone to survey the market and check out neighborhood price histories. From 1992 to 1995, in the days before such sites existed, agents' homes commanded prices that were 4.9 percent higher and stayed on the market more than 14 days longer than equivalent other homes. But from 2000 to 2002, a period when such sites came into popular use, the margins shrank to 2.9 percent and 2.5 days. 'As consumers become more comfortable with the idea that they can price their own properties, times will get tougher and tougher for real estate agents,' Professor Levitt said.

Subject: Re: Real Estate Agents Represent Whom
From: Pete Weis
To: Emma
Date Posted: Sun, Feb 20, 2005 at 13:04:35 (EST)
Email Address: Not Provided

Message:
'So if a home sells for $500,000, the agent personally receives $7,500. Not bad for what may be just a few days of work.' Having been a licensed real estate agent in the past (on a part time basis) and my wife on a full time basis, I could offer some observations regarding this article. The impression many homebuyers and especially home sellers may have is that the average agent makes quite a lot of money - lists a home, does very little, and collects a '$7500' dollar check. The reality - about 70-80% of begining agents quit the business within the first 18 months. Of the remaining 20-25%, only about 10% make a lot of money (a very few make very large annual incomes). What really happens - agents work with sellers and buyers. Some deals go quickly and easily (especially when the market is hot) and others take much more time. Often an agent will spend many days with a buyer who never buys through them. This article makes some good points - certainly agents want turn-over-rate - remember the agent is often paying for advertising in local real estate publications out of her/his own pockets and the longer a house is on the market the more they end up paying for advertising. Some agents are selling in order to move quickly on a piece of property they wish to buy. My wife and I offered a 1% higher commission than the going rate in order to attract more agents to sell our home in order for us to buy a waterfront property which was selling for a good price. We sold our house in nine days. Of course we were saving on the listing side, but we believed offering a 1% higher commission was more effective in selling our house quickly than dropping our price by 1%. Interesting article.

Subject: Re: Real Estate Agents Represent Whom
From: Terri
To: Pete Weis
Date Posted: Sun, Feb 20, 2005 at 14:23:09 (EST)
Email Address: Not Provided

Message:
Clever idea of offering the agents a 1% commission bonus.

Subject: Japan's Puzzles
From: Emma
To: All
Date Posted: Sun, Feb 20, 2005 at 10:41:51 (EST)
Email Address: Not Provided

Message:
Deflation plays tricks with perception. Wages may not rise, but wages buy increasingly more. Interest income may be minimal, but the income buys more. Growth is anemic, but prices are falling so real growth is higher than nominal growth. Besides Japanese statistics do not cover quality improvements in baskets of products. The economy is sluggish but unemployment is below 4.5%. The last thing however Japan would seem to need is a tax increase now, but government debt builds and builds. Government debt builds but household saving is high enough to assure a balance of trade surplus. Should there be more debt?

Subject: Re: Japan's Puzzles
From: Pete Weis
To: Emma
Date Posted: Sun, Feb 20, 2005 at 14:37:28 (EST)
Email Address: Not Provided

Message:
'The economy is sluggish but unemployment is below 4.5%.' What about growth in aggregate wages in Japan? What about deflating assets? Besides the fact that the Japanese are savers to begin with, we know that long term bear markets in both stocks and housing have a reverse wealth effect. Today, for instance, overall residential housing in Japan is worth much less today than it was more than 10 years ago. During the 80's the middle class of Japan was one of the world's wealthiest middle classes. Now its foundations have been eroded. Japan still has more than its share of billionares and very wealthy types but consumption comes mostly from the masses of middle class consumers. We are spenders here in the US (not savers) but, as we all know or should know, borrowing can only keep things afloat for so long. We've had and are having the same erosion of middle class wealth and I think most of the asset deflation (housing & stock markets) is yet to come. As Stephen Roach has pointed out - the US consumer is so important to the global economy and there is no one out there yet to fill in completely if the US consumer fades. With all the build-up of personal debt, it's a good bet that any drop in consumption here in the US will be faster than it has been in Japan. You would also expect it to drag down Europe, China and Japan each of whom are still hooked to a great extent on the US consumer. Common sense tells us that the US housing market, the main support for the US economy, presently, will correct in many regions even without mortgage rate increases. If we get sell-offs in the bond markets and higher long term rates, the housing correction will be even more steep. All of this points to how 'trickle down' isn't really working. If it was we would see stronger job growth and aggregate wage increases. It's just not happening and it would certainly need to happen in a hurry to avoid the damage from all this debt. We are Japan with the added personal debt. To say we are different is grasping at straws.

Subject: Asset allocate out of the USA
From: johnny5
To: Pete Weis
Date Posted: Sun, Feb 20, 2005 at 14:44:46 (EST)
Email Address: johnny5@yahoo.com

Message:
Great insights Pete - you and terri have been so helpful with your ideas. What Wall Street's Best Are Telling Their Clients Investment Firms Push Large Stocks and Short Bonds; A Comeback for Telecom? By JANE J. KIM Staff Reporter of THE WALL STREET JOURNAL January 11, 2005; Page D1 Wall Street's annual race to predict what will happen in the markets over the next 12 months is on. In recent weeks, major banks have been presenting their biggest clients with forecasts as well as ASSET-ALLOCATION and investment strategies geared to 2005. Goldman Sachs Group Inc. sees the Standard & Poor's 500-stock index at 1325 by year-end (it closed yesterday at 1190), while Bank of America Securities, a unit of Bank of America Corp. has a target of 1200. Prudential Equity Group, a unit of Prudential Financial Inc., is bullish on energy stocks; PNC Advisors, the investment-management arm of PNC Financial Services Group Inc., is unenthusiastic about them. But, from a review of what some of the biggest outfits are recommending, a number of common themes and strategies emerge. Most agree that the economy will grow at a steady if somewhat slower pace -- with stock returns, like last year's, in the mid-to-upper single digits. Nearly all advocate putting more money overseas and, given the likelihood of higher interest rates, shifting to bonds with shorter maturities. The general leaning is toward large-cap stocks -- rather than small-cap or medium-cap ones -- because they tend to hold up better in a slower economy. http://online.wsj.com/article/0,,SB110540040784122109,00.html?mod=mkts_main_featured_stories%5...

Subject: Paul Krugman on Japan's Economy
From: Emma
To: Emma
Date Posted: Sun, Feb 20, 2005 at 12:27:08 (EST)
Email Address: Not Provided

Message:
http://web.mit.edu/krugman/www/jpage.html Paul Krugman's articles on Japan.

Subject: Re: Japan's Puzzles
From: johnny5
To: Emma
Date Posted: Sun, Feb 20, 2005 at 11:21:10 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.bis.org/publ/bispap06.pdf BIS Papers No 6 The financial crisis in Japan during the 1990s: how the Bank of Japan responded and the lessons learnt Hiroshi Nakaso Monetary and Economic Department In Japan, the tools for crisis management were limited in the initial stages of the crisis. An improved safety net was introduced in response to the unfolding of events during the 1990s. In the process, it was acutely felt that the cost of resolving the financial crisis was becoming progressively larger as the necessary actions were not taken or delayed. It was learned, with hindsight, that in facing a potential crisis, the authorities ought to anticipate the worst and draw up contingency plans based on a worst case scenario. Indeed, nothing could be more dangerous than adhering to wishful thinking in a crisis situation. Such a prompt or precautionary reaction by the authorities might have reduced the cost of resolving the financial crisis. A question that may be raised today in this connection is whether there were any signs or indices that could have effectively warned the authorities of the mounting risks. Naturally, one can be wise only after the event and it must in fact have been very difficult for the authorities at that time to precisely predict a financial crisis. However, although identifying a single indicator that effectively predicts any financial crisis may be neither realistic nor feasible, there are areas that deserve to be further explored in assessing the overall soundness of the financial system. Conceptually, there may be micro- and macroprudential information that can predict future financial instability. Microprudential information on individual financial institutions is collected by the supervisors. Supervisory data on banks' asset qualities are typical examples. But central banks have a legitimate interest in the microprudential information, because problems with a financial institution could lead to a systemic disruption. Some microprudential information may be collected and analysed by central banks. For example, liquidity positions of individual financial institutions may tell a lot about sequential changes in the creditworthiness of these institutions. Such information on liquidity positions may be collected by a central bank as a part of its market monitoring and surveillance. Macroprudential information would have more direct system-wide implications and thus would attract the attention of those central banks that have responsibilities for financial stability. Such information may be obtained by aggregating microprudential data or through other means of market monitoring and surveillance. At any rate, much still needs to be done to identify or develop micro- and macroprudential data that effectively capture potential problems embedded in the financial system. In this section, as examples of ongoing efforts, some preliminary work by the Bank of Japan in the area of market monitoring and surveillance is introduced. The section picks up two issues: changes in bank behaviour and some early work on “expected default probabilities”. 5.1 Changes in bank behaviour Japan’s experience in the 1990s shows that a build-up of risks in the financial system is reflected, not only in risk-related indices, but also in changes in bank behaviour; in particular their lending behaviour. As demonstrated in Figure 12, Japanese banks were engaged in fierce competition in the bubble economy to gain increased shares in the lending market. The profitability and riskiness of each loan were often neglected and loans were extended at negative lending spreads. This aggressive lending attitude was reversed dramatically after the bubble burst. After early 1990, as stock prices started to fall, banks changed their lending strategies to ensure positive margins consistent with more conservative views on risk assessment. However, this rapid shift in lending behaviour then resulted in a sharp deceleration in the amount of new loans. Changes in behaviour were also witnessed in banks’ funding operations. This is analysed in a paper by the staff of the Bank of Japan (2000). According to the paper, as the crisis developed in 1997-98, some banks started to face funding difficulties. Particularly the larger banks, which had the following common structural problems, were vulnerable to funding difficulties once reputational risk materialised: (a) The amount of funds invested (core investment) substantially exceeded the amount of funds raised in the retail markets (core deposits). This resulted in a high dependence on funds raised in the wholesale markets. (b) The term structure of funds raised in the wholesale markets was predominantly overnight (almost 60% in 1998). (c) General reluctance to liquidate loan assets in order to preserve the relationship with their clients. BIS Papers No 6 37 The banks changed their funding behaviour over time as their problems deepened. This paper traces the funding operations of three major banks38 that eventually failed in the 1990s, using the data obtained by the Bank of Japan in its daily monitoring and surveillance of the markets. Evidence shows that these banks had undergone different stages of funding difficulties before their failures were announced. The extent of funding difficulties may be described in the following four stages, although they did not take place in a completely sequential way. Stage 1 Risk-sensitive market participants and large depositors became more selective and reluctant to do business with the troubled banks. As a result, higher risk premiums were charged to these banks. This is shown in Figure 13, where the funding costs for these banks are expressed in terms of the spread over those of a sound bank. The symptoms seem to appear well in advance (approximately two to three years) of the failure. The funding costs became progressively larger as they approached the fateful days on which the failures were finally announced. Stage 2 As information about the troubled banks spread to the market, providers of funds in the market also started to avoid placing long-term deposits with these banks. Thus, the average maturities of deposits with the troubled banks grew shorter over time. This seems to have taken place almost simultaneously with the rise in funding costs. Figure 14 shows how the average maturities of deposits with these banks grew shorter relative to that of a sound bank, as their fateful days approached. Stage 3 As their problems became more widely known, even retail depositors began losing confidence in the banks and started withdrawing their deposits. This is reflected in the decline of the “deposit surplus ratio” which represents increased reliance on (particularly overnight) borrowing from the interbank money market. Unstable funding seems to have intensified one to one and a half years prior to the failures (Figure 15). At this stage, the banks started recalling loans or selling liquid assets in a desperate attempt to ease the funding pressures. Stage 4 When the liquid assets for sale were exhausted and funding in the interbank market became unsustainable, the banks gave up their attempt to continue business on their own. Consequently, they were placed under the arrangements of the safety net and their failures were formally announced by the authorities. The above description indicates that the funding capability of the troubled bank was a key element that determined the timing of the failure of the bank. It suggests that careful monitoring of the funding operations of a bank would provide the authorities with useful information with respect to the sustainability of the bank in question. Another finding is that retail deposits tend to be “stickier” than wholesale deposits. While wholesale deposits were quickly withdrawn, or the maturity became extremely short (typically overnight) at an earlier stage, retail deposits tended to be relatively stable until the reputation of the bank deteriorated to an unsustainable level. Although it must be further analysed why there were large-scale deposit outflows in spite of the repeated announcements by the authorities that the deposits would be fully protected, the experience of the Japanese banks in 1997-98 provides a strategically important hypothesis; a bank with a relatively large retail deposit base will benefit more from stable funding and thus be more resistant to a stress situation. This could become particularly important after April 2002 when only deposits under ¥10 million per depositor will be under permanent full protection. This portion of deposits may form the most stable source of funding for Japanese banks. 5.2 Expected default probabilities While market monitoring and surveillance continue to be important tools used by the central bank to evaluate the soundness of the financial system, some quantitative analysis may also supplement the evaluation. One such analysis that may deserve further exploration is the calculation of expected default probabilities (EDP). This is a way to quantify the market assessment of a firm’s credit risk. The EDP data are derived from the Merton-type model using share prices of individual firms. The method 38 Hokkaido Takushoku Bank, Long Term Credit Bank of Japan and Nippon Credit Bank. 38 BIS Papers No 6 uses the insight that the share price (as the market value of the firm’s equity) can be interpreted as the price of a call option with a strike price equal to the book value of the firm’s debt. In the EDP approach, a firm is regarded as having defaulted when the firm’s debt exceeds the market value of the firm’s assets. (Then, the market value of the firm’s equity becomes nil below the strike price.) The EDP approach assumes that the market value of assets follows a random walk along the growth trend. An EDP figure represents the probability that a firm will default within a given horizon, typically one year. While EDP is typically calculated for individual firms, it can also be aggregated to provide industrywide insights. Figure 16 shows the average EDP for six major Japanese banks as calculated by a research team within the Financial Markets Department of the Bank of Japan.39 It can be observed that the average EDP rose markedly as the financial crisis of autumn 1997 unfolded. The EDP data may provide a useful measure with which to assess the overall health of the financial system. If the EDP is measured on a continuous basis, it will also be possible to assess the effectiveness of policy measures by observing the changes in the aggregate EDP before and after the implementation of a policy change. 5.3 Summary There is no doubt that monitoring changes in banks’ lending and funding behaviour provides important clues concerning future financial instability. Similarly, quantitative analysis may also be useful to assess the overall health of the financial system. However, in order to gain a comprehensive view of the financial system, such measures would still not be sufficient. Other macro- and microprudential information is necessary. The macroeconomic climate must also be taken into consideration. After all, it would be necessary to make an overall judgment based on sets of macro- and microprudential information against macroeconomic backgrounds. Moreover, the indices that require particular attention may vary over time because no two financial crises could be identical in a changing and evolving world. In this context, a constant search for new methodologies and indices to support an overall judgment on the soundness of the financial system remains an important item on the research agenda. 6. The new safety net Japan’s safety net revealed a number of shortcomings during the crisis and underwent several overhauls before a comprehensive framework was established in 1998. As of December 2000, the safety net for depository institutions had ¥70 trillion of available public funds. Although the comprehensive framework was badly needed to address financial instability, it was a moral hazardcreating system in the sense that so much public money was used and all depositors and other creditors were protected unconditionally. Therefore, it was deemed necessary to replace the safety net with a new, less morally hazardous framework once the systemic threat subsided. The original target date to terminate full protection measures was March 2001. A working party of the Financial Council, an advisory body to the Finance Minister, started work on designing the new safety net in the spring of 1999. The working party was composed of academics, legal experts and officials of the financial authorities including the Bank of Japan. The key features of new framework were discussed in the working group from very practical viewpoints in an effort to incorporate the lessons learned from dealing with past bank failures. The Financial Council produced a report in December 1999 recommending key features for the new safety net. Many of the new aspects were modelled on the deposit insurance system in the United States, but adapted to the Japanese legal environment while maintaining sufficient flexibility. The report assumed that the comprehensive protection measures would be terminated in March 2001 to be replaced by a new system in which large depositors (in excess of ¥10 million per depositor) and other general creditors would not be protected in principle. The idea to shift to a new system in April 2001 was contested by a political argument that part of the financial system, notably the credit cooperatives, remained fragile. The political decision prevailed and the full protection period was extended by one year until March 2002. Nonetheless, other key features set forth in the Financial Council’s report were legislated. The amended Deposit Insurance Law was approved by the Diet in May 2000 and became effective in April 2001. This section describes the outline of the new safety net40 and highlights the key aspects in which the lessons learned from the crisis management during the 1990s are actually reflected. 6.1 Purchase and assumption (P&A) There are several fundamental principles that underlie the new safety net framework based on the lessons learned from dealing with various types of bank failures. First, once a bank is found unviable, a prompt resolution is essential in order to minimise the resolution cost. Second, large depositors and creditors must be required to assume part of the resolution cost of the failed bank. This would not only contribute to reducing the cost for the DIC but also to containing moral hazard. Third, the financial function and the franchise value of the failed bank should be preserved, to the extent there is a significant remaining value. A resolution method that is commonly referred to as the Japanese version of P&A was designed to basically satisfy all of the three principles mentioned above. The P&A method will be the core approach to deal with a failed bank under the new safety net regime. A payoff41 remains an option but a P&A would be preferred as long as there is remaining franchise value in the failed bank, because in a payoff the failed bank is closed down for liquidation and the franchise value is lost completely. An example of a P&A with hypothetical numbers is shown in Figure 17 and actual proceedings in a P&A are displayed in Figure 18. Key characteristics of a P&A may be summarised as follows: (a) In a well-prepared P&A, insured deposits (in Figure 17, assumed to be 40) and the uninsured portion of insured deposits (ie deposits in excess of the insurance limit: in Figure 17, this is 14 after deduction of anticipated loss42) are transferred to an assuming bank along with normal assets (54).43 Note here that a haircut is applied to uninsured depositors upon the business transfer of sound assets and deposits to the assuming bank. The business transfer to the assuming bank is typically completed over a weekend. This means a bank is announced as a failure on a Friday evening and reopens as a new bank on Monday morning. In this way, the financial services of the failed bank are provided uninterruptedly. In the previous safety net framework, 6-12 months were generally required after the failure announcement until the assumption by a rescuing bank. The dramatic shortening of the period was enabled, for example, by judicial intervention. If a bank is found insolvent, a subrogation authorisation will be given by the court, which substitutes for the shareholders’ approval. Also certain proceedings such as those aimed at creditors protection can be omitted under the P&A. It must be noted, however, that as shown in Figure 18, a preparatory period of a few months would still be necessary for a successful P&A. During this period, on-site examination by the FSA and the DIC would be conducted to check the latest quality of the balance sheet of the failed bank. Due diligence by the candidate assuming banks is also exercised during this period. (b) If the preparation of a P&A for a failed bank is interrupted at a very premature stage, when no assuming bank has been found, a bridge bank will be established by the DIC. Normal assets and insured deposits along with the uninsured portion of insured deposits are transferred to the bridge bank. Thus, also in this case, the financial services of the failed bank are provided uninterruptedly by the bridge bank. Note here too that uninsured 7. Future challenges The experience of the 1990s was costly and sometimes very painful. However, lessons were learned and a number of new measures were taken to overcome the shortcomings identified in the 1990s. For example, lack of transparency of banks’ balance sheets was one of the factors that delayed the introduction of a comprehensive safety net. Today, the bank supervisor and the central bank are equipped with tougher bank examination standards. The accounting treatment of bad loans (chargeoffs and provisioning rules) have become consistent with these new tougher examination standards. In FY 2001, fair value accounting for most marketable financial instruments was introduced, requiring banks to report unrealised capital gains and losses in their financial statements. Furthermore, the 45 Until January 2001, the request had been jointly made by the Finance Minister and the Financial Reconstruction Commission. As a result of a restructuring of the central governmental agencies in January 2001, Article 38 has undergone technical amendment. Under the amended article, the Prime Minister and the Finance Minister will request the activation of emergency financial support by the Bank of Japan. Implementation of such emergency support continues to require the approval of the Policy Board of the Bank of Japan. 42 BIS Papers No 6 disclosure standard for NPLs introduced in 1999 is probably among the world’s most far-reaching. Under these arrangements, banks would be motivated to recognise and dispose of bad loans at an early stage before they developed into serious problems that could undermine their market reputation. The central bank, meanwhile, in fulfilling its responsibility to maintain financial stability, established explicit principles to exercise its power as lender of last resort. The Bank moved towards increased policy transparency and accountability and distanced itself somewhat from the traditional notion of “constructive ambiguity”. In the early stages of the crisis, the authorities suffered from a lack of effective policy tools within the safety net framework to address large-scale bank failures. Today, Japan’s safety net for banks has been substantially improved by incorporating the lessons from the past. It is designed to minimise resolution costs in ordinary bank failures, while retaining flexibility to cope with a systemic event. In the private financial sector, more than 100 institutions failed in the 1990s and were eliminated. The banking crisis, coupled with the Japanese Big Bang initiative launched in 1996, triggered consolidation in the financial sector. Consolidation was particularly conspicuous among cooperative financial institutions and large internationally active banks.46 With regard to major banks, 21 banks that were operating in 1995 were consolidated into four groups by 2001. All of these changes were almost unimaginable a few years before. Indeed, there has been a dramatic reshaping of the financial landscape in Japan. While these changes are undoubtedly steps in the right direction, a number of issues remain to be addressed to achieve the ultimate goal of transforming the banking sector into a more competitive and efficient financial industry, as well as to reinforce the mechanisms that safeguard financial stability. This final section focuses on some of the future challenges that need to be addressed to underpin financial stability in Japan. 7.1 Reinforcing the central bank’s research capacity There are incidents that argue in favour of the view that the central bank’s research capacity on financial stability must be reinforced. First, the Bank was among the earliest in the official sector to assess the scale of the potential risks in the financial system after the bursting of the bubble. The Bank suspected that additional comprehensive measures might become necessary if the downside risk materialised. However, the Bank was not totally confident, because the view was not necessarily backed by solid research and analysis. The assumption that asset prices would decline significantly further was thought overly pessimistic by many. It later proved not to be pessimistic at all. In fact, it was still too optimistic in view of what happened afterwards. Second, the incidents in the autumn of 1997 demonstrated that there could be a variety of mechanisms in which a systemic crisis etc etc....

Subject: Fruit and Big Macs?
From: Emma
To: All
Date Posted: Sun, Feb 20, 2005 at 10:28:05 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/20/business/yourmoney/20mac.html?pagewanted=all&position= You Want Any Fruit With That Big Mac? By MELANIE WARNER EACH day, 50,000 shiny, fire-engine-red Gala apples work their way through a sprawling factory in Swedesboro, N.J. Inside, 26 machines wash them, core them, peel them, seed them, slice them and chill them. At the end of the line, they are dunked in a solution of calcium ascorbate and then deposited into little green bags featuring a jogging Ronald McDonald. From there, the bags make their way in refrigerated trucks to refrigerated containers in cavernous distribution centers, and then to thousands of McDonald's restaurants up and down the Eastern Seaboard. No more than 14 days after leaving the plant, the fruit will take the place of French fries in some child's Happy Meal. The apple slices, called Apple Dippers, are a symbol of how McDonald's is trying to offer healthier food to its customers - and to answer the many critics who contend that most of its menu is of poor nutritional quality. McDonald's has also introduced 'premium' salads, in Caesar, California Cobb and Bacon Ranch varieties, a lineup that will soon be joined by a salad of grapes, walnuts - and, of course, apples. It remains to be seen whether these new offerings will assuage the concerns of public health officials and other critics of McDonald's highly processed fat- and calorie-laden sandwiches, drinks and fries. So far, they have not - at least not entirely. But this much is already clear: Just as its staple burger-and-fries meals have made McDonald's the largest single buyer of beef and potatoes in the country, its new focus on fresh fruits and vegetables is making the company a major player in the $80 billion American produce industry. The potential impact goes beyond dollars and cents. Some people believe that McDonald's could influence not only the volume, variety and prices of fruit and produce in the nation but also how they are grown. The company now buys more fresh apples than any other restaurant or food service operation, by far. This year, it expects to buy 54 million pounds of fresh apples - about 135 million individual pieces of fruit. That is up from zero apples just two years ago. (This does not include fruit used to make juice and pies, which use a different quality of apple.) And it is not just apples: McDonald's is also among the top five food-service buyers of grape tomatoes and spring mix lettuce - a combination of greens like arugula, radicchio and frisée. The boom has been so big and so fast that growers of other produce, like carrots and oranges, are scrambling for a piece of the action. OF course, other fast-food chains have similar salads and fruit choices on their menus, but they have not had a comparable influence on the market because of their smaller size. Burger King, for example, has 7,600 restaurants in the United States, while Wendy's has 5,900 and Arby's has 3,300. McDonald's has 13,700. While salads have been offered at McDonald's in some form or another since the late 1980's, this is the first time they have been big sellers. And Apple Dippers are the first fruit the chain has sold that did not reside between two layers of pie crust. Missa Bay, the company that runs the Swedesboro plant - one of six McDonald's apple slicing facilities around the country - could not be happier about that. 'McDonald's is really pioneering the concept of ready-to-eat sliced apples,' said Sal Tedesco, the chief operating officer of Missa Bay, which built the new production line specifically to process apple slices for McDonald's. In a few months, Missa Bay, owned by Ready Pac Produce of Irwindale, Calif., will also be supplying roughly one-quarter of the 13,700 restaurants with sliced green apples for the new fruit salad, which is scheduled to be introduced in May. Mr. Tedesco said that these two items would increase Missa Bay's revenue by at least 10 percent this year. With those kinds of numbers comes power. Just as the enormous size of McDonald's once helped the company turn the nation's beef, chicken and potato industries into highly mechanized, consistent, efficient and low-cost businesses, McDonald's is using its purchasing decisions to build a reliable supply of fresh fruits and vegetables that meet its exacting specifications. At the U.S. Apple Association's annual marketing conference in Chicago last summer, Mitch Smith, the McDonald's director of quality systems in the United States, told a crowd of growers, many from the big apple-producing states of Washington and New York, that if they wanted to work with McDonald's, they should grow more Cameo and Pink Lady apples. Historically, growers have produced relatively few apples of these varieties, but McDonald's likes them for their crispness and flavor. Already, Cameo production in Washington State is up 58 percent in the current crop year from a year earlier, according to the Yakima Valley Growers-Shippers Association. Eventually, a bigger supply of certain varieties will drive prices down, which will be good for McDonald's. But right now, the company's huge presence in the market is keeping prices high. James R. Cranney Jr., vice president of the apple association, said that McDonald's was one of the reasons that apple prices had not declined this year, despite favorable growing conditions that produced an abundant crop. 'When you've got such a big buyer like that it's going to keep the prices from falling,' Mr. Cranney said. If the new power that McDonald's exerts over the produce industry ends up reducing prices and squeezing margins, he said, it would be a trade-off that many growers and processors seem willing to accept. 'Apple consumption has been flat over the past 10 to 15 years,' he said. 'This is exactly what the apple industry needs because we think it's going to increase consumption.' J. M. Procacci, chief operating officer of the Procacci Brothers Sales Corporation in Cedarville, N.J., said sales of grape tomatoes, climbing for the past five years, had received a particular boost from their inclusion in the McDonald's premium salads. Since early 2003, grape tomato sales in the United States have risen 25 percent; he attributes a significant part of the gain to McDonald's. For decades, of course, McDonald's has been buying produce like iceberg lettuce, tomatoes and onions for its hamburgers and other sandwiches. But the premium salads - unlike their poor-selling predecessors, the Shaker salads that came in plastic cups - are an entree and have found a considerable following. Michael Donahue, the McDonald's vice president for communication and customer satisfaction, said the salads now on the company's menu were among the most successful introductions in the last 10 years. While the double cheeseburger is still the most beloved single item - 1.5 billion of them are ordered every year in the United States - Mr. Donahue said the company has sold more than 300 million of the premium salads since their introduction in March 2003. At $4 a salad, that translates to roughly $600 million a year, or 10 percent of domestic revenue for McDonald's last year. 'The salads have definitely been a driver for McDonald's sales in the U.S.,' said John Glass, an analyst at CIBC. Mr. Donahue conceded that the Shaker salads 'did not resonate with customers' in part because customers did not like the idea of eating salad from a plastic cup. The company sold about 170 million of them in the 18 months they were on sale. At the McDonald's corporate headquarters in Oak Brook, Ill., the excitement over the new salads has as much to do with public opinion as rising sales. Five months before the salads were introduced, the company had to contend with a debate over what role it has played in the nation's expanding waistlines after two overweight, burger-loving New York teenagers filed a lawsuit accusing McDonald's of making them fat. A judge dismissed the case, but a federal appeals court last month overruled that decision, allowing the suit to proceed. Many had already come to see McDonald's as a symbol of everything that is wrong with the American food supply. 'Salads have changed the way people think of our brand,' said Wade Thoma, vice president for menu management in the United States. 'It tells people that we are very serious about offering things people feel comfortable eating.' Apple Dippers, which come with caramel dipping sauce and are offered either as part of a Happy Meal or sold separately for $1, do not have the same blockbuster status as the salads. But they have also given McDonald's customers some alternatives to burgers, chicken nuggets and fried potatoes. Mr. Thoma said the salads help explain why the company is serving one million more Americans now than it was a year ago. Many of these customers, he said, are mothers who feel better about giving their children Happy Meals if they come with fruit rather than fries. McDonald's executives say they hope to put even more fresh fruits and vegetables on the menu. 'We're always thinking about this,' said Mark Lepine, the director of food innovation and development. 'We're looking at whether we can leverage the Apple Dipper concept for carrots.' That is music to the ears of Grimmway Farms, the country's largest producer of carrots. 'We think snack packs of baby carrots really make sense for the fast-food environment,' said Lisa McNeese, vice president for food service sales. 'Today we're growing sweeter varieties and improving flavor.' The potential payoff from suddenly moving a product into 13,700 restaurants is so big that the orange industry is kicking itself for not being better positioned for the fast-food market. Oranges are not sold at McDonald's or the other big chains, with the exception of canned mandarin oranges at Wendy's. 'We've got to pool our resources and do a better job of processing oranges in an economical fashion,' said Joel Nelsen, president of California Citrus Mutual, a trade association of citrus growers. Mr. Lepine says he gets frequent calls from fruit and vegetable growers, industry associations and processors wanting to enlighten him on the attributes of their products and to offer him taste tests. At times, he says, his desk is stacked with bags of lettuce and stalks of broccoli. BUT there are limits to what Mr. Lepine and his team can do. 'There has to be a willingness on the part of the customer to buy these products,' said Mr. Lepine, who has been working on menus at McDonald's for seven years. 'We only sell things that people want to buy.' For instance, McDonald's does not want to sell something that people may have readily available at home. It learned that lesson from the disappointment of Go-Gurt, a squeezable tube of fruit yogurt that McDonald's sold in a deal with Go-Gurt's manufacturer, General Mills. Despite Go-Gurt's popularity in supermarkets, it didn't sell well at McDonald's and was pulled within a year. 'Kids think of McDonald's as a treat, and it's not a treat if you have it at home,' said Vicki Spiller, the director of new product purchasing. McDonald's also faces the problem of trying to satisfy contradictory consumer demands. Maura Havenga, senior vice president for supply chain management in the United States, said that a lot of McDonald's customers say in focus groups that they want healthy food, but less than 10 percent actually buy the salads. 'Everyone says they want a veggie burger, but we sell about two or three a day in stores that sell still them,' she said. For that reason, McDonald's is cautious in introducing products, especially nontraditional ones like sliced apples. Mr. Lepine's team took three years just to get the internal approval to move ahead with consumer testing on the Apple Dippers. It took an additional year to complete the required four stages of focus group research. Mr. Lepine was among those who wanted to sell apple slices without the sugary dipping sauce. But because McDonald's insists that all new products get a clear thumbs-up from more than 70 percent of its test customers, dipless apples did not make the cut. 'The cost of failure is extreme,' Ms. Spiller explained. 'We have 26 million customers we serve every day in the U.S., and we've got to make sure we get it right.' It helps if healthy food looks nice, too. The premium salads were designed, in part, for aesthetic appeal. Cheap and reliable iceberg and romaine account for 90 percent of the lettuce in the salad; the 10 percent smattering of spring mix is intended to make the salads more attractive to the eye as well as the palate. The carrots in the salads, for example, are sliced so thin that customers are lucky if they end up eating one-quarter of a small carrot, but the delicate slices don't fall to a puddle at the bottom of the bowl. 'Women look at the salads and say, 'It's beautiful,' ' said Ms. Spiller, proudly. About 80 percent of salad buyers at McDonald's are women, she added. Healthier fare does not come cheap, for McDonald's or its customers. Fruits and vegetables are much more expensive and complicated to ship and store than meat and potatoes. Unlike meat patties, chicken breasts, French fries and other items on the McDonald's menu, salads and fruit cannot be frozen and stored for a month in distribution centers. Shipments of Apple Dippers and salad components leave McDonald's warehouses several times a week, which is part of the reason salads cost $4 and everything else can be had for less than $3. The care required for perishable food also raises the costs. Spring mix is much more delicate than iceberg and romaine lettuce and is twice as expensive, said Bill Zinke, vice president for marketing at Ready Pac, which supplies McDonald's with all three kinds. 'It's almost like you have to protect every leaf,' he said. Similarly, grape tomatoes, which dot the lettuce on McDonald's salads, are more than double the price of plum or standard tomatoes. Despite the fragility of the salads and fruit, McDonald's says it does not use any artificial preservatives or additives to keep them fresh longer. The calcium ascorbate in the Apple Dippers is not much different from the orange or lemon juice that many people pour on their homemade fruit salad to keep it from browning. At Ready Pac's plant in Irwindale, Calif., oxygen is sucked out of the large lettuce packing bags and replaced with nitrogen, an inert gas. This is the same process used on bags of lettuce sold in supermarkets, and, as a result, the McDonald's supply of spring mix lasts about the same as they do: 14 days. Because of that, said Mr. Smith, the McDonald's executive, 'we have to have a very tight-knit distribution network.' PRESERVATIVES were a big issue for Newman's Own, which is responsible for supplying dressing for the salads. When McDonald's first approached the company in early 2002, Paul Newman, the actor who is its chief executive, made it clear that the arrangement would have to be on his terms. One condition was that the company would not use artificial preservatives. 'When we told them we wouldn't do salad dressings with preservatives, they were a little scared,' recalled Tom Indoe, the chief operating officer at Newman's Own. 'We taught them they really didn't need them.' He added that McDonald's was eager to work with Newman's because of the company's all-natural products and reputation for corporate responsibility. Despite his initial reservations about working with McDonald's, Mr. Newman went ahead because sales to a customer of McDonald's size could improve his company's bottom line - and therefore increase the amount it gives to charity. Newman's Own contributes all its profits to charity; working with McDonald's has increased that amount by more than $3 million a year. As part of the three-year deal, though, Mr. Newman has approval over all advertisements and promotions that feature the premium salads. That represents an unusual concession for a company like McDonald's, which is accustomed to calling the shots. So far, nothing has been rejected, Mr. Indoe said. Some critics bristle at the notion that McDonald's has somehow become healthier simply because it uses natural dressings and sells salads and some fruit. 'Nearly all the entree choices at McDonald's - as well as Burger King and Wendy's - are still all of poor nutritional value,' said Margo Wootan, director of nutritional policy at the Center for Science in the Public Interest, a food activist group. 'I applaud them for making those changes, but there's still a lot more that needs to be done.' Ms. Wootan also points out that the Apple Dipper caramel sauce, which is packaged separately, has nine grams of sugar, one-quarter of the total recommended daily limit under new guidelines of the Department of Agriculture. Other advocacy groups said that they were hopeful that McDonald's would one day use its power not only to get better prices and greater supply, but also to change the way the produce industry operates - for the better. Ronnie Cummins, national director of the Organic Consumers Association, an advocacy group based in Little Marais, Minn., said he would like to see McDonald's buy some organic products, which he believes are more healthful for consumers. In a 2003 report on pesticides in produce, the Environmental Working Group, a public-policy outfit based in Washington, ranked apples as the third-most-contaminated produce group, after peaches and strawberries, in terms of pesticide residue. The findings were based on tests done by the Agriculture Department and the Food and Drug Administration from 1992 to 2001. 'McDonald's could have a huge impact,' Mr. Cummins said. 'They could be the company that changes agriculture toward a more organic and sustainable model.' It may sound far-fetched, but from a company that's come a long way from the days of selling mainly hamburgers and fries, anything is possible.

Subject: Bond Market Caution
From: Emma
To: All
Date Posted: Sun, Feb 20, 2005 at 09:34:16 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/20/business/yourmoney/20port.html? When Greenspan Is Stumped, Investors Should Play It Safe By JONATHAN FUERBRINGER WHEN Alan Greenspan says he cannot explain why longer-term interest rates are so low, what's an investor to do? Take cover. Some money managers are doing just that because they have had the same problem as Mr. Greenspan, the Fed chairman: they cannot understand the decline of longer-term rates despite six increases in short-term rates by Fed policy makers since June. 'This development contrasts with most experience,' Mr. Greenspan said last week in testimony to Congress. 'Other things being equal, increasing short-term interest rates are normally accompanied by a rise in longer-term yields.' Instead, the yield on the Treasury's 10-year note has fallen to 4.26 percent from 4.69 percent at the end of June 2004, despite a climb of 1.5 percentage points in the central bank's short-term rate benchmark, to 2.5 percent. While Mr. Greenspan cited many possible reasons for this unusual happening, he ultimately concluded that 'it remains a conundrum.' That's enough to make Paul A. McCulley cautious. 'When the Fed chairman says he's scratching his dome, you should be scratching yours,' said Mr. McCulley, a portfolio manager and economist at Pimco, the asset management and mutual fund company in Newport Beach, Calif. 'You should always be wary when the central bank says an asset price is aberrant.' Thomas H. Atteberry, a manager of the New Income fund at First Pacific Advisors in Los Angeles, agrees. 'He's the guy who is supposed to have all the information,' Mr. Atteberry said of the Fed chairman. 'And he is telling me he doesn't know why. Why commit capital to a long-term investment when you don't understand why it's valued that way?' Mr. Greenspan also acknowledged that he was puzzled by other economic behavior. Although investors seem willing to take on more risk, businesspeople appear reluctant to do so. Capital investment has lagged behind the big rise in corporate profits. And worker productivity, a factor in restraining inflation, has proved to be 'notoriously difficult to predict,' he said. Both Mr. McCulley and Mr. Atteberry still think that longer-term rates will rise. That is why Mr. McCulley said Pimco had reduced its exposure to the Treasury market, and why Mr. Atteberry said he was staying away from it. Mr. McCulley said Pimco had not participated in a popular Treasury trade in which shorter-term securities are sold and longer-term ones are bought. This is called a flattening trade - a bet that the yield on longer-term securities will fall, or at least rise more slowly, than the yield on shorter-term securities. It has proved profitable with the unexpected decline in longer-term yields. Mr. Atteberry has 40 percent of his money as far from Treasuries as possible without stuffing it into a mattress. It is in money market funds. Most of the rest is in mortgage and agency securities, which he said would fare better than Treasury securities in a rising rate environment. Mr. McCulley argues that longer-term rates will rise partly because one factor now holding them down may soon vanish. Unlike other explanations, including the buying of Treasuries by foreign central banks and a general preference among investors worldwide for putting their excess savings into American bonds, this one is obscure. But Wall Street has not overlooked it. It involves plans announced on Jan. 10 by the Labor Department to shore up the Pension Benefit Guaranty Corporation, the federal agency that insures pension funds. On Wall Street, Mr. McCulley said, the announcement was viewed as a step toward advocating that pension funds invest more in long-term notes and bonds. MR. McCULLEY says he believes that hedge funds, eager to be ahead of the game, have increased their purchases of longer-term securities since the announcement. One sign of this could be the sharp decline in the spread, or difference in the yields, of the Treasury's so-called 30-year bond, which matures in 2031, and the current 10-year note. That spread was 0.38 percent on Friday, smaller than the 0.57 percent just before the announcement. The change means that 30-year bonds have been in much greater demand than 10-year notes. But Mr. McCulley expects this run to exhaust itself as soon as speculators see that the change for pension funds will come very slowly; as a result, he said, 30-year bond yields should rise. Mr. Greenspan may have been giving a similar warning to investors, saying that the recent performance of longer-term interest rates 'may be a short-term aberration.' In other words, the normal upward tilt of longer-term rates could return.

Subject: What Can We Learn From Japan
From: Emma
To: All
Date Posted: Sun, Feb 20, 2005 at 07:35:50 (EST)
Email Address: Not Provided

Message:
We must argue over the problems of Japan, for in a wonderfully developed country there appears to have an economic break that defies fixing. Why should this be so, if so it is? When we are worrying about rising asset prices in America, coupled with rising public debt and so little household saving, could find economic growth vanishing as in Japan? What can we learn from Japan? What can we learn from Europe?

Subject: Re: What Can We Learn From Japan
From: johnny5
To: Emma
Date Posted: Sun, Feb 20, 2005 at 08:23:16 (EST)
Email Address: johnny5@yahoo.com

Message:
Right, I will ask again, it is post stock bubble time in europe in the 18th or 19th century - you are in the richest country ever - the world trades in your currency - your military and empire is supreme - a book about the rise and fall of the roman empire is making great waves in your home city of london while those troublesome colonists in america barely make any fanfare at all. Asset allocator advisors are recommending to all your rich relatives to put thier money in london stocks and bonds 65%/35% - even though london and europe will be going through a depression while those redneck farmers in the colonies will have great boom/bust cycles over the next few decades. Today wall street is the financial capital and china/latin america are like the troublesome colonists of the USA 100 years ago. http://www.chinadaily.com.cn/english/doc/2005-02/19/content_417495.htm In 2002, China’s economy ranked as 69th among the 108 nations in the world. Even though in the last 2 decades, China has had a high total growth rate, due to the extremely low base of per capita GDP, the absolute gap bet. Chinese per capita GDP and that of other developed nations is actually increasing. Measured by PPP purchasing power, China in 2001 had per capita GDP of $3,580. The US has had per capita GDP of that amount in 1892, Netherlands, in 1897. If measured by the percent of agricultural labor, the gap bet. China and Britain is more than 200 years. In 2000, 50% of Chinese labor was farm labor, while only 34% of all the British labor force was farm labor in 1801. It is estimated that by the year of 2050, the economy of China will be reaching to the level of the US in 2002. This is to say the gap bet. China and the US will be shortened from 100 years (as of 2001) to 50 years. By the year of 2100, the gap bet. the US and China will be shorten for 10 years, and the modernization of the Chinese economy will be among the top 10 in the world by then. In order to reach the above goal, China has to have an average annual growth rate of 8% for their transportation industry, 6% for energy, 5% for phone, and 3% for knowledge-based equipment. As a conclusion, China has to keep a cool head, and face the reality. China cannot ignore his average standard of GDP of the entire country and only focus on the couple of more developed big cities.

Subject: Could We Be Japan
From: Emma
To: All
Date Posted: Sun, Feb 20, 2005 at 07:34:39 (EST)
Email Address: Not Provided

Message:
Paul Krugman wrote that the economic problems of Japan should be an affront to economists. What are the causes of this stagnation? What can be done? Can Japan recover? Possibly well-being in Japan is masked by recorded data and the Japanese are thriving. Possibly Japan is hopelessly aging. I do not understand. Now, a general consumption tax increase is planned during a recession? What is happening? Where is the economic vibrancy?

Subject: We beat inflation uncle Al
From: johnny5
To: Emma
Date Posted: Sun, Feb 20, 2005 at 09:24:10 (EST)
Email Address: johnny5@yahoo.com

Message:
I am confused too. How do you fight deflation? equities outperform during inflation. http://www.safehaven.com/article-2622.htm When I visited with Bob in Vancouver, he insisted that an accurate study of history can only lead to the conclusion that major bubbles like the one we are now in the process of working our way out of, are always concluded with deflation, not inflation. It is deflation, not inflation, that leads to the loss of control by the ruling elite when the mathematics of an exponential rise in debt simply overwhelm the ability of central bankers to inflate any further.

Subject: We Have Beaten Inflation
From: Terri
To: johnny5
Date Posted: Sun, Feb 20, 2005 at 10:04:32 (EST)
Email Address: Not Provided

Message:
High asset prices does not necessarily mean 'bubble.' But, we do need to worry about the example of Japan. Deflation may be a tougher problem than inflation targets by the Federal Reserve could easily reverse, though I think they could.

Subject: What is Wrong With Japan
From: Emma
To: All
Date Posted: Sun, Feb 20, 2005 at 07:33:23 (EST)
Email Address: Not Provided

Message:
After years of paying attention to Japan, other than in appreciating Japanese arts I am lost. What then is wrong with Japan or with Japanese economic policy? A rapidly growing powerful economy shows incrasing signs of asset inflation, finally asset inflation begins to be reversed in 1990. By 1992, the stock market is severly depressed and shows no sign of recovery even now. Real estate values begin to decline in 1992. Deflation sets in be 1994. Japan has barely grown since 1994, costing the country and the world vast losses in realization of potential growth. There is a tragedy here, but after reading and talking and thinking I am lost in understanding. What is wrong with Japan?

Subject: Post Bubble Dynamics
From: johnny5
To: Emma
Date Posted: Sun, Feb 20, 2005 at 08:01:55 (EST)
Email Address: johnny5@yahoo.com

Message:
Here is what I tried to point out in earlier posts - japan succumbed to thier own domestic speculative excesses - just as china will and why this will stall growth in the future for the USA - we still have to go through a 'wrenching wave of restructuring' http://www.morganstanley.com/GEFdata/digests/20050218-fri.html#anchor0 Japan’s first recession was dominated by a severe contraction in business capital spending; the fall in the sector was more than 80% larger than the cumulative decline in real GDP over the 1991–93 interval. Similarly, America’s first post-bubble recession, as well as the early stages of the recovery from that downturn, was dominated by a precipitous decline in capital spending. The corollary of that observation is that consumers are usually spared from the first wave of post-bubble aftershocks. That was the case in Japan in the early 1990s and has also been the case so far in the US. But that initial resilience may be deceiving. The post-bubble purging of excess capacity invariably leads to a wrenching wave of restructuring, which then deals a sharp blow to job and income security that eventually imparts a downward bias to consumer demand. That trend kicked in with a vengeance in Japan’s second post-bubble recession; in the downturn of 1997–99, the sharp contraction of real consumer spending accounted for fully 72% of the cumulative decline in real GDP. Japan was quick to purge its bubble-induced overhang of excess capacity. But it has taken a much longer period for its consumers to adjust to harsh post-bubble realities. The coming normalization of US interest rates could well be the catalyst that takes the US economy into the next phase of its post-bubble adjustment. Financial markets are priced for ongoing resilience of the American consumer. Should that not turn out to be the case, the dollar would undoubtedly fall further and the US bond market could stage a Japanese-style rally. It is far too soon, in my view, to dismiss the lessons of Japan. http://www.institutionaladvisors.com/pdf/050210 JAY TAYLOR INTERVIEW.pdf TAYLOR: Corporations have had great profits in 2004, and they are building up a huge amount of cash or they are buying their own shares. But they don’t seem to be borrowing much or using the cash they have to invest in plant and equipment. That, along with the fact that corporate insiders have been selling their own shares en masse, suggests to me that the folks who manage corporate America are not overly optimistic about U.S. business prospects, even though profits have been so high. Would you agree and do you see any long-term significance of the cash buildup of American corporations? HOYE: Cash is at a 35-year high. You have had a huge buildup of plant and equipment during the ’90s boom. One of the features of past post-bubble contractions is that corporations with cash keep it because they get concerned about their AA or even AAA credit rating. And then at the same time, banks will only lend to AAA accounts. So corporations stop spending, and banks stop lending. It’s classic. TAYLOR: So the Fed can’t expand the money supply when that happens? HOYE: Yes. Central banks can increase reserves but if corporations don’t borrow, that’s it, game over. That’s why Keynes and all that bunch just went crazy about people hoarding money in the 1930s. Keynes said that if you saved a schilling, you put a man out of work. So now in the U.S. and Canada where we have adopted the Keynesian model, we are now down to virtually a zero savings rate. So if Keynes was right we should have 100% employment. He was a flaming idiot. TAYLOR: Part of Jim Rogers’ argument hinges on China. He thinks, as do most people, that economic growth in China will continue at a torrid pace for as far into the future as the eye can see. Do you have any thoughts on the influence of China in the post-bubble era? Might demand from China overwhelm normal post-bubble dynamics? HOYE: First step is that in the 70s and 80s it was Japan that was the engine of growth and was buying industrial commodities. What’s more, they had the most brilliant policy makers in history. But then tangible asset speculation collapsed so the world could enjoy another financial bubble. But the best model is the U.S. after the 1873 stock bubble. There were huge migrations of people into the U.S. The U.S. was building railroads and canals. It was a very vibrant and innovative economy. But it was subject to its own domestic speculative excesses. It was also subject to the availability of credit from the world’s financial capital in London. So until the global depression bottomed in 1895, the U.S. had bull markets and very sharp collapses, but nonetheless, England and Europe had a depression. The U.S. was within that envelope, and I believe China is going to be vulnerable to its own speculative exc esses and vulnerable to the availability of credit in the world’s financial capital. It’s nice to have them becoming more and more free, but we saw the same pitch in 1929 when the end of socialism in Europe was seen to be a great opportunity for the market and industry in the U.S. That came to play in the 1990s when another collapse of socialism was again seen to provide a great stock market. They were going to sell all kinds of BMWs to the people in East Germany. But if we should go back to an economist by the name of Say, Say’s Law said if you must consume you must produce. The Chinese are in the anomaly of consuming immediately a lot of raw materials from elsewhere. At some point they will develop iron deposits, copper mines, and coal deposits on their own. TAYLOR: I’ve noticed recently that the Chinese are cutting back on some plans to build nuclear power plants. Might this be the start of a contraction in China? I think the lessons are that china just can't grow for much longer anywhere near the rates they have - they can only absorb so much of the worlds resources before they run up against the wall - when they hit the wall - their economy and everyone else linked to them - like the USA can say goodbye to recent growth rates for the next 10 - 20 years. Japan shows when the capital stops being spent on PPE it is a sign of the future - well american companies are cash rich now and not spending on PPE - take it for what it is worth.

Subject: On China
From: Terri
To: johnny5
Date Posted: Sun, Feb 20, 2005 at 10:00:30 (EST)
Email Address: Not Provided

Message:
The guess is that with proper economic management, which they have had, the Chinese economy can grow from 7% for several decades. There are excesses, but they have been and are readily manageable. This seem to me America after the Civil War. Similarly the asset price gains in America are far more moderate than in Japan by 1989.

Subject: Re: On China
From: johnny5
To: Terri
Date Posted: Sun, Feb 20, 2005 at 10:51:28 (EST)
Email Address: johnny5@yahoo.com

Message:
What is a bubble then? The economist in 99 didn't like p/e ratios of 33 - but you tell me warren buffet just bought comcast that has one of 34 - I am so confused. http://www.economist.com/surveys/displayStory.cfm?Story_id=242138 And asset-price inflation can be even more harmful to growth than ordinary inflation. Indeed, there is reason to believe that financial bubbles may be more likely to develop during periods of low CPI inflation. The two biggest bubbles this century—America’s in the 1920s and Japan’s in the 1980s—both developed when inflation was modest. When interest rates are low, people are also able to borrow a much bigger multiple of their incomes to finance speculative investment Flemming Larsen, the deputy director of research at the IMF, pointed out in a recent speech that there was much evidence that an economy can overheat even at a time of price stability as conventionally defined. Excess demand shows up instead in balance sheets and asset prices. Traditional indicators of inflation may mislead monetary policymakers. By describing America’s economy as a bubble in early 1998, The Economist made few friends for itself in that country. Optimists claim that the surge in share prices reflects the “new era” of rapid growth in productivity and profits, brought about by new technology and corporate restructuring. This, they argue, justifies the high share prices recently seen. The p/e ratio of the S&P 500 currently stands at 33, compared with an average of 14 over the past century. By every standard method of valuation, Wall Street is now more overvalued than it was on the eve of its crashes in 1929 and 1987. Today, besides runaway share prices, America shows plenty of other signs of excess. Consumers have been on a borrowing and spending binge, and household saving has turned negative for the first time since the 1930s. Firms are also borrowing heavily. As imports soar, America’s current-account deficit is heading for a record 4% of GDP. The property market is also starting to look frothy: prices of prime residential property in many big cities are soaring. Last, but not least, money-supply growth seems excessive. These are all classic symptoms of a bubble. The consumer-price index is a flawed measure of inflation. Ideally, an effective measure should include not only the prices of goods and services consumed today, but also of those to be consumed tomorrow, since they, too, affect the value of money. Given these costs, there is a strong case for central banks to pay more attention to rising asset prices, and to raise interest rates to deflate a bubble in its early stages Last, and most important, central banks do not have a political mandate to halt asset-price inflation. The awkward truth is that bubbles are popular. Whereas everybody accepts that inflation in goods and services is a bad thing, almost everybody regards rising equity and property prices as a good thing. If, by raising interest rates, the Fed were to reduce the wealth of the 50% of American households who own shares, it would not be long before Congress acted to curb the Fed’s power How not to do it There are two examples of central banks deliberately trying to burst a bubble: America in 1928-29 and Japan in 1989-90. Both attempts did indeed end in tears. But that was largely because both central banks left it very late before they acted, and then pursued over-tight policies after asset prices had crashed. The lesson may be not that central banks should keep clear of bubbles, but that they should intervene as early as possible to prevent them. In Japan, share prices and property prices increased more than fourfold between 1981 and 1989. Geoffrey Miller, the director of the Center for the Study of Central Banks at New York University, who has studied Japan’s bubble**, reckons that with hindsight it is clear that monetary policy was too lax. The Bank of Japan started to fret about rising property and share prices and rampant bank lending in 1987. If it had tightened policy then, the economic damage would have been considerably less. So why did the bank wait two more years? Uncertainties about whether it really was a bubble and how asset prices would respond to higher interest rates both played a part. And as in America today, CPI inflation was low (in part because of a strong yen), so politically the bank would have found it hard to take action. But, says Mr Miller, the Bank of Japan also faced another constraint: political pressure from America. The Louvre Accord agreed by the G7 in early 1987 committed Japan to boosting domestic demand to help reduce America’s trade deficit. Mr Miller concludes that pricking bubbles is far from easy. But he argues that there will be times when asset-price bubbles become so large that they pose a threat to the entire economy—and when they do, central banks should raise interest rates to deflate them. Although most central banks have ignored asset prices, the Bank for International Settlements (BIS, the central bankers’ bank) has been sounding the alarm for years. Its latest annual report expresses deep concerns about the surge in share prices in America. Charles Goodhart, a member of the Bank of England’s Monetary Policy Committee, has also argued for several years that central banks have concentrated on too narrow an index of inflation. The focus on the CPI, he says, is one of the main reasons why monetary policy was too lax in Britain during the property bubble in the late 1980s, and then too tight in the early 1990s. In a recent paper†† he argues that housing and financial assets should be included in some way in a broad inflation index. But in practice this would be tricky, because asset prices are volatile and hard to interpret.

Subject: Why Comcast?
From: Terri
To: johnny5
Date Posted: Sun, Feb 20, 2005 at 12:33:24 (EST)
Email Address: Not Provided

Message:
There is a difference between the entire market having a price earning ratio of 30, and an individual corporation. Comcast has good revenue, but high expenses for improving cable capability. When improvements taper off you are left with lower costs and the fine revenue stream. So, the price earning ratio is higher now than it will be. That is the thinking. The cable franchise has competition, but not much. Debt is moderate. A reasonable investment. Comcast by the way has management that is reliable and trusted. We have to think flexibly.

Subject: Re: Why Comcast?
From: johnny5
To: Terri
Date Posted: Sun, Feb 20, 2005 at 14:31:54 (EST)
Email Address: johnny5@yahoo.com

Message:
I used to be the biggest couch potato terri and let the cable wash over me and rinse my problems away, but now I watch cspan off their website and check out dvd movies from my library if I watch them at all - I quit watching cable 2 years ago. Now with high speed internet on my verizon wireless cellphone I only need a POWER cable coming into my trailer. My buddies in japan watch movies and tv on their 3G cell phones while they ride the bus - I don't think they have had cable ever. If china keeps up with thier satellite plans who will ever choose a wire over a wireless connection for anything? satellite radio, satellite tv, cellular tv and radio etc. If comcast can transition into this market quickly - they could take over the wireless delivery of all this entertainment. I know when cellphones got rolling I cut my landline about 5 years ago. Has Warren made costly mistakes in the past or does he usually only win? Your commentary is really educational terri - thanks for all the input. I could be watching the daytona 500 if I still had cable instead of reading all these interesting financial analyst papers.

Subject: Re: Why Comcast?
From: Terri
To: johnny5
Date Posted: Sun, Feb 20, 2005 at 19:32:24 (EST)
Email Address: Not Provided

Message:
Investors make mistakes, but when you pay reasonable prices the mistakes tend to be softened. Comcast has competition, but they are quite competitive. Buffett also has just bought Proctor and Gamble shares to go along with the Gillette shares that will be merged to P&G. P&G has competition, but are they ever competitive.

Subject: 1720 Carry Trade - Credit Ballooned?
From: johnny5
To: All
Date Posted: Sat, Feb 19, 2005 at 15:53:12 (EST)
Email Address: johnny5@yahoo.com

Message:
I don't have access to the forumals used in asset allocation modeling - but has anyone done a study not just of 10 year analysis like the BHB determinant paper but used these models with 1920's data to see if they would have predicted the 1929 collapse? http://www.institutionaladvisors.com/pdf/050210 JAY TAYLOR INTERVIEW.pdf HOYE: Yes. The first big reckless central banker was John Law in Paris during the bubble of 1720. He was celebrated so long as the financial party was on and the market didn’t crash. But when it crashed, he then had to have a false passport and a disguise to escape France with his life. TAYLOR: He may have lost his head. HOYE: In more ways than one. For those who think a central banker can keep inflation going forever, Law had 8 printing presses going in Paris. And then when the mania collapsed, the public demanded to see the plates destroyed. England was on a gold standard and was not printing money, but with the carry trade running full blast and as asset prices soared, credit ballooned. Speculation is fungible, and it doesn’t matter what the tout is, so long as it soars, it creates credit. Sterling was backed by gold, so London’s bubble was accomplished with a huge expansion of credit. Paris enjoyed that plus a huge printing of currency. In the crash, agents of the boom suffered a devastating loss of esteem. TAYLOR: Of course, now, Ben Bernanke has reminded us that with advanced technology, we have digital money and helicopter money. We are not limited, as was John Law, to just 8 printing presses! HOYE: Well, I think the market will disappoint even the most ambitious of today’s central bankers. And the thing to understand is that unless they go to a pure paper inflation—which would require them to chew through the whole credit market—that would provoke such an uproar that it would force them to quit it. So here we are: it’s a credit inflation, which depends on margin. As long as the prices are going up, everything is fine and it doesn’t matter that short rates are going up. The cost of money doesn’t matter if you know you can double your money every six months. And once the contraction starts, I suggest that it overwhelms the ability of the Fed to pursue its portion of credit creation. I’m not saying that the Fed is going to suddenly tighten. No bloody way—not willingly! But the whole system is going to tighten as all the leveraged “liquidity” disappears. TAYLOR: Because the private sector or the economics don’t allow it to generate returns any longer. So, out of economic necessities, start to turn their non essential items into cash and repay debts? HOYE: As prices start going down, it gives undeniable power to the margin clerks. And their job description is vastly different to that of your typical central banker. TAYLOR: The margin clerks and I would guess it also will involve the fractional reserve banking system overall? HOYE: Yes. TAYLOR: Let me understand. As prices drop, the loan officers and margin clerks at brokerage houses and in banks begin to worry that their clients won’t be able to repay their loans, so they ask for more and more margin—which then triggers further liquidation because people have to sell non essential items to raise cash to meet margin requirements. That then results in a collapse in the value of less liquid assets relative to cash and the ultimate liquidity, namely gold? HOYE: That’s happened many times but, at the top, the street ardently believes that “this time it’s different.” Some years ago, a big mining company spent a lot of money to solve the problem of forecasting the business cycle. In order to make sure the study was impartial, none of the researchers had had any courses in business or economics. The top macroeconomic models were then hired and, when tested, were found inadequate. While those inadequacies were acceptable within the macroeconomic fraternity, the modeling was considered impractical within such a cyclical industry as mining. Much of this work was done before the stock bubble launched and one program was fascinating; this was the attempt to use 1920s data to forecast the monumental reversal of the economy in 1929. A number of macroeconomic models were tried, then modified with some breakthrough mathematics in geophysics, and one of the most important events in financial history couldn’t be anticipated. The group did put together an approach to the big financial events that has been reasonably successful. Within this were the conclusions that in the final stages of a great inflation in either tangible or financial assets, the growth curves become skewed. At the time, we tried to find proof that skewed curves were mathematically unsolvable, but it could not be found. Perhaps this proof may have been accomplished since, but the members of this research group have gone on to other endeavors. But I found no reason to think that macroeconomic modeling would be successful in our go-around with sensationally skewed growth curves. That is just a fancy way of describing the high volatility that has accompanied every bubble era. TAYLOR: A big mining company was spending money and time to find a mathematical proof that skewed curves were unsolvable. Why? HOYE: Glad you asked. So that we could be confident that the economic establishment would be unable to predict the top of the next great financial bubble. It seems that to the establishment it was unanticipated, had an unpredictable collapse and, as instructed by Alan Greenspan, et al., couldn’t even be identified until it was over. http://www.siliconinvestor.com/readmsg.aspx?msgid=21062799 In 1929 we had the stock market in a mania stage with 90% debt and the major cities in the northeast in a commercial building boom even though monetary policy had been tightening for a while. The yield curve was pretty flat in the 6% range, homes were not highly leveraged, savings rates were still high even though consumer spending and borrowing was at records not seen up till that time and we had budget and trade surpluses. Now compare then to today's imbalances and it is downright scary. Perhaps Fannie Mae at over 4 year lows is one of the first signs of perhaps a major credit bust coming and reversal of the carry trade benefits. looking at the charts here - tell me why there is going to be high growth in the american stock market over the next 10 or 20 years. http://www.chartingtheeconomy.com/Stock-Valuations205.html Conclusion This report establishes a direct correlation between GDP, corporate profits and stock valuations over the long term. The purpose of this report is not to forecast the rate of future growth in any of these categories. It is to give perspective on stock valuations today. Even if you assume future growth is at historic rates, stock prices are way out in front of corporate profits. If you assume that corporate profits have benefited in the past several years by potentially unsustainable factors such as low interest rates, low capital spending, favorable tax rates, and high productivity gains, it becomes even more difficult to see how corporate profits can support stock prices at current levels. Why are my relatives being told to put their 500K 65% in US stocks?

Subject: Portfolio Allocation
From: Jennifer
To: johnny5
Date Posted: Sat, Feb 19, 2005 at 18:14:32 (EST)
Email Address: Not Provided

Message:
Vanguard Wellington Fund is 65% stocks and 35% bonds. Balanced Fund is 60% to 40%. Wellesley Fund is 40% to 60%. Retirement Target 2015 is 50% to 50%.

Subject: Re: Portfolio Allocation
From: johnny5
To: Jennifer
Date Posted: Sat, Feb 19, 2005 at 19:20:47 (EST)
Email Address: johnny5@yahoo.com

Message:
Ok so it's 1920 or 1915 or 1925, and my uncle's financial planner put's 500K of his money into 65% in US stocks and 35% in US bonds - he finds a good company like vanguard with really low costs cause those are important - does his proper 'asset allocation' as the BHB determinant paper states - save his butt in 1929? How long after 1929 does it take my uncle to recover his 500K investment being that the asset allocators strategy didn't seem to save his butt. Does my 62 year old uncle live to see any recovery or does he die from a stroke in october 29 because his ignorance made him think he was gonna be a OK?

Subject: Yield Curve - low grade bonds
From: johnny5
To: johnny5
Date Posted: Sat, Feb 19, 2005 at 16:04:07 (EST)
Email Address: johnny5@yahoo.com

Message:
CONT: TAYLOR: But with the Japanese being able to borrow so cheaply in their own currency and then buy higher-yielding dollar assets, and with the dollar getting stronger, wouldn’t there be an inclination for them to keep doing that for awhile? HOYE: That is best answered by looking at the yield curve itself. This is how the post-bubble scenario goes. The lower grade bonds are already selling off. But at some point they will sell off further, and there will be no liquidity in them, and then you get credit downgrading because weakening commodities suggest weakening earnings; weakening earnings suggest inability to service debt, and then you get into the credit rating problem. Following a bubble, this process can get so bad that it even pulls down the prices of long Treasuries. So once the mania ends, short rates will come down, long rates will go up. TAYLOR: This is exactly John Exter’s inverted liquidity pyramid. As people look for liquidity they sell longer-term, less liquid assets, and go to the most liquid assets so that people panic into liquid assets? HOYE: Yes, so that gets back to the real definition of liquidity, which typically has been found in gold and short-term bills in the senior currency. We’ve advised bond traders not to even think about whether the Japanese are going to stop buying the long bond or not. If they stop buying the long bond, will that drive the dollar down? No, because when the curve reverses, where they may have been buying the long bond, they will stop doing that and they will begin buying the short end of the curve. And that is why I am not concerned about any further downside in the U.S. dollar. The dollar crisis will occur when it becomes too strong. TAYLOR: Corporations have had great profits in 2004, and they are building up a huge amount of cash or they are buying their own shares. But they don’t seem to be borrowing much or using the cash they have to invest in plant and equipment. That, along with the fact that corporate insiders have been selling their own shares en masse, suggests to me that the folks who manage corporate America are not overly optimistic about U.S. business prospects, even though profits have been so high. Would you agree and do you see any long-term significance of the cash buildup of American corporations? HOYE: Cash is at a 35-year high. You have had a huge buildup of plant and equipment during the ’90s boom. One of the features of past post-bubble contractions is that corporations with cash keep it because they get concerned about their AA or even AAA credit rating. And then at the same time, banks will only lend to AAA accounts. So corporations stop spending, and banks stop lending. It’s classic. TAYLOR: So the Fed can’t expand the money supply when that happens? HOYE: Yes. Central banks can increase reserves but if corporations don’t borrow, that’s it, game over. That’s why Keynes and all that bunch just went crazy about people hoarding money in the 1930s. Keynes said that if you saved a schilling, you put a man out of work. So now in the U.S. and Canada where we have adopted the Keynesian model, we are now down to virtually a zero savings rate. So if Keynes was right we should have 100% employment. He was a flaming idiot. TAYLOR: He was a flaming bunch of things, but . . . I’d like to get back to the topic of commodities. Jimmy Rogers, who we interviewed on a couple of occasions in this letter, is extremely bullish on commodities. He told me that lead would outperform gold and so far, I think he has been right. What would you tell Jim Rogers if he challenged you with that statement? HOYE: The debate would likely be his opinion versus financial history. TAYLOR: He sometimes reads this letter, so that statement might make some sparks fly! HOYE: Well, he is a perma-bull on commodities. And financial history suggests that no one sector is good forever. Our gold/commodities index includes crude oil, copper, lead, zinc, aluminum, nickel, as well as the grains, and gold has been outperforming commodities for almost a year now. I concluded the research by about 1980 and said that once that commodity blow-off was over, a long bull market could start. When taking this concept to institutions in 1981 and 1982, the standard response was “no,” the Fed will keep printing and there will continue to be inflation. They had been dismayed by their returns on stocks and bonds during the “old” era of inflation. So I came up with the line that, “no matter how much the Fed prints, stocks will outperform commodities.” And that baffled the street for some time. Some are still unclear about the reality of inflation in financial assets. The only reason I could come up with that line was because in every new financial era, stocks outperformed commodities. So then the next difficult part—it is really difficult—is that no matter how hard the Fed tries to print, you still get a contraction. And that I think we should know more about that by October. But I would enjoy having a drink and discussion with Jimmy Rogers. TAYLOR: Perhaps that could be arranged when you come to New York to speak at the next CMRE? HOYE: Sure. TAYLOR: Part of Jim Rogers’ argument hinges on China. He thinks, as do most people, that economic growth in China will continue at a torrid pace for as far into the future as the eye can see. Do you have any thoughts on the influence of China in the post-bubble era? Might demand from China overwhelm normal post-bubble dynamics? HOYE: First step is that in the 70s and 80s it was Japan that was the engine of growth and was buying industrial commodities. What’s more, they had the most brilliant policy makers in history. But then tangible asset speculation collapsed so the world could enjoy another financial bubble. But the best model is the U.S. after the 1873 stock bubble. There were huge migrations of people into the U.S. The U.S. was building railroads and canals. It was a very vibrant and innovative economy. But it was subject to its own domestic speculative excesses. It was also subject to the availability of credit from the world’s financial capital in London. So until the global depression bottomed in 1895, the U.S. had bull markets and very sharp collapses, but nonetheless, England and Europe had a depression. The U.S. was within that envelope, and I believe China is going to be vulnerable to its own speculative exc esses and vulnerable to the availability of credit in the world’s financial capital. It’s nice to have them becoming more and more free, but we saw the same pitch in 1929 when the end of socialism in Europe was seen to be a great opportunity for the market and industry in the U.S. That came to play in the 1990s when another collapse of socialism was again seen to provide a great stock market. They were going to sell all kinds of BMWs to the people in East Germany. But if we should go back to an economist by the name of Say, Say’s Law said if you must consume you must produce. The Chinese are in the anomaly of consuming immediately a lot of raw materials from elsewhere. At some point they will develop iron deposits, copper mines, and coal deposits on their own. TAYLOR: I’ve noticed recently that the Chinese are cutting back on some plans to build nuclear power plants. Might this be the start of a contraction in China? HOYE: It’s possible that the authorities who are deciding on nuclear power may be concerned about running out of money. Let me quote from St Luke. “Which of you intending to build a tower has not sat down first and counted the cost? Whether he has sufficient to finish it. Lest happily, if he has laid the foundation and is not able to finish it, all behold and begin to mock him.” (Luke 14:28-29). But then again, perhaps the Sierra Club has opened a chapter in Beijing. TAYLOR: It might be appropriate for the U.S. as well, no? HOYE: Well, yes, for everyone who has become over-extended on the party. TAYLOR: You have expressed the view that investors will seek gold as liquidity along with T-Bills. But do we have any evidence of investors doing that in recent times since policy makers have gotten rid of the barbaric notion of gold as money? HOYE: Yes we do. At each of those bubble tops I mentioned earlier, from 1720 to recent, all participants including government agencies were caught up in the party. Nobody wanted prosperity to end. But it ends anyway. I might mention this for your gold readers who have the notion that the club of central bankers can run gold down. The best argument against that is to go back to 1946, which was the secular low in interest rates. Then they started to rise, naturally. So when rates approached 3%, policy makers got concerned because it was very easy to figure out that this was going to increase the cost of servicing the debt. So then the Treasury started buying bonds off the market in order to keep rates from rising above 3%. Then in the 1960s when it was at 6%, they were still at it. And in fact they got all excited about their promotion to buy bonds and called it “Operation Twist,” whereby they were going to drive long rates down. But eventually rates got up to 15%. Now, the central bankers with the 1990s’ bubble, had history on their side. The price of gold was going to go down anyway. So then it looked like they were doing it. But they have never been tested by a really big recovery in gold that you can get following a bubble. But this next bear market in stocks and corporate bonds will set up the conditions for a real move in gold that will test just how powerful the central bankers are. And I think they will be just as unsuccessful in keeping gold down as the U.S. policy makers were in keeping interest rates down through the 1960s and ’70s. TAYLOR: In your “ChartWorks” publication of January 25, you addressed the gold markets; you noted that the U.S. dollar and gold were poised for a joint advance. Could you tell our readers what prompted you to predict that and could you also provide some indication of what your target levels and time frame are for the advance in both the dollar and gold? More asset allocator advice: You have already lost the easy money in metals waiting on your asset allocator friends to clue you in. http://www.siliconinvestor.com/readmsg.aspx?msgid=21038945&srchtxt=asset allocation Deutsche Bank AG last year began encouraging some investors to include in their ASSET ALLOCATION decisions a 3% stake in commodities, including metals. Morgan Stanley's Individual Investor Group also recommends investors increase their short-term position in alternative investments, which includes, among others, metals and managed futures funds, in which a manager actively trades commodity and financial futures, including metals contracts. In many cases, Wall Street's interest in metals is coming after the easy money already has been made. Metals prices have moved higher, and many metals-related stocks have soared recently. As copper prices essentially doubled during the past two years, shares of Phelps Dodge Corp., the Phoenix-based copper giant, have tripled. Nickel in December averaged $6.30 a pound, up from $1.89 a pound in 1998. That's the highest price the metal has seen in 15 years. Silver is up about 40% for the past two years, and gold is up more than 50% since Sept. 11, 2001. But some are betting that the bull market in metal prices isn't over. For one thing, China's growth continues to absorb vast amounts of the world's metal production, particularly steel, copper and aluminum. Where is the long term proof that asset allocation adopted in just your own country as your financial planner recommends it will save your butt?

Subject: Re: Yield Curve - low grade bonds
From: Terri
To: johnny5
Date Posted: Sat, Feb 19, 2005 at 16:16:42 (EST)
Email Address: Not Provided

Message:
What is needed is to answer the question is a particular asset reasonably priced now. I say reasonably for bargains are awfully tricky to find now. If an asset is reasonably priced now, chances are high you will be fine years from now.

Subject: Where is the cheap stuff?
From: johnny5
To: Terri
Date Posted: Sat, Feb 19, 2005 at 16:36:13 (EST)
Email Address: johnny5@yahoo.com

Message:
Thanks terri - I will try to find some reasonably priced assets - mr roach doesn't think I can: http://www.morganstanley.com/GEFdata/digests/20050218-fri.html#anchor0 Moreover, I have long argued that the Fed’s success has come at a real cost. Courtesy of extraordinary monetary accommodation and a building sense of froth in asset markets, wealth creation shifted seamlessly from equity to property markets, and American consumers migrated from the job- and income-dependent spending models of yesteryear to the asset-based mindset of today. As a result, households have been more than willing to take the income-based personal saving rate down toward zero, while, at the same time, turning to the home mortgage refi market as the principal means to extract newfound purchasing power from increasingly overvalued property assets. And, of course, US consumers have gone deeply into debt in order to monetize this claim on the asset-based portion of their income stream. But now the Fed faces a most perilous post-bubble exit strategy — taking real interest rates up to a more normal level. That, in my view, will be an exceedingly delicate exercise. Still suffering from subpar job creation and income generation, the overly indebted, saving-short, and asset-dependent American consumer is exceedingly vulnerable to higher interest rates and to the corrections in overextended asset markets that invariably occur in a Fed tightening cycle. The US central bank bought time with its “prevent-Japan” drill in the immediate aftermath of the bursting of the equity bubble. But that time has now run out as the Fed seeks to normalize interest rates. Ironically, the US probably has more to lose from a consumer capitulation than Japan. In large part, that’s because the excesses of America’s consumer culture dwarf the role of the Japanese consumer. The US buying binge of recent years was sufficient to boost consumption to a record 71% of real GDP in early 2003 — a sharp breakout from the 25-year trend of 67% that prevailed over the 1975–2000 period. By contrast, the Japanese consumption share has hovered at only around 55% of GDP since 1990. Japan knows very little of the rampant consumerism that has dominated America’s post-bubble experience. That could well come back to haunt a US consumer who is far more overextended than the Japanese counterpart

Subject: Re: Where is the cheap stuff?
From: Terri
To: johnny5
Date Posted: Sat, Feb 19, 2005 at 17:05:25 (EST)
Email Address: Not Provided

Message:
Notice I did not suggest what is cheap, because I do not really know just now. Where am I looking? Financials and materials and drugs. Oil? The earnings could not be better, but do I want more energy shares? Warren Buffett bought a chunk of Comcast. Hmmm.

Subject: Re: Where is the cheap stuff?
From: johnny5
To: Terri
Date Posted: Sun, Feb 20, 2005 at 10:07:52 (EST)
Email Address: johnny5@yahoo.com

Message:
I thought the Holy One was sitting on a horde of cash waiting on a crash?? This is from about a year ago. http://www.prudentbear.com/archive_comm_article.asp?category=Guest Commentary&content_idx=31605 The financial markets are leveraged for a crash The only question is when. The financial press has been noticing that the small investor is still putting massive sums of cash into stock mutual funds, while corporate insiders are, on average, selling like crazy. The average investor, who has benefited from increased stock market prices through January 2004, is just like the major hedge funds who are sitting on “pins and needles.” They have one finger on the buy button and another finger on the sell button and are ready to jump one way or the other at a moment’s notice. We predict that before the spring of 2005, the vast majority of investors and hedge funds will be hitting the sell button. The average investor is constantly told by Wall Street that he is an investor but it is becoming clear, in this market, that there are only speculators. Meanwhile, investors such as Warren Buffet are already sitting on over $32 billion in cash with at least $12 Billion in foreign currencies that benefit from a falling dollar. Why is it, then, that some of the biggest and smartest money managers are already in cash? Don’t they know that with Japan buying our 10-year Treasury yield down to 3.75 percent, the United States will have another mortgage REFI boom and there will be great corporate earnings released this April? We expect that Wall Street will be hyping stocks as cheap to the investing sheep. The problem for the American investor and, consequently, world stock and bond markets, is excess and unsustainable leverage. Stock and bond prices can only be sustained if interest rates are held artificially low. The riskiest stuff such as internet stocks, junk bonds, and emerging markets, have gone up the most in price and are “flying pigs” priced for perfection. The financial markets need constant jolts of new stimulus to keep them up in the air. The Fed has given our stock and bond markets a major simulative jolt by cutting the Fed funds rate to 1 percent and holding it down even as inflation is starting to “heat up”. Whether the Fed likes it or not in this election year, rising inflation will “take the punch bowl away.” A major market event seems inevitable. Meanwhile, we wait patiently for the market to tighten, forcing the Fed to follow. Alan Greenspan has encouraged new credit creation primarily through the borrowing against single family homes to levels that, just a few years ago, could not be contemplated. Currently, our financial system has at least $2 Trillion of mortgages directly financed at 1 percent with Fed Funds and REPO, and the financial system including banks, Wall Street, the GSEs and hedge funds, puts total leveraged finance closer to $10 Trillion. Everything is financed with almost no money down and anyone can get credit. Take a moment to examine the terms you can get today on a new car, home, a mortgage, treasury to junk bonds, commodities and foreign currencies. The capital markets have become one massive casino – anyone and everyone can come in and play and everyone’s credit is good! Our financial system supports about $35 Trillion of debt and we have virtually no savings. Very few people believe they are gambling with their own money because borrowing with other people’s money to place the bets has become so easy. The market is really wild! Money is being made in the leveraged carry trade or in speculating on margin. Even the average patriotic homeowner with a variable rate mortgage is borrowing short-term to buy stocks, and to pay the bills. The NASD has finally come out and warned brokers that they should not be suggesting to their individual clients to borrow against their houses to buy stocks. This warning may be too late! What happens when investors want to reduce their risk and need to sell but can’t find a buyer? The old story from the stock market crash of 1929 comes to mind about an investor who kept buying a stock from his broker that continued going up in price. Finally, the investor asked his broker to sell. The Broker responded, “Who am I supposed to sell the stock to? You’re the buyer!” That is why the elephants like Warren Buffet and other smart players are already in cash! You can sell a few million dollars worth of stock without rocking the market too badly. But, can you imagine what might happen if some really large hedge fund or Wall Street firm wants to unwind a small $100 billion of levered “cash and carry” trade in mortgage securities. What if a few hedge funds decided to sell a measly $500 billion in mortgage securities? They would be trapped because the markets are just not that liquid, especially when everyone wants to sell! That’s why it’s important to be in cash before the crash! The situation today could be much worse than 1929. In 1929, the major fault in the financial system was stock market leverage. In the 1920’s, stocks could be bought with 10% down! Those who waited to sell stocks were crushed. Stock prices triggered margin calls and forced them to sell. This is not a virtuous cycle; it’s called de-leveraging and it causes a crash. Paying off debt reduces the money supply. [Money is borrowed into existence and paying down debt destroys money]. The problem for our financial system is that in many asset classes, the leverage is extreme. In order to run a leveraged position in mortgage-backed securities, a firm may only need 5 percent equity and can run leverage at 20 to 1. This leverage is way beyond the leverage that crushed stocks in 1929 to 1934. A small rise in short-term interest rates is all that is necessary to trigger a sale of mortgages and treasuries by financial institutions. With respect to bonds, a 5 percent fall in prices is not major and can occur very quickly. Unfortunately, a 5% fall in bond prices could wipe out 100 percent of a financial player’s equity! As the prices for stocks and bonds begin to fall and you still own them, you may wonder who in the world you can sell to, because everyone else is selling. Of course, you pray you can sell to a central bank. Japan’s central bank has already financed half of the United States treasury deficit; that leaves the Federal Reserve. Can you imagine what will happen to money growth in the United States if the Federal Reserve suddenly has to buy $200 to $500 Billion in Treasury and GSE securities? Moreover, the direct leverage in the financial system is only “the tip of the iceberg” of total leverage. Our financial system is held together with more than $150 Trillion of notional derivatives and “spit and bubble gum”. A crash in stocks or bonds will shatter the derivatives market. It is inevitable that major counter parties to these contracts will fail. When that occurs, you do not want to be on the other side of the trade. Indeed, Right Now and Right Here in River City, the U.S. financial markets are nothing more than a huge “Long Term Capital.” The pressure points are everywhere. In the silver, copper, gold and other commodity markets, the open interest in long and short futures positions dwarf the actual physical markets. Steel is being horded and there is likely to be an obvious world shortage by July. Existing stock piles of copper at the current rates of consumption and production may be gone by June. How does a metal exchange operate when there is no metal for delivery? In silver, there are well over 1,000 individuals and financial institutions who, at today’s prices, could buy each and every last ounce of silver in silver bars above ground. Meanwhile, the demand for silver has outstripped the annual supply for the last 14 years. In many cases, the short financial derivative positions in financials can not possibly be delivered in physical form. Exchanges will suffer financial distress and likely need aid; smaller counter parties will be wiped out. Brokerage firms will fail. The biggest hedge funds and derivative players, such as Fannie Mae, Freddie Mac, JP Morgan Chase, as well as one or more Wall Street firms, may need to be effectively taken over by our central bank. Ultimately, if an investor is risk adverse, there are very few places to keep your money safe. Holding gold coins works because, by weight, the value is high. For silver, if you have a safe place to store it, physical holding is certainly preferable to leaving it in any financial institution or exchange. Short-term Treasuries, bank CD’s (but only up to $100,000 per institution), I-bonds, and TIPS are a wonderful place to sit out any potential storm. Asset managers who run bearish funds are worth a serious look. The stock markets have been under pressure since February and we sense the anticipation of great pain when interest rates go up for those who are long stocks and bonds. If we must pick a scenario, the Federal Reserve and Japan’s Central Bank engineered one last rally in the 10-year Treasury to get the mortgage money machine pumping “lucky bucks” into the consumer’s pockets before the November election. This may only work until June. For investors knowledgeable about the Treasury financing cycle, following is the most likely time frame when we expect the “wheels might come off and the markets and roll over a cliff”: - In January to March of this year, the U.S. Treasury financing need was $177 Billion and the Japanese bought over $142 Billion (15 trillion Yen) of our debt. (In the February 2004 refunding, Asian central banks bought 50% of the auctions, which caught the world’s attention.) - In April to June, the U.S. Treasury receives both quarter-end and annual tax payments, keeping the financing need a modest $75 Billion. - In July to December, the U.S. Treasury has to raise $300 Billion. The August and November re-fundings will be critical. If the Japanese and the rest of Asia don’t come in to buy $200 Billion, bond prices are virtually certain to roll off that cliff. Our entire deficit needs to be financed with newly printed American, Asian or European central bank currency. Worse yet, the Fed funds rate is 1 percent, and the 10-year Treasury note yield is 3.75 percent. In the first 2 months of 2004, the CPI was up 0.8 percent, or a 4.8 percent annual rate. Even if the CPI settles down to 0.3 percent a month for the rest of the year, the CPI for 2004 will be tracking 4 percent! Inflation from rising commodity, oil, and a weak dollar, is seeping in. No investor in their right mind will accept a 10-year note yield of 4 percent with 3 to 4 percent inflation. By July, just in time for the Treasury’s August re-funding, it will be clear that inflation is too high to justify a Fed funds rate of 1 percent, and 10-year Treasury rates of 4 percent. The big money players in the “carry trade” aren’t known for being totally blind or stupid. These big owners of Treasuries and GSE bonds will want out! The carry trade will have to test the “Greenspan put” and we do not intend to be long stocks or bonds when the test comes. Indeed, this spring would be an opportune time to go to cash using any rally to get liquid, and out of margin debt. Going short on some of the “flying pigs” is greedy, but tempting, because if the markets go down with a thud and we are not positioned properly, it could be devastating to our ego. However, for the average investor who is risk adverse and for any investor who considers losing a dollar, worse than making a dollar, our advice is to get into cash and be prepared to wait until early 2005. Good hunters know how to wait and good things happen to those who are patient, like buying what they like at half price! But remember, you can only afford to buy assets at a discount if you have the cash. If you understand this, you can truly appreciate Warren Buffet’s greatest secret - having the patience to sit on cash earning little but losing nothing, until the great deals come his way! Nothing beats cash and patience in the long run.

Subject: Warren Buffett Invests
From: Terri
To: johnny5
Date Posted: Sun, Feb 20, 2005 at 11:22:12 (EST)
Email Address: Not Provided

Message:
Warren Buffett just bought a chunk of Comcast. Buffett uses cash all the time when there are values to be had. Staying in cash and timing the market is foolish, when there is a value 'buy.' Also, cash to Buffett means short term investments or hedges. These Prudent Bear folks never seem to have an idea other than 'hide.'

Subject: International Diversification
From: johnny5
To: Terri
Date Posted: Sun, Feb 20, 2005 at 14:08:28 (EST)
Email Address: johnny5@yahoo.com

Message:
You are right Terri. ALl the models say timing the market is foolish - especially that determinant of portfolio performance 2 paper. Asset allocation is the key factor - but read this - it comes from the same issue of the Financial Analysts Journal that the determinant paper was published in: http://www2.cfapubs.org/faj/issues/v51n1/abs/f0510089a.html Why Not Diversify Internationally Rather Than Domestically? Bruno H. Solnik Because total risk for a portfolio declines not only with the number of securities included but with the degree of independence among these securities, substantial risk reduction results from diversifying a portfolio across foreign as well as domestic common stocks. http://www2.cfapubs.org/faj/issues/v51n1/toc.html So why is everyone so focused on one nations for thier investments?

Subject: Investing in Long Term Bonds Since 1973
From: Terri
To: All
Date Posted: Sat, Feb 19, 2005 at 15:29:54 (EST)
Email Address: Not Provided

Message:
Please help me understand: There is a refrain that tells us how poor the return to Social Security has been. I do not understand. Since the Social Security system began to build a surplus in 1983, the return to 30 year Treasury bonds has been above 9% a year. How is such a return poor? Long term Treasury bonds have returned over 9% a year these last 10 years. Where is the problem? Long term treasury bonds have returned over 9% for 30 years. Why the complaints? For Social Security to be invested in bonds these last 5 or 10 or 20 or 30 years, sure seems fine to me.

Subject: SS asset allocation
From: johnny5
To: Terri
Date Posted: Sun, Feb 20, 2005 at 15:43:29 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www2.cfapubs.org/cfa/issues/v32n2/abs/c0320077a.html Strategic Asset Allocation for Individual Investors: The Impact of the Present Value of Social Security Benefits Steve P. Fraser Financial Services Review vol. 9, no. 4 (Winter 2000):295–326 The authors study the optimal asset allocation of an individual's financial portfolio if the present value of the expected Social Security retirement benefit is considered as a part of that portfolio. Because the benefits are expected to increase with inflation and are guaranteed by the U.S. government, the authors consider the benefits similar to those of Treasury Inflation-Protected Securities (TIPS). They include synthetic Social Security benefits (i.e., TIPS) in portfolios and calculate the optimal composition of the combined portfolios for various individual circumstances using four different asset allocation strategies. In all instances, the optimal portfolio composition with Social Security benefits contains more stocks than would have been optimal without the Social Security benefits.

Subject: Re: Investing in Long Term Bonds Since 1973
From: jimsum
To: Terri
Date Posted: Sat, Feb 19, 2005 at 18:40:21 (EST)
Email Address: jim.summers@rogers.com

Message:
Very little Social Security money has actually been invested in bonds, most goes out as benefits as soon as the money comes in. You are looking at the rate of return for the small fraction of Social Security taxes that were actually invested. Critics are talking about the notional return of Social Security for individuals; which is basically the rate of return that would be required in a private investment that has the same costs and expected benefits as Social Security. Since Social Security taxes and benefits are more-or-less tied to the rate of growth of GDP; Social Security 'returns' are going to be about the same as GDP growth, much less than we expect from private investments or from Treasury bonds.

Subject: Many Happy Returns
From: Terri
To: jimsum
Date Posted: Sat, Feb 19, 2005 at 20:31:38 (EST)
Email Address: Not Provided

Message:
Right Jim, But, I am first after the notion of trust fund returns. After all, there is a trillion dollar trust fund and growing. Next, remember that Social Security covers survivors and disability payments. Social Security is indexed to wage increases. My father collects more than 25,000 dollars a year. After all, he worked many years. This is the same as drawing from a 500,000 corporate bond account with a wage index increase built in. Not bad.

Subject: Re: Investing in Long Term Bonds Since 1973
From: johnny5
To: jimsum
Date Posted: Sat, Feb 19, 2005 at 19:13:06 (EST)
Email Address: johnny5@yahoo.com

Message:
I am confused - how does stock or bond returns outpace the underlying GDP growth of the country they are based upon over a very long amount of time? If the USA grows 3% per year - over time doesn't everything else have to come into line with that? If the world GDP falls 3% per year for a sustained term - can anything be a good investment over time?

Subject: Returns
From: Terri
To: johnny5
Date Posted: Sat, Feb 19, 2005 at 20:36:12 (EST)
Email Address: Not Provided

Message:
Long term real growth has been 3.4%. Add inflation and the nominal rate is about 6.8%. Add dividends and you get about 10.2%. Add an increase in the price earning ratio, and there you have almost 11%. Dividends are important!

Subject: Fannie Mae and Freddie Mac
From: Terri
To: All
Date Posted: Sat, Feb 19, 2005 at 11:16:53 (EST)
Email Address: Not Provided

Message:
Again, I have been wondering why there should be systemic risk in Fannie Mae and Freddie Mac. The near government agency status of the corporations has allowed for lower middle class mortgage for decades, and Fannie Mae has been moving to mortgage for lower income households that will shield the households from excessively priced debt. The hedging techniques used by Fannie and Freddie are fairly transparent and conservative. What then is the problem? The problem seems to be persistent lobbying by other finance corporations for more of the mortgage market. So, there is another conservative target.

Subject: Transparent?
From: Pete Weis
To: Terri
Date Posted: Sat, Feb 19, 2005 at 13:49:40 (EST)
Email Address: Not Provided

Message:
Terri. Why have Fannie Mae and Freddie Mac top execs been forced to resign? Why is 'everything is mostly fine' Alan Greenspan expressing such concern? We're learning - rather than being transparent that both GSE's have been hiding actual earnings in an attempt not to spook those who invest in their securities. On the surface it's obvious that both GSE's are very important to the US housing market - they provide nearly 50% of the mortgage money in the US. The threat to Fannie Mae and Freddie Mac comes from a number of different directions: They are, of course, 'holding the bag' when it comes to the housing market. They depend on homeowners to continue paying on their mortgages so that they can continue to service the bonds they have issued. If we do have a significant housing bubble in many US urban areas, about which Greenspan is finally becoming concerned, and there is a significant correction in the housing market then homeowners will almost certainly begin to default on greater numbers of these loans. This, of course, puts pressure on the ability for the two GSE's to service their bonds - this is there credit risk. The ability for homeowners to refinance their loans without penalty as mortgage rates dropped reduced homeowners payments which backed mortgage securities issued by Fannie Mae and Freddi Mac at higher rates. This has resulted in a loss of income for these companies. Interest rate increases not only threaten the housing market which is the backing for securities provided by these GSE's, but too sharp an interest rate increase threatens trillions in interest rate derivitive contracts. If bond investors get spooked by rising interest rates and/or troubles at Fannie Mae and Freddi Mac we could see much steeper rises in mortgage rates and long term rates in general. This is where systemic risk shows its ugly face (remember Volker's warning of a 75% chance of a financial crisis). This is also where JP Morgan & Citigroup with huge entanglements in interest rate swap derivitive contracts come into the picture as well as many other institutions including other large banks, insurance companies, etc. As I have posted before - Warren Buffet, after purchasing General Re, got a detailed look at these derivitive contracts and declared them 'financial weapons of mass destruction'. He went on the state that banking execs really had no understanding of the threat they posed. The bottom line - in a steady state interest rate environment Fannie Mae and Freddi Mac do fine, but when things begin to fluctuate strongly these two companies have difficult transitioning. That in itself is not a real problem. But the fact that Fannie Mae and Freddi Mac have become so overly important to our economy, its housing market, and the complex world of interest rate derivitive contracts is a very real problem. Could Greenspan and the federal reserve act fast enough with the proper methods to prevent a catastrophy? I bet Greenspan is asking himself that question and I bet they are running 'what ifs' and 'worst case scenarios' right now. They certainly better be.

Subject: Re: Transparent?
From: Terri
To: Pete Weis
Date Posted: Sat, Feb 19, 2005 at 14:51:08 (EST)
Email Address: Not Provided

Message:
Pete, you are right. But, but, but the accounting issues here were not to conceal loss, rather to take income swings that can and should be significant quarter to quarter and smooth them. This is a German accounting trick. The transparency is in the use of options and matching asset to debt in backing mortgages. I may well be wrong, but I do not find systemic risk here.

Subject: Nobel Prize winners failed!
From: johnny5
To: Terri
Date Posted: Sat, Feb 19, 2005 at 19:05:13 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.bis.org/review/r041011a.pdf It means that the actions taken by the GSEs to manage interest rate risk can have a substantial impact on interest rate volatility. And, it means that the exposures of major banks and investment banks to these GSEs is larger than in the past, measured relative to capital, and large relative to other major counterparties. Together, these changes mean there are a larger number of non-bank financial intermediaries operating outside the supervisory safety and soundness framework established for banking organizations, that are sufficiently large or integral to the financial system that their failure or anticipated failure could have major implications for the functioning of the markets in which they operate and their financial institution counterparties. ...Within the clearance and settlement infrastructure, economies of scale have led to high levels of concentration in some areas. Two institutions together now handle the vast majority of clearing business for U.S. government securities and the associated triparty repo market in which over $1 trillion turns over twice each day. The dramatic increase in the volume of transactions handled by the core parts of the payments infrastructure places substantially greater demands on the operations of those institutions. Moreover, many of the major payment and settlement utilities operate across national boundaries, raising complicated questions for the appropriate allocation of oversight responsibility. Alongside these changes in the relative size of institutions and in market structure, financial innovation has led to a dramatic increase in the complexity of the risk management challenge. The frontier of financial innovation inevitably advances somewhat ahead of improvements in the risk management and clearing infrastructure. The models used to assess risk in the more novel areas of finance are, by definition, less grounded in experience and less valuable in anticipating how prices and correlations change in conditions of stress. Consensus on the appropriate accounting treatment is less well established. With the dramatic increase in the scope of operations of the major financial institutions, the challenge of pulling together an integrated risk management framework that captures exposures across the entirety of the firm is much greater. The potential for conflicts of interest and opportunities for fraud are greater, placing significant burdens on internal compliance regimes. The changes in regulation and technology that have increased the opportunities for risk transfer mean that more risk may end up in parts of the financial system where supervision and disclosure is weaker and in parts of the economy less well able to manage it. The major U.S. banks and investment banks are more global in the scope of their operations, and their affiliates are a major presence in many of the countries in which they operate, in some cases with a larger share of financial activity than they have in the U.S. market. Payments and clearing arrangements are increasingly transnational in scope. But, the legal and supervisory frameworks for financial activity are still national, and are likely to remain so for the foreseeable future. And despite the development of a much more intensive and extensive network of cooperation among supervisory and regulatory and enforcement authorities, and movement toward an ever-higher standard of convergence in key elements of the regulatory structure across jurisdictions, the regime is inevitably uneven, with different standards across jurisdictions and therefore continuing opportunities for regulatory arbitrage. This is important for banks and financial institutions built around banks because of their access to the safety net and their special role in the payments system. Our approach at the Fed seeks to achieve this outcome for the major institutions for which we are the consolidated supervisor. But the basic argument for applying exacting standards for risk based capital, for liquidity management, and for operational resilience applies to a broader range of supervised and regulated financial institutions whose operations pose significant systemic implications for the financial system. This is particularly compelling in the case of the major GSEs, where the regulatory framework, capital regime and sophistication of the internal risk management framework need to be upgraded to a standard more commensurate with their risk profile and the risks they present to the system. http://www.gsereport.com/SSS/FannieFreddieandSystemicRisk.pdf Only fifteen years have passed since insolvency threatened a housing government-sponsored enterprise (GSE). However, memories are short, and both companies are vastly larger than they were in 1985. As we saw with Long Term Capital Management, even Nobel Prize winners can get it wrong with alarming consequences. Statistically speaking, it is only a matter of time before any management makes costly misjudgments. Almost every company can make major mistakes without imposing stress on our financial system. Even if these companies are large, they are subject to market and government regulation that does not permit financial intermediaries to expose themselves to excessive risk; if such dominoes fall, no others are nearby. Therefore, few companies occupy such strategic ground that their troubles will ripple across the country with alarming speed and danger. Fannie Mae and Freddie Mac are two such companies, and they are weakly regulated. In 1986, when Fannie Mae and Freddie Mac were one-tenth the size they are today, limited oversight provided adequate protection against market disruption. By the early 1990s, Congress recognized that systemic risk was increasing, and strengthened GSE regulation. Now that Fannie Mae and Freddie Mac are five times larger than they were in 1992, the need for broader regulation is urgent. As these two companies grow larger, systemic risk is not rising proportionately. It’s rising exponentially. Today, these two GSEs have grown so large that they need regulation consistent with the “precautionary principle” that compels the development of safety systems that become increasingly robust as danger escalates. Moreover, because the marketplace perceives that obligations of the GSEs carry the implicit backing of the federal government, banks and thrifts do not carry sufficient capital to cover default risk for their holdings of GSE securities Federal Reserve Chairman Alan Greenspan has warned House Financial Services Capital Markets Subcommittee Chairman Richard Baker against allowing the GSEs to take advantage of their ties to the federal government. According to the Chairman, “If the subsidy enables Fannie and Freddie to hold less capital, then bondholders and taxpayers may be at a greater risk if these government-sponsored enterprises need financial assistance in the future.” The second scenario is more probable than the first. This would be the occurrence of a significant loss at a GSE that results in pressure on management to “bet the bank,” i.e., increase financial risk by taking a large gamble to recoup the original loss. Betting the bank occurred at many thrift institutions that incurred losses because of a serious interest rate mismatch in the early 1980s, for example. Such risky gambles often compound initial losses substantially. The problem of a weak regulator is especially important in this scenario: it is not clear that OFHEO has the capacity either to detect the first loss or to act to prevent managers of a troubled GSE from trying to “bet the bank.” GSE managements do not recognize concerns that their missteps could plunge their companies into insolvency. However, the most dangerous financial failures of the past twenty years all have involved institutions that were considered beyond reproach. For example: • Long Term Capital Management (LTCM) was a multi-billion dollar hedge fund managed by Nobel laureates lauded as geniuses in derivative investment. In order to maintain above-market rates of return as it grew, LTCM took on riskier investment positions that plunged in value when the market unexpectedly turned. Many savings and loan institutions failed dramatically in the early 1980s despite serving their communities for decades, costing taxpayers $150 billion. • Orange County, California, was the largest municipal bankruptcy in U.S. history. This was the result of the county following a leverage-based investment strategy that could not withstand unanticipated derivatives losses. • Continental Illinois National Bank failed and this led the FDIC to provide $4 billion to repay debt that carried no explicit federal guarantee. This bailout was justified by the fact that other banks that did business with Continental Illinois might fail if Continental defaulted on its debt obligations. To justify their confidence, Fannie Mae and Freddie Mac rely on econometric models to protect their burgeoning investment portfolios against interest rate fluctuations. This is another way that the two GSEs resemble the LTCM hedge fund. If, as happened to LTCM, a GSE suddenly faces financial circumstances that differ from the predictions of its models, significant losses could occur. The high leverage and lack of diversity in assets of the GSEs could mean that, as with LTCM, the shock could cause failure of the institutions. Of course, even GSE management would acknowledge that their skill set is unlikely to earn anyone on their teams a Nobel Prize in finance. If it can happen to the very best when leverage is employed, it can happen to anyone. They have poor asset diversification, concentrated only in residential housing. This concentration means that a shock impairing a portion of the company’s assets is likely to devalue many other assets simultaneously; • They have only one-third the capital of large banks that hold a diversified asset mix; • According to Dow Jones Newswire1, the GSEs’ giant derivatives portfolios are “the glue that hold together their enormously leveraged businesses.” In 2000, only $35 billion in shareholder’s equity supported over $700 billion of notional derivatives risk. If only a few counterparties fail to perform, or if the GSEs hedge strategies have not adequately covered derivatives risk, this equity could disappear overnight; • Their earnings are propped up by large federal subsidies that are generating growing controversy. If these earnings fall, so do the long-term financial reserves of the companies. According to the Congressional Budget Office, 40 percent of their 1995 profits came from their government subsidies. • They have on retainer an array of lobbyists and ex-government officials that likely would be deployed to limit early intervention efforts by their regulator to manage a troubled GSE. Finally, a small financial regulator, the Office of Federal Housing Enterprise Oversight, with inadequate statutory authority, supervises Fannie Mae and Freddie Mac. The shortcomings of the regulator include: • OFHEO is subject to the annual appropriations process. The GSEs have used their lobbying strength to limit OFHEO’s appropriations; • The GAO has found that OFHEO lacks the regulatory enforcement powers that are possessed by other federal regulators, including the bank and thrift regulators and even the Farm Credit Administration, another GSE regulator; • OFHEO lacks the authority to put a failed GSE into receivership; and • OFHEO is located within the Department of Housing and Urban Development rather than at the Treasury, a department that would have the stature and motivation to protect OFHEO from political attack. Of course, it is not the prospect of large losses at a GSE alone that creates systemic risk. After all, the stock market dropped $3 trillion in value in 2000 without creating systemic danger. While there was substantial private pain due to the slump, much of it was absorbed by private institutions and investors that were unleveraged. Therefore, there was no contagion effect. If a GSE stumbles, the same cannot be said. Contagion is likely. When Continental Illinois failed in 1984, the Comptroller of the Currency warned that over 2,000 banks had made deposits or invested in Continental Illinois obligations and that over a hundred banks might fail if Continental closed without a bailout. Yet, Continental was only a $41 billion institution, about 25 times smaller than Fannie Mae or Freddie Mac. Many leveraged financial institutions own a large amount of GSE financial obligations. This creates an environment conducive to the transmission of risk from a GSE to the larger financial system; if a GSE became troubled, holders of GSE debt might panic and try to sell at a loss. As the market value of GSE debt obligations dropped, the capitalization of banks with large holdings of this debt could be threatened to the point that regulators might believe themselves obligated to intervene to close the banks. In Congressional testimony on March 22, 2000, Gary Gensler, the Undersecretary of the Treasury for Domestic Finance addressed this issue. He declared that there are significant linkages between insured depositories and GSEs. Consequently, he recommended that Congress limit bank and thrift investments in GSE debt obligations to amounts that conform to the “loans to one borrower” rule that applies to other loans. As Gensler declared: To protect the exposure of banking institutions, current law places limits on an individual bank's credit exposure to any one entity. National banks may hold no more than 10 percent of their capital in the corporate bonds of any one issuer or lend unsecured more than 15 percent of their capital to any one borrower. Most state banks are subject to similar limits. Among all debt securities issued by private companies, however, only GSE debt securities are exempt from this investment limit. The GSEs are major players in the derivatives market. Counterparty risk can be many times larger than the liabilities on their balance sheets. When Long Term Capital Management was on the brink of default, its investors learned that a default on any one of seven thousand outstanding derivatives contracts would automatically trigger a default in all contracts, having a total notional value of $1.4 trillion. At its zenith, LTCM had total assets of approximately $130 billion and capital of $4.7 billion standing behind this trillion dollar counterparty arrangement. Fannie Mae is running its own derivatives business with substantially higher leverage than LTCM. The Wall Street Journal recently reported that Fannie Mae had a debt-to-equity ratio on its derivatives portfolio of 2019 percent. Together, Fannie Mae and Freddie Mac held a notional amount of $743 billion of derivatives outstanding as of September 30, 2000. The amount of disruption that a GSE failure causes depends on the government’s reaction speed. If the federal government stops losses before they exceed GSE capital, then disruption can be contained and only minor macroeconomic damage will result. However, the weak state of supervision of Fannie Mae and Freddie Mac makes this an outcome that is far from assured. Fannie Mae and Freddie Mac possess a threatening combination of three factors – size, high leverage and limited financial supervision – that greatly increase the odds that the government will not be able to deal with a high-impact event before it transmits a major shock both to other institutions and throughout the housing market. Fannie Mae and Freddie Mac also are subject to leverage and risk-based requirements, but at far lower and riskier levels than banks. Increasing capital cushions at Fannie Mae and Freddie Mac will increase the time available to OFHEO to deal with a financial crisis. A larger equity cushion will reduce the pressure on the managers of a troubled GSE to bet the bank. The managers will be discouraged from risk-taking if they still have significant stockholder capital at risk after the GSE has taken the first shock. Under current conditions of very thin capitalization, GSE managers will be under far more pressure to bet the bank in the event of a crisis. They will have so little capital at stake that they could perceive great benefits from taking a gamble: much to win and little to lose. Taxpayers often are big losers when others reap the gains from speculation while they suffer the losses. http://www.ofheo.gov/media/archive/docs/reports/sysrisk.pdf A newer report with 113 pages - after reading this I do not know that I can share your level of confidence terri. It's all making my brain hurt reading it all - who can keep all this knowledge in thier head - I yield to your superiority in this systemic risk.

Subject: 'The Fall of Fannie Mae'..
From: Pete Weis
To: johnny5
Date Posted: Sat, Feb 19, 2005 at 21:31:48 (EST)
Email Address: Not Provided

Message:
by Bethany Mclean in Fortune magazine is an excellent overview of the GSE problem. I won't post it here because it is quite long, but for anyone interested they can put THE FALL OF FANNIE MAE BETHANY MCLEAN (capitals not needed) in a google search and find it easily.

Subject: Re: 'The Fall of Fannie Mae'..
From: johnny5
To: Pete Weis
Date Posted: Sun, Feb 20, 2005 at 06:47:45 (EST)
Email Address: johnny5@yahoo.com

Message:
Thanks Pete. http://www.knowledgeplex.org/news/66640.html And then Frank Raines overplayed his hand one last time. In a highly unusual move, Fannie insisted that the SEC review OFHEO's accounting allegations. .' Fannie representatives tried to argue that if they couldn't get it right, no one could. Nicolaisen wasn't having any of it. 'Many companies out there get it right,' he said. What the SEC failed to point out was that many companies don't have the complicated linkage that Fannie does. The best people in the world couldn't get it right at LTCM - and fannie admits to having nowhere near that skill set - perhaps Raines believed in his heart they were right and lost perspective - but I feel the SEC and the rest of us need to realize things get so big and complicated even teams of experts perhaps cannot encompass all the risk and variables. Outside of the politics we need to examine the financial history - too big to fail fooled many smart people just in the recent past. Perhaps I am wrong but I have seen buffet in many interviews and he appears more ethical than others in his line of work. If those WMD's have him worried - I would think it is for good cause. http://www.knowledgeplex.org/news/74599.html On Thursday, Mr Greenspan urged Congress to step in and cut the two agencies down to size. If 'immediate divestiture' of their mortgage holdings would be too abrupt, their portfolios should nonetheless be slimmed down over several years. His words wiped more than 2% off Fannie Mae's share price, and 3% off Freddie Mac's. The chairman's words have hurt the two agencies before. Last year, the Fed chairman suggested homebuyers should take out flexible-rate mortgages, rather than fixed-rate. This is questionable advice for homebuyers, but it is unquestionably bad for Fannie Mae and Freddie Mac. Borrowers, who are averse to risk and often overexposed to mortgage debt, pay a premium for the security of a constant stream of interest payments, a premium Fannie Mae and Freddie Mac are happy to pocket. The implicit guarantee the agencies exploit accounts for half of their stockmarket value, according to Wayne Passmore, an economist at the Fed. But only a small fraction of this subsidy is passed on to homebuyers in the form of cheaper mortgages. The rest is pocketed by the agencies' shareholders. This is, said Mr Greenspan last year, an 'opaque and circuitous' way to subsidise homeownership. If the words of one economist can have that kind of effect - how fragile our markets are. Why is an agency that is subsidizing the poor and giving them a chance at home ownership a for profit company?

Subject: Business Leadership in China
From: Emma
To: All
Date Posted: Sat, Feb 19, 2005 at 10:43:19 (EST)
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http://www.nytimes.com/2005/02/19/business/worldbusiness/19guru.html 7 Habits of Highly Effective Cadres By DAVID BARBOZA HARBIN, China - The crowded auditorium began to take on the feel of a rock concert. At the urging of the speaker, people suddenly stood up and, to the pulsing strains of a recording by the group Barenaked Ladies, thrust their fists in the air and shouted, 'Yes! Yes! Yes!' After the speaker finished, a middle-aged woman, who had been lucky enough to catch one of the souvenir furry carrots tossed into the crowd, dashed toward the podium like a wild teenager, seeking another one. Then a larger throng of people scrambled toward the dais in search of autographs. Elbows flew. Something similar happened a few days earlier, at the prestigious Tsinghua University in Beijing, when a group of students and faculty members pushed one another trying to reach the speaker: a tall, Western business icon. Several students crashed to the floor in the mayhem. Everyone wanted to meet ... Chester Elton. Chester who? Mr. Elton, the 46-year-old author of a 105-page management handbook called 'The 24-Carrot Manager,' is practically unknown in the United States. But in China, where Western business and management gurus are suddenly all the rage, he is a big celebrity. 'I just love coming to China,' Mr. Elton said while signing one of his books and nearly being pushed over in the frenzy here in Harbin. 'I feel like a rock star here.' Mr. Elton is actually just one of many popular management gurus: experts say the country has a severe shortage of skilled business managers and a growing cadre of people who want to be the next Bill Gates. So Western management experts - teaching everything from how to reward employees to how to foster innovation - are flocking to China, trying to capitalize on this capitalist frenzy. Big names are coming, like John F. Welch Jr., Stephen R. Covey and Michael E. Porter, a Harvard Business School specialist on competition. But so are the lesser known. They are conducting management-training seminars, hawking their books, making television appearances and soaking up the adoration. Many of them, like Mr. Elton, have even been hired by Communist Party officials, who are eager to transform China's struggling, money-losing state-owned companies into lean, mean capitalist machines. 'There's a huge demand for management training in this country,' says Juan A. Fernandez, a professor of management at the China Europe International Business School in Shanghai. 'There's a transformation going on, from the state-owned mentality, where the only objective was production, to a market-oriented mentality, where you have to care about employees and customers.' And profits. Along with the management gurus and motivational speakers, America's leading universities are now offering high-priced executive M.B.A. programs here. Major consulting firms are rushing into China to help state-owned companies realign their operations. The management problems are particularly acute here in northeast China, the nation's Rust Belt, where large industrial companies are struggling with bloated, inefficient operations. Hoping to reinvent some of these companies, government officials are asking Western experts to unleash a new form of government-backed propaganda, one with decidedly non-Communist slogans, like 'downsizing' and 'performance-based pay.' The management craze is also being fed by the growth of private enterprises here. Business newspapers, magazines and television shows are proliferating; bookstores are stocking management best sellers translated from English; and airport shops are regularly drawing crowds by showing motivational videos with titles like 'You Will Be Rich!' Wang Renping, a 32-year-old Harbin entrepreneur, exemplifies the changes reshaping China. He keeps a photograph of Mao on his office wall, and a picture of Peter F. Drucker, the ultimate management guru, on his desk. 'I started reading Peter Drucker's books four years ago,' Mr. Wang, general manager of an online real estate company, said. 'He's my idol, and that's why I put his picture on my desk. It reminds me of his theories when I'm working.' In China's biggest cities, people like Mr. Wang are not just reading the works of their heroes. They also want to get as close to them as they can. Last June, for instance, an overflow crowd paid $1,000 a ticket - a huge sum in a country where the average worker earns less than $3,000 a year - to receive the gospel according to Mr. Porter, a professor at the Harvard Business School with an international reputation for his works on competition between companies and across national borders. Many of them, of course, probably had their way paid by their employers. The money is making a small dent in the American trade deficit with China. Mr. Covey, the best-selling author of 'The Seven Habits of Highly Effective People,' earned about $50,000 last year just by speaking via video to a group of Chinese businessmen. Given the demand as China's economy continues to boom, it is no surprise that many decidedly lesser lights have sought to bask in the glow. Robert P. Miles drew crowds by billing himself in promotions here as the 'spokesman' for Warren E. Buffett, the billionaire investor. Officials at Berkshire Hathaway, Mr. Buffett's investment vehicle, said Mr. Miles was not a spokesman for Mr. Buffett. He is an author who has written about Mr. Buffett. Mr. Elton began to focus on China about a year ago. His book, 'The 24-Carrot Manager,' has sold more than 50,000 copies in China. So Mr. Elton, a motivational speaker, came to China with his Utah-based 'rewards and recognition' company, O. C. Tanner, hoping to sell more books and earn large fees. His message is quite simple, even elementary: treat your workers with respect, reward them with gifts - carrots, in his metaphor - and productivity and profits will soar. 'How do you motivate and engage your employees?' he asks his audience rhetorically. 'You have to find out what's important to them: that's the power of carrots.' Western-educated M.B.A. students might consider this baby talk. But here in Harbin, an old industrial center that has little of the allure of coastal China, more than 300 entrepreneurs and government officials seemed to find such talk enlightening. On a recent visit, the bald-headed Mr. Elton, helped by a translator, paced the stage, peppering his talk with slapstick humor: a segment on how not to reward employees opens with a video showing a penguin slapping another penguin down, repeatedly. 'People want a pat on the back,' he said, 'not a slap in the head.' The act includes props (he tossed furry carrots into the audience), rock music and even historical references: 'When times got tough for Mao in the new government, Mao would say, 'This is not tough. The Long March was tough.' ' But his teachings did not always hit the mark. In Beijing, when he asked the audience who was in love, a woman raised her hand and he called her forward. 'How many times does your husband say, 'I love you'?' he asked. Never, the woman shot back. 'Can he say, 'I love you,' too much? Is it possible to say, 'I love you' too much?' 'Yes,' the woman answered, saying that would be unrealistic and essentially meaningless. The audience seemed confused. Mr. Elton laughed and said: 'You failed. Here's a carrot. Go sit down.' Mr. Elton's message was that saying 'I love you' or telling employees they are important should be part of a manager's everyday thought. But that did not translate very well here. Indeed, much of his talk seemed lost on the Chinese audience. Some people slumped in their chairs, some slept, others toyed with their mobile phones. But when Mr. Elton blared rock music and asked the audience to participate in the closing, saying, 'Do you believe in the power of the carrot?' the crowd leapt to its feet. When he asked them to raise their hands and shout, 'Yes!' they did. And before long, the stampede for carrots and autographs began. After the speech, a human resources manager from the impoverished Anhui Province, who spoke on condition he not be identified, said: 'This really broadens your mind. This is the first time I get this kind of method.' Others said the talk was 'refreshing' and 'creative,' though not always so adaptable to Chinese circumstances. 'In state-owned companies it's not that easy to launch a decision promoting someone or raising his salary,' said Yanchun Liu, 46, the director of human resources at Beiya Dairy in Harbin, suggesting that jealousy and hard feelings develop among other employees. But even as several experts here agreed that China was not yet ready for many of the ideas espoused by Western managers, the demand for those promising to unlock the secrets of capitalist success remains strong. When Mr. Welch, the former chairman of General Electric, came to China last summer - for a $500,000 fee - fistfights nearly broke out after his speech as cameramen jostled with audience members who had paid more than $3,000 to get close to him. 'We didn't hire many security people,' said Zhou Fei, whose company organized the Welch appearances. 'Things turned into chaos after the forum was over. People ran to Jack Welch asking for autographs and photos.'

Subject: AIDS in South Africa
From: Emma
To: All
Date Posted: Sat, Feb 19, 2005 at 10:22:29 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/19/international/africa/19africa.html AIDS-Linked Death Data Stir Political Storm in South Africa By MICHAEL WINES JOHANNESBURG - In an implicit but devastating account of the havoc AIDS is causing here, South Africa's government reported Friday that annual deaths increased 57 percent from 1997 to 2003, with common AIDS-related diseases like tuberculosis and pneumonia fueling much of the rise. The increase in mortality spanned all age groups, but was most pronounced among those between ages 15 and 49, where deaths more than doubled. Working-age adults are more sexually active than the rest of the population, and the opportunity for transmitting H.I.V. is greatest among members of this group. The report, by the government agency Statistics South Africa, caused contention even before its release, which came more than a month after the originally scheduled date. Critics charged - and the agency denied - that the delay was because of political pressure from President Thabo Mbeki's government, which they say has long played down the dimensions of the AIDS crisis here. Mr. Mbeki's office sharply rebuked the agency in 2001 after it reported that 4 in 10 deaths among working-age adults probably resulted from AIDS, saying that statisticians could not prove their conclusion. The statistics agency has denied that its report was politically influenced. The report notes that both the total number of deaths and their causes are undoubtedly inaccurate, because death reporting is not consistent in rural areas, and medical expertise is uneven across the nation. The report states that 499,000 of South Africa's roughly 44 million people died in 2002, up sharply from 318,000 in 1997. Much of that increase appears to result from H.I.V., the virus that causes AIDS. Experts agree that there are at least five million H.I.V.-positive citizens here, the most of any country. Diagnosing AIDS as a cause of death can require advanced medical knowledge and equipment. Moreover, an unknown number of AIDS deaths go unreported because South African life insurance policies frequently do not cover AIDS-related deaths. Nevertheless, the agency reported that the new figures 'provide indirect evidence that H.I.V. may be contributing to the increase in the level of mortality for prime-aged adults, given the increasing number of deaths due to associated diseases.' Dr. Steve Andrews, an H.I.V. clinician and consultant in Cape Town, said the sobering figures in the report suggested that it had not been politically varnished. Given the improvement in medical care and living standards in South Africa, he said, 'we should not be seeing this aggressive move in death rates - not at all.' The report concluded that the average number of deaths in South Africa rose to 1,370 per day in 2002 from 870 in 1997, an increase that could not be explained by the 10 percent increase in population during the same period. The reported causes of death point to AIDS as the factor underlying much of the increase in mortality. Deaths from tuberculosis, influenza and pneumonia - all primary causes of AIDS-related deaths - more than doubled in the five years encompassing 1997 to 2001, while deaths from other AIDS-related diseases like gastrointestinal infections rose about 25 percent. Deaths from some ailments unrelated to AIDS, like hypertension and cerebrovascular problems, also rose, but at lower rate. General heart disease, once by far the biggest killer of South Africans, fell during the period and was well behind tuberculosis and influenza in 2001. Two aspects of the report were especially notable. The death-certificate figures indicate the proportion of deaths among sexually active women is rising significantly compared with deaths among men - a ratio that strongly indicates a country's AIDS-related mortality rate. In 1997, 149 men ages 25 to 29 died for every 100 deaths among women; the comparable figure in 2003 was 77 male deaths for every 100 female deaths. The report also suggested that AIDS was increasingly exacting a toll among the very youngest South Africans. In 1999, the report stated, disorders of the immune system emerged for the first time as one of the 10 leading causes of deaths of children under 15.

Subject: An Indian Refinery
From: Emma
To: All
Date Posted: Fri, Feb 18, 2005 at 16:24:26 (EST)
Email Address: Not Provided

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http://www.nytimes.com/2005/02/18/business/worldbusiness/18refinery.html A Former Gas Station Attendant's Big Bet on a Refinery Has Paid Off By KEITH BRADSHER JAMNAGAR, India - The vast refinery and petrochemical complex here is the size of Manhattan south of Central Park. It could have been a costly white elephant. Instead, the quirky project, which includes the world's largest mango plantation, has become one of the most profitable bets in the global refining industry. The success of the complex shows the changing economics of refining, a business once regarded as an unglamorous backwater by oil executives more interested in finding the next big oil field. Completed by Reliance Industries of Mumbai in 1999 at a cost of $6 billion, the operation's $7 billion a year in sales equals 4 percent of the entire revenue of India's corporations. It is one of the few refineries in the world that can take very thick high-sulfur highly acidic grades of crude oil and process them into extremely pure, low-polluting gasoline and diesel fuel. The New York region, with its demanding environmental standards, has become the biggest single destination for shipments from here, said Captain Sunil Pradham, who manages a four-mile-long jetty that stretches into deep water where tankers pick up cargos, four at a time. Crude oil tankers with deeper drafts unload their cargos even farther offshore, pumping the oil through an undersea pipeline to the refinery. Rapidly rising energy demand from China and India in the last several years has benefited the refinery in two ways. Saudi Arabia and other oil exporters have stretched their output by producing more thick grades of crude oil with lots of sulfur and other contaminants; they were already pumping better grades of crude at close to full capacity before the surge in Asian demand. So much low-quality crude has flooded the market that it now sells at a discount of up to several dollars a barrel compared with better grades. That has meant savings for refineries like the one here that can handle poor-quality crude. At the same time, Asia has run short of refinery capacity, as oil companies failed to foresee the soaring car sales that have driven up the region's demand. That has allowed refineries to charge higher markups for gasoline and other refined products. Gross pretax profit margins run $10 to $14 a barrel, said P. K. Kapil, the president of the complex here. That is remarkably high by the standards of the refining industry, where margins have often been $1 or $2 a barrel and sometimes disappeared altogether in the 1990's. The complex here is the creation of Reliance's founder, Dhirubhai Ambani, who died in 2002. As a young man working as a gas station attendant in Yemen in the 1950's, Mr. Ambani dreamed of someday owning his own oil empire, from drilling to refining to marketing. Returning to India with $100 in his pocket, Mr. Ambani entered the textile business, then moved into the production of polyester and other chemicals needed for synthetic fabrics, becoming one of India's wealthiest tycoons. Hobbled by a debilitating stroke, he ordered the construction in 1996 of what remains the world's largest refinery complex built as a single project. The refinery is the third largest in the world, trailing ones in Venezuela and South Korea that grew to their current size through a series of expansions. Critics of Reliance often accuse the company of wielding tremendous influence with local and national governments in India and being obsessed with secrecy. The refinery complex here, which includes a 350-megawatt power plant and two chemical plants, shows signs of both. The government of Gujarat granted the company a 10-year holiday from steep sales taxes to attract the refinery. The Indian Air Force has moved a squadron of F-14 fighter jets to an airfield three miles away, along with a battery of surface-to-air missiles, to protect the site from any possible attack from Pakistan, a little over 100 miles away. The complex has two command centers, one above ground and another in a subterranean bunker in case of bombing raids. Cameras on the complex's fences can spot a snake more than a half mile away. Employees not only must wear badges, but even have their palm prints scanned by devices to confirm their identities. 'You can steal a card; you can't steal a hand,' said S. C. Malhotra, the Reliance senior vice president who oversaw construction. Most unusual of all are the extensive orchards of mangos, avocados, figs and more. Excess heat from the refinery is used to desalinate seawater for the irrigation of the fruit trees, and teak is grown with treated effluent from the refinery. Hital R. Meswani, a great-nephew of Mr. Ambani who is now the Reliance board member responsible for the oil and manufacturing businesses, said that the giant refinery's location in a militarily sensitive area near the Pakistani border made sense. The harbor here is deep and well protected from storms, the sailing times from Mideast oil fields are short and modern weapons systems would make it possible for the refinery to come under attack even if it were deeper in India, he said. Since Mr. Ambani died, his sons, Mukesh and Anil, have quarreled over control of his empire. But their father's influence still pervades the refinery, where visitors are strongly urged to watch videos extolling him, including one in which he floats in a chair in front of his orchards, a faint white light radiating from his image. And the founder's many sayings about the virtues of hard work and achievement are still recited reverently by executives. 'His words,' Mr. Kapil, the president, said, 'were like gospel truth to us.'

Subject: India and China and Oil
From: Emma
To: All
Date Posted: Fri, Feb 18, 2005 at 15:53:59 (EST)
Email Address: Not Provided

Message:
http://www.nytimes.com/2005/02/18/business/worldbusiness/18energy.html?pagewanted=all&position= 2 Big Appetites Take Seats at the Oil Table By KEITH BRADSHER MUMBAI - India, sharing a ravenous thirst for oil, has joined China in an increasingly naked grab at oil and natural gas fields that has the world's two most populous nations bidding up energy prices and racing against each other and global energy companies. Energy economists in the West cannot help admiring the success of both China and India in kindling their industrialization furnaces. But they also cannot help worrying about what the effect will be on energy supplies as the 37 percent of the world's population that lives in these two countries rushes to catch up with Europe, the United States and Japan. And environmentalists worry about the effects on global warming from the two nations' plans to burn more fossil fuels. With engineering expertise and equipment more available around the world, one result is that oil executives and drillers in remote spots increasingly speak Mandarin or Hindi, not English. Their newfound commercial confidants live in pariah states like Sudan and Myanmar, one sign that the political dynamics of the world oil market pose a difficult challenge for the Bush administration. The prospect of China's consuming ever growing lakes of oil has been noted over the years, although it is gaining new urgency as Chinese consumption continues to soar. China's oil imports climbed by a third last year as its oil demand exceeded Japan's for the first time. Now India is joining China in a stepped-up contest for energy, with both economies booming recently just as their oil production at home has sagged. China trails only the United States in energy consumption; India has moved into fourth place, behind Russia. Voracious energy demand is coming from people like Kalpana Anil Gaikar, a 35-year-old unemployed widow with three children here who keeps running up costly electricity bills. Her appetite, millions of times over, is pushing India and China to vie for control of oil and natural gas fields from Sudan to Siberia. Both countries are also expanding their navies as they become increasingly dependent on lines of oil tankers from the Mideast, posing the beginnings of an eventual challenge to American influence in the Indian Ocean and South China Sea. As millions of Indians and Chinese buy cars, television sets and air-conditioners, the fossil fuels burned to power their purchases have become some of the fastest-growing contributors to global warming. Chinese emissions alone soared close to 15 percent last year. Under the Kyoto Protocol, neither India nor China faces any specific limits on its emissions of global warming gases. Both countries joined the agreement with promises to try to restrain emissions, but even environmentalists hesitate to demand stringent restrictions on China or India. That is because their energy consumption per person remains less than one-sixth the American level. Ms. Gaikar pays $9.30 a month in rent for her tiny apartment in a public housing project here in Mumbai, formerly known as Bombay, but up to another $4.50 a month for electricity to power the lights, ceiling fan and other amenities. That is a hefty electrical bill for someone who earned less than $30 a month at a bedsheet factory until she lost her job in late December because of a broken leg. Her children need the lights to study for school, however, and she has no intention of cutting the power. 'Whatever my leg, I'll have to go back to work,' she said. To meet the demand, India's government, like China's, is looking to tap countries the Bush administration and the European Union have tried to isolate. During a recent conference in New Delhi, a succession of top Indian officials saluted Omer Mohamed Kheir, the secretary general of the Ministry of Energy and Mining in Sudan, who sat beaming in the middle of the front row. The Oil and Natural Gas Corporation, which is controlled by the Indian government, recently began producing oil in Sudan in cooperation with Chinese state-owned companies. It is now building a pipeline in Sudan and negotiating to erect a refinery as well. 'The Asians came to Sudan in a very difficult time, and we created a very good strategic relationship with them,' Mr. Kheir said in an interview. He dismissed Western accusations that militias with links to government forces have been raping and murdering large numbers of villagers and refugees in the Darfur region. 'Darfur is not a deeply rooted problem; we think it is quite artificial,' he said. Three government-controlled Indian companies concluded a $40 billion contract with Iran on Jan. 7 for the purchase of liquefied natural gas over 25 years and for stakes in oil fields there. The Indian government followed up on Jan. 13 by concluding a deal with the military government of Myanmar for the construction of a gas pipeline. Subir Raha, chairman and managing director of the Oil and Natural Gas Corporation, said that Western countries had been arbitrary in their imposition and removal of sanctions on countries like Libya, so his company could not be expected to follow their practices for countries like Sudan and Myanmar. 'If you talk about pariah states, Libya is an excellent example,' he said. 'One fine morning, you see there are no sanctions.' China has also been in the spotlight lately because of suspected sales of missile technology to Iran, one of the biggest sellers of oil to China and other Asian markets. China's deputy foreign minister, Zhou Wenzhong, took similar positions to India's in an interview in the summer of 2004. 'Business is business,' he said then. 'We try to separate politics from business. Secondly, I think the internal situation in the Sudan is an internal affair, and we are not in a position to impose upon them.' India's oil imports climbed by 11 percent in 2004, and China's by 33 percent, straining the capacity of production operations, pipelines, refineries and shipping lines and helping to keep oil prices above $40 a barrel. The International Energy Agency expects them to use 11.3 million barrels a day by 2010, which will be more than one-fifth of global demand. Western engineers and equipment for complex drilling are now readily available for hire, making it easier for India's and China's state-owned companies to work together and undertake ventures on their own. Around the world, countries 'are using their state oil companies to ally with each other,' said William Gammell, the chief executive of Cairn Energy of Scotland, one of the biggest foreign oil companies operating in India. 'The majors used to have all the technology, and now you can get the technology by buying it.' India's recent enthusiasm for energy security has extended to assets that are the subject of legal scrutiny as well. Companies controlled by the Indian and Chinese governments are the two main bidders publicly pursuing large stakes in the Yukos oil and gas assets that the Russian government recently confiscated in a tax dispute. The confiscation is the subject of litigation in Texas. Mr. Raha said he would not be dissuaded from the pursuit by the controversy over how the Russian government obtained the assets. 'I haven't seen a single deal or transaction basically that didn't have legal issues,' he said. A vigorous debate has emerged in India over whether this country's need for oil will inevitably put it at odds with China. Mani Shankar Aiyar, India's minister of oil and natural gas, said that India and other Asian nations needed to pursue their own interests in oil markets and that he wanted to cooperate with China, not compete with it. Greater private automobile ownership and expanding industries have increased energy demand in China and India just as traditional sources of energy are fading away. In India, thousands of villages are switching from burning dried dung or brush for fuel to buying liquefied petroleum gas for stoves or plugging into the national electricity grid to power everything from ceiling lights to computers. Beijing and now New Delhi are following a long tradition of rising economic powers seeking to secure energy supplies. Britain, Japan and the United States wheeled and dealed in the years leading up to World War II for control of oil fields around the world, with diplomats often working with oil company executives. Through the 1980's and early 1990's, government-controlled oil companies from Malaysia and Brazil also invested in distant oil fields, notably in China and the South China Sea. As Chinese and Indian companies venture into countries like Sudan, where risk-averse multinationals have hesitated to enter, questions are being raised in the industry about whether state-owned companies are accurately judging the risks to their own investments, or whether they are just more willing to gamble with taxpayers' money than multinationals are willing to gamble with shareholders' investments. 'Sudan is the beneficiary,' said Philip Andrews-Speed, a former BP geologist in China who now runs an oil policy study center at the University of Dundee in Scotland. 'If these state-owned companies were not in the game, there would not be much interest in Sudan.' China made many of its investments in the 1990's, when oil fell as low as $10 a barrel, and signed large contracts for liquefied natural gas in 2002, before recent sharp increases in gas prices. India made its first big investment in Sudan three years ago, but its national leaders are calling for a greater effort to secure oil fields now despite high prices. Some Western countries, like Germany, have dismissed as outdated the whole idea of owning far-flung oil fields. They have relied on being able to buy oil in world markets, instead of buying oil fields, and have emphasized energy conservation, notably through high gasoline taxes. China and India have not only avoided imposing steep taxes, but have even regulated energy prices directly and indirectly for years. India in particular still keeps domestic prices for natural gas below world levels to subsidize power generation and fertilizer production, two industries with customers who still have the political power to prevent price increases. 'This is a basic reality of the Indian market,' said Proshanto Banerjee, the chairman and managing director of GAIL (India) Ltd., a big state-controlled gas company, 'and it would not be proper to ignore this.'

Subject: China is now worlds leading consumer
From: johnny5
To: Emma
Date Posted: Fri, Feb 18, 2005 at 16:17:56 (EST)
Email Address: johnny5@yahoo.com

Message:
The whole mess with Yukos makes me laugh - like having the court case here really makes a difference - BWAHAHA! http://atimes01.atimes.com/atimes/China/GB18Ad01.html Greater China Feb 18, 2005 China overtakes US as world's leading consumer By Emad Mekay WASHINGTON - China is quickly overtaking the United States as the world's biggest consumer of global resources, energized by a dynamic economy that is growing at a record pace, says a Washington research group. 'China is no longer just a developing country. It is an emerging economic superpower, one that is writing economic history,' said Lester Brown, founder of the Earth Policy Institute and author of Wednesday's report. 'If the last century was America's, this one looks to be the Chinese century,' he said. The report says China is outpacing the US in four of the five most important commodities: grain, meat, coal and steel. The fifth, oil, is still consumed in the US at rates triple that of China, about 20.4 million barrels per day. But while oil use in the US rose by 15% from 1994 to 2004, its use in the Asian giant more than doubled. China has now surpassed Japan as the world's second-largest consumer of oil after the US, said the report, titled 'China Replacing United States as World's Biggest Consumer'. China also consumes about 800 million tonnes of another fossil fuel, coal, which meets nearly two-thirds of the country's energy demand. 'With its coal use far exceeding that of the US and with its oil and natural gas use climbing fast, it is only a matter of time when China will also be the world's top emitter of carbon,' says the report. 'Soon the world may have two major climate disrupters.' Chinese consumption patterns are rising in other categories. It has opened a wide lead with grain: 382 million tonnes, compared to 278 million tonnes of the US last year. Among the three big grains, the world's most populous country leads in the consumption of both wheat and rice, and trails the US only in corn. Among leading consumer products, China trails the US only in automobiles. By 2003, it had 24 million motor vehicles, scarcely one-tenth of the 226 million on US roads. But with car sales doubling over the last two years, China's fleet is quickly catching up. Sales of electronic goods are growing strong in China. In 1996, China had 7 million mobile phones, by 2003 it had 269 million. This far outpaces the growth in the US, which had 44 million mobile phones in 1996 and 159 million in 2003. The use of personal computers is booming as well, with the number of computers in use doubling every 28 months. Even China's use of fertilizer is double that of the US: 41.2 million tonnes. Currently, China imports vast quantities of grain, soybeans, iron ore, aluminum, copper, platinum, phosphates, potash, oil and natural gas, forest products for lumber and paper, and the cotton needed for its world-dominating textile industry. These massive imports have put China at the center of the raw materials economy. Its huge appetite for materials has driven up not only commodity prices but ocean shipping rates as well. China's use of steel, a key indicator of industrial development, has also soared. Steel consumption is now more than twice that of the US, driven by urban migration and the construction of thousands of factories, highrises and office buildings. The US still maintains a wide lead over China in terms of individual consumption patterns, mainly due to the latter's much lower per capita income of US$5,300 - about one-seventh of America's $38,000. However, the report predicts that as Chinese incomes rise at a record pace, use of foodstuffs, energy, raw materials and sales of consumer goods will continue to climb. Brown said these trends are an early warning that China's rapid growth could lead to a globally unsustainable use of resources. 'At one time, it wouldn't have been credible even to ask these questions but now that China has passed the US in aggregate consumption and given the greater momentum for its growth, it sort of gives one license to think about what if they reach US consumption levels in per capita terms,' Brown said. 'What we are learning from China is this: the Western industrial development model is not going to work for China and therefore for the world - that is, a fossil fuel-based, automobile-centered, throwaway economy.' For example, if paper use per person in China were to reach the US level, China would need more paper than the entire world produces, he said. 'They have done that on the national level for a lot of key resources. But what if they do it per person, which means expanding consumption something like four-fold over what it is today?' The report also examines China's growing influence on the US economy, which has become heavily dependent on Chinese capital to underwrite its fast-growing debt. If China ever decides to divert this capital surplus elsewhere, either to internal investment or to the development of oil, gas, and mineral resources elsewhere in the world, the US economy will be in trouble, the report says. China's record-high domestic savings and huge trade surplus with the US are just two of the most visible manifestations of its economic strength. It is now China, along with Japan, that is buying the US treasury securities that enables the US to run the largest fiscal deficit in history. 'China's eclipse of the US as a consumer nation should be seen as another milestone along the path of its evolution as a world economic leader,' Brown said.

Subject: 'Masters' or 'Servants'?
From: Pancho Villa
To: All
Date Posted: Fri, Feb 18, 2005 at 15:35:53 (EST)
Email Address: nma@hotmail.com

Message:
from The Economist: School for scandal Is the MBA responsible for moral turpitude at the top ? Several of the corporate scandals that took place in the early years of this decade are currently being replayed in courtrooms from NY to Alabama(-song). The trials of top executives at HealthSouth, Tyco International and Worldcom are reminding the public how unethical was the behavior of some of the nation’s top managers only a few short years ago. The finger of blame for this behavior is sometimes pointed at the MBA, the degree offered by business schools from Harvard to Hawaii. Perhaps this is not as odd as it sounds. After all, MBA(ce)s lay as thick on the ground at Enron as managerial hubris, and disinterested outsiders are not lone in asking whether there might have been some connection. In an extraordinary mea culpa, Sumantra Ghoshal, a respected business academic who died last year, argued in a paper to be published shortly that the way MBA students are taught has freed them “from any sense of moral responsibility” for what they subsequently do in their business lives. This, he believed (and other respected academics, such as Jeffrey Pfeffer of Stanford, are carrying his argument forward ), is because management studies have been hi-jacked intellectually by the dismal science (not the book) of economics. A stout defense of the virtues of economics from a publication called The Economist would hardly be a surprise. But, in fact, this is not necessary to refute the claim that business schools are responsible for moral turpitude at the top of corporate America. As it happens, most of the erstwhile corporate leaders currently appearing in the dock never went near one (see page 53), whereas many acknowledged champions of business ethics, such as Lou Gerstner at IBM, did. What’s more, many of the top business schools have taken steps to offset any ethically desensitizing influence there may have been in their MBA coursework. They have greatly expanded their teaching of business ethics - some by introducing special courses, others in more memorable ways. Tuck School of Business, for example, persuades an ex-convict to come every year to tell its MBA students of his regrets. The dubious claim that business schools are responsible for the moral failures of their graduates decades after graduation does, however, highlight one widespread misunderstanding about the role and purpose on an MBA. Mr Ghoshal and his supporters are right that the top business schools strive for academic respectability, and that this has led to criticize this. As long as schools are teaching academic degrees (and, after all, the letters MBA stand for Master of Business Administration), they have to tech the most compelling business theories around. It may be a pity that these are disciplines for not coming up with the ideas to rival, for example, agency theory or the maximization of shareholder value. The real problem arises when students, or their new employers, believe that an MBA is, somehow, a qualification for business leadership. It is not, nor could any academic degree provide this. Law or medical degrees are necessary but not sufficient for the making of outstanding lawyers or doctors. In a similar way, a good MBA degree can help provide a student with analytical skills and theoretical knowledge useful to a business career. But becoming a successful leader of men and women in a turbulent business world requires maturity and wisdom. Happily, there is no degree programme for those.

Subject: We yearn for respect from...
From: Pete Weis
To: Pancho Villa
Date Posted: Fri, Feb 18, 2005 at 21:42:08 (EST)
Email Address: Not Provided

Message:
our peers. But somehow we've developed this belief that an accumulation of wealth will bring us this respect. We deny it and at times doubt it, but deep down inside we believe it. So we are fascinated with Donald Trump and his jetset lifestyle, even though we may think he is a bit phony. Even 'new age' Christianity, here in America, tells us if we give heavily to the latest and greatest TV evangelist, we will, in turn, be richly rewarded by God. Pat Robertson has told us this - and he's perhaps one of the best examples of how to reach exceedingly high levels of wealth 'spreading the word of God'. 'Blessed are the poor' has been replace by 'blessed is my offering plate' and 'blessed is my stock portfolio'. The new age economics is 'trickle down' but that's the problem it's just a trickle as corporate execs too often siphon of all the excess liquidity into huge stock options and not very much into capital expansion. All the while our Fed chairman tells us that adjustable mortgage rates are a good thing to keep the liquidity flowing - more trickle down. 'Family values' have become which families have the greatest personal value as our financial magazines rate the 100 richest people in America from 1 thru a 100 - wouldn't many of us like to be on that list? So is it a wonder that when a few started to stretch the ethical boundries and then the legal boundaries, and their peers began to notice how much wealth was being accumulated, they couldn't wait to get in line. Afterall, it's respect and acceptance we are all after in the end.

Subject: Re: We yearn for respect from...
From: Emma
To: Pete Weis
Date Posted: Sat, Feb 19, 2005 at 10:45:01 (EST)
Email Address: Not Provided

Message:
Sensitive statements, wonderfully expressed.

Subject: We are Reminded Why Costs Matter
From: Terri
To: All
Date Posted: Fri, Feb 18, 2005 at 15:30:20 (EST)
Email Address: Not Provided

Message:
Johnny5 reminds us: http://www.vanguard.com/bogle_site/lib/jcbspch4.html John Bogle's research shows that mutual fund investors have over the last 25 years made significantly lower returns on stocks than the S&P Index returns. The problem of course is investment cost. Mutual funds are expensive; too darned expensive. Well, the equity premium has been lower than through the century these last 10 and 20 and 25 years. With mutual fund costs that are even 1% the equity premium is cut in half. With 2% costs, the equity premium is about gone. Thanks, Johnny5.

Subject: Peak conventional world oil.....
From: Pete Weis
To: All
Date Posted: Fri, Feb 18, 2005 at 15:07:40 (EST)
Email Address: Not Provided

Message:
production has got to be pretty close. Not a good thing with demand rising so steeply and a world hooked on low interest rates. This just adds to the information about growing 'water cuts' in Middle Eastern oil fields: Shell, Exxon Tap Oil Sands, Gas as Reserves Dwindle (Update1) Feb. 18 (Bloomberg) -- Shell Canada Ltd. Chief Executive Officer Clive Mather says oil from his Athabasca project, where tar sands are boiled to produce crude, can cost twice as much as drilling in the North Sea. And it's worth every cent, he says. ``If we had access to unlimited conventional oil, I guess the interest in Athabasca would diminish quite quickly, but that isn't the case,'' Mather said in a Feb. 3 interview in London. ``This is high-cost oil, there's no question about that. At current prices, it's still very good business.'' A 15-year decline in oil reserves is spurring companies such as Royal Dutch/Shell Group, Exxon Mobil Corp. and ChevronTexaco Corp. to spend $76 billion in the next decade to boost supplies of oil from tar sands and diesel fuel from Qatari natural gas. Oil executives say they have no choice but to try alternatives to drilling because there is not much more crude to be found in their current fields. ``We're damn close'' to the peak in conventional oil production, Boone Pickens, who oversees more than $1 billion in energy-related investments at his Dallas hedge fund firm, said in an interview in New York Feb. 16. ``I think we're there.'' Suncor Energy Inc., the world's second-biggest oil-sands miner, is his largest holding. New Production Companies will produce 10.1 million barrels of oil a day by 2030 from projects in Canada and Qatar, more than Saudi Arabia does today, according to forecasts by the International Energy Agency in Paris. That's 8 percent of the world's total. Shell is spending $13.70 per barrel at its Athabasca project in Canada, higher than drilling projects, said Mather. Oil executives say that crude prices near $45 a barrel more than offset the extra cost. Crude for March delivery today was little changed, trading at $47.68 a barrel on the New York Mercantile Exchange at 9:30 a.m. London time. The oil industry needs to spend $3 trillion by 2030, or $105 billion a year, to meet an expected surge in demand, the IEA estimates. ``Pressure on supply will become sufficient for more money to be put into non-conventional oil,'' said Peter Odell, an oil politics and economics professor emeritus at the Erasmus University in Rotterdam. ``This is a natural development of a resource base from the lowest cost to the highest cost.'' Exxon Mobil, BP Plc, Shell, ChevronTexaco and Total SA, the five largest publicly traded oil companies, last year reported net income of about $85 billion, equal to the economic output of Venezuela, a nation of 25 million people and the third-largest member of the Organization of Petroleum Exporting Countries. Falling Reserves, Returns Oil-sand mining projects offer a rate of return of 13.6 percent, less than half the 33.4 percent at a deepwater Gulf of Mexico field such as BP's Mad Dog project, said Scott Mitchell, an analyst at energy consultant Wood Mackenzie in Edinburgh. West Africa's deep waters offer an 18.2 percent return, he said. The estimates are based on an average price of $21 per barrel. Shell and BP, Europe's two largest oil companies, this month reported oil and gas reserves declined in 2004, based on U.S. rules. It was the first drop in more than six years for London- based BP, whose only investment in non-conventional oil sources is in Venezuelan heavy crude. BP acquired the stake when it bought the Veba Oel German oil-refining business from E.ON AG. Shell Reserve Slump Shell, based in London and The Hague, reported Feb. 3 that reserves fell in 2004 because it found enough oil to replace just 15 percent to 25 percent of what the company pumped. BP replaced 89 percent of production, the company said Feb. 8. BP forecasts it can expand oil and gas output by 5 percent a year using existing deposits and doesn't need to turn to non- conventional projects. BP's growth comes from Russia, where it spent $7.7 billion on the TNK-BP joint venture. ``To renew our exploration business, we only need to rely on the exploration for and development of primarily conventional oil and gas resources,'' Chief Executive John Browne said on a Feb. 8 conference call. Oil futures show crude prices will stay close to $40 a barrel until 2011 because of rising demand, spurring investment in projects once considered to be marginal. Futures contracts are a promise to deliver a commodity at a specified price at an agreed- upon date in the future. Supply Pressure Canada's tar sands may get $48 billion of investment by 2012, according to Canada's National Energy Board, double the amount spent in the decade ending in 2003. As part of that, Imperial Oil Ltd., controlled by Exxon, said in November it may pay $6.5 billion to double its capacity to produce oil from tar sands. For investors, oil sands have been a better bet than the best- known oil companies. Canadian Oil Sands Trust, which invests only in the Albertan mining projects, is up 67 percent in the past year. BP shares during that time are up 34 percent in London and Exxon Mobil, based in Irving, Texas, gained 39 percent in New York. Current spending plans show Canada's oil sands may produce 2 million barrels a day by 2015, more than Iraq today, crude worth $29.2 billion of revenue a year at oil prices of $40 a barrel. Qatar may receive more than $28 billion of investment, to cause a 22-fold surge in the amount of fuels produced from natural gas, based on IEA estimates. Only two gas-to-liquids projects exist now, in Malaysia and South Africa, representing 35,000 barrels of daily production. The Qatari ventures are for a total of almost 800,000 barrels a day in 2011, according to the IEA. The fuels may be worth $15.5 billion a year in revenue, based on today's diesel prices. Oil's Limits Shell will spend as much as $6 billion in Qatar to produce diesel fuel in 2009, according to project director Andrew Brown. Projects announced by Exxon, ConocoPhillips, Marathon Oil Corp., ChevronTexaco and Sasol Ltd. will cost another $22.3 billion. The potential for non-conventional oils may exceed the IEA forecasts. Should oil reserves be lower than expected, non- conventional oil production may be 37 million barrels a day in 2030, or 39 percent of global demand, the IEA said in an alternative to its most likely scenario in the 2004 World Energy Outlook, released in October. Ignoring oil sands and the potential to make fuels from natural gas ``is a mistake,'' said Ian Henderson, who manages $680 million at the JP Morgan Fleming Natural Resources Fund in London. ``It's taken millions and millions of years for hydrocarbons to form, and we are running out of them.'' Henderson owns shares of Canadian Natural Resources Ltd. and Petro-Canada, a partner in Syncrude Canada Ltd., the world's largest oil-sands mining business. Both companies are based in Calgary. His investment fund is up 30 percent in the past year, compared with a 20 percent gain in the FTSE 350 Mining Index. Making Canada's oil sands viable would ease demand for crude from Saudi Arabia and other suppliers, Odell said. Alberta's oil sands deposits contain 174.5 billion barrels of reserves, according to the Alberta Energy and Utilities Board. That total is two-thirds of Saudi Arabia's proven reserves of 262 billion barrels. Sticky Mixture Alberta's oil sands cover an area larger than the state of Florida, and about two tons have to be dug up, heated and processed to make a single 42-gallon barrel of oil. Suncor Energy spends C$12 ($9.62) to C$12.50 to mine and upgrade a barrel of oil. Saudi Arabia pumps a barrel of oil for about $2. Devon Energy Corp. President John Richels, a Canadian and a lawyer by training, remembers the first time he held a handful of the oil-encrusted sand, in the early 1990s. He said he had a hard time believing the sticky mixture could be turned into smooth- flowing crude. Devon, based in Oklahoma City, is now investing C$527 million in the Jackfish oil sands project in Alberta. ``They're not particularly high-return projects,'' he said in an interview. ``We see the same kinds of returns, though, in other parts of the world.'' And given the lack of exploration and political risk, the projects pay off, he said. `Operating Risks' Failures are costly. A blaze at Suncor Energy in Alberta slashed output by about half, and full production won't resume for months. The lost output is worth $4.4 million a day at $40 a barrel. The company expects insurance to cover most of its losses. ``There are operating risks,'' Suncor Chief Financial Officer Ken Alley said in an interview. ``It's not unlike the refining industry where you operate with hydrocarbons, at high pressure and high temperature, and that is a risk that you design facilities to protect against. Nevertheless there is a level of residual risk.'' Oil sands projects of Shell and Suncor failed to meet their budgets and deadlines, the companies said, the result of competition for equipment and labor. `Cost Overruns' Syncrude Canada's project to boost capacity by 100,000 barrels a day to about 350,000 is expected to cost $6 billion by mid-2006, almost double a 2001 forecast of $3.14 billion, according to Canadian Oil Sands Trust, lead partner in the venture. Developments by Shell Canada, 78 percent-owned by Shell, and Suncor cost as much as 70 percent more than planned, the companies reported. ``The problem is the consistent, continual and predictable cost overruns,'' Pickens said. ``That can't keep happening, I don't think, but still those overruns are a concern.'' Exploiting Venezuela's heavy oil may double the reserves of non-conventional sources. Paris-based Total SA, Europe's third- largest oil company, and Statoil ASA, the biggest in Norway, are among those exploiting Venezuela's heavy oil deposits, reserves that may equal another 100 billion barrels to 270 billion, according to the U.S. Energy Department. The country already is processing 500,000 barrels a day of heavy crude. In Qatar, the plants use a basic technology invented in the 1920s and exploited by the Nazis during World War II to make oil products from coal when embargoes cut off crude oil imports. The technology was also used in South Africa during Apartheid. Wasted Gas The gas-to-liquids process is wasteful, with about 45 percent of the natural gas lost in conversion, the IEA estimated. The process consumes 10,000 cubic feet of gas to make one barrel of fuel, according to Malcolm Wells, a spokesman for Sasol Chevron Ltd., a joint venture between San Ramon, California-based ChevronTexaco and South Africa's Sasol, which is spending at least $6 billion on building plants in Qatar. At that rate, the amount of gas used for seven barrels of diesel is equal to what is burned in the average American household in an entire year. Project costs are escalating because of higher steel prices and increasing demand for equipment. Shell's gas-to-liquids plant will cost as much as $6 billion, 20 percent more than initially forecast, the company said. BP just closed its gas-to-liquids pilot plant in the U.S. and is planning instead to sell natural gas to use in power plants, said Robert Wine, a BP spokesman in London. `Isn't Cheap' Gas-to-liquids ``isn't a cheap industry to get into,'' said Wells at Sasol Chevron. ``It requires massive investment into infrastructure and huge sources of gas.'' Qatar has the world's third-largest natural gas reserves, after Russia and Iran. Another 12 plants to make fuels from natural gas are in various stages of planning, in Nigeria, Iran, Egypt, Australia, Venezuela, Brazil and elsewhere, according to Paris-based Technip SA, Europe's largest oil-services company. A lack of information about proven oil reserves complicates assessing when supply from the world's conventional oil fields will peak, the IEA said in its world energy outlook. The agency estimated it will occur sometime between 2013 and 2037. ``Oil won't last forever,'' said Manouchehr Takin, a senior analyst at the Centre for Global Energy Studies in London, a consulting company founded by former Saudi oil minister Sheikh Zaki Yamani.

Subject: Re: Peak conventional world oil.....
From: johnny5
To: Pete Weis
Date Posted: Fri, Feb 18, 2005 at 15:33:41 (EST)
Email Address: johnny5@yahoo.com

Message:
XOM's calm in this regard confuses me - if we are just in a business cycle then oil will fall back to $20 a barrel. http://biz.yahoo.com/rb/050215/energy_chevrontexaco_1.html Reuters ChevronTexaco Warns of Global Bidding War Tuesday February 15, 5:32 pm ET By Deepa Babington HOUSTON (Reuters) - Asia's insatiable appetite for oil coupled with tight supplies has triggered the start of a global bidding war for oil from the Middle East, the head of ChevronTexaco Corp. said on Tuesday. The rapid growth in energy demand from Asia coupled with difficulties in accessing oil reserves has also resulted in a new energy equation where the days of cheap oil and gas are numbered, Dave O'Reilly, chief executive of ChevronTexaco, told a Cambridge Energy Research Associates conference. Asian giants like China and India figure prominently in this new energy equation -- a development that should not go unnoticed by the U.S. government, O'Reilly said, without specifying what exactly Uncle Sam should do about it. 'What I see happening is the beginning of alliances forming between Asian entities and Middle East entities for the long term,' O'Reilly told reporters. 'And I think it's very important that our government recognizes and understands the implications of that.' The remarks come as the emergence of fast-growing nations like India and China on the global energy scene sparks fears that they may outbid Western oil majors in asset deals or in securing access to a shrinking pool of oil reserves. 'We are seeing the beginnings of a bidding war for Mideast supplies between East and West,' O'Reilly said. 'The new Asian demand is reshaping the marketplace -- and we're seeing the center of gravity of petroleum markets shift to Asia, and in particular to China and India.' The Asian impact on demand coupled with the lack of easy access to areas of plentiful oil reserves has also meant that oil prices aren't coming down anytime soon, he said. Oil prices shot up dramatically in the past year thanks to fears of a supply disruption and the spike in demand, prompting a growing crowd within the energy industry to ponder whether sky-high oil prices are here to stay. 'The time when we could count on cheap oil and even cheaper natural gas is clearly ending,' O'Reilly told the conference. Not everyone shares ChevronTexaco's perspective on oil prices. Exxon Mobil Corp. (NYSE:XOM - News), the world's largest publicly traded company, for example, maintains that there has been no fundamental shift in the energy paradigm and that the oil business is simply one that is characterized by cycles.

Subject: Appreciate You Guys
From: Terri
To: johnny5
Date Posted: Fri, Feb 18, 2005 at 21:13:03 (EST)
Email Address: Not Provided

Message:
Appreciate you guys lots and lots.

Subject: Vangaurd analyzes US asset allocation
From: johnny5
To: All
Date Posted: Fri, Feb 18, 2005 at 12:39:07 (EST)
Email Address: johnny5@yahoo.com

Message:
Still US centric analysis - where are the people that think outside the box like Buffet? http://global.vanguard.com/international/hEurEN/research/srcsofprtprfEN.html SOURCES OF PORTFOLIO PERFORMANCE: STRATEGIC ASSET ALLOCATION IS THE DOMINANT FORCE IN DETERMINING A PORTFOLIO’S LONG-TERM PERFORMANCE. Are the findings of a landmark paper published in 1986 – which concluded that asset allocation was the primary determinant of portfolio return’s variability, with security selection and market timing playing minor roles – still relevant today? A recent research conducted by Vanguard sought to answer this question by building on this pioneering study, using a larger and more robust set of US balanced funds data. A portfolio’s performance depends on three interrelated decisions: security selection, market timing and an investor’s policy, or long-term asset allocation. Once an investor has determined a policy allocation to stocks, bonds and cash, this allocation can be implemented through an indexing strategy – simply aiming to mirror the returns of the stock, bond and cash benchmarks that make up the policy allocation – or through active management. An actively managed strategy attempts to exceed the expected return of the policy allocation through security selection and/or market-timing. The original Brinson, Hood and Beebower (“BHB”) paper1 analyzed quarterly return data of 91 large pension funds over the period 1974 to 1983. Its main conclusion was that 94% of the variability of total portfolio returns is explained by the strategic asset allocation. Other academic researchers have offered an alternative measure to the variability of total portfolio returns. Surz, Stevens and Wimer2 use, for example, the ratio of the benchmark return to the fund return as explanatory factor. Vanguard’s research key findings – US analysis The Vanguard Group, Inc. recently conducted an analysis3 of 420 US balanced mutual funds from the CRSP Survivorship-Bias Free US Mutual Fund Database. These funds operated at any time between 1962 and 2001; a 40-year database incorporating major bull and bear markets in both equities and bonds. The data included monthly returns, annual allocations to asset classes and some fund characteristics such as expense ratios and turnover. To ensure reliability, we analyzed only funds with at least 60 months of return history. The key findings were: On average, benchmark portfolios (after index management fees) had a higher return than the corresponding funds, On average, benchmark portfolios (after index management fees) had lower risk (volatility of return) than the corresponding funds, On average, 77% of the variability of a fund’s returns was explained by its strategic asset allocation policy, with market timing and stock selection playing minor roles, These conclusions held in all time periods and all observed investment environments over the time period in bull market or bear; and On average, the return for the highest cost funds lags their own benchmark much more so than do the lowest cost funds. The importance of strategic asset allocation can be intuitively grasped Figure 1 gives three examples of the effects of asset allocation and stock selection on total portfolio return over time. The three curves reflect sample asset allocation strategies: aggressive, balanced and conservative, implemented using index funds. The straight vertical lines represent the range of returns by using an active management stock selection strategy. Although active strategies can clearly have an impact on performance, they play a subordinate role for the average investor. That is, you cannot expect to earn equity-like returns in a cash fund and vice versa. Research results The study found that, on average, 77% of the short-term variability of a fund’s returns can be attributed to its benchmark (asset allocation) strategy. However, the results for each fund depend on its degree of active management. For example, a fund that implements its strategy with index funds and rebalances the asset allocation to benchmark will clearly have a very high outcome. However, one that uses only active management, with high tracking error portfolios, will have much more variability of the actual fund return relative to benchmark. As a result, in the latter case, the benchmark could be expected to explain a lower proportion of the fund return variability. Our analysis also shows that, on average, more than 100% of the long-term performance of a fund is determined by its strategic asset allocation. This implies that, on average, market-timing and security selection have been unable to overcome the higher costs, such as operating expenses and trading costs, associated with active management. The benchmark portfolio thus produces a higher average return than the actual portfolio – interestingly with less risk. On average, the benchmark portfolio’s return volatility is 87% of the actual fund’s volatility. Figure 2 shows the key results in the various periods analysed, both bull and bear. Characteristics of funds that add value Figure 3 gives a summary of the nature of funds that outperformed, underperformed and those that performed in line with the benchmark. On average, outperforming funds had lower expense ratios (costs) and lower turnover. Figure 4 shows the proportion of funds whose returns were higher, lower or in line with those of their own benchmark portfolios. This is clear evidence of the difficulty of consistently outperforming a highly-diversified and efficiently managed all-index portfolio. Over the long-term, the higher costs of active management are also playing a key role. Conclusion It is widely claimed that strategic asset allocation is an investor’s most important decision and is the most important determinant of portfolio performance. This US analysis conducted by Vanguard reports new results supportive of the earlier studies that short-term return variability and long-term average return of a broadly diversified portfolio are largely explained by its asset allocation policy. Since the vast majority of investment returns can be attributed to an asset allocation decision, investors should concentrate on understanding the requisite factors to make their asset allocation decision: goals, the risk and return characteristics of the asset classes, risk tolerance, and investment horizon. Should they wish to pursue active management strategies, they should attempt to do so by investigating the funds with lower expenses, fees, and turnover. So what does the research tell us? Strategic asset allocation is the dominant influence on US total fund returns. Market timing and stock selection play minor roles and over the long-term have detracted value after costs and added risk. Higher cost funds deliver, on average, lower returns relative to their benchmark, compared to lower cost funds. Conclusions are quite consistent in all market environments – bull and bear! 1 “Determinants of Portfolio Performance”, Financial Analysts Journal, July/August 1986, vol. 42, no 4.back 2 “The Importance of Investment Policy”, Journal of Investing, vol. 8, no 4 (Winter).back 3 “Sources of Portfolio Performance: The Enduring Importance of Asset Allocation”, The Vanguard Group, Inc., July 2003.back

Subject: asset allocation MYTHS
From: johnny5
To: All
Date Posted: Fri, Feb 18, 2005 at 12:36:39 (EST)
Email Address: johnny5@yahoo.com

Message:
http://www.forbes.com/forbes/1997/0113/5901270a.html False prophets By David Dreman, 01.13.97 IN JANUARY of 1995, many market timers and asset allocators warned that the market looked toppy. The S&P 500 had run up 71% from its 1990 low, and close to 600% from the beginning of the great bull market. Toppy? The market proceeded to advance another 71%. Market timers and asset allocators promise to get you in and out of the market at the right time. Asset allocators go one promise further. Working with a host of technical, fundamental and economic variables, they claim they can maximize your returns through the proper blend of stocks, bonds, cash and other investments. If they could do what they claim to be able to do, the timers and allocators would make their followers rich. Who, after all, wouldn't have wanted to be out of the market in October of 1987 and back in early the following year? But in practice no one I repeat, no one can consistently call market turns with precision. ; The chart, taken from Morningstar data, tells it all. It shows the returns of 186 asset allocators for the 11 years to last September, compared with the S&P 500 and the average of all domestic equity funds. The period covers a good part of the bull market, as well as the 1987 crash, the worst on record, and the sharp downturn of 1990. This was an ideal period for the market timers or asset allocators to prove their mettle. They should have gotten you out before the 1987 and 1990 crashes and back in on time to ride the resurgent bull. Had they succeeded, you would have outperformed the market handily. As the chart shows, heroes they ain't. While the market surged 508% over the entire period and the average equity fund moved up 410%, the asset allocators increased only 296% (all figures are dividend adjusted). With hundreds of market letter writers and asset allocators bandying forecasts about, some of them are bound to make good calls it's the law of the coin toss. But calling heads once does not seem to improve the chances of calling it right at the next toss. ; Mistiming Take the case of a well-known market timer whose claim to fame was that she called the 1987 crash, a claim somewhat disputed because she never issued it to her clients. As the market fell sharply in July 1996, this seer predicted it would drop another 1,000 points. Her revised forecast drove the Dow down 40 points the day it was issued. But her revised forecast notwithstanding, the Dow had moved up 1,129 points near the end of December. Even when the timers and allocators make lucky calls at the top, there is almost no chance they will get you back in anywhere near the bottom. On paper their claims make sense. In the real world they don't. Still, what do you do after the market's enormous gains? I wouldn't sell quality stocks, particularly if the gains are taxable. If you bought a stock at 10 and it is now at 50, you owe Uncle Sam $10 a share in capital gains taxes. So even if you could buy the stock back at 40, you still wouldn't be cash ahead. The way to make big money is to buy and hold quality stocks, not to try and o