Ask Uncle Bill

It Can't Always Be Great--A Not So Good Article On Retiring Rich

Pretty much the same old stuff from this article about retiring rich--your expenses will stay about the same in retirement, inflation eats away at your money, Medicare doesn't cover all medical expenses, and so on.  But read it anyway, mainly for the last sentence.

Retire Rich: Learn From Someone Who Did

by Walter Updegrave/Money Magazine

When Henry "Bud" Hebeler was winding down his career at Boeing nearly 20 years ago, he was appalled at the advice he got from retirement planning software.

"The assumptions about returns, inflation, longevity and expenses were highly simplistic," says the 74-year-old Hebeler. With his engineering degrees from MIT and his experience - first as Boeing's chief forecaster and planner and later as president of Boeing Aerospace - Hebeler figured he could do better.

He has. His Web site, AnalyzeNow.com, is a compendium of advice and tools (mostly free) that can help you tackle topics ranging from how to create a retirement budget to whether to buy an annuity.

What distinguishes Hebeler from the typical retirement "expert" is that he combines a strong quantitative background with real-life retirement experience - his own and that of fellow retirees.

Hebeler took time out from his hectic schedule of skiing, golf, travel and running a site to share his thoughts.

Q. What's the most popular misconception about retirement planning?

A. That your spending will drop as you age and you become less active. My father played golf until he was 95. My wife and I are in our seventies and we ski the expert slopes at Park City, Utah.

My friends who have reduced their spending didn't do so because of lack of energy or physical ability. It doesn't take much effort to get into a taxi and go to the theater. They're cutting back because they know they're going to live longer than they thought they would. They spent too much too early and now they're worried about running out.

Q. So what can you do to assure that your money will last?

A. If you have enough savings to live on, consider delaying taking Social Security until full retirement age or even later. Holding off can be especially worthwhile if you have a spouse who didn't work or had a low income, since the higher payment you get by waiting can be passed on to your spouse when you die.

I also think retirees should consider putting some, but not all, of their money in an immediate annuity. Look at inflation-adjusted immediate annuities, since they provide a lifetime income that, like Social Security, goes up with inflation.

Q. How did your work at Boeing influence the advice you give?

A. It made me more conservative. In business you see how often things don't work out as you planned. Projects cost more to complete than you estimated.

The same is true of retirement, but retirement plans seldom call for setting aside reserves for unforeseen events. There are a lot of surprises, usually more bad ones than good.

Q. What kinds of surprises?

A. For one thing, your expenses are likely to be very different in retirement than during your career. Things that were probably covered by your company insurance - dental work, vision care, a variety of medical tests - typically aren't paid for by Medicare. My hearing aids alone cost $6,000, which wasn't covered at all.

People also don't anticipate the impact of inflation. In the first 10 years of my retirement, the purchasing power of my company pension declined by 30%. And then there are obligations people rarely plan for, such as having to help parents or adult children who are struggling financially.

Q. If you could advise people to do just one thing to improve their retirement prospects, what would it be?

A. People who aren't retired need to know how much to save. My father used to tell me that you should always save at least 10% of your income.

That's more like 15% to 20% today because you're less likely to have a pension.

Writing Off 2008 Already

The new year has a rough start.  Will it continue?  Who knows but historically the beginning of the new year has little impact on what happens for the rest of the year as shown in the following article from Marketminder.com.

January Ineffect
1/7/2008

Story notes:

• January’s rough start has many investors invoking the old saying, “So goes January, goes the year.
• Statistically, this belief isn’t supported. History shows negative starts can be followed by positive years and vice versa.
• Market volatility is normal, no matter when it happens, and doesn’t mean a prolonged downturn is at hand.

_________________________________________________________________________

January has commenced with gray weather, record snows, fierce storms, already broken New Year’s resolutions (stupid leftover pumpkin pie), and the usual post-holiday gloom—not to mention a continuance of December’s volatility. Most major market indexes are negative so far this year, leading many investors to invoke the old saw “so goes January, goes the year.” Already, we’re seeing stories highlighting the long and widely held belief that a rough start to January portends trouble ahead.

The Stress Is Just Beginning
By Tomoeh Murakami Tse, Washington Post
http://www.washingtonpost.com/wp-dyn/content/article/2008/01/05/AR2008010500149.html 

This article states, “If the first three trading days of the year are any indication, 2008 is bound to test the nerves of even the most poised investors.” Fair enough—volatility always “tests nerves.” Except the first three trading days are never an indication of what’s ahead. Not ever. Three days of any month, no matter the calendrical significance, tell you nothing. Investors wouldn’t make a stock forecast based on the Ides of March—there’s nothing about any one day or group of days’ returns that tells you anything about what to expect looking forward.

Statistically, this is easy to disprove by checking historical data to see what happened each January and the annual results. Throughout history, negative starts to January have been followed by all sorts of combinations of positive and negative returns. Positive start, negative January, positive year. Negative start, positive January, negative year. On and on. Looking at the six worst first 10 days for the S&P 500, you see US stocks ended positively four of those times—one year up a big 42%! Another up 26%! What does that tell you? Nothing—beyond stocks are positive more than negative. And the third best start ever ended the year down 15%. Not so great.

Fundamentally, this makes even less sense. What do a few days in January tell us about investor demand for securities? Markets don’t obey a calendar. There’s nothing magical about January’s start suggesting markets must suddenly begin “behaving” themselves. Markets are volatile. They can be volatile in January, July, on Tuesday, the day after the Fourth of July—pretty much any time. Markets don’t have neat steps-and-stairs increases, and if they did, you wouldn’t be happy with the return you got. If you want that kind of steady appreciation, you’re going to have to be satisfied with what you can get by buying US Treasuries and holding them to maturity (i.e., not much).

We call the market “The Great Humiliator” (TGH for short) around here for a reason. Its sole purpose is to humiliate as many people as it can for as long as it can for as much money as it can. Scaring investors out of superior long-term returns with a bumpy start to the year is one way the market robs otherwise rational people of their senses.

We remain confident the world is altogether too dour. Don’t let TGH humiliate you out of the market with a bumpy start to the year—that’s just what that filthy trickster wants

How Much Is Enough To Retire? Finally Some Reasonable Answers

When I see something I like, I steal it.  Or at least borrow it.  The financial world is full of worthless calculators.  Here is something by Jon Clements of the Wall Street Journal that makes sense.

It's halftime. What's the score?

Today, I turn 45. (Don't feel bad; only my mother ever remembers.) By my reckoning, that puts me halfway through my working career and hence halfway to retirement.

How big a nest egg should a 45-year-old have? Here's a look at who faces a midlife financial crisis -- and who might be able to retire early.

Taking stock. Start with the accompanying table, which shows what percentage of pre-tax income you need to sock away over the next two decades, depending on how much you currently have saved.

Suppose you have a $240,000 portfolio, equal to three times your $80,000 annual income. To retire in comfort, you ought to save a manageable 12% of income every year for the next 20 years, calculates Charles Farrell, a financial adviser with Denver's Northstar Investment Advisors.

That savings rate -- which would include any employer contribution to your 401(k) -- will give you a retirement stash equal to 12 times income at age 65, or $960,000 in today's dollars. If you then use a 5% initial annual withdrawal rate, your savings will kick off $48,000, or 60% of your old salary. Add in Social Security and you might be hauling in a respectable 80% of pre-retirement income.

All this assumes you can clock an after-inflation investment return of five percentage points a year during the next two decades. To hit that target, keep a healthy sum in stocks and a tight lid on investment costs. (If you don't have precisely 20 years to retirement and want a sense of whether you're on track, try the retirement planner at www.dinkytown.com.)

Quitting early. What if you have savings of four or even five times income? As you can see from the table, amassing enough for retirement should be a breeze. In fact, if you have savings of five times income today and you never saved another dime, you would hit 12 times income at age 63.

But if you have already amassed a hefty nest egg at 45, you're probably a diligent saver, and you might look to retire early. Let's say you salt away 20% a year.

At that rate, if your portfolio today is equal to four times income, you will hit 12 times income at age 59, Mr. Farrell calculates. Similarly, if you currently have five times income saved, you should be set by age 56.

True, that means retiring before you're eligible for Social Security. But if you are a diligent saver used to living on a small portion of your income, that shouldn't be a big sacrifice.

Catching up. On the other hand, maybe you haven't been so thrifty. As the table indicates, the annual savings rate required to amass 12 times income by age 65 is 20% if you currently have two times income saved -- and a whopping 27% if your nest egg today is merely equal to your annual income.

Can't do it? Instead, you could scale back your retirement goals, delay retirement or both. Suppose you have savings equal to twice your income. If you sock away 12% of income per year, you could retire at age 69 with 12 times income.

Alternatively, you could call it quits with 10 times income at age 66. Again, imagine you earn $80,000 a year. If you retire with 10 times income, or $800,000, and use a 5% withdrawal rate, you will have $40,000 a year from your portfolio, equal to 50% of your old salary.

Meanwhile, if you have a nest egg of just one times income and you can't see cranking up your savings rate to 20% or more, you will likely have to curtail your spending fairly sharply in retirement, unless you work well past 65. For instance, to retire with 10 times income, you would need to salt away 12% of your pretax income every year until age 71.

One warning: All of the above presumes your income rises at the inflation rate between now and retirement. What if your income rises much faster? Ironically, that could make it tougher to retire.

"Let's say you get a big raise at age 50," Mr. Farrell says. "It's probably not feasible to replicate that lifestyle in retirement. The majority of that money should probably be committed to additional savings." If you do that, your nest egg will grow faster, and you won't have to throttle back your spending quite so much when you retire.

Copyrighted, Dow Jones & Company

Oil At $100 A Barrel--Maybe Not So Bad This Time

I see no reason that oil is so expensive but it is.  And that is a fact, for now.  But, as screwed up as some people think the world is right now, it could be worse.  It could be the 1970's when the whole engine fell off the track.  Here is an article from the London Times that gives some insight as to why now is different.

Gerard Baker

It's human nature to imbue inert numbers with profound significance. We celebrate 18th birthdays and 25th anniversaries as though doing so might pause, even for a moment, the merciless ticking away of life's clock. We build buildings without 13th floors. In Asia they will go to extreme lengths to avoid any contact with the number 4. The Bible can be read like an extended number puzzle: twelve tribes, ten commandments, seven plagues, four horsemen.

In financial markets this tendency has fascinated economists. A certain number in an index or a price for a traded instrument is said to be “psychologically important”. It is believed that traders behave differently when they near or cross some round number - a $2 pound, 10,000 on the Dow Jones industrial average.

It seems implausible at first sight that hard-bitten capitalists would be victim to such unreason. Yet the idea that particular numbers matter persists in the minds of some people in the markets, which is enough to make it a kind of reality, I suppose. Sometimes, it seems, like an old horse that whinnies and retreats from some unseen spectral object, markets really do think a particular number might be haunted.

One of those magic numbers is $100 for a barrel of oil. On Wednesday, for the first time, contracts for future delivery on the New York Mercantile Exchange finally recorded that figure.

There seemed something especially ominous about hitting such an iconic number on the very first trading day of the new year - a year already invested with so much fear for the global economy. It was generally reported that, unless you happen to work for an oil company, this was a seriously bad number.

I beg to differ. There are good reasons not to fear $100 oil and even a case for mild celebration. That might not make much sense as you stand shivering this morning spending half a day's wages to fill up your petrol tank. And it might appear to sit oddly with our last experiment with rapidly rising oil prices - those halcyon economic days of the 1970s - but it's true.

The oil shock of the 1970s did help to bring the world that ugly pantomime horse called stagflation - stagnation with inflation. The quadrupling of prices in the 1970s to a price that, in inflation-adjusted terms, was just about the same as this week's was one of the primary factors behind the worst decade for the global economy since the Great Depression.

But while it's obviously true that today's higher oil prices represent both an inflationary risk and, at the same time, a recessionary one, as a kind of additional tax on our disposable income, there are lots of good reasons to think the effect this time should be much smaller than it was 30 years ago.

The first is that, back then, a sluggish global economy was hit hard by the deliberately restrictive policies of the oil-producing nations. It was, in the economist's jargon, a supply shock, as oil output was restrained by the producers from keeping pace with demand.

This time the principal reason for rising prices is less to do with supply than with demand. For all the talk of imminent global recession, 2007 was another bumper year. The continuing advance of China and emerging markets, solid growth in the US and a sprightly performance by those old laggards Europe and Japan meant that available oil production could not keep pace with demand. Now, of course, the rising price is the mechanism by which that demand will be restrained a little - but that is no reason to think a slump is on the cards.

The second big difference concerns the other end of the stagflation horse - inflation. A good reason for mild optimism today is simply that our policymakers have already lived through the experience of the 1970s and know what to do to avoid repeating it.

Back then, the oil shock came on top of a decade of steadily rising inflation, which nobody seemed to mind much. In the 1960s and early 1970s respectable economists thought there was a trade-off, that a bit more inflation was a price worth paying to keep growth going and unemployment down. So they “accommodated” the oil shock with easier monetary policy.

We learnt the hard way there is no such trade-off. If central banks accommodate higher oil prices with easier monetary policy, the almost immediate consequence will be rapid inflation, which will kill off growth.

Of course, today's economic climate poses threats. The continuing global credit crisis means that central banks might not be able to be as tough with rising inflation as they would like. But current easy monetary conditions are a temporary, emergency measure to tide us over this immediate crisis, not a permanent feature of the economic landscape.

The third good reason for suppressing our misery at $100 oil is that we are much less dependent on that baleful commodity than we were. Manufacturing - with a high energy-intensity - takes up barely half the share of our economies that it did in the 1960s. Thanks to improved production techniques and more efficient combustion engines, it has been estimated that today each unit of the West's economic output requires about a quarter of the energy input that it did 40 years ago.

Which leads us to the case for gentle euphoria at world record oil prices. A large part of the reason we are more energy efficient than we were 40 years ago is precisely because oil prices went so high in the 1970s, forcing us to use fuel more effectively.

Whether or not you believe that climate change is the world's biggest medium-term economic challenge and whether or not you believe that attempts to reduce our consumption of fossil fuels will make a bit of difference to it, you cannot seriously think that going on consuming oil at current rates is healthy.

Our continuing dependence on oil is wasteful, it messes up our environment, and it maintains our ruinous obligations to some of the most unpleasant regimes in the world - from Saudi Arabia to Venezuela via Russia and Iran.

If $100 doesn't wean us off the petroleum fix, perhaps we should start cheering for $200.

Hit It Where They Ain't

The stock market likes to go against conventional wisdom.  This article from Marketminder.com explains why the 'experts' are most often wrong in their predictions.

 

Groundhog Day 2008

12/18/2007

The close of each year stirs an instinctual phenomenon in the professional finance world. Like premature Punxsutawney Phils, investment institutions scramble forth from the warmth of their Bloomberg machines to forecast the climate of the upcoming calendar year.

This barrage of forecasts each year end is explained by behaviorism’s theory of order preference – an insistence on certain things in a certain order for little purpose other than societal convention. Why not forecast every 24 months instead of 12? Or each April instead of December?

In truth, a calendar year’s end means little to stocks. Markets go on—milestones like months and years are delineations of the mind and little more. But still, most investors engage in the prognostic ritual each December. In the next weeks you’ll hear many big-name gurus squawk (or should that be squeak?) their forecasts.

Of course, forecasting is a necessary thing for successful investing. If you don’t have some idea about where markets are headed, then beating the market is significantly tougher (if not near impossible.)

Most forecasters—even the gurus—fall wide of the mark. That’s because the factors driving most forecasts are usually derived from widely available information, are already broadly known, and therefore priced into the market. If there’s one thing we know is true, it’s that you have to know something others don’t to beat the market.

Still, paying close attention to what the gurus forecast is important. Why? Because a lot of folks look at them! So that means what they’re predicting becomes widely known—the antithesis of information that can beat the markets. So you’ve got to know what others are pricing in today to even have a shot at beating the market later.

As always, we advise critical thinking on these matters and to eschew herd behavior. After all, it’s been proven time and again that most stock market gurus with verifiable track records are wrong more than they’re right—making them about on par with good ol’ Punxsutawney Phil, who’s shadow detection technique of discerning spring’s arrival is right well less than 50% of the time.

How To Flub A Job Interview--Follow This Advice

Personal finance columns drive me up a wall.  Here is a doozy of bad advice.  We'll take it point by point.

Five Ways to Flub a Job Interview

by Penelope Trunk

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Posted on Wednesday, November 7, 2007, 12:00AM

We spend so much of our careers doing good work, meeting interesting people, and learning new skills. But it really all starts with one moment: the interview.

Once you get there, you need to be able to package everything together for a nice, neat presentation that's memorable in exactly the right way.

Here are five mistakes a lot of people make -- even people who are great at doing interviews:

1. Not preparing for a phone interview.

Most hiring managers screen candidates on the phone before they bring the candidate in for an interview. This is to make sure there aren't any glaring problems.

A phone interview saves time. If you can't get the answers to basic questions right on the phone, there's no point in interviewers watching you botch those questions in person. Also, the hiring manager is looking for you to make a mistake that would rule you out. For example, not knowing that you shouldn't take a call with a screaming baby in the background.

So instead of thinking of the phone interview as a precursor to the real thing, think of it as something you can prepare for. Learn the rules.

MY INTERJECTION HERE--IF YOU DON'T PREPARE FOR AN INTERVIEW, THIS ARTICLE IS NOT GOING TO HELP YOU.  YOU ARE ALREADY TOO STUPID TO GET A JOB.

2. Misunderstanding the point of a face-to-face interview.

Hiring managers today have a lot of tools at their disposal to figure out if you're qualified for a job. The Internet reveals your history, and often the content and quality of your work; LinkedIn can provide a plethora of references from people who have worked with you, whether you actually provide them to the employer yourself or not. And a phone screen can give a sense of your verbal abilities.

So what's left? Whether or not you click with them -- whether they like you. Remember that intangible thing that happens on a date when you decide if you like the person or not? The same thing happens with hiring.

This is what the face-to-face interview is all about. So make a great first impression, and focus on making sure the interviewer likes you.

SEE POINT 1.  YOU DON'T KNOW THE POINT OF A FACE TO FACE INTERVIEW?  IF YOU DON'T, DON'T WORRY, YOU ARE PROBABLY INCAPABLE OF FINDING THE OFFICE FOR THE INTERVIEW.

3. Neglecting talking points.

When President Bush walks into a press conference, he doesn't worry what journalists are going to ask him because he already has the answers he's going to provide -- no matter what the questions are. Such answers are called talking points.

Politicians want to frame an issue, so they listen to a question and then decide which of their talking points they'll use to answer that question. In this way, each question they're asked is an opportunity to get their own points across.

I once had a media trainer teach me how to stick to talking points, and it works for a wide range of situations -- including job interviews.

You control what five topics you want to discuss, so you should pick five things about yourself that you want to get across in an interview, and each point should come with some sort of story or example. You listen to each question and then figure out which point fits in well for a particular question.

You're not George W. Bush, though, so you can't totally ignore questions that don't have pat answers. But you'd be surprised how often you can answer an interview question with one of the five answers about yourself that you've prepared. This is a way to control an interview and make sure the focus is on your strengths.

A great resource for helping you understand how to frame your answer for any question is the "The Complete Q & A Job Interview Book" by Jeffrey Allen.

YOU CONTROL THE INTERVIEW?  SORRY, NOT TRUE.  SURE THERE ARE SOME POINTS YOU WANT TO GET ACROSS BUT IF YOU START TAKING OVER THE STAGE, YOU ARE GOING TO LOSE.  THE MAIN PURPOSE OF AN INTERVIEW FOR THE HIRING MANAGER IS TO SEE IF THIS PERSON IS GOING TO FIT IN.  BE YOURSELF.  IF THEY DON'T LIKE YOU, TOO BAD.  IF THEY DON'T YOU ARE PROBABLY BETTER OFF NOT WORKING THERE ANYWAY.   

4. Thinking the job description is set in stone.

When you start an interview, find out what you're interviewing for. Typically, the person who writes and publishes a job description is not the person making the hiring decision. Ask the hiring manager what the goals are for the position, and ask who the new hire will work most closely with so you know who'll have the biggest say in whether or not you get hired.

And, if you get the job, remember that it could change all over again. Immediately. So don't ever assume you know what your job is until you investigate. The only constant about your job description is that you must be invaluable to your boss in order to succeed.

DOES THIS PERSON UNDERSTAND ANYTHING ABOUT CORPORATIONS?   I DON'T THINK SO.  THE PERSON DOING THE HIRING PROBABLY DID WRITE THE JOB DESCRIPTION OR GIVE THE INPUT TO HR SO THEY CAN PUT IT INTO THEIR PET FORMAT, SO PAY ATTENTION TO WHAT THE HIRING MANAGER IS SAYING.  THE ONLY THING THAT MAKES ANY SENSE IN THIS ARTICLE--BE INVALUABLE TO YOUR BOSS!

5. Failing to close.

A job interview is a sales call, and all good salespeople know that you don't have a deal until you close it. An almost-deal is not a deal, in the same way that a good interview is not a job.

So toward the end of the interview, if you think things are going well, say, "Do you have any reservations about hiring me?" Most hiring managers will answer this question truthfully, and it'll give you a chance to assuage their fears.

This is a hard question to ask, because you'll be faced with your weaknesses right there in the midst of the interview. But if you don't take the time to explain how you'll overcome those weaknesses it won't come up, and you're much less likely to get the job.

THIS IS SO DUMB--DO YOU HAVE ANY RESERVATIONS ABOUT HIRING ME?  WHY, SHOULD I?  IF SOMEBODY ASKED ME THAT QUESTION, I WOULD ASK FOR PSYCHOLOGICAL TESTING.  IF YOU ARE INTERESTED IN THE JOB, SAY SO AND THEN TELL THEM WHY YOU CAN DO IT.  JEEZ, THIS IS SO STUPID.

SORRY BUT THIS KIND OF STUFF WILL KEEP YOU UNEMPLOYED FOR A LONG, LONG TIME.

Need Job Fulfillment? Read this--

I love Ben Stein.  Really like the first part of this, not too crazy about the middle part and back on track for the last part.  Go, Ben, go.

Arm Yourself for Job Fulfillment and Retirement Bliss

by Ben Stein

Now for some decidedly non-PC thoughts.

I hear a lot of bragging from my pals about how their daughter got into Brown or their son is being courted by Goldman Sachs or their grandchild just got into a fancy prep school.

Worth Bragging About

What I never hear is bragging from parents who say, "My son just got into the Army Special Forces and is risking his life to keep your son and you alive." I never hear parents saying that their kids got into the 82nd Airborne and are now fighting in Afghanistan to give people there a decent life and keep Al-Qaeda tied down so they don't come here to attack us.

Now, you may say, "All well and good, and it's great that these military families are so modest. But what does this have to do with me?"

It has everything to do with you, my friend.

Why It Matters

First, the military people on the ground -- and those in the ground in Section 60 of Arlington National Cemetery -- are the ones who keep your family alive. They're the ones who comprise the wall around America so that we can play and make money for our retirement and enjoy our children. They, whether in training or in traction, are the ones who keep America humming and keep the noblest dream of freedom alive in our hearts.

Again, you may say, "I agree and honor them, but what does this have to do with a column about money, careers, and finance?" Again, everything.

Day after day I get letters from readers who complain about their jobs and their lives. They have dead-end careers. They have bosses who disrespect them. They have colleagues who are strangers. I know that world. I've been in it.

Real Job Satisfaction

But I also get letters aplenty from men and women in the military. They love their jobs. They do exciting work. Dangerous, of course, but exciting. They have immense responsibilities. They get challenged on a scale they would never have dreamed conceivable. They bring more out of themselves than they knew they had.

Yes, they don't get paid as much as they should. But their pay isn't terrible, and they get extraordinary benefits. More than that, they wake up each morning feeling that they matter. They never have to worry if they're making a difference in the world, because they know there would be no civilized world without them. Their colleagues on the battlefield not only treat them with respect, they would give up their lives for them. They have each other's backs in the real sense of the phrase. (Please, someone at a Wall Street firm, tell me if your colleagues feel the same way about you.)

In short, dear reader, you might want to consider a career in the military. The world needs you, and it just might make you feel like you're doing something very worthwhile with your life.

Light at the End of the Tunnel

Second, I want you to think about retirement in a serious, truthful way. This will tell you that while you're going to be fairly vigorous and sprightly for the first part of your golden years, you possibly won't be for all of them. You'll get a bit weak, often more than a bit confused, and generally not totally "there" for your duties and responsibilities.

This is one of the many reasons I love and recommend variable annuities, which you then convert into a lifetime annuity. Once you've set the annuity on autopilot and start adding to it (always with an eye on fees), it compounds month after month free from tax.

True, when you start withdrawing from it, you have to pay income tax on the amount of gains in the account. But for most Americans, that rate is now extremely low. And you get that check from the insurance company or financial house as regularly as clockwork. It mounts up and up during your contributing years, and then you get the money through the mail.

You don't have to study the market. You don't have to worry about ups and downs. The money just comes in every month or every quarter and you live on it. And it's guaranteed to be there until you die, or for some specified number of years thereafter.

Old age, especially the part of old age that involves loss of powers, is frightening enough for anyone. Old age that involves fear of financial insecurity is truly horrifying. Annuities are a safe, easily accessible, low-cost (if you keep an eye on fees) way out of that desolate valley. Keep them in mind, even if others mock them. They work.

Hardly Working

Finally, I have a correspondent who endlessly asks me if I know ways to get rich that don't involve much work so she won't miss her pedicures. She also wants to work only with nice people who are also smart.

I hate to break this to her and to everyone in her situation, but there's no such job. Making money takes hard work. The people who do it well make it look easy, but it isn't. It's hard work. Get used to it. And the people you work with aren't always nice, either.

There's no royal road to quick wealth. Hard work and disciplined, sensible savings will get you there. Not pedicures.

Taxes--Higher In The Future?

Not sure I buy all this but an interesting article on politics and taxes (or tax increases) as a result of the election cycle. 

THE BASIC RULE REMAINS--BE IN THE MARKET OVER TIME AND YOU WILL GET RICH.

 

A Capital Gainsay

11/12/2007

Story Highlights

• Media headlines are already warning of higher tax rates after the 2008 elections.
• It’s far too early to know what the outcome of the elections will be, or what the incoming administration’s agenda will be.
• There’s currently little benefit to trying to maneuver around potentially higher capital gains rates.

________________________________________________________         

Though our political pals have already been campaigning for, seemingly, an eternity, we’re now entering the official campaign season. Hoorah! And the most popular agenda item, after ensuring the survival of blood-thirsty, man-eating Arctic carnivores, seems to be whether to extend or end the “Bush tax cuts.”

The market doesn’t care if the president’s Democrat or Republican, and we don’t either. At MarketMinder, we’re vigorously politically agnostic, preferring no political action to any political agenda—left, right, or center. But should the Dems sweep the White House and Congress in 2009, are tax hikes guaranteed? And does that mean you should sell now to take advantage of today’s lower capital gains rates? No and no.

First, the Dems are by no means guaranteed the White House. It’s way too early to handicap the race. Recall Howard Dean seemed unstoppable before his barbaric yawp in Iowa. A million things could happen between now and November ‘08. Governors Romney or Richardson could make a surge. A major candidate could drop out of the race. Senator McCain could seize the lead from Mayor Giuliani, switch parties, and convince Stephen Colbert to be his running mate. Senator Obama could be discovered to have been Hillary Clinton’s commodities broker! Voters could realize Hillary Clinton is Hillary Clinton!

If that provides no comfort, consider this: Would it shock you if the next president is a Democrat, and would it shock you if he or she raised the capital gains rate? Did you answer “no” to both? The next president won’t take office for 13 months, yet we’re already seeing headlines like these:

Wall Street Braces for Higher Tax Rates
By Jeanne Sahadi, CNNMoney.com
http://money.cnn.com/2007/11/07/pf/taxes/investment_rate_change_effect/index.htm?postversion=2007110815 

The market doesn’t move on what’s widely expected—it moves on economic fundamentals that are unexpected. By the time President Whoever enacts their stupid tax agenda, the market will have had a very long time to price in the ill effects. That doesn’t mean we think tax hikes are no big deal—it means you needn’t worry about what pretty much everyone is already worried about. There’s not much market moving power in the wholly expected.

But let’s suppose you know exactly who’ll win and exactly what’s in their black little heart—raising the capital gains rates to 25%. Or higher! What can you do with that information?

Some might say, “Sell! Sell! Sell!” to take advantage of today’s lower capital gains rate. Fine . . . then what? Sit with your proceeds in cash? Even assuming a tax hike, equities have a far superior long-term average than bonds or cash. Selling now to avoid a higher rate later isn’t cutting off your nose to spite your face—it’s full frontal lobotomy!

Another straw man might say, “Well, I’ll sell now to pay the lower rate, then reinvest. That’d be smart, right?” Nope—if you assume stocks generally rise over time (as we do), the best place for your dough usually is in stocks. Trying to time the market, no matter what your reason, is fraught with peril.

Plus, it’s not guaranteed you’d be better off by gaming the lower rate now. The magic of compounding means it’s generally better to leave money working in the market for as long as possible. Why pay taxes now if you don’t have to? Yes, your rate might be higher later, but it’s a higher rate on conceivably a much bigger pool of assets—meaning if you give the market time, you can still end up with more, net-of-taxes, than if you do a tax hokey-pokey now. Isn’t the goal to end up with more money? We’re not fond of handing our money to the government either, but we wouldn’t purposely deprive ourselves of greater returns just to make a point. We’re principled, but we’re not crazy.

We can’t know how the elections will turn out, and there’s no telling what the incoming administration’s tax policy will be. Anything can happen—we can even envision a situation where a Democratic sweep of both Congress and the White House still wouldn’t yield higher taxes! Given those uncertainties, and the undeniable benefit of compounding interest, the best course of action is to deny the government tax revenue today in return for the likelihood of greater returns for yourself in the future. It’s the American way.

UFOs? NO, ETFs

Well, leave tomorrow for six days in a U-Haul so I have lots to do to get ready.  Not a lot of time for this stuff but if you want to learn up on ETFs go for it.  Me, I would just read category 12 and do that.  Easy for me to say, I wrote it.  Category 12 I mean, not the following which came from MarketMinder.com.

 

THE ADVISOR'S CORNER

Exchange Traded Funds

8/30/2007 |

The Advisor’s Corner tackles a common situation or issue facing financial advisors and their clients.

Over the past decade, exchange traded funds (ETFs) have exploded in popularity. Originally designed to track a broad market index at a relatively low cost, ETFs now come in all shapes, sizes, and levels of specificity. Most every segment of the market now has an ETF to track it. In this column, we’ll take a closer look at exchange traded funds and discuss ways these tools can be useful in building a diversified portfolio.

Client: What’s an exchange traded fund? Who were they created for?

Advisor: Exchange traded funds, or ETFs, are securities tracking a specified index or basket of assets in a fashion similar to an index fund. However, unlike an index fund, an ETF trades like a stock on a major exchange and the price fluctuates throughout the day. ETFs were originally designed to provide investors with a relatively low-cost method of investing in a particular index or segment of the market. ETFs provide instant diversification and allow investors to sell the index short, buy on margin, and purchase a smaller number of shares. (Most index funds have a minimum buy-in.)

Over the past several years, ETFs have gained in popularity with investors who believe there is no value to trying to outperform a market index or benchmark. ETFs allow investors to essentially perform like the market at a lower cost relative to most other actively managed mutual funds.

Client: That approach sounds pretty appealing. What are the drawbacks?

Advisor: On the surface, it seems an appealing alternative to other investing techniques. If you can spend minimal time achieving market-like returns, what’s not to like?  But, like almost everything market-related, it’s not that easy.

Many “indexers” purchase ETFs planning to just let them “do what they do” over the next twenty years. Unfortunately, though this is a noble goal, you see very few able to stick to it. Why? Part of the reason most investors underperform the market is their (very natural and understandable) propensity to allow emotions to overwhelm objectivity. Many investors become spooked by even small short-term losses in their portfolio. It can be difficult to recognize short-term losses are likely temporary in the bigger picture. When market indices and the funds tracking them have double-digit declines, many investors panic and fail to stay the course. That panic can lead investors to sell out at the wrong time—making it likely they miss the opportunity for the positive returns they seek.

Really, buying a fund for the long-term and actually sticking with it are two totally separate things.

Client:  Is there a better way to use ETFs?

Advisor:  In my opinion, yes. There are certain instances when utilizing ETFs to gain exposure to narrow sectors of the market makes sense, from a transaction cost and diversification standpoint. For example, if I want an approximately 3% portfolio weight in Japanese stocks, I can more cost-effectively gain exposure and diversification with an ETF.

But if I purchased individual positions instead, I would have a few challenges. First, I would have to purchase multiple individual stocks, maybe 10 or more, to properly diversify in that narrow category. However, allocating only 3% of my portfolio to 10 or more positions can lead to big transaction costs. Since most brokerages charge minimum commissions for trades, buying 5 or 10 shares of a stock becomes much more expensive relatively than buying 100 or more shares. Second, even with 10 or so positions, I still wouldn’t have achieved the diversification available with a single ETF that might track several hundred positions.

Client:  So, why create a portfolio using anything but ETFs?

Advisor:  First, even though it is not nearly as important as proper asset and sub-asset allocation, stock picking can still add value to your portfolio’s return. Studies have shown nearly 10% of a portfolio’s return is attributable to stock selection. If you have the time and ability to pick good stocks, you can likely add return.

Second, if you build an ETF-only portfolio, you still have many decisions to make. Do you use only broad index ETFs? Or do you use sector, country or size-specific ETFs? How much do you put in each one? When do you rebalance? How do you ensure the underlying positions in each fund don’t overlap? Essentially, using ETFs this way requires active management—something an ETF user may be trying to avoid. Part of the ETF allure is their passive attributes and there’s nothing passive about this type of approach.

How To Make A Million--The Easy Way

Stealing articles again because I have a lot to do--1,500 miles to go in a UHaul takes your mind off money.  And you should take your mind off money too by making investing a habit, not a gamble.  See below--pretty dry but makes a lot of sense.  An article called Taking A Gamble On Ignorance by Kebin Bailey, an Aussie.

A FRIEND of mine recently told me with great confidence that investing in shares was gambling.

I took offence and assured him that if you use a scientific approach you can wash out most of the speculative risk and be left with ownership of good quality businesses that produce good earnings year after year.

His opinion about the market is not unique -- and is borne out of an ignorance of the evidence that backs up sound portfolio theory.

He has only experienced the hype of stock tips and timing calls of when to get in and when to get out of the market. In a word, his only experience of shares was speculating.

Empirical research has shown that stock selection and market timing techniques contribute virtually nothing to the total return of a broadly based investment portfolio over time and in many cases detract from the overall portfolio performance.

Research conducted by Brinson, Hood and Beebower in several well documented studies showed that over 94 per cent of the long-term return of broadly based investment portfolios were attributable to the asset allocation decision.

Only the remaining 6 per cent was attributable to stock picking and market timing.

However, stock picking and market timing (sometimes called tactical asset allocation) are the very areas that generate the bulk of the revenue for the investment industry.

Many shareholders have failed to match the market return, despite taking far greater concentration risk by picking a relatively small number of shares that they think will be winners.

They tend to blame their broker for poor stock selection without realising the futility of the exercise in the first place.

Most of us rarely compare the total performance of our portfolio relative to the market as a whole and we are often unaware of our poor relative performance.

Some of us are like the gambler who only remembers the wins at the track but conveniently forgets the losers. During a rising or "bull" market when a "rising tide lifts all ships", share clubs spring up and there is a sense that investment is easy and fun.

Interest begins to flag when losses start to accumulate during a prolonged downturn. Nothing substantial is learned about the nature of investment markets and a belief is usually formed that share investment is speculative and dangerous.

The famous author Benjamin Graham used a precise formula to differentiate between investment and speculation. His description has stood the test of time.

"An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

Often, the unsuspecting public is led into purchases that they think are investments when they are in effect, speculations.

The evidence of how to achieve better results is available but ignored by the majority of participants in the advice industry for commercial reasons.

Prior to the advent of the computer, work was already being done on the efficiency of markets.

Some of this research dates back to the work of French mathematician Louis Bachelier, who presented his dissertation in 1900 on "The Theory of Speculation" for his degree of Doctor of Mathematical Sciences at the Sorbonne in Paris.

In this paper he stated that "the mathematical expectation of the speculator is zero." He described this condition as a "fair game".

Bachelier arrived at his conclusion because "it seems that the market, the aggregate of speculators, at a given instant can believe in neither a market rise nor a market fall, since, for each quoted price, there are as many buyers as sellers."

The logic is irrefutable: "Clearly, the price considered most likely by the market is the true current price: if the market judged otherwise, it would quote not this price, but another price higher or lower."

Over time, of course, prices will move in either direction, when the market as a group changes its mind about "what the price considered most likely" is going to be.

My friend who thought investing was about second guessing the market should read Bachelier. He should ignore short term fluctuations, diversify as broadly as possible and focus on the long-term dividend producing potential of every purchase.

And you should read Category 12--All You Need To Know

Death Of A Salesman

Why go to the work of thinking up stuff when you can steal it?  Did I say steal it?  Sorry, borrow it. 

The job of salesman (salesperson?) has always fascinated me because I'm not very good at it.  Wish I was because it is a job you can take anywhere.  I was in international finance and the smart money said you had to live in New York, London, or at worst, Chicago to make a living.  I proved that wrong but the career category is not very portable. 

Sales is.  If you're good you can live anywhere.  The guy building the million dollar house next to ours is a salesman for IBM working out of his house.  And he builds houses in his spare time.  What a life. 

So think about it but read this by Ben Stein first.

Ten Ways to Blow a Sale

by Ben Stein

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Posted on Friday, October 12, 2007, 12:00AM

In 1900, the most common job in the United States was farm laborer. That was backbreaking, dangerous work. Now the most commonly occurring job is salesperson.

That's not as difficult. Usually, such jobs are performed in air conditioned settings. The most painful parts of it are dealing with rude customers and having to stand for long hours.

It's Yours to Lose

There are all kinds of sales jobs, of course, from selling gum and cigarettes at convenience stores to selling giant office buildings, airplanes, or immense blocks of stocks or bonds. Or even selling entire companies.

But whether you're a salesperson at 7-Eleven or Goldman Sachs, you've probably heard and read advice on how to make a sale. I'd like to change gears and come at it from another angle. As a companion piece to my column from last year, "The Art of (Killing) the Deal," how about some further advice on how to lose a sale?

The Terrible Ten

If you find yourself doing the following acts or omissions on a regular basis, you might want to reconsider your steps:

1. Don't listen to your customer. Instead, only tell him or her what you feel like saying.

Don't hear what's important to the customer about a house or a car or a pair of shoes or an investment. Only talk about what's interesting and important to you.

2. Show disrespect to your customers. After all, you never know if the guy is serious or not. So make fun of him and belittle him until -- and maybe even after -- you actually see the color of his money.

Don't hesitate to be sarcastic and mock or criticize his choices and opinions. After all, it's your store, your dealership, your brokerage. You're the expert, not him or her. Besides, customers like being taken down a few pegs. They don't want to just be sucked up to -- they want to be treated badly. It makes them much more likely to buy.

3. Don't be accommodating on big purchases. If you're selling something as expensive as a home or large boat or resort condo, and if the buyers have any hesitation because of unsettled market conditions, don't cut them any slack. Just show them the standard contract, and make it as one-sided as you can.

Make sure you tell them it's your way or the highway. Yes, it might be a million-dollar sale, and maybe you haven't had any other customers in a few weeks (or months). But still be totally unbending about your terms even if what the buyer wants doesn't really cost you much money.

You have to show that ratty little buyer who's boss. Flexibility is for losers, and you're not a loser.

4. Put your personal life ahead of your customers. Get right off the phone with your clients if your girlfriend calls. If you have a manicure and pedicure appointment, do that before you even consider staying a minute late to get the sale closed.

After all, there are always more clients coming through the door -- your nails are sacred. You have to respect yourself and not become a slave to your job.

5. Don't know your product. If your customer asks about your product, the best answer is "whatever," preferably said in the most dismissive tone possible.

If you don't know something your client asks about, tell him it's not important and that if he really wants to find out about it, he should look it up online. You have other things to do, like that manicure and pedicure.

6. Don't bother closing the deal. Or rather, make it really hard for the customer to close the sale.

Don't have the paperwork ready. Gossip with the finance manager instead of getting your papers ready. Forget to fill out parts of the contracts. Then tell the buyer he'll have to cool his heels while you get it done -- and then just leave and make him wait until tomorrow! It'll teach the customer a much-needed lesson in humility.

7. Lie to your customers about the product. Tell them it's safer, or more reliable, or guaranteed for longer than it is.

After all, they'll never catch on. And if they do, there'll be plenty more customers coming. Besides, you'll be gone and in another state by the time they catch on. If they sue, that's your boss' problem, not yours. Little lies help you, and they don't really hurt anyone.

8. Look like a total slob. Have bad breath. Don't wear clean clothes. You're a poet, an artist -- you don't have to look like you're someone's butler or maid.

You can look any old way you want and smell any way you want. Your charming personality will come through anyway. If it doesn't, tough. There are 300 million people in this country, and any one of them is a customer. So worry about the next one, not this one.

9. Don't bother to close the deal. Just explain a little bit, then walk away and let the customer stew. Don't come back to him -- let him come crawling to you.

Don't explain things, then ask how he wants to pay for it and any other question that will lead to closing.

10. If you're selling big-ticket items, don't bother to qualify your customers.

Don't find out if they can actually afford that plane or that car or that home. Just do your standard pitch and assume the guy or gal in front of you has the money to do the deal. That really works beautifully. Then, if they don't qualify, yell at them for being deadbeats.

Salesman, Heal Thyself

Oh, there are a lot more. But if you find yourself doing any of these little things, pause, take a few steps back, and ask yourself, "Do I really want to sell this thing?" If the answer is yes, then take a step back and start again with selling in mind.

(I'm greatly indebted to my master-salesman pal and fellow author Barron Thomas for many of these tips.)

Quick Political Fixes That Don't Work

Going to post another article that is pretty good but pretty boring but has a lot of meaning so read it.  I'm too busy right now to do it all myself since I just added a possible lawsuit in Florida over my late uncle's estate.  Just gets better and better.

But I realized when I saw this article at MarketMinder.com (full disclosure--I do business with these guys) that none of you have ever seen or been under price controls.  Hope you never do because they don't work, ever.  Read on.

The high cost of cheap food

Published: October 24 2007 20:37 | Last updated: October 24 2007 20:37

In 1973 Richard Nixon, US president, under political pressure be­cause of rising domestic food prices, banned the export of soyabeans. The policy had predictably dire results, but today, with the world in the grip of another bout of food price inf­lation, governments worldwide are rushing to distort the market with subsidies and quotas, price controls and export taxes. They should stop.

In the run-up to its presidential election, Russia has imposed price controls on basic foodstuffs, and plans an export tariff on wheat. China already controls prices; other importers, including Egypt, Jordan, Bangladesh and Morocco, are increasing subsidies or fiddling with their tariff regimes.

The simple problem with all these actions is that they distort the market. Price controls and export tariffs make production less profitable, which discourages increased supply and can make shortages worse. Subsidies stimulate demand so it does not fall into line with higher prices. All distort the terms of trade within a country. Farmers suffer at the expense of city dwellers – especially perverse in countries with high rural poverty, such as China.

None of this is too bad in the short term. If food prices fall back, price controls become meaningless, subsidies can be withdrawn and export tariffs no longer make sense. The more pernicious problems will appear if food prices stay high. With more demand for protein from fast-growing Asian middle classes, lunatic policies to subsidise corn-based ethanol and the legacy of under­investment during long years of low prices, that prospect seems likely.

For exporters, distorting the market in favour of domestic consumers harms the balance of payments, lowers investment and helps rivals. Nixon’s ban is often credited with creating Brazil’s soyabean industry.

For net food importers, who can keep prices down without shortages only by offering subsides, the risks are much more serious. Cheap food is an open-ended fiscal commitment – once in place it is politically impossible to withdraw – that can play havoc with a budget. Developing countries have improved their fiscal position in recent years. They should not throw that away.

Rich countries, where food is a small part of total consumption, have less to worry about, although they should beware the ratchet effect as food importers increase subsidies and food producers tax exports, driving up world market prices still further. But leaders in the developing world, no matter the political pressure to bring down the cost of grain, should resist. Cheap food comes at a high price.

Copyright The Financial Times Limited 2007

Deliver Us From Human Resources

Somebody over at Tower Perrin doesn't have enough to do as evidenced by this 'study.'  I struggled through it but not sure I can draw any conclusions except that Mexican companies have the greatest percentage of 'engaged' employees.  From what I saw in Mexico they are engaged because they just feel damn lucky just to have a job.

Interesting remarks about Japan as well.  Well, interesting if you are in Human Resources.

On the 'road to engagement?'  What is that?

Read on and figure out your own conclusion.  Please share any insight because I'm not sure I get this.  Or even want to.

Few workers are 'engaged' at work and most want more from execs
Sunday October 21, 10:28 am ET
By Andrea Coombes

Just 1 in 5 workers are 'engaged' -- and most want more from executives

SAN FRANCISCO (MarketWatch) -- Only 21% of workers worldwide are "engaged" -- that's human-resource-speak for ready to expend some extra effort at work -- while 38% are either disenchanted or disengaged, according to a new survey.

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Engagement is not satisfaction or happiness, but the degree to which workers connect to the company emotionally, are aware of what they need to do to add value and are willing to take that action, said Julie Gebauer, a managing director with consulting firm Towers Perrin, which surveyed almost 90,000 workers in 19 countries.

"Happy employees don't necessarily create better financial results, but there is a definite link between engagement and a company's financial performance," Gebauer said.

The survey found 21% of workers worldwide are engaged, and another 41% are "enrolled," which means they're on the road to engagement, Gebauer said.

More than 80% of the engaged employees say they contribute to the quality of company products, services and customer satisfaction, while only 40% of disengaged workers agree.

Engagement helps retention too: About 50% of engaged employees say they have no plans to leave their company versus 15% of the disengaged.

'Dollars-and-cents issue'

The fact that almost 80% of workers are less-than-engaged is likely costing companies money, Gebauer said.

"The notion of engagement is really a dollars-and-cents issue. Organizations that have employees that are highly engaged deliver better financial results than those that don't," Gebauer said.

In a separate study, Towers Perrin assessed data on 40 global companies over a three-year period, measuring employee engagement at a certain point and then looking at the companies' financial results over the ensuing three years.

Companies with highly motivated workers enjoyed a 3.7% increase in operating margins and a 2% rise in net profits, while companies with a lower level of worker commitment saw both measures decrease slightly.

Countries vary widely

The portion of engaged workers varies widely by country, according to the survey.

In the U.S., 29% of workers are engaged and 28% are disenchanted or disengaged, while in Mexico, 54% of workers are engaged -- the highest among the 19 countries surveyed -- while 16% are disenchanted or disengaged.

The lowest portion of engaged workers on the list is Japan, where 3% of workers are engaged and 72% are disenchanted or disengaged.

Still, other reports find higher levels of worker commitment among U.S. workers, at least. A separate survey finds that 72% of workers would recommend their company as a good place to work, up from 62% two years ago, and 64% say their company values them as employees, according to a survey of 2,000 U.S. workers in September by Rasmussen Reports LLC, a research firm, for Hudson, a staffing and recruitment firm.

From the Towers Perrin report, here's the full list of engagement levels by country:

Region	Engaged	Enrolled	Disenchanted	Disengaged
Global	21%	41%	30%	8%
Mexico	54%	30%	13%	3%
Brazil	37%	38%	22%	3%
India	36%	46%	15%	3%
U.S.	29%	43%	22%	6%
Switzerland	23%	50%	23%	4%
Canada	23%	44%	25%	7%
Spain	19%	35%	31%	15%
Russia	18%	46%	30%	7%
Germany	17%	47%	28%	8%
China	16%	51%	27%	6%
U.K.	14%	42%	33%	11%
Belgium	13%	47%	31%	9%
Netherlands	13%	47%	32%	7%
France	12%	41%	35%	12%
Italy	11%	40%	36%	13%
Poland	9%	37%	39%	15%
Korea	8%	45%	40%	7%
Hong Kong	5%	36%	46%	13%
Japan	3%	25%	56%	16%

Engage me

So, what makes for an engaged employee? It's not necessarily pay. While the level of pay is important, it's not among the top 10 drivers of engagement, Gebauer said.

Rather than using "the blunt instrument of pay," Gebauer said, companies should survey their work force, much as they might study their customers, to assess what employees are seeking.

The top 10 drivers of employee engagement across all 19 countries are a mixed bag that includes both the behavior and actions of senior management and individuals' own actions and abilities:

1. Senior management sincerely interested in employee well-being
2. Improved my skills and capabilities over the last year
3. Organization's reputation for social responsibility
4. Input into decision-making in my department
5. Organization quickly resolves customer concerns
6. Set high personal standards
7. Have excellent career advancement opportunities
8. Enjoy challenging work assignments that broaden skills
9. Good relationship with supervisor
10. Organization encourages innovative thinking

Many employees "are looking for a greater demonstration of senior management's interest in their day-to-day work," Gebauer said.

"What employees are looking for is open communication, communication that reflects the fact that senior management really understands how the work gets done, and recognizes and appreciates that," she said.

Senior management's interest in employees can be expressed in a number of ways, Gebauer said, "including organizations' willingness to help employees balance work and activities outside of work, to sponsor competitive benefit programs, to focus on career development and training," she said.

"Those are things that will translate to employees as senior management being interested in my well-being," she said.

Communication helps, too, even the electronic kind. "CEOs who will provide a monthly Web cast or a voicemail just letting people know about key developments in the industry and in the company -- those are some of the things that help employees put at least a voice and a face to senior management," she said.

The study's findings refute other studies that find workers' immediate supervisors are most important to employees' sense of well-being.

"It's not to say the manager isn't important, but imagine the best manager in the world working in an organization that doesn't have a good performance-management system, doesn't have good advancement opportunities," Gebauer said.

"How is that manger going to help the employee navigate through an organization that is actually not working so well?"

Beats the hell out of me.

Getting To A Million Bucks

Most people don't get rich because they refuse to start small.  Why bother?  Just win the lottery.  I can't believe people buy lottery tickets but they do.  And the ones I see doing so don't look very smart.  And they aren't.

The way to get there is simple, well, kind of.  Save two times your annual salary and let the power of compound interest take over.  Einstein said that compound interest was the eighth wonder of the world and most people think Einstein was, well, an Einstein.

Jonathan Clements gives the details in the following---

How to Save $1 Million for Retirement

The Wall Street Journal Online
By Jonathan Clements


If you're a newly minted college graduate, the $1 million-plus needed for retirement might seem impossibly large.

Feeling discouraged? Try lowering your sights, aiming instead to accumulate savings equal to two times your annual income.

Once you hit that milestone, the financial wind will be at your back -- and reaching your retirement-savings goal should be a breeze.

Breaking through. Suppose you expect eventually to earn $80,000 a year. Looking ahead to retirement, you reckon that -- in addition to Social Security -- you will want maybe $45,000 a year from your portfolio, adjusted for inflation.

To generate that $45,000, you will need a $1 million nest egg, calculated in today's dollars. This assumes that, in retirement, you use a 4.5% annual portfolio-withdrawal rate.

Investment Growth

"People wonder how they will ever accumulate enough money," says Charles Farrell, a financial adviser with Denver's Northstar Investment Advisors. "But what many investors fail to understand is that, once they reach a certain level of assets, most of the savings should come from investment growth."

Mr. Farrell figures the breakthrough occurs at around two times income. Let's say your salary has hit that $80,000, you have amassed $160,000 in savings, you are socking away 12% of your pretax income each month and your investments earn 6% a year.

Over the next 12 months, your $160,000 portfolio would balloon to $179,518, or $19,518 more. Your monthly savings would account for $9,600 of that growth. But the other $9,918 would come from investment gains. In other words, you've got to the crossover point, where the biggest driver of your portfolio's growth is now investment earnings, not the actual dollars you're socking away.

You should, however, keep salting away money. That sacrifice will be handsomely rewarded, as things really start to snowball. Using the assumptions above, your portfolio would soar from $160,000 to more than $418,000 a decade later. True, part of this gain would be lost to inflation. But inflation should also drive up your salary, allowing you to squirrel away more money.

Get Started Now

Getting started. That still leaves the initial task of accumulating two times income.

"It can take people 12 to 15 years," Mr. Farrell says. "The earlier you can start, the better. But if you're close to two times pay by your early 40s, you're probably in pretty good shape."

As you strive to amass that sum, your top priority should be funding your employer's 401(k) plan. In addition to the initial tax deduction and continuing tax deferral, you will likely receive a matching employer contribution, which will help speed your portfolio's progress.

If you can, save outside your employer's plan, by funding a Roth individual retirement account. That won't get you an initial tax deduction, but you will enjoy tax-free growth. A Roth also offers a heap of flexibility. At any time, you can withdraw your contributions -- but not the account's investment earnings -- without any sort of tax hit. That means your Roth could double as an emergency reserve or as your house down-payment fund.

Investment Ideas

Which investments should you buy? Check out broadly diversified no-load funds like AARP Aggressive and Schwab Target 2040, both of which require a $100 initial investment. Until you reach Schwab's $1,000 brokerage-account minimum, you will need to add $100 every month through an automatic investment plan, where money is pulled out of your bank account and invested directly in the fund.

Also consider Fidelity Freedom 2050 and T. Rowe Price Retirement 2050. The regular minimum at both funds is $2,500. T. Rowe Price will trim that minimum to $1,000 if you open an IRA and waive the minimum entirely if you sign up for a $50-a-month automatic-investment plan. Similarly, at Fidelity Freedom 2050, you can sidestep the minimum if you agree to invest $200 a month through Fidelity's SimpleStart IRA program.

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Minimum Wages Worldwide at Yahoo! News

Who's Earning What? America's minimum wage, though unchanged in a decade, is still more than 250 times that of Mongolia.

Just Be Glad You Are Not In The Newspaper Business

Very early in my career, like at the beginning, I had a boss who was not the happiest guy on the planet.  He had about an hour and half commute by train each way which for me explained everything but so did a lot of other people but they seemed kind of normal.  Not Dick, he was miserable. 

Then one day he wasn't.  Everyone noticed but put it down to exception.  Until it happened again the next day and the next and the next.  What was going on?  As the junior guy with the most to lose, I was selected to ask about the reformation. 

I did.  Dick's answer--"I quit reading the newspapers."

Here is an article with a lot of references to newspaper articles which you may want to read but you should probably ignore if you want to be a successful investor. 

   

Flaming Kamikaze Squirrels! (And Other Anomalies)

10/19/2007

Story Highlights:

• A true, prolonged bear market can’t be forewarned or foreordained by the mass media.
• This week’s market volatility is perfectly normal, not a specter of ghosts past—stocks remain a great value for investors

Discounting an anomaly is impossible. What are the odds a squirrel catches fire and ignites a car? Like zero, right? Whoops…it happened!

Flaming Squirrel Ignites Car in Bayonne
By N. Clark Judd, Hudson County Now
http://www.nj.com/hudsoncountynow/index.ssf/2007/10/flaming_squirrel_ignites_car_i.html

Flaming squirrels are uncommon…but fiery car-igniting squirrels are downright anomalies! As a car owner, there really is no way to protect against such an event, is there? (Do most car insurance policies cover flaming squirrels, or is that just geckos? If so, does that fall under “acts of god,” “collision,” “arson/vandalism,” or what?) We’ve written on the nature of market anomalies before:

Obsessing Over Black Swans (5/1/2007)
http://www.marketminder.com/commentary/commentarypage.aspx?articleID={798DE358-09EF-4BE6-B75C-AA673CB282E3}&sectionID=\commentary\daily

On the 20th anniversary of Black October, today’s market drop (S&P 500 shed 2.6%) has some folks wondering if it’s déjà vu all over again. But this is no new bear market and no downside market anomaly. This is barely a bump in the road.

Why? Many reasons. An important one is Black Monday took just about everyone by surprise. It’s extremely difficult to have a true market crash everyone expects because that expectation will be baked in to stock prices a priori.

A true crash today would not come as a surprise—too many folks are worrying about it:

Crash and Quivers a Lesson, Not Guide
By Annette Sampson, Sydney Morning Herald
http://www.smh.com.au/news/business/crash-and-quivers-a-lesson-not-guide/2007/10/19/1192301043459.html

Watching for the Next Black Monday
Bryant Park Project, NPR.org
http://www.npr.org/templates/story/story.php?storyId=15436281

20 Years Later, Could Markets Crash Again?
By John Waggoner and Adam Shell, USA Today
http://www.abcnews.go.com/Business/PersonalFinance/story?id=3750809&page=1

Paint it Black
Economist.com
http://www.economist.com/finance/displaystory.cfm?story_id=9993586

As a matter of fact, the so-called ills frightening today’s markets are the oldest of this bull market!

Wall Street Walloped
By Alexandra Twin, CNNMoney.com
http://money.cnn.com/2007/10/19/markets/markets_0405/index.htm?postversion=2007101916

We quote: “Stocks slump, with Dow down 300 points on credit and housing sector woes, earnings fears, record-high oil prices, slide in dollar, questions about the Federal Reserve.” Not a new worry among them! That’s great evidence this is mere short-term investor psychology.

On Monday we gave our thoughts on why twenty years later a new Black Monday is highly unlikely:

Ghost of October Past (10/15/2007)
http://www.marketminder.com/commentary/CommentaryPage.aspx?articleID={3D4C6163-2B00-498C-8B3A-2481840C0DF0}

Keep in mind, the week’s market drop is not even the largest one week drop of the year. This is still well within the confines of normal market volatility.

Don’t fret stocks too much—their prospects for the immediate future are still stellar. This was just a rough week. But if you require further solace, here’s some sense about 1987 and today:

The Truth About the Crash of 1987
Donald Luskin, Poorandstupid.com
http://www.poorandstupid.com/2007_10_14_chronArchive.asp

Have a great weekend…and watch out for those kamikaze squirrels.

Cheating Today

Actually I've been cheating for the last couple of weeks since our son went to blow up things in the Las Vegas desert, we're building a house, I may have to sue some people in Florida, and I'm having trouble getting the electrician to show up.  Not a lot of time for other things like concentrating so I'm cheating.  Actually the subject is about paying attention to only certain things so take a look at this article from Marketminder.com (again) and learn to ignore thinking that only gets in the way of getting rich.  Here goes---

The Myth of One

9/12/2007 |

Right now, you’re reading this column and your mind is focused on each sentence. That’s a marvelous and miraculous thing your brain is doing! The ability to focus on one thing is an incredible feat of focus allowing us to accomplish much in life. But there’s a big drawback: While you’re focusing on this column, there’s a whole world of activity your brain is ignoring!

That pain in your back, the chatty co-worker across the room, the phone that won’t stop ringing, the fly buzzing around your head…where did all those pesky thoughts go? None of them ceased to exist, you just stopped paying attention for a few seconds.

Blocking extraneous issues from our minds and directing our focus towards what’s most relevant is a nifty feature of the human brain: We’re actually designed to ignore most of what’s going on around us. Human brains—and those of many animals—are made to focus and reduce situations to actionable, understandable steps. We can’t keep a whole lot of information at the forefront of our consciousness for very long. At best, we can hold on to a few items at a time, but mostly we just focus on one thing or we’ll forget it.

That’s because evolution designed the brain as a hierarchical thing—receiving stimulus from the outside world and running the data through various neural unconscious systems (which account for the vast majority of brain activity) and deciding what, if any, information is worth bringing to your actual frontal lobes (where most of your consciousness is believed to reside). You’ll never even know about most of what your brain does or perceives!

That’s a great thing because nobody wants to be thinking about regulating their heartbeat, digesting this morning’s cinnamon raisin bagel, or focusing the lenses in their eyeballs to read the newspaper every second of the day. Our unconscious brains do all that heavy lifting so we can put our attention on other issues.

Only problem is, the brain’s tendency to block out extraneous information can be a very hazardous thing for investors.

I like to call most of today’s financial media pundits disciples of the “Myth of One.” That is, most stories we read today tend to focus on one issue alone as if that was the only thing moving stocks. “Oh, stocks were down today because housing starts fell last month!” or “Stocks went up because mortgage loan demand was higher than expected in August!” (Really? Since when are we suddenly all so focused on mortgage demand as the seminal market moving issue?)

The reality is millions upon millions of factors are acting on the market at any given time. But our brains can’t live with that idea so we write and read stories about single factors as if they were the only relevant thing. How absurd! But that’s how our brains work—we’re just not made to see the big picture. (In fact, our brains are so blind no one seems to