Yellow Pages de forex

Pendant que le chômage montait en janvier, les taux sans emploi de quatre états' sont montés plus haut que 10%, selon des données fédérales libérées mercredi. En janvier, 49 états et la zone de Colombie ont enregistré des augmentations de taux de chômage de mois-au-dessus-mois, le département de travail rapporté. Chacun des 50 états et la zone de Colombie ont eu des taux plus élevés que l'année précédente. Lisez plus…

LONDON (AP) — The pound slid to a six-week low against the dollar Monday after the British government’s weekend announcement that it will take a majority stake in Lloyds Banking Group PLC in return for insuring up to 260 billion pounds of assets at the ailing bank. By midday London time, the pound was down 1.8 percent at $1.3832, having earlier fallen to $1.3776, the lowest level since late January’s $1.3501 — itself the lowest level in nearly 24 years. Read more…

NEW YORK (AP) — Oil prices rose above $44 a barrel Friday as a jump in U.S. unemployment weakened the dollar and gave foreign investors more buying power. The Labor Department said America’s unemployment rate widened to 8.1 percent in February, the highest since late 1983. The U.S. shed 651,000 jobs last month. “The dollar got shaken a little bit by that stunningly bad report,” said Phil Flynn, analyst at Alaron Trading Corp. “It caused people who were running to the dollar as a safe haven to take pause. They’re running to gold or silver today. And some of that money went back to the euro.” Read more…

By TOM RAUM and DANIEL WAGNER, Associated Press Writers Tom Raum And Daniel Wagner, Associated Press Writers

WASHINGTON – A Depression doesn’t have to be Great — bread lines, rampant unemployment, a wipeout in the stock market. The economy can sink into a milder depression, the kind spelled with a lowercase “d.”

And it may be happening now.

The trouble is, unlike recessions, which are easy to define, there are no firm rules for what makes a depression. Everyone at least seems to agree there hasn’t been one since the epic hardship of the 1930s.

But with each new hard-times headline, most recently an alarming economic contraction of 6.2 percent in the fourth quarter, it seems more likely that the next depression is on its way.

“We’re probably in a depression now. But it’s not going to be acknowledged until years go by. Because you have to see it behind you,” said Peter Morici, a business professor at the University of Maryland.

No one disputes that the current economic downturn qualifies as a recession. Recessions have two handy definitions, both in effect now — two straight quarters of economic contraction, or when the National Bureau of Economic Research makes the call.

Declaring a depression is much trickier.

By one definition, it’s a downturn of three years or more with a 10 percent drop in economic output and unemployment above 10 percent. The current downturn doesn’t qualify yet: 15 months old and 7.6 percent unemployment. But both unemployment and the 6.2 percent contraction for late last year could easily worsen.

Another definition says a depression is a sustained recession during which the populace has to dispose of tangible assets to pay for everyday living. For some families, that’s happening now.

Morici says a depression is a recession that “does not self-correct” because of fundamental structural problems in the economy, such as broken banks or a huge trade deficit.

Or maybe a depression is whatever corporate America says it is. Tony James, president of private equity firm Blackstone, called this downturn a depression during an earnings conference call last week.

The Great Depression retains the heavyweight crown. Unemployment peaked at more than 25 percent. From 1929 to 1933, the economy shrank 27 percent. The stock market lost 90 percent of its value from boom to bust.

And while last year in the stock market was the worst since 1931, the Dow Jones industrials would have to fall about 5,000 more points to approach what happened in the Depression.

Few economists expect this downturn will be the sequel. But nobody knows for sure, and nobody can say when or whether the downturn may deepen from a recession to a depression.

In his prime-time address to Congress last week, President Barack Obama acknowledged “difficult and trying times” but sought to rally the nation with an upbeat vow that “we will rebuild, we will recover.”

The next day, Federal Reserve Chairman Ben Bernanke told the House Financial Services Committee that the “recession is serious, financial conditions remain difficult.” He held out a best-case hope that it might end later this year, with “full recovery” in two to three years.

Despite the tempered optimism, the economic outlook remains grim. Consumer confidence has fallen off the table, stocks are at 12-year lows, layoffs come by the tens of thousands, and credit remains tight.

The current downturn has many of the 1930s characteristics, including being primed by big stock market and real estate booms that turned to busts, said Allen Sinai, founder of Boston-area consulting firm Decision Economics.

Policymakers and economists note there are safeguards in place that weren’t there in the 1930s: deposit insurance, unemployment insurance and an ability by the government to hurl trillions of dollars at the problem, even if it means printing money.

Before the 1930s, any serious economic downturn was called a depression. The term “recession” didn’t come into common use until “depression” became burdened by memories of the 1930s, said Robert McElvaine, a history professor at Millsaps College in Jackson, Miss.

“When the economy collapsed again in 1937, they didn’t want to call that a new depression, and that’s when recession was first used,” he said. “People also use ‘downward blip.’ Alan Greenspan once called it a ’sideways waffle.’”

Most postwar U.S. recessions have come after the Fed has increased interest rates to cool down rapid economic growth and inflation. Later, the Fed lowers rates and helps restart the economy, with the housing and auto sectors — both sensitive to interest rates — leading the way.

This time is different: As Senate Banking Committee Chairman Chris Dodd, D-Conn., said, “Our housing and auto sectors are leading us not out of recession, but into it.”

What’s more, the Fed no longer has the ability to kick-start recovery by lowering interest rates. The central bank has already effectively lowered the short-term rates it controls to zero.

And there are no guarantees the massive economic stimulus package and series of bank bailouts will stave off a nightmare recession, or worse.

“It is certainly plausible that the kinds of policy measures that have been good enough to tame the business cycle are no longer adequate in a fast-moving, highly leveraged, highly networked economy,” said Anirvan Banerji of the Economic Cycle Research Institute.

Today’s economic indicators don’t project a depression. But Banerji is cautious. Economic data in 1929 didn’t show that the stock market crash was about to lead to years of economic misery, either.

“It did not look like the kind of plunge that would be a depression until after the recession began,” Banerji said. “The Great Depression didn’t start out as a depression. It started out as a recession.”

The depression that consumed most of the 1870s and followed something called the Panic of 1873 makes a better comparison to what’s happening now, said Scott Nelson, a history professor at the College of William and Mary.

Financial markets had become centrally located by the 1870s, notably in London. And nations had not yet enacted the protectionist trade policies that were in place by the 1930s.

The results were not exactly promising. Gangs of orphans roamed city streets as men moved west to pursue cattle industry jobs. Widows struggled to make money by serving unlicensed liquor. Thousands of workers, many Civil War veterans, became transients.

The downturn lasted more than five years, according to the economic research bureau — four times as long as what the United States has endured so far in this downturn.

Today’s recession is already longer than all but two of the downturns since World War II. But for now, public officials are being extremely cautious about the D-word. Alfred Kahn, a top economic adviser to President Carter, learned that lesson in 1978 when he warned that rampaging inflation might lead to a recession or even “deep depression.”

When presidential aides asked him to use another term, Kahn promised he’d come up with something completely different.

“We’re in danger,” he said, “of having the worst banana in 45 years.”

Over the past few weeks, there has been a notable deterioration in the correlation between the price action of the Japanese yen and traditional risk-related assets like equities.

This relationship has been utilized and exploited for nearly 18 months as investors and market participants have used the this currency as a gauge for general risk sentiment while others have used it in a kind of cross-market pair trading strategy. Now, traders are left to wonder whether this is a natural recession in a very obvious market link or a sign that the Japanese currency is losing its status as the primary FX safe haven.

The History
Before, we delve into forecasting the future of the yen’s link to safe haven flows; we must first understand why the market has come to expect the correlation to be so strong. Looking back before the current financial and economic crisis, the markets were enjoying a boom period where capital was prevalent, leverage was the standard and rates of return were high. This led seasoned and novice traders alike to the now infamous carry trade. Utilizing leverage, these market participants would borrow in a low interest bearing currency and invest in a higher one. During the height of the boom, the Japanese yen was the primary ‘funding’ currency as the Bank of Japan was forced to keep its benchmark lending rate under 0.50 percent for over a decade thanks to a lack of inflation in the economy. Comforted by the market’s deep liquidity, the flow of capital behind this strategy grew exponentially.

In the summer of 2007, when financial conditions started to deteriorate and the global economy began to yaw, the carry unwinding began. As investors took losses in their other positions, they were forced to liquidate their carry trades to raise cash to buffer dwindling reserves. This matched losses in traditional asset classes to a steady repatriation of yen. Pessimism has proven to be enduring, and the sheer size of the carry trade has supported a long-lasting deleveraging of the once high-flying strategy. Other considerations that have come into play for the yen’s status as a safe haven during the market’s plummet were borne out of economic truisms. Japan is the second largest economy in the world; and therefore, expectations that it would survive and recovery from the shock are greater than some of its counterparts. What’s more, the country is known for large capital surpluses. As a saver nation, liquidity was not considered a problem for Japan. These three considerations served the currency well, until recently.

The Fundamental Break From Safe Haven
The Japanese yen was supported by its well-established carry status and fundamentals for a long time – producing an envious correlation between the currency and the Dow Jones Industrial Average (among other risk related assets). However, with a global recession taking hold and extending the financial slump, we may have seen the market conditions outlast the yen’s staying power.

As the most certain driver for the risk/yen link, the carry trade is also the most ambiguous in its turn against the currency. There will be a natural point to which the built up yield-differential trade will be fully unwound. There were finite funds put into this strategy during the boom years; and therefore, there will be a time when these speculative funds are repatriated. It is difficult (if not impossible) to determine when this deleveraging is complete; but 18 months of forced liquidation and the potential for capital losses in holding a long yen-based cross has at the very least cleared the bulk of the funds. This point has likely come and gone, and speculative momentum behind the move have since taken over for actual flows. Therefore, we merely needed a catalyst to break this trend - and economic health may have been that trigger.

With the carry trade’s influence over the yen waning, its correlation to risk trends was riding on expectations that speculation would maintain its course and Japan’s economy would drawing the market’s capital on its own accord. A critical look at the yen fundamentals now, however, casts the stability of the economy in doubt. Just this past week, the government released its fourth quarter GDP figures which pegged the year-over-year pace of contraction at a staggering 12.7 percent – the sharpest decline since 1974. Such an aggressive decline was not unexpected. Domestic consumption trends have long suffered from a lack of income growth and a consumer base that is renowned for its savings; while foreign demand for Japanese exports has shrunk as the global recession deepens. Far more disconcerting are the forecasts for growth in the world’s second largest economy. The Bank of Japan’s top economist has said first quarter GDP could be “unimaginable;” and growth through 2009 is expected to shrink a record 4.0 percent on an annualized basis according to official forecasts. Add to this the trouble that Japanese policy officials have found in reaching an agreement on much-needed stimulus plans, bailouts and liquidity injections; and both growth and financial health severely undermine safety of funds.

Has The Yen Lost Its Safe Haven Status For Good?
Though we have seen the role of the Japanese yen as a safe haven currency come under strain; does that mean it will lose this global function for good (or at least this market cycle)? Yes and no. As a strict safe haven, there is little to revive the currency’s draw. Most of the carry deleveraging has been spent. There is still something to be said about Japan’s long-standing capital surplus and the economy being the second largest in the world; but this holds little appeal considering the direction it is going. Japan is expected to suffer a far deeper slump going forward and the lack of needed government intervention to this point will likely put the nation behind the recession curve (on which the US, Euro Zone and even the UK are likely ahead on). And, though large surpluses help to establish confidence in liquidity and cash in the economy, this is no longer a key issue for the rest of the world as massive injections of liquidity in the banking system have stabilized overnight lending on a global basis.

On the other hand, while the yen is losing its safe haven status; it is not likely to lose its place in the carry trade. When global growth does turn around and interest rates start to entice macro investors back to the carry strategy, the Japanese target cash rate will no doubt hold near its incredible lows – and market participants know it. With long-lasting deflation and a glut of domestic savings, there is little to drive the benchmark rate higher. In contrast, Australian, New Zealand, the UK, the Euro Zone and even the US (to a lesser extent) have a history of quick recoveries and central banks that are more apt to respond through monetary policy. This means, investors will once again draw funds to invest elsewhere to take advantage of the carry and further enjoy the natural appreciation int eh exchange rate.

Who Will Replace The Yen In The Short Term?
Looking down the line, the return of the carry trade is likely a long time off; so those that were trading the yen as a safe haven will have to find an alternative in the mean time. There are two popular options: the US dollar and Swiss franc. The latter currency has enjoyed the status of carry trade and safe haven for quite some time. As a relatively low-yield currency with a central bank that typically deliberated on rate shifts only once a quarter, the Swiss currency was a natural source for funds. And, with an economy that prizes low taxes on funds and privacy, its safe haven status was secure – that is until recently. Just this past weekend, EU leaders gathered to develop a coordinated plan to answer the ongoing economic crisis; and one of their policy points was identifying and sanction tax shelters like Switzerland. This clearly leaves the franc in a state of limbo. The dollar on the other hand, has seen its safe haven status intensify with time. Though its recession is expected to worsen with time, US policy officials have taken broad steps to turning growth around – likely putting the US well ahead of the curve. This secures interest in the market’s favored risk-free asset: Treasuries. And though Fed Chairman Ben Bernanke has forecasted the US holding its benchmark interest rate at low levels for an extended period, speculators no doubt still expect returns on traditional assets to growth unimpeded with the rebound in investor confidence.

Written by John Kicklighter, Currency Strategist

While the dollar exhibited incredible volatility this past week; for the most part, the increase in price action would not come with any defined direction from the world’s most liquid currency. Instead, the majors would further carve prominent wedge formations that will ultimately demand breakouts and a decision for direction some time soon – and that resolution may come this week.

Fundamental Outlook for US Dollar: Bullish

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While the dollar exhibited incredible volatility this past week; for the most part, the increase in price action would not come with any defined direction from the world’s most liquid currency. Instead, the majors would further carve prominent wedge formations that will ultimately demand breakouts and a decision for direction some time soon – and that resolution may come this week. First, we need to take a look at price action to understand the building stress behind the markets. Both EURUSD and USDJPY have worked their way into terminal wedges that will force the market into a decision. However, from a fundamental standpoint, these two pairs highlight very different roles for the US dollar. When measured against the euro, direction will come from a bias in growth forecasts. Far more unique among the majors, USDJPY pits the market’s top two safe haven currencies against each other – and long-held rules may change.

It is well known that the Japanese yen is the go to currency for safety of funds concerns. This has been the case for more than a decade as Japan has kept its lending rates at or near zero (deriving an anti-carry interest) and the economy has floated large surpluses and savings. However, with global interest rates plunging towards zero and world-wide growth expected to hit its worst pace since WWII; investors are left to rethink where their capital is safest – and where it could also generate return when conditions do turn around. For the United States’ part, there little room for yields to deflate any further (they are also near zero). More importantly, though, they are far ahead of the curve on efforts to stabilize the domestic markets and economy. Constant liquidity injections, government guarantees, critical bailouts, proposals to draw out toxic debt that is clogging the credit system, the introduction of massive stimulus plans and endeavors to develop regulation for the long-term make for a strong foundation that few other economy’s can match. It is simply a matter of time before these cumulative stimulus catches up with the greenback.

The safe haven dynamic of the world’s most liquid currency (backed by the world’s most liquid ‘risk-free’ asset) has been a clear driver in all of the majors outside of the yen’s purview. However, as global policy makers attempt to put out the fires and interest rates near zero; we are slowly seeing a shift away from panic to growth. With global interest rates quickly approaching zero and more than three months of congestion under the market’s belt, fundamental speculation is focusing on gauging the world’s economies’ position on the recession curve. For those that are looking at relatively shallow and short contractions (and therefore expected to recover first), investors see the potential for return when risk has been fully exercised. The US is certainly a ways off from finding a true bottom in its own recession; but compared to Japan and the United Kingdom – its prospects look much better. Alternatively, when set against the Euro Zone, we are met with real debate. We will keep an eye on the round of second-tier data due this week, but the true shift in sentiment will likely be more closely linked to the efforts of the government to recharge the economy. - JK

Written by John Kicklighter, Currency Strategist

Who’s next?

With consumers shutting their wallets and corporate revenues plunging, the business landscape may start to resemble a graveyard in 2009. Household names like Circuit City and Linens ‘n Things have already perished. And chances are, those bankruptcies were just an early warning sign of a much broader epidemic.

Moody’s Investors Service, for instance, predicts that the default rate on corporate bonds - which foretells bankruptcies - will be three times higher in 2009 than in 2008, and 15 times higher than in 2007. That could equate to 25 significant bankruptcies per month.

We examined ratings from Moody’s and data from other sources to develop a short list of potential victims that ought to be familiar to most consumers. Many of these firms are in industries directly hit by the slowdown in consumer spending, such as retail, automotive, housing and entertainment.

But there are other common threads. Most of these firms have limited cash for a rainy day, and a lot of debt, with large interest payments due over the next year. In ordinary times, it might not be so hard to refinance loans, or get new ones, to help keep the cash flowing. But in an acute credit crunch it’s a different story, and at companies where sales are down and going lower, skittish lenders may refuse to grant any more credit. It’s a terrible time to be cash-poor.

[See how Wall Street continues to doom itself.]

That’s why Moody’s assigns most of these firms its lowest rating for short-term liquidity. And all the firms on this list have long-term debt that Moody’s rates Caa or lower, which means the borrower is considered at least a “very high” credit risk.

Once a company defaults on its debt, or fails to make a payment, the next step is usually a Chapter 11 bankruptcy filing. Some firms continue to operate while in Chapter 11, retaining many of their employees. Those firms often shed debt, restructure, and emerge from bankruptcy as healthier companies.

But it takes fresh financing to do that, and with money scarce, more bankrupt firms than usual are likely to liquidate - like Circuit City. That’s why corporate failures are likely to be a major drag on the economy in 2009: In a liquidation, the entire workforce often gets axed, with little or no severance. That will only add to unemployment, which could hit 9 or even 10 percent by the end of the year.

[Want to land a plum job without paying taxes? Here's how.]

It’s possible that none of the firms on this list will liquidate, or even declare Chapter 11. Some may come up with unexpected revenue or creative financing that helps avert bankruptcy, while others could be purchased in whole or in part by creditors or other investors. But one way or another, the following 15 firms will probably look a lot different a year from now than they do today:

Rite Aid. (Ticker symbol: RAD; about 100,000 employees; 1-year stock-price decline: 92%). This drugstore chain tried to boost its performance by acquiring competitors Brooks and Eckerd in 2007. But there have been some nasty side effects, like a huge debt load that makes it the most leveraged drugstore chain in the U.S., according to Zacks Equity Research. That big retail investment came just as megadiscounter Wal-Mart was starting to sell prescription drugs, and consumers were starting to cut bank on spending. Management has twice lowered its outlook for 2009. Prognosis: Mounting losses, with no turnaround in sight.

Claire’s Stores. (Privately owned; about 18,000 employees.) Leon Black’s once-renowned private-equity firm, the Apollo Group, paid $3.1 billion for this trendy teen-focused accessory store in 2007, when buyout funds were bulging. But cash flow has been negative for much of the past year and analysts believe Claire’s is close to defaulting on its debt. A horrible retail outlook for 2009 offers no relief, suggesting Claire’s could follow Linens ‘n Things - another Apollo purchase - and declare Chapter 11, possibly shuttering all of its 3,000-plus stores.

[See 5 pieces missing from Obama's stimulus plan.]

Chrysler. (Privately owned; about 55,000 employees). It’s never a good sign when management insists the company is not going out of business, which is what CEO Bob Nardelli has been doing lately. Of the three Detroit automakers, Chrysler is the most endangered, with a product portfolio that’s overreliant on gas-guzzling trucks and SUVs and almost totally devoid of compelling small cars. A recent deal with Fiat seems dubious, since the Italian automaker doesn’t have to pony up any money, and Chrysler desperately needs cash. The company is quickly burning through $4 billion in government bailout money, and with car sales down 40 percent from recent peaks, Chrysler may be the weakling that can’t cut it in tough times.

Dollar Thrifty Automotive Group. (DTG; about 7,000 employees; stock down 95%). This car-rental company is a small player compared to Enterprise, Hertz, and Avis Budget. It’s also more reliant on leisure travelers, and therefore more susceptible to a downturn as consumers cut spending. Dollar Thrifty is also closely tied to Chrysler, which supplies 80 percent of its fleet. Moody’s predicts that if Chrysler declares Chapter 11, Dollar Thrifty would suffer deeply as well.

Realogy Corp. (Privately owned; about 13,000 employees). It’s the biggest real-estate brokerage firm in the country, but that’s a bad thing when there are double-digit declines in both sales and prices, as there were in 2009. Realogy, which includes the Coldwell Banker, ERA, and Sotheby’s franchises, also carries a high debt load, dating to its purchase by the Apollo Group in 2007 - the very moment when the housing market was starting to invert from a soaring ride into a sickening nosedive. Realogy has been trying to refinance much of its debt, prompting lawsuits. One deal was denied by a judge in December, reducing the firm’s already tight wiggle room.

[See why "Wall Street talent" is an oxymoron.]

Station Casinos. (Privately owned, about 14,000 employees). Las Vegas has already been creamed by a biblical real-estate bust, and now it may face the loss of its home-grown gambling joints, too. Station - which runs 15 casinos off the strip that cater to locals - recently failed to make a key interest payment, which is often one of the last steps before a Chapter 11 filing. For once, the house seems likely to lose.

Loehmann’s Capital Corp. (Privately owned; about 1,500 employees). This clothing chain has the right formula for lean times, offering women’s clothing at discount prices. But the consumer pullback is hitting just about every retailer, and Loehmann’s has a lot less cash to ride out a drought than competitors like Nordstrom Rack and TJ Maxx. If Loehmann’s doesn’t get additional financing in 2009 - a dicey proposition, given skyrocketing unemployment and plunging spending - the chain could run out of cash.

Sbarro. (Privately owned; about 5,500 employees). It’s not the pizza that’s the problem. Many of this chain’s 1,100 storefronts are in malls, which is a double whammy: Traffic is down, since consumers have put away their wallets. Sbarro can’t really boost revenue by adding a breakfast or late-night menu, like other chains have done. And competitors like Domino’s and Pizza Hut have less debt and stronger cash flow, which could intensify pressure on Sbarro as key debt payments come due in 2009.

Six Flags. (SIX; about 30,000 employees; stock down 84%). This theme-park operator has been losing money for several years, and selling off properties to try to pay down debt and get back into the black. But the ride may end prematurely. Moody’s expects cash flow to be negative in 2009, and if consumers aren’t spending during the peak summer season, that could imperil the company’s ability to pay debts coming due later this year and in 2010.

Blockbuster. (BBI; about 60,000 employees; stock down 57%). The video-rental chain has burned cash while trying to figure out how to maximize fees without alienating customers. Its operating income has started to improve just as consumers are cutting back, even on movies. Video stores in general are under pressure as they compete with cable and Internet operators offering the same titles. A key test of Blockbuster’s viability will come when two credit lines expire in August. One possible outcome, according to Valueline, is that investors take the company private and then go public again when market conditions are better.

Krispy Kreme. (KKD; about 4,000 employees; stock down 50%). The donuts might be good, but Krispy Kreme overestimated Americans’ appetite - and that’s saying something. This chain overexpanded during the donut heyday of the 1990s - taking on a lot of debt - and now requires high volumes to meet expenses and interest payments. The company has cut costs and closed underperforming stores, but still hasn’t earned an operating profit in three years. And now that consumers are cutting back on everything, such improvements may fail to offset top-line declines, leading Krispy Kreme to seek some kind of relief from lenders over the next year.

Landry’s Restaurants. (LNY; about 17,000 employees; stock down 66%). This restaurant chain, which operates Chart House, Rainforest Café, and other eateries, needs $400 million in new financing to finalize a buyout deal dating to last June. If lenders come through, the company should have enough cash to ride out the recession. But at least two banks have already balked, leading to downgrades of the company’s debt and the prospect of a cash-flow crunch.

Sirius Satellite Radio. (SIRI - parent company; about 1,000 employees; stock down 96%). The music rocks, but satellite radio has yet to be profitable, and huge contracts for performers like Howard Stern are looking unsustainable. Sirius is one of two satellite-radio services owned by parent company Sirius XM, which was formed when Sirius and XM merged last year. So far, the merger hasn’t generated the savings needed to make the company profitable, and Moody’s thinks there’s a “high likelihood” that Sirius will fail to repay or refinance its debt in 2009. One outcome could be a takeover, at distressed prices, by other firms active in the satellite business.

Trump Entertainment Resorts Holdings. (TRMP; about 9,500 employees; stock down 94%). The casino company made famous by The Donald has received several extensions on interest payments, while it tries to sell at least one of its Atlantic City properties and pay down a stack of debt. But with casino buyers scarce, competition circling, and gamblers nursing their losses from the recession, Trump Entertainment may face long odds of skirting bankruptcy.

BearingPoint. (BGPT; about 16,000 employees; stock down 21%). This Virginia-based consulting firm, spun out of KPMG in 2001, is struggling to solve its own operating problems. The firm has consistently lost money, revenue has been falling, and management stopped issuing earnings guidance in 2008. Stable government contracts generate about 30 percent of the firm’s business, but the firm may sell other divisions to help pay off debt. With a key interest payment due in April, management needs to hustle - or devise its own exit strategy.

- With Carol Hook, Danielle Burton and Stephanie Salmon

In the midst of a market meltdown and economic crisis, many Americans’ 401(k) retirement plans are looking a bit bedraggled. But some tender loving care from plan participants, employers and policy makers can help spruce up these accounts.

Market upheaval has underscored a litany of woes in 401(k) plans. Many people don’t save enough, make poor investment choices, pay high fees that eat into returns, and raid their retirement accounts to pay credit-card bills or fight foreclosure. Meanwhile, hard-hit employers are suspending 401(k) matching contributions.

And a market crash on the eve of retirement can crush the 401(k)s of even the most diligent savers. In the 12 months following the market’s peak in October 2007, more than $1 trillion worth of stock value was shaved off 401(k) and other defined-contribution plan accounts, according to Boston College’s Center for Retirement Research.

Those losses are particularly painful because the 401(k) has become the primary retirement savings vehicle for many Americans. Roughly 50 million people have 401(k)s, and these accounts now have about $2.5 trillion in assets, estimates the Employee Benefit Research Institute in Washington.

Lawmakers and employers already are looking at ways to improve the 401(k). At hearings in October, the House Education and Labor Committee heard a variety of proposals for overhauling these plans. And many companies have been automatically enrolling workers in 401(k)s and directing their contributions into broadly diversified funds. But you don’t have to wait for change to come.

You, your boss and Congress can start fixing up 401(k) plans today. Here’s how:

1. Save Till It Hurts…

Undersaving has always been a big issue in 401(k) plans, and the economic doldrums are only making matters worse. A recent survey commissioned by AARP, an advocacy group for older people, found that about 20% of workers age 45 or older had stopped contributing to a 401(k), IRA or other retirement accounts in the past year.

Think you can’t save any more? Ask your payroll manager to calculate what your paycheck would look like if you boosted your 401(k) contribution, suggests Christine Benz, director of personal finance at investment research firm Morningstar.

“The percentages might seem daunting, but if you look at it in dollar-and-cents terms, you might find it’s something you could easily implement,” says Ms. Benz.

2. … Even With No Match

Employers’ matching contributions are a big incentive for many workers to contribute to 401(k) plans. But major employers like General Motors and FedEx are suspending these contributions, and cuts are on the way at other companies. One out of 10 employers already has reduced or plans to reduce the match, according to a December survey by consulting firm Watson Wyatt Worldwide, up from 6% just two months earlier.

If your employer has suspended the match, you should boost your own contributions to make up for it. Together, the employee and employer should contribute at least 10% to 15% of the worker’s salary to build a healthy nest egg, retirement experts say.

The maximum amount most workers can contribute to a 401(k) this year is $16,500. Workers age 50 or older can contribute an additional $5,500.

3. Set It and Forget It

Sharp market swings can lead 401(k) savers to make some poor investment decisions, like fleeing stock funds simply because they’ve taken a dive. Investors who dump stocks at depressed levels lock in losses that could take a big bite out of their savings.

People who leave the asset-allocation decisions in the hands of a professional don’t have to worry about making emotional investment decisions in rocky markets. One solution: So-called target-date funds hold a broadly diversified blend of stocks, bonds and other investments and gradually shift toward a more conservative mix as investors near retirement.

But be aware that these funds can still fall hard and fast. The average target-date fund dropped 32% last year, while the Standard & Poor’s 500-stock index fell 38.5%. Even 2010 funds for investors about to hit retirement fell 25%.

4. Pay Attention to Fees

Hefty fees can put a lot of cracks in your nest egg. Yet many employers haven’t even tried to calculate the total costs of their plans. You should be able to see the total dollar amount you’re paying in plan fees so you can compare the 401(k) and other savings vehicles such as an IRA, Ms. Benz says.

Some of the simplest, cheapest investment options — indextracking funds — aren’t even offered in many plans. Rep. George Miller, a California Democrat who is chairman of the House Education and Labor Committee, wants to pass legislation encouraging all plans to offer at least one index fund.

5. Get More Workers Saving

Many companies don’t offer 401(k)s, and many workers who do have the opportunity to invest often simply don’t.

More and more employers are automatically enrolling workers. But many of these efforts focus only on new hires. They should also include existing employees. What’s more, many workers don’t have access to a 401(k). The costs and administrative burdens can be daunting for small businesses.

One solution might be for the government to make it easier for small employers to band together to offer workers 401(k)s, says Paul Stevens, president and CEO of the mutual-fund industry trade group the Investment Company Institute.

by Eleanor Laise

Copyrighted, Dow Jones & Company, Inc. All rights reserved.

Could your bank turn into the Bank of the U.S.A.?

The latest wave of banking problems has investors worried that the government will nationalize deeply wounded institutions, such as Bank of America Corp. and Citigroup Inc.
Such a dramatic step could make it easier for some bank customers to get a loan. And customers with deposits will still be protected by federal insurance, just as they are today. Still, consumers could see more branch closings, more standardization across bank products and a deterioration in customer service. Common and preferred shareholders, meanwhile, will likely get wiped out in a bank nationalization.

With all of the problems that banks are now facing, here is a primer on bank collapses and the impact of possible bank nationalization.

What does “bank nationalization” mean?

A nationalized bank is owned and run by the government. The shocks of the credit crisis last fall spurred lawmakers to seminationalize the banking sector; nearly 314 institutions have already signed over some of their shares and other securities to the Treasury in return for $350 billion in government TARP funds. The government could now go a step further by taking complete ownership of certain troubled banks.

Why nationalize banks?

It makes sense only if banks are in danger of failing. In Western countries, nationalization is largely used as an emergency method to prop up banks during tough times. It is typically used to lend to small and medium-sized businesses and restructure burdensome loans to consumers.

Has nationalization ever worked before?

It has a mixed record. Sweden took over its banks, restored them to health and privatized them again. France nationalized its banking sector, privatized it again by selling it into private hands and now may be in the process of another wave of nationalization. In the U.S., the government took over hundreds of institutions during the savings-and-loan crisis a couple of decades ago. It aggressively sold off bad assets, and the experiment is now regarded as a success.

What will happen to my account if my bank is nationalized?

There should be very little change to consumers’ bank accounts and insurance-protection levels if their bank is nationalized. The Federal Deposit Insurance Corp., which insures deposits for up to $250,000, will continue to cover all FDIC-insured institutions, regardless of who the owner is.

And even though an increasing number of banks are failing, the FDIC — which is backed by the full faith and credit of the U.S. government — can’t run out of money because of its ability to borrow from the Treasury.

Will I be able to get a loan?

Nationalized banks are more likely to loosen the lending spigots. Banks would start making loans that they wouldn’t otherwise make today, such as to borrowers with less-than-stellar credit. There would be more pressure to make loans to achieve social objectives.

Homeowners at nationalized banks should also benefit since the government is likely to halt any foreclosure proceedings, says Greg McBride, senior financial analyst at Bankrate.com. “Uncle Sam is not going to want to put anybody out of their house,” he says.

Government-owned banks could offer basic credit cards with low rates that would appeal to less-creditworthy customers who regularly use cards to borrow. But such cards are less likely to come with costly rewards programs, such as those that earn frequent-flier miles, says Dave Kaytes, managing director at Novantas.

How will private-banking and brokerage-account customers be affected?

That depends on whether the government takes a short- or long-term view. If it intends to be a long-term owner, then it will probably sell off the brokerage, investment-banking and other auxiliary operations as nonessential to the core banking business. If, however, the government sees its step as a short-term fix to shore up the system temporarily, then it may hang on to such operations.

What other products and services might be affected?

If the government takes over a bank, management will be under even more pressure to cut costs. Expect more branch closings and poorer customer service. “Think of the bank as the DMV of the future, run by government employees who have little upward mobility,” says Mr. Kaytes.

“I think we can expect that over time, the nationalized banks will be less open to innovation and new product development, more conservative in their approaches, and more constrained in their actions and subject to tighter scrutiny,” says Jim Eckenrode, banking and payments research executive at TowerGroup.

What are the disadvantages of bank nationalization?

In the U.S., the biggest problem for the government would be the sheer impracticality and expense of taking over all 8,000 banks — or even the 314 institutions that described themselves as “banks” in order to receive government aid.

The U.S. government would have, at most, the ability to take over only a handful of the most important institutions. As a result, nationalization would not solve the pressing problem of potential bank failures, particularly among small banks. Consumers who have deposits in such banks would still be dependent on the FDIC to return their money during a failure, and such a process could be lengthy and involve a lot of red tape.

Copyrighted, Dow Jones & Company, Inc. All rights reserved.
Provided By Wall Street Journal
by Jane J. Kim and Heidi Moore
Sunday, January 25, 2009

My house is shabby, but it is comfortable
There is no end to wanting - after the Ferrari and the Birkin bag, what next?

By Lee Wei Ling, daughter of Lee Kuan Yew, Former Prime Minister of Republic of Singapore

In 2007, in an end-of-year message to the staff of the National Neuroscience Institute, I wrote: ‘Whilst boom time in the public sector is never as booming as in the private sector, let us not forget that boom time is eventually followed by slump time.

Slump time in the public sector is always less painful compared to the private sector.’ Slump time has arrived with a bang.

While I worry about the poorer Singaporeans who will be hit hard, perhaps this recession has come at an opportune time for many of us. It will give us an incentive to reconsider our priorities in life.
Decades of the good life have made us soft.

The wealthy especially, but also the middle class in Singapore, have had it so good for so long, what they once considered luxuries, they now think of as necessities. A mobile phone, for instance, is now a statement about who you are, not just a piece of equipment for communication. Hence many people buy the latest model though their existing mobile phones are still in perfect working order.
A Mercedes-Benz is no longer adequate as a status symbol. For millionaires who wish to show the world they have taste, a Ferrari or a Porsche is deemed more appropriate.

The same attitude influences the choice of attire and accessories. I still find it hard to believe that there are people carrying handbags that cost more than thrice the monthly income of a bus driver, and many more times that of the foreign worker labouring in the hot sun, risking his life to construct luxury condominiums he will never have a chance to live in.

The media encourages and amplifies this ostentatious consumption.
Perhaps it is good to encourage people to spend more because this will prevent the recession from getting worse.

I am not an economist, but wasn’t that the root cause of the current crisis - Americans spending more than they could afford to? I am not a particularly spiritual person. I don’t believe in the supernatural and I don’t think I have a soul that will survive my death. But as I view the crass materialism around me, I am reminded of what my mother once told me: ‘Suffering and deprivation is good for the soul.’

My family is not poor, but we have been brought up to be frugal.
My parents and I live in the same house that my paternal grandparents and their children moved into after World War II in 1945. It is a big house by today’s standards, but it is simple - in fact, almost to the point of being shabby.

Those who see it for the first time are astonished that Minister Mentor Lee Kuan Yew’s home is so humble. But it is a comfortable house, a home we have got used to. Though it does look shabby compared to the new mansions on our street, we are not bothered by the comparison.

Most of the world and much of Singapore will lament the economic downturn. We have been told to tighten our belts. There will undoubtedly be suffering, which we must try our best to ameliorate. But I personally think the hard times will hold a timely lesson for many Singaporeans, especially those born after 1970
who have never lived through difficult times. No matter how poor you are in Singapore, the authorities and social groups do try to ensure you have shelter and food. Nobody starves in Singapore.
Many of those who are currently living in mansions and enjoying a luxurious lifestyle will probably still be able to do so, even if they might have to downgrade from wines costing $20,000 a bottle to $10,000 a bottle. They would hardly notice the difference.

Being wealthy is not a sin. It cannot be in a capitalist market economy.
Enjoying the fruits of one’s own labour is one’s prerogative and I have no right to chastise those who choose to live luxuriously. But if one is blinded by materialism, there would be no end to wanting and hankering.
After the Ferrari, what next? An Aston Martin? After the Hermes Birkin handbag, what can one upgrade to? Neither an Aston Martin nor an Hermes Birkin can make us truly happy or contented. They are like dust, a fog obscuring the true meaning of life, and can be blown away in the twinkling of an eye.
When the end approaches and we look back on our lives, will we regret the latest mobile phone or luxury car that we did not acquire? Or would we prefer to die at peace with ourselves, knowing that we have lived lives filled with love, friendship and goodwill, that we have helped some of our fellow voyagers along the way and that we have tried our best to leave this world a slightly better place than how we found it?

We know which is the correct choice - and it is within our power to make that choice.
In this new year, burdened as it is with the problems of the year that has just ended, let us again try to choose wisely.

To a considerable degree, our happiness is within our own control, and we should not follow the herd blindly.

The writer is director of the National Neuroscience Institute
–
Blessed are those who can give without remembering and take without forgetting.