Where are we going

Without speculating much and looking at the sequence of present events, surrounding America’s foreign policy and its stand in the global market of power, one has to worry, seriously, worry about the present and future.

Most western countries have develop a culture that has eliminated ingredients to foster debate and dissent, to support a social format that support a class system that is probing to have more cracks than the present obvious crisis.

America has lost its capacity to foster varied views and debates and has entrenched itself in a very narrow set of views, this views are becoming every passing day more evident out of synch with the needs of most Americans.

There is not debate about the present standing of a America. It is an important piece of conversation to have a national level, for all Americans. Out the radical view it is America’s way or the highway, that was true ten years ago. Now it is no more a feasible and true view of acting, the marines cannot bring more contract to Boeing as they used to, of to Chiquita Banana a new banana republic with a corrupt dictator in charge to exploit the local assets to be brought back to America‘s shareholders and corporate bosses. The Chinese, The Russian, most of the European Union and in some cases the African union, are acting that indicates America power is not absolute anymore and needs to be share in all aspects. So far they have chosen to use the power of capitalism to put the brake on the United States, as the Chinese did with the bond market of the European Union with they currency policy, or Latin America asserting equal trade conditions and renegotiating past (most Latin American leaders agree to qualify those contracts as abusive) corporate contracts to exploit their natural resources.

In the eyes of citizens of the rest of the planet, there is a consistent view of disapproval of America.
It used to be that the populist line was “everybody complaints about America, but all want to come to America” that was true until ten years ago, now what we are seen is a major shift, mostly due to economic equality. As an example, the minimum wage in Portugal is 30% higher than in the US, and in Portugal with the minimum wage a family of two can be above poverty level, and afford a decent way of live, in the US with minimum wage you will need both members of the family to work and still be under pauper conditions. Those are hard facts and the adjustment is spreading to most Americans, and it is not been accepted as a new way of life.
Among leaders of the same people who disapprove of America present standards, there is consensus of approval, but it is for a very different reason.
Each country has a reason to go against the will of their own citizens, the most interesting is the present position of England. The English government continues to be label by Britons as a lap dog of the Americans, but there is more behind scenes that the eye can see.
British ruling class by aligning themselves, what it seems to many blindly, with America, they are actually doing something much more important. British rules are asserting their economic power in the form of a new renaissance of English colonialism, by accumulating political favors. Those favors are getting cash-out in the form of corporate favoritism and American military support to expand corporate penetration in countries in which England can exert very little influence by themselves, but they can assert and obtain trade preferences by using America’s military and in many cases dictator rules under the control of America’s protection. The list of those countries is large but the most important are those that separated from the former Soviet Union.
Other countries like China are using their fast gained economic power to assert preferential market access.

There must be a national debate about how to confront the next years in a world that is changing their economic structures from energy to currency formations and technological development. America’s ruling class is failing to bring American citizens to a higher level of competitive advantage and the price to pay is going to be dear and painful.

Liars, their lies and those who help them propagate

http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&date=20080602&id=8712024

I open my news service I was confronted by headline that strikes “again” as the mulling of reality.
The head line read: “Paulson committed to dollar as reserve currency.”
It is true that the American Secretary of the Treasury is committed to have the dollar as reserve currency. I do not think that if the American Secretary was not committed to our dollar he might be suggesting switching to a stronger currency. This headline is the natural and poor reporting that the Reuters has to offer, but it has a deeper meaning, that is Reuters has choose to be a propaganda outlet to distribute so called news. No one with a straight face will put his or her name in such headline.
Any person will immediately recognize Paulson as the Secretary of the US Treasury and Ex-CEO of Goldman Sachs, also known for missing the mark and outright lying in a consistent basis and misinforming the people that granted his job.
The intent here of the editor clearly was to minimize the meaning of Paulson as Secretary of the Treasury and make the name to be some kind of abstract entity that chooses to make statements of profound meaning and solid.
By now, we know that Paulson is a crony elitist CEO for whom American citizens and well been is a peripheral thought part of the benign neo-fascist movement, that has arose in the past 30 years in the USA. Strong statements but the facts and situations we are living totally fit the definition.
Paulson and the media which provides the propaganda is very similar to any other benign fascist process in history. This is a natural evolution in America, by a large majority more American are more comfortable with pseudo-fascism that they are with a working Democracy. You can call any political ruling system anything you please and loudly defined, but the real measure is the inner workings of the system and how it affects the citizens under the system. Paulson like others whom are promoters of benign fascism are comfortable lying and manipulating the facts.

If you have not heard

*-If you have not heard we are in a recession.
*-If you have not heard 84% of Americans believe fairy tales are facts.
*-If you have not heard the cost of the cheapest 4 year college degree with room at board and related expenses is at $80K and climbing.
*-If you have not heard we do not have poor in America we have “Low Food Intake Families” in other words families in famine.
*-If you have not heard we have more than 10 million families in low food intake category.
*-If you have not heard the president’s approval ratings is at the lowest ever record.
*-If you have not heard 1 in every 32 Americans will file for bankruptcy in the period 2007-2010.
*-If you have not heard America is the only developed country that does not provide alternatives for Universal medical coverage.
*-If you have not heard the average savings rate is a negative 5%.
*-If you have not heard the Defense Department failed again to pass the most basic auditing of its accounts.
*-If you have not heard the war in Iraq costs $750 Billion and by some accounts can reach up to $2 Trillion by 2010, that is $61,500 per citizen.
*-If you have not heard Communist China owns more US debt than any other country in the planet.
*-If you have not heard Communist China has a total of $1.2 Trillion in US Treasury Debt and they receive $3.000 in interest per American citizen per year.
*-If you have not heard The US is the second to last of developed countries in Health Care development.
*-If you have not heard college graduates will have to pay debt for their schooling for more than 15 years.
*-If you have not heard minimum wage in America now is earned by more workers than ever in history, said, the working poor are the largest growing group.
*-If you have not heard 62% of all tax received by the IRS is spent by the federal government in military or pseudo military expenditures.
*-If you have not heard the federal government has cut spending in research and consumer protection by 92% in the last 15 years.
*-If you have not heard has failed to comply with 67% of its international agreements signed in the past 20 years.
*-If you have not heard, you better start pay to pay real attention.

Professor Elizabeth Warren

The Author of "The Income Trap" was the Jefferson Lecture in 2007.
The research presents what many knew already, we are in going in the wrong direction, it is something that has occurred in the past 30 years and we hare choosing to ignore at our own peril.
This lecture is a must share item with friends family and no politico should scape from the facts presented.

Here We Are! Now, What?

If you had read my posts in the past, I had postulated a view stating the present disaster was coming.
The labor department and the USDA, stated that more than 23 Million Americans are in need of Food stamps to be able to have a poor meal.
If you think that famine is not possible in America, you are not seen what is happening around you. It is not OK to be blind for political or philosophical reasons.
When people in Argentina started to die of famine was a disgrace for the country that was in 2003.Here we are 6 years later in America we are setting the seeds of famine. You might negated but you will read, that is not an arrogant forecast it is a reality that is happening around you.

The present government has brought down America supremacy in many areas. The most important one is the economic supremacy, today the financial system is been saved by foreign debt, that is floated in open markets, those markets want their coupons, so this time is different. The lenders will do two things: one ask for the interest the other is to demand the few assets left and a currency that at the present cannot compete globally.

It is sad but it is true.

Liars and the Liars Den

As I watched Secretary Paulson today describe the present economic crisis, I said to myself, he is not only full of it, but he was lying beyond the acceptable level for the last six months.
What is the difference today versus six months ago.
Simple, six months ago it was a sotto vocce agreement among big bankers that all involved will find ways to pump and dump their mess into the global markets.
What they -by they I meand The Fed, banks and politicos- have encounter is a disproportionate abuse of trust and greed that goes beyong any one acceptable actitude. This is the result of a corrupt set of values that assume that you can foul the people all the time. They might be right but th truth is catching up with them, but most people are not swilling to hold them accountable for thir lack of values.
This recession now is starting to evolve, some think we might find a worse situation going forward.
The facts all indicate that the US has lost its economic supremacy, and its social supremacy, and the only supremacy left is the military supremacy, and to conitunue this supremacy, it must generate enough business, as of today is not generating enough business to sustain the large expenditures to mantain such large amount of dollars need it to keep going in debt to levels that taxes cannot mantain.

Unless policy makers decide tocome up with a major shift in the economic paradigm. For example a shift in energy generation, we are so far behind in the solar and wind generation technology, that by implementing a national R&D ten year plan, to regaign leadeship in technology and energy it will be extremely difficult to compete in standard industry development with China, India and in the twenty years with Africa.

Report: Americans getting poorer

Report: Americans getting poorer
In a new analysis of after-tax income, the United States ranks 15th among the world's richest countries. But wage comparisons for 'average workers' are tricky.

By Christian Science Monitor
"Comparisons are odious," that is, hateful, according to a popular phrase about seven centuries old. Comparison, however, is one of the tasks assigned to the Organization for Economic Cooperation and Development, an international body of 30 of the richest countries. It tries to compare its members' economic and social data, a difficult, perhaps even odious, job.

Sometime back it broadened statistically (for comparison purposes) the definition of the average workers in its member nations while trying to examine relative tax burdens. The result was "monumental," reckons Jacob Kirkegaard, an economist at the Peterson Institute for International Economics.

The OECD ranked the after-tax income of the average worker in the United States as 15th among its member nations. The richest middle class, if measured in terms of the purchasing power of its income, was in Britain.

Video: Do Americans work hard enough?

That ranking would surprise most Americans, who likely consider their nation the most prosperous in the world.

In one fell swoop, OECD statisticians lowered the estimated income of the average American worker by more than 10% and raised average incomes of other rich nations by as much as 30%, notes Kirkegaard.

It may well be that the comparative U.S. standard of living is slipping. The price of oil has risen more dramatically in the United States than in other nations because of the dollar's large devaluation. The reason for the drop is also statistical. In the past, the OECD had been using a proxy for the middle class based on the "average production worker." This concept focused on full-time workers in the relatively declining manufacturing sector, which tends to be unionized in the United States and better paid on average. The OECD's new measure is based on the "average worker," which captures all sorts of private-sector jobs in mining, utilities, construction, retail, hotels, restaurants, financial services, real estate and other areas.

So this new system ought to provide a fairer comparison.

But 15th place?

Not likely, figures David Grubb, an OECD economist in Paris. He points out that the United States and Canada included in their statistics sent to Paris the wages of nonsupervisory workers -- and not those of higher paid supervisory workers and salaried professionals. When that statistical difference is corrected, the rank of the American middle class would move up from 15th. How far is uncertain.

Continued: Wages vs. income

In the newest OECD Economic Outlook, the average annual wage in the total economy of the United States was $45,563 for 2005. That's exceeded only by Luxembourg, a wealthy banking duchy, with $50,634. Britain, Ireland and Australia are not far behind the United States with incomes above $40,000.

The problem is that this is a measure of total wages, not just the middle class, and it includes the richest Americans whose incomes have risen enormously in recent years. Outside of Hungary, the United States has the most extreme income inequality in the OECD.

Video: Does money buy happiness?
Kirkegaard figures middle- and lower-income Americans are being squeezed by the flood of money going to the superwealthy. Democrats in Congress have the same view, and their tax proposals would shift the tax burden up the income ladder.

Wages vs. income
After the early 1990s, the incomes of "very well-off Americans increased much faster than those of both the middle class and the poor," figures Gary Burtless, an expert at the Brookings Institution in Washington.

For example, top corporate officers got pay increases of 9.5% a year in the 1990s, on top of high levels to start with.

This doesn't mean that Middle America incomes have been entirely flat. An analysis by Terry Fitzgerald, an economist at the Federal Reserve Bank of Minneapolis, concludes that a "broad swath of Middle America experienced notable hourly wage gains" since 1975. In other words, children can still assume they have a better living standard, on average, than their parents did. To reach that conclusion, Fitzger­ald had to disentangle a "confusing web of data." Two data series on individual hourly wage rates showed little, or even negative, growth over the past 30 years. But labor income for the entire national economy was shown to have grown 39% in that time span.

To square this apparent contradiction, Fitzgerald applied to the two wage series a broader price index (personal-consumption expenditures), which covers the basket of final goods and services that people consume each year.

The new result: Average hourly earnings rose 10%, rather than declining 4%, from 1975 to 2005. Median hourly wages also rose 20% rather than 12%. Then he factored fringe benefits into the wage calculation, since they have become increasingly expensive and "contribute to workers' well-being."

That combination accounted for 28% of the 39% growth of total labor income.

"This does not contradict the claim that wage inequality increased over this period -- it did," writes Fitzgerald in a bank publication. In other words, the rich are still getting proportionately richer.

This article was reported and written by David R. Francis for The Christian Science Monitor.

The Surprising Ignorant Class

As of January of 2007, it was obvious for most people who pay a little attention, the stock markets and debt market had something amiss. When bonds fund specializing in collateral debt packages with 6% to 8% yields are paying 30% to its investors, something does not add up, the math does not add up, the risk taken does not add up, and the ratings companies overrated the products in purpose, as we know today.
There is no need of a Ph.D. in economics to realize something is not straight.
To obtain those results superfluous risks were taking and all CEO’s and top management at major leading financial institutions were accomplices and enablers of the big con on the people. To add INRI at this problem the so call self-regulators justified the creation of so called “hybrid investments” for decades every single time we create the golden goose is all the old con of the pyramid and when the pyramid it falls, poor Ponzy schemers look like saints.
After their con gets discovered we realized who was on it, lets start by the Chairman of the federal reserve whom “we have no signs of the housing market affecting the financial markets’ or “our banking institutions are strong” that what they say in June thru August, Now in September after it was clear they could not hide behind their false statements and Congress decided to have hearings int eh subject – can you imagine for congress to arrive to have hearings and the fed is deaf- the federal reserve and the Secretary of the Treasury –ex-Ceo of Goldman Sachs, and part of the big con- continued to deny any contagion from the housing debacle to the financial markets, in the mean time, behind the scenes the Treasury was having frantic meetings with major banks trying to figure out how to resolve this debacle.
If you had picked Trades magazine in April/ May 2007 edition, the front page was about the bonanza that these hedge funds and other hybrid investments did for 25 year olds, show them making hundreds of millions of dollars using “unregulated techniques”. Well, those hundreds of millions have to come from somewhere they do not get made out of thin air.
The sad part of the history is that as any other abusive operation it came from the most vulnerable, mostly from pension funds of municipal workers, teachers, basically anyone with a pension public or private. That is the sad part. In this story there is not much good to tell.

As long as most people pay taxes the government decides so create a supra welfare package to bail out all those heroes of the financial markets. Remember while these shenanigans are going on, kids are going to schools with not heat and bridges are failing in major cities and more than 90 millions Americans are under covered for medical ailments.
One has to wonder if the loss of people’s will to protest has created a new submissive slave society that refuses to evolve.

Who Are The Stock Market Manipulators

As I wrote in the past, the bias is to keep the wheel of fortune spinning, it does not matter where it falls, the manipulator does not care, the idea is to keep it "all pink all the time."
Pink benefits them and makes those holding stocks feel pink. Their happiness it exposes them to a meager return of annualized 7% including dividends - as reported by Standard and Poor.
All is done using substantial amount of risk. Those risks shifts depending when you have to buy and sell stocks, and how much leverage those pools of pension money need to re float with extra leverage -thus increased risk.
The market operators have become extraordinary good at controlling public opinion and governments around the globe. Manipulators are confident -some say arrogant- to keep demanding the elimination of government guaranteed pensions, thus the risk is shifted to the individuals via “privatized pensions funds”, in other words they get people’s money to buy baseless assets. Thus a de facto transfer wealth towards those who control the access to debt and again sell back their liabilities to the pension pools.

The list of manipulators is short enough that can be compiled in one page.
To have an example how a market can be moved here is a press release on April 4 2007, that might offer some light.

“The indices are trading slightly higher midday as investors weigh more relief in the Middle East, a subsequent decline in oil prices, and upbeat analyst commentary against weak economic data.
The biggest headline today has been Iranian President Ahmadinejad announcing the release of the 15 British naval personnel captured nearly two weeks ago. The news has improved overall sentiment and pushed oil prices lower. However, given yesterday's sizable gains amid a lack of overwhelming news to support such a rally, it hasn't been overly surprising to see some hesitation on the part of buyers.
In fact, if it weren't for a 2.0% surge on the Nasdaq's most influential constituent and the third most heavily-weighted stock on the S&P 500 -- Microsoft (MSFT 28.43 +0.56), the indices would be exhibiting more noticeable consolidation. The Dow component is getting a boost after a Citigroup analyst raised his Q3 earnings estimates.”
In this case a major bank as Citigroup also one of the largest pools of pensions, issues a comments, that can be or not, but because it has under management and receives every day enough pension money to move the stock with a comments, not a fact.
As simplistic as it might sound there are some important mechanics behind issuing opinions with baseless facts.
If Citigroup knows that Microsoft is going to increase earnings, why do they need to tell the planet? Self interest? It can be broken down in two: one is sending a message to all other pension funds saying, we are not selling, for now; second to its fund mangers: reduce your selling of the stock. You might wonder why they do not send an email to all their fund managers, and keep it quiet having asymmetric advantage.
Well, that will have cross some many countries and at least thousands of fund managers that it will be a de facto stock manipulation. Because Microsoft float of share is so large it is easier to send the message in the open saying we are not selling, what about you?
Still this is an opinion that affects millions of people and around five trillion dollars worth of market capitalization.
That how big a comment like this is.

Stocks The Biggest Casino in Human History

As you hear the news and you might get the feeling that you are getting some part of the truth about the underlining rational why stocks go up or down.

The answer is not simple. It can be summarize in two parts one is the transfer of wealth from the poor towards those with the access to large sums of borrowing, this is a new and extremely sophisticated class warfare, that can be see as the super-wealth taking advantage of the rest of the population. Second, linked to the first is the shift of risk from government responsibilities to the unprepared workers. Pension allocations is the primary driver of stocks prices second is the speculators from hedge funds that work for all major banks.
If you pay attention fear is the number one driver of news. Second is the building on the sense of wealth by using the power of central banks to create interest rates that will re-allocate the value of assets, as the wealth effect create by home value increases, with no underlining reason other than cheap borrowing costs. The dichotomy of fear and wealth creates uncertainty and the need for personal assessment of savings and pension risks.
Imagine if two and half billion people will give you for the next thirty years the present average of $290 a year and you can keep at least .5% of that money as custodian. No a bad deal, and it gets better. It does not matter what happen to the actual returns and performance of that money your cut stays the same.

Clearly, this “all is good” creates a bias and that is to keep the money flowing and people believing the downside needs to keep growing like a pyramid scheme you need money flowing in to absorb the all those fees accumulated over the movement of the money from fund a to b and the rotation keeps the grease and those manager multimillion dollar salaries alive. If you wonder why all the financial news are biased in the optimistic the reason is simple they want your money.
If you think about why stocks should be sold above any other asset, well that is the dirty secret, they do not need, but the are enough suckers to keep the game alive, and the use of the free capital rhetoric is not other than taking the pension of other people and place it into stocks does not matter if those stocks any intrinsic worth.

I think that it will be interesting to address some of the fallacies and talking points that the talking heads use when they talk about stocks and other risk investments.

Part of the same process is the boom and boost process that occurs every four or five years in the prices of stocks and other assets as real estate. I leave that for a future commentary.

The big question is what one should do to have a more stable system. It is not hat easy anymore, but there are action that you can take and one is to find people in your community that care about their future and are concern about the risk that the present system represents.

Can the same Occur in Other Countries!

Calpers Pressed to Drop Iran `Terrorism' Investments
By Alison Fitzgerald
March 19 (Bloomberg) -- California lawmakers are considering legislation that would force state pension funds to sell billions of dollars of shares in companies doing business with Iran.
The California Public Employees' Retirement System, the largest U.S. pension fund, and the state teachers' fund would have to unload shares in companies including BNP Paribas of France, Siemens AG of Germany and Eni SpA of Italy.
``Who's funding terrorism? It sure as hell shouldn't be our public employees,'' said Joel Anderson, a Republican assemblyman from El Cajon who introduced the measure. ``When you're looking at the war on terrorists, this is one of the best weapons we have -- just defunding them.'' Anderson estimated his legislation would affect $24 billion worth of investments.
California, which last year directed state pension funds to drop investments in Sudan, is among a growing number of U.S. states, from Texas to Maryland to New Jersey, moving to embrace so-called ``terror-free'' investing.
The movement, which includes federal legislation, against nations the State Department says sponsor terrorism, may put public pension managers in a front-line role in a debate over international policy. Some critics say the effort is misguided and would hurt small investors.
Calpers and the California State Teachers' Retirement System control $388 billion in investments. The legislation would affect overseas-based companies, since U.S. businesses are already mostly barred from trading with the countries on the State Department list: Iran, Sudan, Cuba, North Korea and Syria.
Federal Action
U.S. Congresswoman Ileana Ros-Lehtinen of Florida, the senior Republican on the House Foreign Affairs Committee, introduced a measure last week that would require U.S. government pension funds to divest stocks of companies that invested more than $20 million in Iran's energy industry.
``This measure will serve as one more critical instrument to deny the Iranian regime the economic resources required to pursue its dangerous activities,'' she said in a statement.
William Reinsch, president of a trade group representing 300 multinational corporations, said the legislation would work against U.S. interests.
``We're going to destroy our relations with the very countries we need in a united front against Iran,'' said Reinsch of the Washington-based National Foreign Trade Council.
The council won a court challenge last month, overturning an Illinois law aimed at companies doing business in Sudan.
Heightening Tension
If public funds are forced to divest, he said, ``the real losers would be a bunch of retired policemen and firefighters.'' That's because pensions would have to sell international mutual funds, which have had high returns, he said.
The Bush administration has ratcheted up its criticism of Iran's government, accusing it of supplying insurgents in Iraq with weapons to kill U.S. troops.
Supporters of Israel, which has been the target of threats by Iranian President Mahmoud Ahmadinejad, are backing the move to pressure Iran.
The American Israel Public Affairs Committee, the main U.S. pro-Israel lobbying group, will support divestment efforts against Iran in 10 states this year, Howard Kohr, executive director of the Washington-based group, said in a March 12 speech. Divestment ``would have a crippling effect on Iran's economy,'' Kohr said.
Shareholder Activism
A campaign to force companies to divest may affect ``a significant number of the world's largest companies,'' said Roger Robinson, who heads a company that tracks investing in terrorist nations. Robinson, a National Security Council aide in the Reagan administration, said he has no position on the California bill.
Edwina Frawley, a spokeswoman for Paris-based BNP Paribas, declined to answer questions about Iran. She said the company complies with ``all current ethical standards and regulations.'' Munich-based Siemens didn't respond to an e-mail request for comment, and a spokeswoman for Rome-based Eni declined to comment.
The California legislation puts Calpers, a leading proponent of good corporate-governance practices, in the position of being criticized itself.
``They have historically prided themselves on being ahead of the curve on issues like this,'' said Reinsch of the foreign trade council. ``One would think they would be ahead on this one.''
No Direct Investment
Calpers spokesman Clark McKinley said the fund doesn't invest directly in Iran, and he couldn't verify how much of its holdings might be affected by Anderson's measure. The Calpers board hasn't yet reviewed the legislation, he said.
The teachers' fund, known as Calstrs, hasn't taken a position either, said spokeswoman Brenna Neuharth. Calstrs already screens investments for geopolitical risk, including human rights abuses and money laundering, Neuharth said.
When the California assembly approved divesting from Sudan last year, Calpers said it wouldn't invest in nine companies. Calstrs sold stock in a Russian and a Chinese oil company.
The U.S. Securities and Exchange Commission last year asked Ford Motor Co., Marathon Oil Corp. and six other companies to explain their activities in countries on the terrorism list.
The SEC asked Ford in a July 5 letter whether the company's ``reputation and share value'' were being compromised by its activities in Syria, Iran and Sudan. Ford said its business was limited and lawful.
Missouri, Georgia
Missouri has adopted a policy to require two state funds to divest from companies that do business with Iran, Sudan, North Korea and Syria. Georgia is also considering such legislation, and a bill will be introduced in Ohio next week.
Missouri State Treasurer Sarah Steelman said she made the decision after learning the state was using BNP Paribas, France's biggest bank, to place its overnight money. It had been named as one of several European banks that lent $1 billion to Iran.
``We kicked them off our broker-dealer list and put in place policies that said we won't do business with companies that do business in Iran,'' she said.
In January, Steelman sent a letter to every state treasurer urging them to consider similar policies. ``This investment strategy provides an opportunity for many of us far from the front lines of the war on terrorism to do our part,'' she wrote.
To contact the reporter on this story: Alison Fitzgerald in Washington at Afitzgerald2@bloomberg.net

Risk and Standard Deviations of Risk

The latest home mortgage worries have a very dangerous component to the stability of debt markets, that is the underlining risk regrading also commonly known as CDO's.
The algorithms that take 70% of a bundle of junk bonds mixed with 20% of AAA bonds or debt and 10% of AA and wiht a few stirrings of magic the whole package turns into AAA.
That is how big is the mortgage problem. I has touched from good to bad and worse stopping over all over the derivatives of merges and adquisitions to car financing, but lucky for us, the Chiense and Japanese pension system are the ones holding the bag. So you will be able to laugh out loud while you life under a 110% financed home, a 100% finanaced luxury car and maybe if you are lucky enough like The Donald 400% finanaced live style while claiming billions in assets.
(I personally know it. I worked for the Donald).

The dollar just hit and all time low against all major currencies, so here you haveit, a strong dollar policy, it means a real weak dollar, so every time you hear "we are commited to a strong dollar policy" it does not mean that "they" are doing anything to keep the dollar strong, is like been committed to rain in Las Vegas, it never rains. so spend five minutes and see what your dollar can buy around the planet, that might give you some food for thought why most people need to buy at Wal-Mart and not at Whole Foods or Carrefour.

Shameless Defiants

You might think the increase in news about ethics-related corporate wrongdoing will make some faces red -corporate leaders and politicos- hot. No luck.

Corporatists have found a new who-cares attitude, their shameless shenanigans can continue without much damage to their personal reputation or the corporate image. Sadly, they are right.
Most shareowners have decided irresponsibility is OK. Thus this new found arrogance is thriving in the corporate boards, and corporate directors find themselves better than ever in saint status.

But who actually support these un-ethical low-lifers.
The Answer can be found here:
http://news.moneycentral.msn.com/provider/providerarticle.aspx?feed=OBR&Date=20070221&ID=6514348
These guys in teh article are only a couple of many hundreds that are supporting the whole mechanics of corrupting the savings of most citizens.
They follow a sacrosanct litany of “super-hero of the moneyed” to favor the pilfering of the average Joe savings thru abusive commissions on pensions and funds -money- management.
If you think that in a democracy you elect leaders to protect you from white glove robbers, tough luck, politicos have become part of the takers, you might call corrupted, and all this, is proven that system so much laud is becoming irreversely corrupted.
Lesson: Do not trust your shadows.

Your real tax rate: 40% or 46%

http://articles.moneycentral.msn.com/Taxes/Advice/YourRealTaxRate40.aspx
Income taxes, sales taxes, property taxes, Social Security and Medicare taxes, 'sin' taxes and the rest add up to a virtual flat tax nationwide.
By Scott Burns
We have a national flat tax, albeit one with bumps and potholes.
The fact that the political parties won't acknowledge this is one reason they are doing a disservice to the voting public.
Instead, both parties have a vested interest in the theatrical possibilities created by the idea of graduated tax rates. Notice that I said "the idea of" graduated tax rates. That should not be confused with reality.
Democrats argue that taxes on the rich should be raised because others need the money. This wins votes from the legions of voters who aren't rich.
Republicans argue, with great piety, that high taxes crush incentives and should be reduced, and that only then will the American way see a new dawn.
Politicians talk this way because they generally talk about only one tax: the federal income tax, which offers graduated rates from 10% to 35%.
Politicians rarely talk about what real people experience: the true maze of taxes and government benefits. If someone put them all together, we could see what our actual tax burden was. We could see who pays at the highest or lowest rates. Discussions of tax policy wouldn't be a waste of time.
Well, two researchers did it.
In a study for the National Bureau of Economic Research, Boston University economists Laurence J. Kotlikoff and David Rapson have found that our all-in marginal tax rate is 40%, give or take a bit. Yes, you read that right: 40%.
Most workers will pay about that much on each dollar of income when all taxes -- federal and state income taxes, sales taxes, taxes for benefit programs, etc. -- are considered.
As a consequence, a 30-year-old couple earning only $20,000 a year has a marginal tax rate of 42.5%, while a 45-year-old couple earning $500,000 pays at 43.2%. There are some exceptions: A 30-year-old couple earning $50,000 a year, for instance, pays 24.4%, and a 60-year-old couple making $150,000 a year faces a tax rate of 47.7%.
The average marginal tax rate on incomes between $20,000 and $500,000 is 40.3%, the median tax rate is 41.8%, and the standard deviation of all of those rates is 5.3 percentage points. Basically, most of us pay about 40%, plus or minus 5.3 percentage points.
Video: Don't worry about an audit
That's not a big range, particularly when you notice that it covers an income rise of 2,500%.
So I have a modest proposal: Ask your senators or representative if they have a clue about this. If they don’t, regardless of party, they shouldn't be in office. Vote accordingly.

Best'O Greed Part 2

And a big "Boo-Yah" to you, too
Q: I'm trying to follow Jim Cramer and Mad Money to make big money in stocks. Will it work?
A: Fans of Jim Cramer and his Mad Money stock-picking television show on CNBC call in excited about stocks, usually starting their questions with Cramer's signature "boo-yah!" yell.

For an hour, Cramer plays up his hyperactive personality, barking out buy and sell recommendations on dozens of stocks. He is the evangelist of stock pickers and market timers. Fans see him as a fountainhead of information on gems other investors, traders, fund managers and analysts have somehow overlooked.

Is Cramer really a stock-picking genius?

When I asked Cramer for his picks, CNBC, after considerable prodding, provided a spreadsheet with Cramer's picks from two of the five segments of each show, excluding the lightning round, in which he answers questions from viewers.

Based on this incomplete list, Cramer's picks have gained 16.2%, on average, from the show's launch March 14, 2005, through March 27, 2006. That makes the Standard & Poor's 500 gain of 7.3% look pretty sad. Cramer says he's made his viewers lots of money. "I'm very proud of my record," he says.

I provided CNBC's list to third-party research firm Investars.com, which said, based on the incomplete list provided by CNBC, that the S&P 500 stocks picked by Cramer have performed much better than the S&P 500 at large and his picks of stocks in the small-cap Russell 2000 index have outperformed that index. Investars also found that small-cap stocks recommended by Cramer soar after being mentioned on Mad Money.

But before you get "Boo-Yah" tattooed on your forearm, let's take a closer look:

• Tracking the right benchmark. The median market value of the 606 stocks in the Cramer list was $6.8 billion, according to S&P's Capital IQ. Morningstar considers a portfolio with a median market value between $1.6 billion and $9.3 billion to be midcap. So it doesn't really make sense to compare Cramer's performance to the S&P 500, which is heavily weighted toward large-cap stocks.

What if we compare Cramer's results to a midcap index fund such as the iShares S&P MidCap 400 index exchange-traded fund (IJH)? Had you ignored Cramer and simply bought IJH on March 14, 2005 and held it until March 27, 2006, you would have been up 16.4%. That's dead even with Cramer's performance.

But it's not quite fair to compare Cramer to the IJH either. His picks include large- cap stocks and some foreign plays. So I asked IFA.com to calculate the return of the basket of index mutual funds it recommends for risk-tolerant, results hungry "mad money" type investors. The return of this portfolio, after fees, was 21.8%, trouncing Cramer's return. You can view the IFA portfolio here.

Cramer himself has described how hard it is to beat index funds. "After a lifetime of picking stocks, I have to admit that (Vanguard Group founder John) Bogle's arguments in favor of the index fund have me thinking of joining him rather than trying to beat him," Cramer said on the dust jacket of Common Sense on Mutual Funds, Bogle's 1999 book.

• Time. Don't forget the cost of the time it take to follow Cramer. IFA.com's President Mark Hebner breaks it down this way: Imagine having $100,000 to invest in a ten-stock portfolio of Cramer's stock picks. Cramer recommends spending at least an hour a week researching each stock. That translates to more than 500 hours of homework a year. Even if all that work pays off and you beat the market by two percentage points, that's a return of $2,000 or $4 an hour. "Was it really worth it?" Hebner asks.

Time also tends to be cruel to stock pickers. The chances of a money manager outperforming the market in the long term, especially after fees and other costs, is small, says Bogle, whose Vanguard Group popularized index mutual funds and who is acquainted with Cramer. "I wish him well, but I'm not investing with him," Bogle says.

• Fees. Had you followed Cramer's advice, you would have had to buy more than 606 stocks, according to the CNBC data. Even if you use an online broker that charges just $5 a trade, you would have spent $3,030 in commissions.

In an e-mail, Cramer wrote: "Transaction costs are always a factor whether they are done within a mutual fund, a hedge fund or by an individual himself. I believe strongly that my figures clearly beat almost every relevant benchmark by a mile and that even if you put in transaction costs you would be well ahead of the game."

To be fair to Cramer, one year of performance is not adequate to judge a stock picker. And CNBC spokesman Kevin Goldman wrote in an e-mail to USA TODAY: "It is overly simplistic to measure year-to-year comparisons. Cramer can change his mind on a stock depending on a number of factors. He says each investor should do his or her own homework about a stock."

What's the lesson here? Be skeptical anytime someone claims to have the ability to predict short-term movements in stocks or the stock market and make them prove their returns to you. Almost always, the best thing to do is plug your ears and run away, fast.

Best Of Breed Part 1

Great new indexing tool just needs a better wrapper
By Paul B. Farrell, MarketWatch
ARROYO GRANDE, Calif. (MarketWatch) -- Titles and headlines sell stuff. In fact, my old marketing
professor told us that they are 88% of the reason why people read an advertisement or a column or pick
up a book. You gotta "GRAB!" your reader or customer. Make them stop in their tracks.
No grabber? No stop? No readers. No sale! Well, I just got a review copy of a new book by financial
adviser Mark T. Hebner, a colorful high-graphics beauty, loaded with fabulous charts, tables, data and
research. But the title is "Index Funds." I set it aside.
"Freakonomics!" Now that title's a show-stopper! The new "Bogleheads Guide to Investing!" Gotcha! A
must-read! But plain-vanilla "Index Funds?" Dull. Boring. A snoozer. So stick with me and read: For this
review I'm retitling Hebner's book "The Freakoindex Guide to Winning Portfolios!"
Folks, there's actually a big connection between the two: Freakonomic research says "experts" have an
"informational advantage" and use it against their clients. Which sure hints why index funds will never be
more popular than a mere 8% of the $8 trillion fund world, even though indexing consistently beats
actively managed funds. Index funds will always be the minority because the "experts" will invent jazzier
titles and headlines to sell nonindex funds that make more money for the "experts!"
So the media has a responsibility to get the indexing message out. And I believe Hebner's giving
American investors a great resource. Yet many will miss it because it lacks a jazzy "88%" title. And it's
pricey. But we've got a big surprise for you. After we review it we're going to show you how to get it for
free! So here's our summary of what we call "The Freakoindex Guide to Winning Portfolios:"
Step 1: Passive investors win
The game's fixed. Active investors try to pick the winners from among thousands of stocks and funds.
But prices are news-driven. And news is random and unpredictable. Worse yet, "experts" like Wall Street
brokers, portfolio managers and traders have an "informational advantage" that makes it impossible for
Main Street to beat them. They take advantage of naïve investors blindly throwing money at news tips.
Step 2: Nobel economists win
Hebner has the best survey I've seen of research by Nobel Prize-winning economists and other
academics. Unlike Wall Street plugging an IPO client or some brokers hustling commissions, they're
objective and unbiased. All this research proves conclusively that indexing and simple asset allocation
are the best way to win.
Step 3: Stock pickers lose
Wall Street brags about the stock-picking talents of active managers. Yet research says only 3% of them
beat their benchmark, and it's mostly luck. Stock-picking success is random. And today's winners are
rarely on top tomorrow.
Step 4: Market timers lose
Market timing is a fool's game. Over a 10-year period, 88% of your returns will come from a brief 40 up
days. Nobody can predict which 40 days. An academic study of 15,000 predictions by 237 timers
concluded: There's "no evidence that [market-timing] newsletters can time the market."
Step 5: Picking managers loses
Forget about picking next year's hot managers. You can't. The S&P 500 beat 97% of mutual fund
managers for a 10-year period ending October 2004. In two 30-year studies, the S&P 500 outperformed
97% and 94% of the managers. And only 12% of the top-100 managers repeated.
Step 6: Style drifters lose
Active managers love playing with your money, churning portfolios. They're gambling, it's fun. Their
average salary is more than $400,000 annually, even when they lose your money. One study proves that
40% of all funds drift from their stated objective. Reported holdings are months old, so you never really
know what's in any fund, or in your portfolio!
Step 7: Silent partners win
Before you make a dime invisible partners skim money off the top! They're silent because the SEC
doesn't require funds to disclose details about who's skimming: expenses, commissions, fees and taxes.
In one 15-year study of taxable accounts, actively managed funds returned 50% of the gross, while index
funds returned 85% to investors.
Step 8: Risk blindness
The sad truth is, most American investors don't know that what they're doing amounts to gambling. They
chase short-term returns, follow hot tips, never really understanding the impact that timing and risk-taking
have on their after-tax returns.
Step 9: History exposes
Managers come and go. Performance drifts unpredictably over the short term. Indexes are your only
reliable source going back 80 years. Raw indexes, not actively managed funds, are the best measure of
long-term portfolio risks.
Step 10: Risk capacity
What's your risk profile? Your risk "capacity" is a combination of five factors: Personal tolerance for risk
(anxiety level!), your investment IQ, net worth, income and savings rate, plus time to retirement or any
special withdrawal needs. This book has a ton of information on how to determine your risk profile!
Step 11: Risk exposure
Over 90% of a portfolio's returns are a function of asset allocation and not the specific funds, stocks and
bonds. Active management has a negative effect on returns, draining off a third or more. Over a 50-year
period, studies show that a diversified index portfolio will outperform the S&P 500.
Step 12: Invest and relax
Hebner says index and relax: The best way to maximize your returns is to avoid active trading, market
timing and actively managed funds. Create and build a portfolio of index funds that works for your unique
risk profile. Set it and forget it. Buy quality, rebalance periodically. And relax.
Now the best news of all: Hebner's hard copy is a museum piece, a work of art that ought to be on your
coffee table or framed on a wall. But if you think it's a bit pricey at $29.99, get it online free, right now!
See the virtual book.
You can return to this fabulous resource any time you need research, data (yes, Hebner's team does
update statistics regularily) and inspiration about investing, asset allocation and portfolio management.
So get it: "The Freakoindex Guide to Successful Portfolios" is perfect for America's 94 million Main Street
investors! Even if you only call it "Index Funds."

The Phelps Factor

Joseph E. Stiglitz

(NOBLE PRICE OF ECONOMICS)

On December 10, Edmund Phelps, my colleague at Columbia University, will receive the Nobel Prize in economics for 2006. The award was long overdue. While the Nobel Prize committee cited his contributions to macroeconomics, Phelps has made contributions in many areas, including the theory of growth and technological change, optimal taxation, and social justice.

Phelps’ key observation in macroeconomics was that the relationship between inflation and unemployment is affected by expectations, and since expectations themselves are endogenous – they change over time – so, too, will the relationship between unemployment and inflation. If a government attempts to push the unemployment rate too low, inflation will increase, and so, too, will inflationary expectations.

This insight holds two possible policy implications. Some policymakers have concluded from Phelps’ analysis that the unemployment rate cannot be lowered permanently without ever-increasing levels of inflation. Thus, monetary authorities should simply focus on price stability by targeting the rate of unemployment at which inflation does not increase, referred to as the “non-accelerating inflation rate of unemployment” (NAIRU).

But the NAIRU is not immutable. The correct implication, which Phelps repeatedly emphasized, is that governments can implement a variety of policies, particularly structural policies, to allow the economy to operate at a lower level of unemployment.

Policies that focus exclusively on inflation are misguided for several other reasons. As a practical matter, even controlling for expectations (as Phelps’ work insists that we do), the relationship between unemployment and inflation is highly unstable. It is virtually impossible to discern the relationship from the data except in a few isolated periods.

Changes in education levels, unionization, and productivity are part of the explanation for this instability. But, whatever the reason, policymakers face considerable uncertainty about the level of NAIRU. Thus, they still face a trade-off between pushing unemployment too low, and setting off an episode of inflation, and not pushing hard enough, resulting in an unnecessary waste of economic resources.

How one views these risks depends on the costs of undoing mistakes, which in turn depends on other properties of the inflation-unemployment relationship that Phelps’ analysis did not address. The weight of evidence indicates that the cost of undoing the mistake of pushing unemployment down too far is itself very low, at least for countries like the US, where the relationship has been carefully studied. In this view, the Federal Reserve should aggressively pursue low unemployment, until it is shown that inflation is rising.

By contrast, inflation “hawks” argue that inflation must be attacked preemptively. While most central banks are inflation hawks, this stance is a matter of religion, not economic science. There is simply little or no empirical evidence that inflation, at the low to moderate rates that have prevailed in recent decades, has any significant harmful real effects on output, employment, growth, or the distribution of income. Nor is there evidence that inflation, should it increase slightly, cannot be reversed at a relatively minor cost – comparable to the benefits of additional employment and growth enjoyed in the excessive expansion of the economy that led to the increase in inflation.

In the early 1990’s, the Fed, and many others, thought that the NAIRU was around 6%-6.2%. Based on changes in the economy, I and the staff that worked with me on President Bill Clinton’s Council of Economic Advisers argued that the NAIRU was considerably lower. We were right. Unemployment fell to 3.8% without any surge in inflation.

This matters because, as the great economist Arthur Okun argued, reducing unemployment by two percentage points would increase output by 2%-6%, or $0.5-1.5 trillion dollars in the case of America. Even for a rich country, that is a lot of money. It could be used to put America’s social security system on a stable footing for the next 75-100 years. It could even pay for a substantial share of the cost for a war like that in Iraq!

Phelps’ work helped us to understand the complexity of the relationship between inflation and unemployment, and the important role that expectations can play in that relationship. But it is a misuse of that analysis to conclude that nothing can be done about unemployment, or that monetary authorities should focus exclusively on inflation.

That view belongs to a school of modern macroeconomics that assumes rational expectations and perfectly functioning markets. In other words, individuals – usually assumed to be identical – fully use all available information to forecast the future in an environment of perfect competition, no capital market shortcomings, and full insurance of all risks. Not only are these assumptions absurd, but so are the conclusions: there is no involuntary unemployment, markets are fully efficient, and redistribution has no real consequence. But, while government policies, according to this school, are ineffective, that matters little. Because markets are always efficient, there is no need for government intervention. More perniciously, many supporters of this view, when confronted with the reality of unemployment, argue that it arises only because of government-imposed rigidities and trade unions. In their “ideal” world without either, there would, they claim, be no unemployment.

For more than three decades, Phelps has shown that there is an alternative approach. He has tried to understand what we can do to lower unemployment and increase the well-being of those at the bottom. But he has also striven to understand what makes capitalist economies dynamic, what lies behind the entrepreneurial spirit, and what we can do to promote it further. Phelps’ economics remains one of action, not resignation.

Joseph Stiglitz is a Nobel laureate in economics. His latest book is Making Globalization Work.

4 ways you can fight greedy CEOs

( Michael Brush is doing for the individual shareholder what the SEC should be doing.)

Don't just fume about grossly overpaid execs and other corporate scams. You can make a concrete difference. Here are the people to contact and steps to take to get reforms under way.

By Michael Brush
The boss has always made a bundle. In 1940, U.S. corporations paid their chief executives 48 times as much as the average worker, on average. No small gap.

But that doesn't come close to today's great pay divide. CEOs earned $11.3 million on average last year, a 27% increase from the prior year and a huge 262 times more than the average worker. Barry Diller, the chairman and chief executive of the IAC/InterActiveCorp (IACI, news, msgs), took home $295 million last year, including pay, bonus and options cashed in, according to the Corporate Library.

What's worse? The CEOs don't seem to see anything wrong with that type of compensation. Diller recently said critics of his pay and similar packages are "birdbrains."

The momentum of CEO pay, obviously, isn't headed in the right direction. But you don't have to be a Democrat to appreciate that the party about to take power may give the little guy a bit more say in how much the big guy gets paid.

In a minute, I'll give you a set of four steps you can take to help get executive compensation back under control. First, another quick look at why such action is needed.

According to the Corporate Library, a corporate governance research firm, here's what the five highest-paid CEOs made last year:

1. IAC/InterActiveCorp's Diller got $295 million.

2. Capital One Financial (COF, news, msgs) CEO Richard Fairbank got $249 million by cashing in options.

3. Nabors Industries (NBR, news, msgs) CEO Eugene Isenberg got $203 million in pay, bonus, cashed-in options and restricted stock.

4. Yahoo (YHOO, news, msgs) CEO Terry Semel pocketed $183 million in pay, cashed-in options and restricted stock.

5. KB Home (KBH, news, msgs) chief Bruce Karaz got $156 million in pay, bonus, cashed-in options, restricted stock and incentive grants.

If these kinds of giveaways to CEOs tick you off, you don't have to just sit and fume about it.

Congress, regulators and companies themselves are considering a slate of reforms that would go a long way to correct the problem -- and you can take several concrete steps to support these changes.

Here's a list of whom to contact (click a name to send an e-mail):

SEC Chairman Christopher Cox's office. (Click the name to send an e-mail to Cox.)

Your representatives in the U.S. House and Senate.

Rep. Barney Frank, D-Mass., who will chair the House Committee on Financial Services, and Sen. Chris Dodd, D-Conn., who will head up the Senate Committee on Banking, Housing and Urban Affairs next year. (Please, e-mail MSN Money a copy of whatever you send to any member of Congress.)

And here's my quick list of reforms that you can try and do something about:

Boot the directors
The real culprits behind enormous salary increases for CEOs are boards that approve these egregious pay packages in the first place. So it's important to vote against board members on pay committees that let these bloated pay packages through. "Unless you boot off directors who agree to these outrageous pay plans, there is no way to stop it," says Nell Minow of the Corporate Library.

"Don't just discipline board members, change them," says Patrick McGurn, special counsel for Institutional Shareholder Services. Shareholders may soon get more power to do so -- but you'll need to support reform efforts aimed at getting greater "proxy access" for shareholders, as the reform effort is called.

The Securities and Exchange Commission recently sided with a company that rejected a shareholder proposal which would have given shareholders holding more than 3% of its shares the right to nominate board candidates. But a federal court has told the SEC to reconsider its ruling, which may give shareholders more say in policing boards that play too loose with corporate checkbooks.

Get a clearer view
What you can do -- Step #1: Contact the SEC and tell them you support the rights of shareholders to use the corporate proxy machine to propose changes in the rules on how board members are elected. "This should be on top of the list," says McGurn. Tell your representatives in Congress, too, since they have the power to influence SEC policy. The case involves American International Group (AIG, news, msgs) and the American Federation of State, County and Municipal Employees (AFSCME), which wants the bylaws change.

The good news is that it will be much easier to see how much executives make come springtime, when companies file proxy materials -- the documents containing details of executive pay.

The SEC recently adopted rules calling for better clarity, and pay experts are expecting some big surprises. "That in and of itself will have a chilling effect," says Minow, "although these people seem incapable of embarrassment."

But there's still room for improvement in disclosure. One shortcoming is that the SEC doesn't require companies to reveal the targets (such as company profits, revenues, etc.) executives have to hit to receive performance-based pay. This is a problem, since options often account for the lion's share of bloated pay packages.

Outgoing UnitedHealth Group (UNH, news, msgs) CEO William McGuire racked up an awesome $1.6 billion worth of exercisable options and $174.9 million out-of-the-money options during his tenure at the helm. That's on top of a salary, bonus and "other pay" package worth $10.6 million in 2005 alone, according to the Corporate Library.

Unmask the consultants
What you can do -- Step #2: Tell the regulators and your representatives that you want more detail about what targets CEOs have to hit to increase the size of their paychecks.

Companies hire compensation consultants to help determine how much to pay their executives. The question is whether that advice is objective. For instance, those same consultants try to get business from the companies to advise on their employees' retirement plans. If they give the CEO a healthy pay raise, does that help them land or keep other consulting jobs?

What you can do -- Step #3: Ask the SEC and your representatives to require disclosure of all relationships between compensation consultants and the companies whose executive pay packages they design.

Fantasy shareholding
If you hold just $2,000 worth of a company's stock for over a year, you have the right to submit votes to fellow shareholders. "For $2,000 you get a seat at the table with the board of directors and the CEO," says McGurn. "It's like fantasy baseball."


You can't force companies to ask shareholders to vote on anything (see Step #1). One area that's strictly off limits: votes that would constrain management on day-to-day business decisions. (That's fair enough. You wouldn't want shareholders micromanaging companies.)

But you can get proposals that ask shareholders to vote on several changes that can improve the quality of boards and help reign in executive pay, says Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware.

For several years, for example, Bristol-Myers Squibb (BMY, news, msgs) shareholder Dundas Flaherty filed proposals that asked shareholders if they wanted the office of chairman and chief executive to be split. Having the same person in both roles, some critics say, compromises board independence. About 40% of shareholders approved the proposal each time, says Cornish Hitchcock, a Washington D.C.-based attorney who helped Flaherty. In 2005, Bristol-Myers Squibb agreed to split the jobs.

What you can do -- Step # 4: As a shareholder, ask companies to put pay-related reforms to a vote -- or at least be sure to look for pay-related proposals from other activist shareholders and vote "yes."

For example, watch for proposals asking you to vote against excessive golden parachutes, excessive pay packages and the compensation committee reports that justify them, says Hitchcock, who also advises Amalgamated Bank's LongView index funds on how to use shareholder proposals.

Elson says proposals that require majority voting for directors are crucial. This change means that directors have to get a majority of all votes cast to win -- not just the largest number among several candidates. This makes it harder for boards and managers to get a rubber stamp on their favored candidates when the broader shareholder base is apathetic.

There are, of course, other steps to take. And anytime you go head to head with a corporation, it can be an uphill fight. But with the political winds swinging toward shareholders' favor, now's the time to give it a try.

Fear Mongering and Population Numbers

The graph below is from the Department of Labor & represents the number of Americans working from December 1948 until November 2006.
You will see the graph indicates a much larger segment of the population in the working force.
The consistent media in 55% of the working population until the Reagan revolution, in which salaries starting to feel the lack of purchasing power declining a 32% by 1986. At that point, is a clear that an increment coming from the women segment to integrate in the labor force at a much lower pay ratio.
The last ten years employment is running at 64% of the population that is a 17% increase in the labor force since 1948.
The next issue that affect employment ratios is Social Security, with a larger working population and increasingly lower pay outs from Social security it is clear that for the next 60 years, at least that is the real data at hand, Social Security has more contributors per person today that it had in 1985 with lower pay outs.
I think the present debate about teh solvency of social security has to do more with hos the contributions should be impose, managed and collected than the solvency of the Social Security system.
The proponent of Social Insecurity have a lot to gain from it but fear mongering is not a decent tool to change a system that supports our elders peace.

Staying Safe from Financial Predators

by Robert Kiyosaki
Tuesday, November 14, 2006
Ken Lay, the disgraced former chairman of Enron, found a way to escape his legal problems: He died after being convicted of fraud and conspiracy charges. His onetime CEO and partner in crime, Jeffrey Skilling, wasn't so "lucky": He was sentenced to 24 years in prison last month.

I'm not gleeful about Lay's death or Skilling's sentencing, partly because I'm afraid true justice hasn't been carried out. Similarly, when Martha Stewart was convicted and went to prison in 2004, I was shocked. Not because I condone insider trading or attempting to cover up illicit activities, but because she was hardly the criminal the justice system should have been after.

Between 1995 and 2005, literally trillions of investor dollars were stolen from ordinary people with hopes for a secure retirement or a college education for their kids.

Wealth Instead of Jail Time
Many of the crooks responsible for such acts have never been caught and some remain in business. In the same vein, while the savings of average people across the country were being wiped out, the New York Stock Exchange "inadvertently" awarded CEO Dick Grasso a $187 million dollars in compensation.

While Martha was baking cookies in jail, Grasso was richly rewarded for presiding over one of the most corrupt eras of the stock exchange. Was the $187 million Grasso's sales commission for the $7 to $9 trillion the "little" investors lost?

Thank goodness Elliot Spitzer, the New York State attorney general, had the guts to take him to court and win. It looks like Grasso may have to pay back $100 million, but he won't do any time behind bars.

This raises all sorts of questions. Who are the guys who awarded Dick Grasso so much money in the first place? Is someone going after them? Do you still want to trust your money to these people? Does Martha doing time make you feel more confident? Is Jeff Skilling the last crook?

Out of Sight, Out of Mind
It is true that people, especially investors, tend to have short memories. As soon as a market heats up, greed takes over and caution is forgotten.

For instance, the real estate market hit bottom in 1992. Property prices were horrible, the savings and loan industry went bust, and dishonest bankers and real estate developers like Charles Keating were going to jail. Scandals were everywhere, and the federal government had to step in for a bailout.

But in less than 10 years, memories of that horrible disaster were erased, crooks and corruption were forgotten, and people were pouring their money back into real estate.

Today, such corporate giants such as Enron, Tyco, WorldCom, Arthur Andersen, and others are gone -- taking trillions of investor dollars with them. But with the Dow over 12,000 memories of these offenders (and of Martha in jail) have vanished just as surely, and investors are once again flocking to the stock market.

Where Are They Now?
At the height of the Enron mania, the company's market value was $65 billion. Once the dust cleared, the final value was $0. As you know, Ken Lay, Jeffrey Skilling, and CFO Andrew Fastow were all convicted of crimes -- but what happened to the rest of the predators?

What about Enron's board of directors who were supposed to supervise Lay, Skilling, and Fastow? What about the accountants and the analysts? What about all the pension and mutual fund managers who were buying the worthless Enron stock with their investors' money? Were they asleep as Enron executives were robbing and lying? Aren't they still out there investing other people's money?

And what about all the stockbrokers and financial planners who recommended the mutual funds that were buying the Enron, Tyco, and WorldCom stock for their investors? Are they still in business? Were they investigated? If medical doctors can be sued for malpractice, shouldn't financial professionals practice under the same safeguard?

And what about all the financial journalists on television and in print who failed to alert investors to Enron's shady practices? Only a few years ago they were cheering on the dotcom stocks, and today are cheering on the Dow reaching 12,000.

A Rogue's Gallery
Some of the people who made off with millions of investor money are still being celebrated rather than questioned. For example, former General Electric CEO Jack Welch is still considered a leadership guru.

Yet if you look at the facts, Welch took a lot of investor money and left GE in worst shape than ever. When he was exposed for an extra-martial affair, his retirement compensation also came to light. His work at GE netted him nearly $1 billion. His retirement benefits include use of company jets and a lavish New York apartment, and his stipend is $734,000 a month.

Now, if he'd left GE a stronger company, I wouldn't have much to criticize. But the hard facts are that the 2000 value of GE was $600 billion and by early 2005 it was down to $379 billion.

There's also Steve Case of AOL fame. When AOL acquired Time Warner, Time Warner's stock went to $90 a share before falling to a low of less than $10. Market value of the merger was $240 billion, but by 2005 it was less than $82 billion. Thanks to Case, I have a number of friends at Time Warner who are wondering what happened to their retirement.

The Takeaway
Most of the people who were responsible for one of the biggest market crashes in history are still in the system today, doing many of the same things today that they were doing then.

So, as the Dow continues its upward march past 12,000, remember that Martha Stewart is now out of jail -- but so are many of the other characters who actually did run off with the money and never served a day or jail time.

Your mind is still your most important asset, so be careful who you take your advice from and what you believe is true. Remember that all financial markets are filled with good but not necessarily innocent people looking after their own self-interests before they look after yours.

Alarm over radioactive legacy left by attack on Lebanon

Robert Fisk: Mystery of Israel's secret uranium bomb
Alarm over radioactive legacy left by attack on Lebanon
Published: 28 October 2006
Did Israel use a secret new uranium-based weapon in southern Lebanon this summer in the 34-day assault that cost more than 1,300 Lebanese lives, most of them civilians?

We know that the Israelis used American "bunker-buster" bombs on Hizbollah's Beirut headquarters. We know that they drenched southern Lebanon with cluster bombs in the last 72 hours of the war, leaving tens of thousands of bomblets which are still killing Lebanese civilians every week. And we now know - after it first categorically denied using such munitions - that the Israeli army also used phosphorous bombs, weapons which are supposed to be restricted under the third protocol of the Geneva Conventions, which neither Israel nor the United States have signed.

But scientific evidence gathered from at least two bomb craters in Khiam and At-Tiri, the scene of fierce fighting between Hizbollah guerrillas and Israeli troops last July and August, suggests that uranium-based munitions may now also be included in Israel's weapons inventory - and were used against targets in Lebanon. According to Dr Chris Busby, the British Scientific Secretary of the European Committee on Radiation Risk, two soil samples thrown up by Israeli heavy or guided bombs showed "elevated radiation signatures". Both have been forwarded for further examination to the Harwell laboratory in Oxfordshire for mass spectrometry - used by the Ministry of Defence - which has confirmed the concentration of uranium isotopes in the samples.

Dr Busby's initial report states that there are two possible reasons for the contamination. "The first is that the weapon was some novel small experimental nuclear fission device or other experimental weapon (eg, a thermobaric weapon) based on the high temperature of a uranium oxidation flash ... The second is that the weapon was a bunker-busting conventional uranium penetrator weapon employing enriched uranium rather than depleted uranium." A photograph of the explosion of the first bomb shows large clouds of black smoke that might result from burning uranium.

Enriched uranium is produced from natural uranium ore and is used as fuel for nuclear reactors. A waste productof the enrichment process is depleted uranium, it is an extremely hard metal used in anti-tank missiles for penetrating armour. Depleted uranium is less radioactive than natural uranium, which is less radioactive than enriched uranium.

Israel has a poor reputation for telling the truth about its use of weapons in Lebanon. In 1982, it denied using phosphorous munitions on civilian areas - until journalists discovered dying and dead civilians whose wounds caught fire when exposed to air.

I saw two dead babies who, when taken from a mortuary drawer in West Beirut during the Israeli siege of the city, suddenly burst back into flames. Israel officially denied using phosphorous again in Lebanon during the summer - except for "marking" targets - even after civilians were photographed in Lebanese hospitals with burn wounds consistent with phosphorous munitions.

Then on Sunday, Israel suddenly admitted that it had not been telling the truth. Jacob Edery, the Israeli minister in charge of government-parliament relations, confirmed that phosphorous shells were used in direct attacks against Hizbollah, adding that "according to international law, the use of phosphorous munitions is authorised and the (Israeli) army keeps to the rules of international norms".

Asked by The Independent if the Israeli army had been using uranium-based munitions in Lebanon this summer, Mark Regev, the Israeli Foreign Ministry spokesman, said: "Israel does not use any weaponry which is not authorised by international law or international conventions." This, however, begs more questions than it answers. Much international law does not cover modern uranium weapons because they were not invented when humanitarian rules such as the Geneva Conventions were drawn up and because Western governments still refuse to believe that their use can cause long-term damage to the health of thousands of civilians living in the area of the explosions.

American and British forces used hundreds of tons of depleted uranium (DU) shells in Iraq in 1991 - their hardened penetrator warheads manufactured from the waste products of the nuclear industry - and five years later, a plague of cancers emerged across the south of Iraq.

Initial US military assessments warned of grave consequences for public health if such weapons were used against armoured vehicles. But the US administration and the British government later went out of their way to belittle these claims. Yet the cancers continued to spread amid reports that civilians in Bosnia - where DU was also used by Nato aircraft - were suffering new forms of cancer. DU shells were again used in the 2003 Anglo-American invasion of Iraq but it is too early to register any health effects.

"When a uranium penetrator hits a hard target, the particles of the explosion are very long-lived in the environment," Dr Busby said yesterday. "They spread over long distances. They can be inhaled into the lungs. The military really seem to believe that this stuff is not as dangerous as it is." Yet why would Israel use such a weapon when its targets - in the case of Khiam, for example - were only two miles from the Israeli border? The dust ignited by DU munitions can be blown across international borders, just as the chlorine gas used in attacks by both sides in the First World War often blew back on its perpetrators.

Chris Bellamy, the professor of military science and doctrine at Cranfield University, who has reviewed the Busby report, said: "At worst it's some sort of experimental weapon with an enriched uranium component the purpose of which we don't yet know. At best - if you can say that - it shows a remarkably cavalier attitude to the use of nuclear waste products."

The soil sample from Khiam - site of a notorious torture prison when Israel occupied southern Lebanon between 1978 and 2000, and a frontline Hizbollah stronghold in the summer war - was a piece of impacted red earth from an explosion; the isotope ratio was 108, indicative of the presence of enriched uranium. "The health effects on local civilian populations following the use of large uranium penetrators and the large amounts of respirable uranium oxide particles in the atmosphere," the Busby report says, "are likely to be significant ... we recommend that the area is examined for further traces of these weapons with a view to clean up."

This summer's Lebanon war began after Hizbollah guerrillas crossed the Lebanese frontier into Israel, captured two Israeli soldiers and killed three others, prompting Israel to unleash a massive bombardment of Lebanon's villages, cities, bridges and civilian infrastructure. Human rights groups have said that Israel committed war crimes when it attacked civilians, but that Hizbollah was also guilty of such crimes because it fired missiles into Israel which were also filled with ball-bearings, turning their rockets into primitive one-time-only cluster bombs.

Many Lebanese, however, long ago concluded that the latest Lebanon war was a weapons testing ground for the Americans and Iranians, who respectively supply Israel and Hizbollah with munitions. Just as Israel used hitherto-unproven US missiles in its attacks, so the Iranians were able to test-fire a rocket which hit an Israeli corvette off the Lebanese coast, killing four Israeli sailors and almost sinking the vessel after it suffered a 15-hour on-board fire.

What the weapons manufacturers make of the latest scientific findings of potential uranium weapons use in southern Lebanon is not yet known. Nor is their effect on civilians.

Did Israel use a secret new uranium-based weapon in southern Lebanon this summer in the 34-day assault that cost more than 1,300 Lebanese lives, most of them civilians?

We know that the Israelis used American "bunker-buster" bombs on Hizbollah's Beirut headquarters. We know that they drenched southern Lebanon with cluster bombs in the last 72 hours of the war, leaving tens of thousands of bomblets which are still killing Lebanese civilians every week. And we now know - after it first categorically denied using such munitions - that the Israeli army also used phosphorous bombs, weapons which are supposed to be restricted under the third protocol of the Geneva Conventions, which neither Israel nor the United States have signed.

But scientific evidence gathered from at least two bomb craters in Khiam and At-Tiri, the scene of fierce fighting between Hizbollah guerrillas and Israeli troops last July and August, suggests that uranium-based munitions may now also be included in Israel's weapons inventory - and were used against targets in Lebanon. According to Dr Chris Busby, the British Scientific Secretary of the European Committee on Radiation Risk, two soil samples thrown up by Israeli heavy or guided bombs showed "elevated radiation signatures". Both have been forwarded for further examination to the Harwell laboratory in Oxfordshire for mass spectrometry - used by the Ministry of Defence - which has confirmed the concentration of uranium isotopes in the samples.

Dr Busby's initial report states that there are two possible reasons for the contamination. "The first is that the weapon was some novel small experimental nuclear fission device or other experimental weapon (eg, a thermobaric weapon) based on the high temperature of a uranium oxidation flash ... The second is that the weapon was a bunker-busting conventional uranium penetrator weapon employing enriched uranium rather than depleted uranium." A photograph of the explosion of the first bomb shows large clouds of black smoke that might result from burning uranium.

Enriched uranium is produced from natural uranium ore and is used as fuel for nuclear reactors. A waste productof the enrichment process is depleted uranium, it is an extremely hard metal used in anti-tank missiles for penetrating armour. Depleted uranium is less radioactive than natural uranium, which is less radioactive than enriched uranium.

Israel has a poor reputation for telling the truth about its use of weapons in Lebanon. In 1982, it denied using phosphorous munitions on civilian areas - until journalists discovered dying and dead civilians whose wounds caught fire when exposed to air.

I saw two dead babies who, when taken from a mortuary drawer in West Beirut during the Israeli siege of the city, suddenly burst back into flames. Israel officially denied using phosphorous again in Lebanon during the summer - except for "marking" targets - even after civilians were photographed in Lebanese hospitals with burn wounds consistent with phosphorous munitions.

Then on Sunday, Israel suddenly admitted that it had not been telling the truth. Jacob Edery, the Israeli minister in charge of government-parliament relations, confirmed that phosphorous shells were used in direct attacks against Hizbollah, adding that "according to international law, the use of phosphorous munitions is authorised and the (Israeli) army keeps to the rules of international norms".

Asked by The Independent if the Israeli army had been using uranium-based munitions in Lebanon this summer, Mark Regev, the Israeli Foreign Ministry spokesman, said: "Israel does not use any weaponry which is not authorised by international law or international conventions." This, however, begs more questions than it answers. Much international law does not cover modern uranium weapons because they were not invented when humanitarian rules such as the Geneva Conventions were drawn up and because Western governments still refuse to believe that their use can cause long-term damage to the health of thousands of civilians living in the area of the explosions.
American and British forces used hundreds of tons of depleted uranium (DU) shells in Iraq in 1991 - their hardened penetrator warheads manufactured from the waste products of the nuclear industry - and five years later, a plague of cancers emerged across the south of Iraq.

Initial US military assessments warned of grave consequences for public health if such weapons were used against armoured vehicles. But the US administration and the British government later went out of their way to belittle these claims. Yet the cancers continued to spread amid reports that civilians in Bosnia - where DU was also used by Nato aircraft - were suffering new forms of cancer. DU shells were again used in the 2003 Anglo-American invasion of Iraq but it is too early to register any health effects.

"When a uranium penetrator hits a hard target, the particles of the explosion are very long-lived in the environment," Dr Busby said yesterday. "They spread over long distances. They can be inhaled into the lungs. The military really seem to believe that this stuff is not as dangerous as it is." Yet why would Israel use such a weapon when its targets - in the case of Khiam, for example - were only two miles from the Israeli border? The dust ignited by DU munitions can be blown across international borders, just as the chlorine gas used in attacks by both sides in the First World War often blew back on its perpetrators.

Chris Bellamy, the professor of military science and doctrine at Cranfield University, who has reviewed the Busby report, said: "At worst it's some sort of experimental weapon with an enriched uranium component the purpose of which we don't yet know. At best - if you can say that - it shows a remarkably cavalier attitude to the use of nuclear waste products."

The soil sample from Khiam - site of a notorious torture prison when Israel occupied southern Lebanon between 1978 and 2000, and a frontline Hizbollah stronghold in the summer war - was a piece of impacted red earth from an explosion; the isotope ratio was 108, indicative of the presence of enriched uranium. "The health effects on local civilian populations following the use of large uranium penetrators and the large amounts of respirable uranium oxide particles in the atmosphere," the Busby report says, "are likely to be significant ... we recommend that the area is examined for further traces of these weapons with a view to clean up."

This summer's Lebanon war began after Hizbollah guerrillas crossed the Lebanese frontier into Israel, captured two Israeli soldiers and killed three others, prompting Israel to unleash a massive bombardment of Lebanon's villages, cities, bridges and civilian infrastructure. Human rights groups have said that Israel committed war crimes when it attacked civilians, but that Hizbollah was also guilty of such crimes because it fired missiles into Israel which were also filled with ball-bearings, turning their rockets into primitive one-time-only cluster bombs.

Many Lebanese, however, long ago concluded that the latest Lebanon war was a weapons testing ground for the Americans and Iranians, who respectively supply Israel and Hizbollah with munitions. Just as Israel used hitherto-unproven US missiles in its attacks, so the Iranians were able to test-fire a rocket which hit an Israeli corvette off the Lebanese coast, killing four Israeli sailors and almost sinking the vessel after it suffered a 15-hour on-board fire.

What the weapons manufacturers make of the latest scientific findings of potential uranium weapons use in southern Lebanon is not yet known. Nor is their effect on civilians.

Losers, A Mental State

The majority of people supports the war in Iraq, bold statement, as the war grows more controversial and some say extremely expensive. I assert this is just temporary and based in the American mentality of winning and repudiating the foreign mentality of losing.

Who wants to join a losing team.
Today, the Iraq invasion and its consequences has put a majority of people in a state of mind: the loser’s mind.
No one wants to be with the losing team.
That is pessimistic and we live in an optimistic all the time social state, if not forget about it and go shopping.
The perception of losing as occurring with “Operation Iraqi Freedom” is making most people uncomfortably to be near the losers, most folks are bailing out, no losing team for them.
The many all weather optimists, interested and ideologues alike, there is some light of hope, so far, is all make believe, but in the soul of all there is a sorrow for losing.
If the endeavor of Iraq would have the most minimal signal of been in a winning track, many will rapidly jump in the bandwagon and become sudden winners.
Although with the past three years of disastrous actions and diatribes full of lies, it seems that the optimists are starting in the four inning with a handicap of seventeen homeruns.
Do not despair, yet, it is possible with a few billions thrown in propaganda, which it will not the first time, the idea of winning in Iraq can be accomplished.

Psychoanalysts will tell you that those perpetual optimists will gain back the company of those who feel the Bush-Cheney junta has put them with a forever no end in sight losing team.

I am confident the invasion of Iraq has many more supporters than those out of the closet losers copying with denial.
For most people can be argued that sticking with the present state of political power, is also a sad losing proposition, but this is only temporary unmanaged perception.

Some say money is the culprit, the argument is, we are mortgaging the future of the next generation. Well, that was never a consideration when people cheered in the bars when we bomb the hell out of Iraq, or for that matter, no one protests the 50% of all taxes spent in the government war machine, so money is not the culprit.

Some say that too many American soldiers have already died, one is too many, but I hear only attacks and treason claims when the invasion was televised, so there is not much concern over lives and the consequences of invasions.

The number one reason why four years latter people are mad and discouraged is because the junta failed to make the Iraqis and American proud of the invasion.
It would have been a lesson to other dictators if the invasion of Iraq would have the ingredients of pride, altruism, and seriousness. Sadly, the invasion of Iraq is proven to be was about oil and class warfare from the corporatists to the rest of American citizens.
Thus, from the beginning was a losing proposition, many told us this war was about oil and personal revenge, they say it loudly, and they were label traitors losers etc. Today, those same one are saying : I told you so.” The next reality is that most people are recognizing that this is a class warfare, and it was the purpose from the get go.
Lou Dobbs has taking these arguments flag and making a serious and honest reporting in the subject of destroying American working class.


Most people get caught in the demagoguery of the new dukes- Senators, counts-Congressman and king, President. The fact of the matter is that Washington is the Versailles of Louis XIV and all the ideological filth that emanates from there is just that: filth of the powerful and their loud-mouths in the media.

As Lou Dobbs, Bill Moyers and other truth tellers will tell you, there is a very well-off group who understands the process and controls it very well. This group have created the laws to favor them, allowing them to pilfer the rest 95% of people’s money. This monarchy loves this war and its faith based arguments, for this cadre all looks really nice. I will say, all looks extremely rosy if you are near Halliburton or any other war profiteer, the monarchy is doing a great job.

A Shot in the Arm for 401(k) Investors

by Suze Orman
September 11, 2006
Last month, Congress passed and President Bush signed new legislation that affects your 401(k) and IRA savings.


The Pension Protection Act of 2006 also includes some changes on how traditional pensions -- known as defined benefit plans -- are run, but given that fewer and fewer firms offer those types of accounts, I'll focus on what most of you are relying on for retirement: your 401(k)s and IRAs.


There's a lot to commend in the new legislation, but that doesn't mean you should just sit back and settle for the new federal guidelines. Many of the changes simply create minimum "floors" for your retirement savings. To save enough to retire on comfortably, you need to aim for the ceiling, not the floors.


Automatic Isn't Automatically Perfect


Let me explain. A major provision of the legislation encourages employers to automatically enroll their employees in the company 401(k) plan rather than requiring employees to "opt in."


Furthermore, the law suggests setting the base contribution level at no less than 3 percent of an employee's salary, and to increase that contribution rate by 1 percentage point a year until it reaches 6 percent and no more than 10 percent.


I'm all for auto enrollment (amazingly, up to 30 percent of employees eligible for a plan don't participate), but I don't want employees to assume that a 3 percent contribution rate -- or 6 percent for that matter -- is enough.


The first rule of 401(k) investing is to always invest enough so that you'll get the maximum company matching contribution. If that requires you to invest more than 3 percent of your salary, do it. It's simply the best move you can make: Every penny your employer pours into your 401(k) account is akin to a bonus. You don't want to turn down bonus money, do you?


Contribute to the Max


It's no secret that my favorite type of retirement account is a Roth IRA. And I've said repeatedly that if you're eligible for a Roth but don't have enough money to invest in both a Roth and a 401(k), the best strategy is to sock away whatever amount you need to qualify for the maximum 401(k) employer match -- but not a dollar more -- and then concentrate on building up your Roth.


The maximum annual IRA contribution is $4,000 this year, or $5,000 for individuals at least 50 years old. (Quick review: individuals with incomes below $110,000 and married couples filing a joint tax return with income under $160,000 are eligible to fund a Roth.)


The maximum annual employee 401(k) contribution this year and in 2007 is $15,000 ($20,000 if you're at least 50 years old). The good news is that the new legislation makes those high contribution levels permanent; up until now they were scheduled to phase out after 2010 and revert to the lower limits put into place back in 2001.


So let me be clear: If you have the ability to max out your contributions to both your Roth IRA and 401(k), go for it. Don't assume that the 3 percent or so contribution rate your employer automatically signed you up for is all you need. You can and should invest more if you're able.


A New Kind of 401(k)


The new law also gives "permanent" status to the Roth 401(k), which could be a huge win for you. Employers have been somewhat slow to offer these new types of 401(k)s, in large part because they were only temporary; without an act of Congress, Roth 401(k)s were scheduled to disappear in 2010.


The fact that Congress acted and made these 401(k)s permanent should encourage more employers to offer them to employees. If yours doesn't, start making a fuss.



The Roth 401(k) is a fantastic saving opportunity if you're young, and if you happen to think that your tax rate in retirement will be higher than it is today. That's likely for many of us given that rates today are near historical lows, even though our federal budget is under tremendous strain.


With the Roth 401(k) you don't get any tax break on your initial contributions, but just like a Roth IRA you'll never pay a penny of tax on the money you withdraw in retirement, assuming you meet some basic requirements. That can be a huge advantage over a traditional 401(k), where all your withdrawals are taxed at your income tax rate and you don't even get to take advantage of the typically lower capital gains rate.


Taking Stock


A recent survey of 401(k) plans by Vanguard found that among plans that offered company stock, about 70 percent of participants had more than 20 percent of their assets invested in their employer's stock.


That's way too much. No single stock should be more than 5 percent to 10 percent of your invested assets. This doesn't just protect you from Enron-like debacles, it's also basic diversification common sense: Your retirement shouldn't ride on a single investment.


The new legislation addresses the fact that many employers use company stock to make matching contributions to their employees. In a sense, these employers force their employees to own the stock. The new law provides some relief here, pushing employers to make it easier for employees to unload company stock they get as a match or profit sharing.


The change is good, but doesn't really help address the real problem -- the fact that participants aren't quick to take action. Study after study shows that inertia, not action, tends to run our 401(k) behavior. We tend to stick with what we have, rather than make changes that will help us.


So the pressure is still on you to protect yourself. If you have more than 10 percent of your money in one stock -- regardless of how much you love your company and are optimistic about its future -- you're putting your retirement in danger. You owe it to yourself to diversify.


A Boon for Beneficiaries


Congress just gave your heirs a very nice tax break. Under the old rules, any 401(k) beneficiary other than a spouse had limited options in how to take the payout; the reality was that most took it as a lump sum that triggered a big tax hit. (Remember, 100 percent of 401(k) withdrawals are taxed as ordinary income.)


With the new law, beginning in 2007 beneficiaries can instead move the 401(k) into a special IRA specifically designated for beneficiaries, and make annual withdrawals over many years based on their own life expectancy.


That means heirs will be able to leave more of the money invested in the tax-deferred account for longer. And that's a great way for your heirs to build their own sizeable retirement nest egg.


No Charity Tax


Finally, the new law also has a great break for IRA investors older then 70-1/2 who face making required minimum distributions (RMD) even though they don't need the income.


In 2006 and 2007, you'll now be allowed to donate up to $100,000 each year from your IRA to a public charity and not owe any tax on that money. That is, you won't first have to claim the money as a taxable RMD before you make the donation.


This can be a useful way to support a charity and meet your RMD requirements without boosting your adjusted gross income. The donation can't also be claimed as a deduction, so it makes the most sense for those of you who don't itemize.