July, 2008

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News Stories

The Hidden Costs of the Golden Years
If you're getting ready to retire and think you are prepared, you might want to think again. Once you walk out your office door for the final time, you're bidding farewell not only to workplace politics and long commutes, but also to free eyeglasses and tooth fillings, subsidized hearing aids and acupuncture and a host of other health-care benefits you may not even have realized were there. In their place, you and your spouse are facing the likelihood of forking out about $225,000 between your 65th and 80th birthdays -- on everything from prescription deductibles to Medicare premiums to stuff that Medicare just doesn't cover.
The harsh reality is that with each year that a retiree lives, health-care costs of one kind or another -- doctor visits, specialist treatments, medications and so on -- are likely to rise. That $225,000 tab for the next 15 years is up from $170,000 for a retiring couple just five years ago, according to an analysis by Fidelity Investments.
Financial advisers agree that the problem of funding retirement health-care looms largest for those with less than $5 million or $6 million in retirement savings. Most concur that richer retirees will be able to cover the vast majority of their health-care needs through a combination of insurance products and out-of-pocket spending -- and without throwing their whole retirement plans or lifestyles into chaos.
6/23/08 Barrons.com

5 Retirement Risks and How to Manage Them
Retiring can be risky business. The Society of Actuaries, a group of professionals who evaluate risk for a living, recently named inflation the top retirement concern among both retirees and people nearing retirement age, according to a survey released this week. About 57 percent of those already retired and 63 percent of those near retirement age said they were concerned that the value of their savings wouldn't keep pace with inflation, the telephone survey of 801 adults ages 45 to 80 found. The Society of Actuaries also offered advice for dealing with the top retirement risks. Here's a summary:
Inflation.
Between 1980 and 2007, U.S. inflation averaged 3.5 percent a year, ranging from 1.1 to 8.9 percent. And yet most retirees have only one source of inflation-adjusted income: Social Security. Time-tested strategies to beat inflation include investing in stocks and stock-based mutual funds, owning a home and other assets, holding TIPS (Treasury inflation-protected securities), buying annuity products that offer a cost-of-living adjustment, and delaying tapping your retirement assets for as long as possible.
Outliving your assets.
A 65-year-old American man can expect to live 17 years on average, while a woman the same age can expect to live 20 years. Fully 30 percent of women and 20 percent of men can expect to reach age 90. Defined-benefit pension plans, Social Security, investments that preserve principal, and deferred annuities that commence at high ages, such as 75 or 80, can all help protect assets.
Loss of a spouse. Women have longer life expectancies and tend to marry men who are older than them, so a widowhood period of 15 years or more is not uncommon. The death of a breadwinner spouse can trigger a dramatic decline in your standard of living. A single person requires nearly 80 percent of the income needed by a married couple, according to the Society of Actuaries. Yet the Social Security benefit paid to a survivor is typically only from 50 to 67 percent of what the couple received. Married couples can consider joint and survivor annuities and life insurance, plus strategies for maximizing their Social Security benefit.
Long-term care.
Long-term care options include home care, adult day care centers, assisted-living facilities, and nursing homes. What they have in common: They're all expensive. The cumulative cost of care may amount to $1 million for a couple, with nursing home costs reaching $70,000 annually. Long-term-care insurance can help pay for the cost of caring for disabled seniors.
Healthcare and medical expenses.
Nearly all retirees and those near retirement say they maintain a healthy lifestyle, and three quarters have or plan to have supplemental health coverage. But retirees need to be prepared for unexpected health problems, Medicare premiums, and the expenses that Medicare doesn't cover.
US News and World Report

8 Rules to Break to Build wealth
Being "upside down" is usually a negative term when applied to financial matters, but multimillionaire Robert Shemin believes that sort of thinking is ... well ... upside down. Shemin, author of "How Come That Idiot's Rich and I'm Not?" feels there are two positions when it comes to wealth: right side up and broke, or upside down and rich. Shemin prefers upside down. The best way to build and maintain wealth, maintains Shemin -- once considered the "least likely to succeed"-- is by breaking the rules you think and hear about when building wealth.
Following are eight rules worth breaking -- in upside-down order -- and what Shemin and other financial gurus have to say about them. Diverging from the traditional mind-set may put you on the right course to riches.
8. Avoid mistakes, learn before investing
7. Don't ask for help
6. Follow the path your advisers recommend
5. Don't invest in uncharted territory
4. Try to time the market
3. Have enough money or good credit to invest
2. Don't get into debt
1. Have a plan
Click here to read the explanation for each one.
bankrate.com in Yahoo Business

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THE ECONOMY: SEVEN INDICATORS - From CNN Money (as of 8/1/08)

The Indicator	What It's Telling Us	Next Update
Consumer Confidence	The consumer is often wrong	Aug 26
Retail sales	Sales hurt by auto weakness	Aug 13
Leading Economic Indicators	Higher prices could crimp growth	Aug 21
Manufacturing Activity (ISM)	Signals expansion for the first time since January	Aug 1
Industrial Production	Rebounds in June	Aug 15
Job Growth	Unemployment at 4-year high	Sept 5
Inflation (CPI)	Gas prices drive inflation to a 5% annual rate	Aug 14

Recent Economic News

Unemployment at 4-year high - 8/1/08 CNN Money
Employers trim payrolls for seventh straight month in July, as jobless rate rises to 5.7%, a full percentage point higher than year ago. Employers trimmed jobs once again in July and the unemployment rate hit a four-year high, according to a government report Friday that showed the seventh straight month of job losses . The Labor Department reported a net loss of 51,000 jobs in the month, compared to a revised loss of 51,000 jobs in June. Economists surveyed by Briefing.com had been forecasting a loss of 75,000 jobs in the latest report. The latest report brought job losses this year to 463,000.
The unemployment rate edged up to 5.7% from a 5.5% reading in June. It was the worst reading since March 2004, and slightly worse than economists' forecast of a 5.6% rate. The rate has now jumped a full percentage point from a year ago. But the 5.7% unemployment rate only tells part of the problem faced by job seekers. It doesn't include those who have become discouraged from looking for work, or those who have accepted part-time jobs when they want to be working full time. Counting all of those unemployed or underemployed people, the rate rises to 10.3%, the first time that measure has hit double figures since November 2003.

G.D.P. Grows at Tepid 1.9% Pace Despite Stimulus - 7/31/08 NY Times
The economy grew less than expected from April to June despite a huge booster shot of tax rebates, the government reported on Thursday, dimming the outlook for a quick recovery. And more bad news may lie ahead: new claims for unemployment benefits jumped to a five-year high last week, an ominous sign for the ailing labor market that could signal a further decrease in spending in the months ahead. Gross domestic product expanded at an annual rate of 1.9 percent in the second quarter, the Commerce Department said, primarily because of a surge in export sales powered by the weak dollar.
The government also revised down its G.D.P. estimates for the past three years, effectively removing the sheen from what was once considered a time of robust growth. The economy actually shrank in the last three months of 2007, the first contraction since the recession of 2001. The government had originally reported growth of 0.6 percent for that quarter.
Economists had expected the economy to grow by 2.3 percent last quarter, primarily because of the $100 billion in tax rebates mailed to consumers in the spring. But domestic consumption only rose 1.5 percent for the quarter - an improvement over the 0.9 percent rate recorded in the previous period, but less than many had hoped.

U.S. consumer confidence ticks up in July - 7/29/08 MarketWatch
U.S. consumer confidence ticked up in July, the Conference Board reported Tuesday, while the level remained relatively low and job concerns persisted. The July consumer confidence index rose to 51.9 from a June reading that was revised to 51.0 from a prior estimate of 50.4. Economists surveyed by MarketWatch had expected a July reading of 50.0. The percentage of consumers saying jobs are "hard to get" rose to 30.3% in July from 29.7% in June.

Home prices fall 15.8% in past year: Case-Shiller - 7/29/08 MarketWatch
Home prices in 20 major U.S. cities have fallen a record 15.8% in the past year, as prices fell in all 20 cities tracked by the Case-Shiller home price index, Standard & Poor's reported Tuesday. Home prices fell 1% in May compared with April. Prices in seven cities are down more than 20% in the past year.

ADP employment index shows 9,000 jobs added in July - 7/30/08 MarketWatch
U.S. private-sector employment rose by 9,000 in July, according to the ADP employment index released Wednesday. Adding in some 20,000 government workers typically hired in a given month, the ADP index suggests U.S. nonfarm payrolls rose by about 30,000 in July. The ADP report has overstated job growth compared with the government data. The government will release its report on Friday, with economists expecting a loss of 70,000. The ADP index fell a revised 77,000 in June.

Foreclosures Up Big - 7/25/08
According to RealtyTrac, Inc. of Irvine, CA, foreclosures were up significantly in the second quarter. Compared to the first quarter, foreclosures were up over 13%. Compared to last year, they were up over 120%. In Nevada, one in every 43 households received a foreclosure notice in the second quarter. In California, the number was 1 in every 65 households. The national average was approximately 1 in every 170 households.

Markets React to Housing Surprise 7/25/08 Forbes.com
A monthly Commerce Department report showed durable-goods orders for June were up 0.8% after climbing just 0.1% in May. Meanwhile, the Census Bureau reported new-home sales were up 530,000, compared with a revised 533,000 in May, and well above the consensus estimate of 503,000.

U.S. June durable goods orders up surprising 0.8% - 7/25/08 MarketWatch
Orders for U.S.-made durable goods surged in June, rising 0.8% on stronger demand for primary metals, machinery and electronics, the Commerce Department reported Friday. Excluding the 2.6% decrease in transportation goods, orders rose 2.0%, the sharpest gain since last December. The increase far exceeded the expected 0.3% fall forecast by economists surveyed by MarketWatch. It was the largest increase in total orders since February. Shipments rose 0.5% in June, and were up 0.2% excluding transportation goods. Inventories rose 0.5% and unfilled orders rose 0.9%.

Existing-home sales fall 2.6% to 10-year low - 7/24/08 MarketWatch
Resales of U.S. single-family homes and condos fell 2.6% in June to a seasonally adjusted annual rate of 4.86 million, the lowest level in 10 years, the National Association of Realtors reported Thursday.
Resales have sunk 15.5% in the past year and are down about 33% from the peak in 2005. The pace of sales has been relatively stable since last August at around a 5 million annual pace. Economists surveyed by MarketWatch expected sales to fall to 4.95 million.

U.S. jobless claims rise to highest level since March - 7/24/08 MarketWatch
First-time claims for state unemployment benefits rose to their highest level since late March in the latest week, the Labor Department reported Thursday. The number of initial claims in the week ending July 19 rose 34,000 to 406,000. It's the highest level since the week ended March 29. The consensus forecast of Wall Street economists was for claims to rise to 380,000. Claims in the previous week were revised to an increase of 24,000 to 372,000 compared with the initial estimate of a rise of 16,000 to 366,000. The four-week average of initial claims rose 4,500 to 382,500.

U.S. Foreclosures Double as House Prices Decline - 7/24/08 Bloomberg News in govtexec.com
U.S. foreclosure filings more than doubled in the second quarter from a year earlier as falling home prices left borrowers owing more on mortgages than their properties were worth. One in every 171 U.S. homeowners lost their house to foreclosure, received a default notice or was warned of a pending auction, an increase of 121 percent from a year earlier and a 14 percent rise from the first quarter. About 25 million U.S. homeowners risk owing more than the value of their homes. That would make it impossible for them to negotiate better loan terms or sell their property without contributing cash to the transaction.

Fed: Slower growth, rising prices slam economy- 7/23/08 AP in Biz.yahoo.com
The country slogged through slower economic growth and rising prices during the summer, packing a double whammy to people and businesses alike.
The Fed's new snapshot of business conditions, released Wednesday, also underscored the challenges confronting Federal Reserve Chairman Ben Bernanke and his colleagues as they try to get the economy back on track. Growth and inflation barometers turned worse in the summer, according to the Fed report. Some worry that the country may be headed for a bout of stagflation, that toxic combination of stagnant growth and stubborn inflation not seen in decades. Boosting rates to fend off inflation would hurt the fragile economy and the already crippled housing market. On the other hand, the Fed isn't inclined to lower rates because that would aggravate inflation. Consumer spending -- the economy's lifeblood -- was reported as "sluggish or slowing" in nearly all the Fed regions, although the government's tax rebate checks spurred sales for some items, especially electronics. Sales at many other stores, particularly for housing-related goods, were typically characterized as "weak or falling," however.

Fed Report Says Economy Continued to Slow -; 7/23/08 AP in the NY Times
The country slogged through slower economic growth and rising prices during the summer, packing a double whammy to people and businesses alike. The Fed’s new snapshot of business conditions, released Wednesday, also underscored the challenges confronting the Federal Reserve Chairman Ben S. Bernanke and his colleagues as they try to get the economy back on track. For now, many economists predict the Fed will probably leave a key interest rate alone when it meets on Aug. 5 — given all the economic crosscurrents. Increasing rates to fend off inflation would hurt the fragile economy and the already crippled housing market. On the other hand, the Fed is not inclined to lower rates because that would aggravate inflation. Growth and inflation barometers turned worse in the summer, according to the Fed report. Some worry that the country may be headed for a bout of stagflation, that toxic combination of stagnant growth and stubborn inflation last seen in the 1970s. Mr. Bernanke has said, however, that he does not believe the economy will suffer from stagflation.

Leading Indicators Fell 0.1% in June - 7/22/08 By Reuters in the NY Times
The index of leading economic indicators slipped 0.1 percent in June as expected, showing that the limping economy is still far from being on the mend, the Conference Board reported Monday. The index’s reading for May was revised to show a 0.2 percent drop, initially reported as a 0.1 percent rise. Economists polled by Reuters ahead of the report had anticipated that June’s index would fall 0.1 percent. During the first six months of the year, the leading index fell 0.9 percent, the Conference Board said. The coincident index, a measure of current conditions, rose 0.1 percent in June, following a 0.1 percent decline in May, and the lagging index dropped 0.3 percent in June, after falling 0.2 percent in May.

Single-family home starts drop to 17-year low - 7/17/08 MarketWatch
New construction of single-family homes fell 5.3% to a fresh 17-year low in June, while a change in data collection procedures for multifamily units in New York City pushed up total starts by 9.1%, the Commerce Department reported Thursday. A flood of multifamily building permits was filed in New York following adoption of the new rules, skewing the overall data for both building permits and housing starts. Excluding multifamily starts in the Northeast, housing starts fell 4%, the government said. The new rules affected only multifamily construction in New York City. Economists, apparently unaware of the impact of the new rules, expected starts to fall about 2% to a 959,000 annual rate.

Home builders index hits another record low - 7/16/08 MarketWatch
The home builders' sentiment index fell two points in July to record-low 16, with all three components of the survey also dropping to historic lows, the National Association of Home Builders reported Wednesday. At 16, the NAHB/Wells Fargo housing market index shows that only one-in-six home builders has a positive view of the market. New subdivisions have become ghost towns, with current sales dropping off and with the traffic of prospective buyers drying up in recent months. Few builders anticipate any improvement in sales in the next six months.

U.S. June CPI soars 1.1%, biggest gain in 26 years - 7/16/08 MarketWatch
Double-digit increases in gasoline prices helped push up the consumer price index 1.1% in June, the fastest rate in 26 years, the Labor Department reported Wednesday. The unexpectedly large rise in the CPI was led by a 6.6% increase in energy prices and a 0.8% increase in food prices. Excluding food and energy prices, the core CPI rose 0.3%, the biggest increase since January. Excluding energy prices alone, the CPI rose 0.4% in June. With prices rising so fast, real (inflation-adjusted) weekly earnings fell 0.9% in June, the biggest decline in 22 years.

U.S. Consumers Down But Not Quite Out - 7/12/08 forbes.com
American consumers are sitting tight, according to Friday's preliminary data for July that showed consumer sentiment rose slightly to 56.6 from June's final reading of 56.4. While the reading-- relatively unchanged from the prior month's third-lowest reading on record--offers little to get excited about, it comes as a relief as economists had been expecting a stark 55.5 result. Consumer expectations struck a low not seen since May 1980, hitting 48.3, down from June's 49.2.
Retail discounts helped keep pessimism at bay but consumers maintained a bleak outlook regarding rising prices. One-year inflation expectations jumped to their highest level since 1981 at 5.3% from June's 5.1% and five-year inflation expectations remained at the same level as the last two months, at 3.4%, according to the Reuters/University of Michigan Surveys of Consumers' preliminary July reading.

Trade Deficit Ebbs as Exports Rise to Record High - 7/11/08 AP in the NY Times
The U.S. trade deficit narrowed in May as exports -- including industrial supplies and consumer goods -- climbed to all-time highs.
The latest snapshot of trade activity, reported by the Commerce Department on Friday, showed that the nation's trade gap, thanks largely to the declining dollar, decreased to $59.8 billion. That was down 1.2 percent from April's trade deficit and was the best showing since March. The trade picture turned out better than many economists were anticipating. They were forecasting the trade gap to widen to $62.2 billion in May.
Exports of U.S.-made goods and services totaled an all-time high of $157.6 billion in May. That marked a 0.9 percent increase from April. The declining value of the U.S. dollar relative to other currencies, especially the euro, is helping to make U.S. exports cheaper and thus more attractive to foreign buyers. Growth in exports has been one of the few bright spots for the U.S. economy, which has been pounded by housing, credit and financial crises.

Shoppers stimulate discount stores - 7/10/08 CNN Money
Wal-Mart and Costco post strong June sales as consumers seek to get the most from one-time government payments; performance from clothing retailers was mixed.
Consumers sought the biggest bang for their economic stimulus bucks in June, sending the sales of discount merchants such as Wal-Mart and Costco surging. Wal-Mart Stores Inc. trounced analyst expectations Thursday with a 5.8% jump in June sales for stores open at least one year, attributing the increase to the government's economic stimulus payments. Analysts interviewed by Thomson Reuters had expected an increase of 3.8% for the five weeks ended July 4, not including gas sales.

U.S. initial jobless claims hit lowest level since April - 7/10/08 MarketWatch
First-time claims for U.S. unemployment benefits fell by 58,000 in the latest week, the Labor Department reported Thursday. At 346,000, initial claims were the lowest since April. The four-week average of those claims fell to 380,500, while continuing claims hit their highest level since December 2003. Continuing claims rose to 3.20 million, and the four-week average of continuing claims rose to 3.13 million.

May hires rate slowest pace since June 2003 - 7/9/08 Reuters in Yahoo Finance
Employers hired workers in May at the slowest pace in nearly five years as a fragile economy apparently sapped enthusiasm for adding staff, a government report showed on Wednesday. The total rate of hires, which gauges the number of employees added to payrolls during month, fell to 3.1 percent from 3.4 percent in April and was the slowest pace since a matching 3.1 percent in June 2003, the Labor Department said. In June 2003, the jobless rate hit 6.4 percent, the job market looked bleak and the downward trend in nonfarm payrolls did not bode well for consumer spending. Industries driving the hire rate down in May were construction, trade, transportation and utilities, the department said in its monthly Job Openings and Labor Turnover survey.

Pending home sales fall 4.7 percent - 7/8/08 AP in Yahoo Finance
A measurement of pending home sales fell to the third-lowest reading on record in May as the housing market's recovery continued to prove elusive. The National Association of Realtors' seasonally adjusted index of pending sales for existing homes fell 4.7 percent to 84.7 from an upwardly revised April reading of 88.9. The index was 14 percent below year-ago levels. Home sales are considered pending when the seller has accepted an offer, but the deal has not yet closed. Typically there is a one- to two-month lag before a sale is completed. Wall Street economists surveyed by Thomson/IFR had predicted the index would come in at 87. The index, which sunk to a record low of 83 in March, stood at 98.5 in May 2007. A reading of 100 is equal to the average level of sales activity in 2001, when the index started. Pending sales fell around the U.S., sinking the most -- 7.1 percent -- in the South, and the least -- 1.3 percent -- in the West. Sales of existing homes edged up in May, indicating that buyers were taking advantage of deeply discounted prices. But many economists believe prices must drop further before the housing industry can mount a sustained recovery.

U.S. June ISM services falls sharply to 48.2% - 7/3/08 MarketWatch
Nonmanufacturing sectors of the U.S. economy contracted in June, the Institute for Supply Management reported Thursday. The ISM nonmanufacturing index fell to 48.2% from 51.7% in May. The decrease was below forecasts. Economists were looking the index to inch lower to 51.0%. Inflation pressures intensified. The price index rose to 84.5% from 77.0% in the previous month. The employment index fell to 43.8% from 48.7% in the previous month.

Factory Orders Up 0.6% 7/3/08 - AP in the NY Times
Orders to American factories grew by the smallest amount in three months in May, reflecting slumping demand for autos, heavy machinery and steel. The Commerce Department reported Wednesday that factory orders rose by 0.6 percent in May, less than half the gains recorded in April and March. Manufacturing has been hurt by troubles in the auto industry and housing-related industries. That weakness has been offset by strength in exports, which have benefited from a weak dollar. The overall number was roughly in line with the rise of 0.7% expected by economists surveyed by MarketWatch.

U.S. Workforce Shrinks For 6th Straight Month - 7/3/08 Washington Post
Employers cut 62,000 jobs in June, marking the sixth consecutive month that the nation has shed jobs, according to a government report released yesterday, deepening concern that the struggling U.S. economy could turn worse before it gets better. The collapse in the real estate and mortgage industries, coupled with the specter of inflation fueled by the rising price of oil and other commodities, has crimped employers and left top policymakers and private analysts convinced that the economy is in for a prolonged period.

A half-year of job losses - 7/3/08 CNN Money
Employers trimmed jobs from their payrolls in June for the sixth straight month, as the government's closely watched report Thursday showed continued weakness in the labor market. The Labor Department reported a net loss of 62,000 jobs in the month. That matched the job loss figure for May, which was revised higher from 49,000. Economists surveyed by Briefing.com had forecast a loss of 60,000 jobs. The June number brought to 438,000 the number of jobs lost by the U.S. economy so far this year. The unemployment rate stayed at 5.5%. Economists had forecast the rate would come in at 5.4% in the latest reading.

U.S. June ISM manufacturing index surprises to upside - 7/1/08 MarketWatch
The nation's manufacturers boosted production in June for the first time since January, the Institute for Supply Management reported Tuesday. The ISM index inched higher to 50.2% in June from 49.6% in May. The rise was unexpected. The consensus forecast of estimates collected by Marketwatch was for the index to slip to 48.5%. Readings below 50 indicate contraction.

U.S. construction spending down 0.4% in May - 7/1/08 MarketWatch
Spending on U.S. construction projects fell 0.4% in May as outlays on private residential construction took another tumble, the Commerce Department reported Tuesday. Economists surveyed by MarketWatch were looking for a decline of 0.6%. On a year-over-year basis, construction spending was down 6%. Spending on private residential construction declined 1.6% in May, following a decline of 1.7% in the prior month. Spending in May on overall private construction declined 0.7%. Spending on public construction rose 0.4%.

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