Archive for September, 2009|Monthly archive page


In Uncategorized on September 29, 2009 at 13:01

The president of the World Bank said on Monday that America’s days as an unchallenged economic superpower might be numbered and that the dollar was likely to lose its favored position as the euro and the Chinese renminbi assume bigger roles.

Robert Zoellick said the Treasury should get more power.

“The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency,” the World Bank president, Robert B. Zoellick, said in a speech at the School for Advanced International Studies at Johns Hopkins. “Looking forward, there will increasingly be other options to the dollar.”

Mr. Zoellick, who previously served as the United States trade representative and as deputy secretary of state under President George W. Bush, said that the euro provided a “respectable alternative” for financing international transactions and that there was “every reason to believe that the euro’s acceptability could grow.”

In the next 10 to 20 years, he said, the dollar will face growing competition from China’s currency, the renminbi. Though Chinese leaders have minimized their currency’s use in international transactions, largely so they could keep greater control over exchange rates, Mr. Zoellick said the renminbi would “evolve into a force in financial markets.”

The World Bank, which is financed by governments around the globe and lends money primarily to poor countries, has no say over the economic policies of large nations or over currency matters.

But Mr. Zoellick’s comments were unusual, in part because he seemed intent on being provocative. He argued that the United States and a handful of other rich nations could no longer dominate the world economy and suggested that America was losing its clout. He also took issue with a central piece of the Obama administration’s proposal regarding the country’s financial regulatory system.

“The greenback’s fortunes will depend heavily on U.S. choices,” Mr. Zoellick said. “Will the United States resolve its debt problems without a resort to inflation? Can America establish long-term discipline over spending and its budget deficit?”

Mr. Zoellick criticized President Obama’s plan to put the Federal Reserve in charge of reducing “systemic risk” and to regulate institutions considered too big to fail. Saying that Congress had become uneasy about the Fed’s exercise of emergency powers to bail out financial institutions and prop up credit markets, Mr. Zoellick argued that the Treasury rather than the Fed should get more power because the Treasury was more accountable to Congress.

“In the United States, it will be difficult to vest the independent and powerful technocrats at the Federal Reserve with more authority,” Mr. Zoellick said, adding that “the Treasury is an executive department, and therefore Congress and the public can more directly oversee how it uses any added authority.”



In Uncategorized on September 27, 2009 at 23:47

‘NEVER RETIRE,’ Wm. Safire’s last Op-Ed column in the Times:


Published: January 24, 2005

The Nobel laureate James Watson, who started a revolution in science as co-discoverer of the structure of DNA, put it to me straight a couple of years ago: “Never retire. Your brain needs exercise or it will atrophy.”

Why, then, am I bidding Op-Ed readers farewell today after more than 3,000 columns? Nobody pushed me; at 75, I’m in good shape, not afflicted with political ennui; and my recent column about tsunami injustice and the Book of Job drew the biggest mail response in 32 years of pounding out punditry.

Here’s why I’m outta here: In an interview 50 years before, the aging adman Bruce Barton told me something like Watson’s advice about the need to keep trying something new, which I punched up into “When you’re through changing, you’re through.” He gladly adopted the aphorism, which I’ve been attributing to him ever since.

Combine those two bits of counsel – never retire, but plan to change your career to keep your synapses snapping – and you can see the path I’m now taking. Readers, too, may want to think about a longevity strategy.

We’re all living longer. In the past century, life expectancy for Americans has risen from 47 to 77. With cures for cancer, heart disease and stroke on the way, with genetic engineering, stem cell regeneration and organ transplants a certainty, the boomer generation will be averting illness, patching itself up and pushing well past the biblical limits of “threescore and ten.”

But to what purpose? If the body sticks around while the brain wanders off, a longer lifetime becomes a burden on self and society. Extending the life of the body gains most meaning when we preserve the life of the mind.

That idea led a lifetime friend, David Mahoney, who headed the Dana Foundation until his death in 2000, to join with Jim Watson in forming the Dana Alliance for Brain Initiatives. They roped me in, a dozen years ago, to help enliven a moribund “decade of the brain.” By encouraging many of the most prestigious neuroscientists to get out of the ivory tower and explain in plain words the potential of brain science, they enlisted the growing public and private support for research.

That became the program running quietly in the background of my on-screen life as language maven, talking head, novelist and twice-weekly vituperative right-wing scandalmonger.

I had no pretensions about becoming a scientist (having been graduated near the bottom of my class at the Bronx High School of Science) but did launch a few publications and a Web site – – that opened some channels among scientists, journalists and people seeking reliable information about the exciting field.

Experience as a Times polemicist made it easier to wade into the public controversies of science. Dana philanthropy provides forums to debate neuroethics: Is it right to push beyond treatment for mental illness to enhance the normal brain? Should we level human height with growth hormones? Is cloning ever morally sound? Does a drug-induced sense of well-being undermine “real” happiness? Such food for thought is now becoming my meat.

And what about what the cognition crowd calls “executive transfer” in learning? Does an early grasp of the arts – music, dance, drama, drawing – affect a child’s ability to apply that cognitive process to facility in math, architecture, history? New imaging techniques and much-needed longitudinal studies may provide answers rather than anecdotes and affect arts budgets in schools.

So I told The Times’s publisher two years ago that the 2004 presidential campaign would be my last hurrah as political pundit, and that I would then take on the full-time chairmanship of Dana. He expressed appropriate dismay at losing the Op-Ed conservative but said it would be a terrible idea to abandon the Sunday language column. That’s my scholarly recreation, so I agreed to continue. (Don’t use so as a conjunction!)

Starting next week, working in an operating and grant-making foundation, I will have to retrain parts of my brain. That may not make me a big man on hippocampus, but it means less of the horizon-gazing that required me to take positions on everything going on in the world; instead, a welcome verticalism will drive me to dig more deeply into specific areas of interest. Fewer lone-wolf assertions; more collegial dealing. I hear that’s tough.

But retraining and fresh stimulation are what all of us should require in “the last of life, for which the first was made.” Athletes and dancers deal with the need to retrain in their 30’s, workers in their 40’s, managers in their 50’s, politicians in their 60’s, academics and media biggies in their 70’s. The trick is to start early in our careers the stress-relieving avocation that we will need later as a mind-exercising final vocation. We can quit a job, but we quit fresh involvement at our mental peril.

In this inaugural winter of 2005, the government in Washington is dividing with partisan zeal over the need or the way to protect today’s 20-somethings’ Social Security accounts in 2040. Sooner or later, we’ll bite that bullet; personal economic security is freedom from fear.

But how many of us are planning now for our social activity accounts? Intellectual renewal is not a vast new government program, and to secure continuing social interaction deepens no deficit. By laying the basis for future activities in the midst of current careers, we reject stultifying retirement and seize the opportunity for an exhilarating second wind.

Medical and genetic science will surely stretch our life spans. Neuroscience will just as certainly make possible the mental agility of the aging. Nobody should fail to capitalize on the physical and mental gifts to come.

When you’re through changing, learning, working to stay involved – only then are you through. “Never retire.”

‘REV. FORREST CHURCH, WHO EMBRACED A GOSPEL OF PUBLIC SERVICE, DIES AT 61,’ from the obituary in today’s New York Times.

In Uncategorized on September 27, 2009 at 09:48

My friend & spiritual guide for over a dozen years died  one day after his 61st birthday here in Manhattan. Tributes and reflections can be read at :

The service will be at All Souls on Saturday October 3rd at 4pm.

The Rev. Forrest Church, a longtime pastor at the Unitarian Church of All Souls on the Upper East Side who spent the last three years of his life, after being told he had terminal cancer, articulating a philosophy of death and dying and a complete expression of his liberal theology in two books, died on Thursday in Manhattan. He was 61. The cause was complications of esophogeal cancer, said his wife, Carolyn Buck Luce.

As the senior minister to the liberal and affluent All Souls congregation since 1978, Mr. Church preached a message of love, compassion and social service in stirring fashion, inviting his listeners on a shared quest.

“I don’t come thundering out of the pulpit with the quote unquote truth,” he told People in 1996. “I am involved in a search, and all of my conclusions are tentative.”

He set up a shelter for homeless women in Harlem, started a scouting program for boys and girls at a welfare hotel and organized free lunches and dinners for the homeless. In 1985, early in the AIDS epidemic, he organized a task force to place placards on buses and subways reading “AIDS is a human disease and deserves a humane response.”

He also wrote nearly two dozen books, many of which applied his theology to everyday life. They included “God and Other Famous Liberals” (1991), “Life Lines: Holding On (and Letting Go)” (1996) and “Lifecraft: The Art of Meaning in the Everyday” (2000).

“Much more than a parish minister, he was a writer, thinker and public intellectual of consequence,” Dan Cryer, who is at work on a biography of Mr. Church, wrote in an e-mail message on Friday. “In the ’80s and ’90s, he was a key national spokesman challenging what he depicted as the religious right’s hijacking of flag, family and Bible. He was an eloquent public speaker and commentator on radio and television who also wrote books of enormous spiritual power and who, as a historian, showed great insight into the nuances of church-state relations in American history.”

Mr. Church wrote and preached with particular eloquence on life, love and death. In 2006 he was told that he had inoperable cancer of the esophagus and had only months to live.

That prognosis turned out to be incorrect. He underwent what appeared to be a successful operation, but in 2008 doctors discovered that his cancer had returned and had spread to the lungs and liver. On five separate occasions he delivered what he thought would be his last sermon.

His illnesses motivated him to write “Love and Death: My Journey Through the Valley of the Shadow” (2008) and a final book summing up his religious philosophy, “The Cathedral of the World: A Universalist Theology,” to be published in November by Beacon Press. While battling cancer, he also completed “So Help Me God” (2007), a study of the religious views of the first five presidents.

“Every minister spends a lifetime preparing to ace the death test,” he said on the PBS program “Religion and Ethics” in February. “It’s what we do. We can’t fail that test, having gone through it with so many others.”

Frank Forrester Church IV was born on Sept. 23, 1948, in Boise, Idaho. His father was Frank Church, who later became a Democratic senator from Idaho, ran against Jimmy Carter in the 1976 presidential primaries and went on to serve as chairman of the Senate Foreign Relations Committee.

After earning a bachelor’s degree at Stanford in 1970, the younger Mr. Church enrolled in Harvard Divinity School, where he received a master’s degree in 1974. He earned a doctorate in early church history from Harvard University in 1978.

Unsure of his next step, he interviewed for the post of parish minister at All Souls, where he delivered tryout sermons so moving that he won the job over 24 other candidates.

His speaking style was direct, and he expressed his religious philosophy in simple terms. “Do what you can,” he often said, “want what you have, and be who you are.” When he took the job, church attendance hovered around 100 on Sundays. Today, it is not uncommon for 1,000 worshipers to attend.

In addition to technical works on Christian and Gnostic literature, his books included “Father and Son: A Personal Memoir of Senator Frank Church of Idaho,” which was published a year after his father’s death in 1984, and many works on religion and American history aimed at a general audience. These included “Our Chosen Faith: An Introduction to Unitarian Universalism” (1989) and “The American Creed: A Biography of the Declaration of Independence” (2002).

While married to his first wife, Amy Furth Church, he met Ms. Luce as a member of his congregation. Their ensuing affair caused a public controversy, but the congregation voted overwhelmingly to keep him as senior minister.

In addition to his wife, he is survived by his mother, Bethine, and a brother, Chase, both of Boise; two children from his first marriage, Frank Forrester Church V of Flushing, Queens, and Nina Church-Adams of Brooklyn; and two stepchildren, Jacob Luce of Manhattan and Nathan Luce of Golden, Colo.

In late 2006 he retired as senior minister of All Souls and became minister of public theology, a position that allowed him to preach on a limited schedule, officiate at weddings and memorial services and write on current issues in public theology and religion.

“I look back without regrets, and I look forward without fear,” he told The New York Times in 2008. “I have never been more in the present.”

‘JOB SEEKERS OUTNUMBER OPENINGS BY A RECORD NUMBER,’ in the N.Y. Times. Six times as many unemployed as there are job openings. HUNKER & STAY HUNKERED!

In Uncategorized on September 26, 2009 at 23:03

Despite signs that the economy has resumed growing, unemployed Americans now confront a job market that is bleaker than ever in the current recession, and employment prospects are still getting worse.

Job seekers now outnumber openings by six to one, the worst ratio since the government began tracking open positions in 2000. According to the Labor Department’s latest numbers, from July, only 2.4 million full-time permanent jobs were open, with 14.5 million people were officially unemployed.

And even though the pace of layoffs is slowing, many companies remain anxious about growth prospects in the months ahead, making them reluctant to add to their payrolls.

“There’s too much uncertainty out there,” said Thomas A. Kochan, a labor economist at M.I.T.’s Sloan School of Management. “There’s not going to be an upsurge in job openings for quite a while, not until employers feel confident the economy is really growing.”

The dearth of jobs reflects the caution of many American businesses when no one knows what will emerge to propel the economy. With unemployment at 9.7 percent nationwide, the shortage of paychecks is both a cause and an effect of weak hiring.

In Milwaukee, Debbie Kransky has been without work since February, when she was laid off from a medical billing position — her second job loss in two years. She has exhausted her unemployment benefits, because her last job lasted for only a month.

Indeed, in a perverse quirk of the unemployment system, she would have qualified for continued benefits had she stayed jobless for the whole two years, rather than taking a new position this year. But since her latest unemployment claim stemmed from a job that lasted mere weeks, she recently drew her final check of $340.

Ms. Kransky, 51, has run through her life savings of roughly $10,000. Her job search has garnered little besides anxiety.

“I’ve worked my entire life,” said Ms. Kransky, who lives alone in a one-bedroom apartment. “I’ve got October rent. After that, I don’t know. I’ve never lived month to month my entire life. I’m just so scared, I can’t even put it into words.”

Last week, Ms. Kransky was invited to an interview for a clerical job with a health insurance company. She drove her Jeep truck downtown and waited in the lobby of an office building for nearly an hour, but no one showed. Despondent, she drove home, down $10 in gasoline.

For years, the economy has been powered by consumers, who borrowed exuberantly against real estate and tapped burgeoning stock portfolios to spend in excess of their incomes. Those sources of easy money have mostly dried up. Consumption is now tempered by saving; optimism has been eclipsed by worry.

Meanwhile, some businesses are in a holding pattern as they await the financial consequences of the health care reforms being debated in Washington.

Even after companies regain an inclination to expand, they will probably not hire aggressively anytime soon. Experts say that so many businesses have pared back working hours for people on their payrolls, while eliminating temporary workers, that many can increase output simply by increasing the workload on existing employees.

“They have tons of room to increase work without hiring a single person,” said Heidi Shierholz, an economist at the Economic Policy Institute Economist. “For people who are out of work, we do not see signs of light at the end of the tunnel.”

Even typically hard-charging companies are showing caution.

During the technology bubble of the late 1990s and again this decade, Cisco Systems — which makes Internet equipment — expanded rapidly. As the sense takes hold that the recession has passed, Cisco is again envisioning double-digit rates of sales growth, with plans to move aggressively into new markets, such as the business of operating large scale computer data servers.

Yet even as Cisco pursues such designs, the company’s chief executive officer, John T. Chambers said in an interview Friday that he anticipates “slow hiring,” given concerns about the vigor of growth ahead. “We’ll be doing it selectively,” he said.

Two recent surveys of newspaper help-wanted advertisements and of employers’ inclinations to add workers were at their lowest levels on record, noted Andrew Tilton, a Goldman Sachs economist.

Job placement companies say their customers are not yet wiling to hire large numbers of temporary workers, usually a precursor to hiring full-timers.

“It’s going to take quite some time before we see robust job growth,” said Tig Gilliam, chief executive officer of Adecco North America, a major job placement and staffing company.

‘SAVING AGAIN? HERE’S A WAY TO DO IT RIGHT,’ by Karen Blumenthal in the Wall St. Journal via

In Uncategorized on September 24, 2009 at 15:53

The return of thrift calls for smart planning; from top drawer down.

Pat yourself on the back.

Government data show that in the face of the financial crisis, we have reduced our debt, cut our spending and, by one measure, boosted personal savings to the highest level this decade.

So now that you’re back on track, how are you going to make the most of your hard-won reserves? Will you rebuild your retirement accounts? The kids’ college funds? Buy a new home? Or should you put it away for a generic rainy day — or the day the rain comes through that old roof?

No matter how hard you try, there never seems to be enough savings to cover everything, even if you put away the 10% to 20% of your income that many financial advisers recommend. And let’s face it, many of us don’t save anywhere near that.

David Laibson, a Harvard University economist, estimates that about 10% of Americans save too much, while perhaps 30% of us have a healthy savings habit. And the rest of us? “When there’s money in the bank account, people go out and spend it,” he says.

So let’s try another tack: Think of your various savings needs as something like your bedroom dresser. How well you fill that chest of drawers will determine how much financial flexibility you have and what kinds of choices you can make later in life.

Just as you have to have that all-important underwear drawer, you need an emergency-cash drawer. This drawer will give you daily comfort and keep you out of trouble, allowing you to pay the bills for a few months if you lose your job, get sick or face a financial emergency. Unless you have stocks or bonds that you are willing to liquidate, you need enough cash to cover a few months of crucial expenses, such as the rent or mortgage, bills and groceries.

Just as you need a sock drawer, you also need a retirement drawer to keep you warm in your later years. If your company still provides a pension, that drawer may be filled for you. But most of us need to contribute to it, and the tax incentives and potential employer match of a 401(k) or a similar account make that an attractive place to put your savings.

You might also consider a vacation drawer, for funding your fun. For some of us, it’s as crucial as a drawer for T-shirts and tops. “That’s usually one of the top four or five biggest expenses for most families,” after housing, cars and food, says Don Linzer, chief executive of Schneider Downs Wealth Management Advisors in Pittsburgh. But most people don’t budget for vacations, running the risk of being caught short when the credit-card bills arrive.

To help you prioritize, here’s a bedroom-dresser model for filling your savings drawers at various stages of your financial life:

When you’re starting out. Saving money from a first-job salary is tough, but once you get in the habit, it will pay huge dividends. By transferring a little money to your savings drawer with every check, you will accumulate an emergency fund off the bat. If your debt drawer has lots of high-cost credit cards, you’ll want to clean that out as well.

When those two drawers are in good shape, you can start filling that retirement drawer, which offers a tax break for your 401(k) contributions, a potential match from your employer plus the opportunity to benefit from many years of growth.

Your goal should be to contribute at least enough to capture your employer match, which is like adding to your financial wardrobe free. Ultimately, you will want to contribute about 10% of your pay toward retirement; if you contribute 6%, and your employer throws in a 3% match, you’re nearly there.

Your next priority is to start building your other savings and reserves, the equivalent of your jeans drawer. This is the drawer that gives you options and helps you look good — money that allows you to buy a car and make a down payment on a house, or that gives you the flexibility to do things you really want to do.

When you have a family. As if diapers and day care don’t strain your budget enough, you will want to start thinking about a college-savings drawer when your kids are still young and you have a lot of years to save. Consider this the equivalent of your workout-clothing drawer, for savings that will help your financial health later on.

Again, you should be tending to your cash fund and retirement savings first. But you’ll then want to consider at least a small contribution to a 529 plan, which grows tax-free. You can increase your contributions as you get a better sense of what kind of student your child is.

College is expensive, but try not to get overwhelmed: It doesn’t have to be fully funded before your child leaves high school. If you’re also paying down a mortgage, that’s a form of savings too.

Colleen Schon, senior vice president of the Barrett Group of Raymond James & Associates in Auburn Hills, Mich., calculated that hypothetical parents in their mid-30s, with two kids and $150,000 in income, should put about a quarter of their savings in their retirement funds, about a quarter in 529 accounts and the rest in other savings, to cover home repairs, vacations and other needs.

That isn’t always what happens, though. In fact, families with incomes between $100,000 and $250,000 “are the worst at savings,” Ms. Schon notes, because they have high expectations for their houses, cars and their kids’ experiences. “Keeping them focused is really difficult,” she says.

When the kids leave home. With the college drawer cleaned out, people in their 50s and 60s should focus on building up their retirement savings, aiming to contribute the maximum allowed, up to $16,500 annually — plus $5,500 in catch-up contributions each year — plus whatever they can save outside those accounts.

This “is one of the most challenging stages,” says financial adviser Trudy Haussmann, president of Haussmann Financial Inc. in Newport Beach, Calif., “because children are much slower these days to leave the payroll.” In addition, your own parents may need support.

Empty-nesters may also want to consider replacing that college drawer with one for long-term care, which covers home health aides or nursing-home care. Think of it as your woolly-sweater drawer for keeping you warm on the coldest days. If a family’s assets are more than, say, $300,000 and less than $1 million to $2 million, long-term care insurance, while costly, may make sense.

When you retire. With your retirement drawers hopefully bulging, now it’s time to rearrange your dresser altogether. Funds needed for the next five years or so should be in cash or short-term investments so they won’t be subject to stock-market fluctuations. It may also make sense to keep funding that vacation drawer, if traveling during retirement is a priority.

Funds you won’t need for five to 10 years should be treated as medium-term savings, while funds that you won’t need for 20 years will be your long-term savings. And if you’re in a position to do so, you might want to consider restocking that college drawer, to fund 529 accounts for the grandchildren.

Copyright © 2009 Dow Jones & Company, Inc. All Rights Reserved.


In Uncategorized on September 24, 2009 at 15:38

The most difficult question posed to me at the public talks I’ve given the past five years is this: HOW DO YOU DECIDE WHEN TO BUY OR SELL YOUR HOLDINGS?

My tendency is to say: ‘I just get an internal feeling that the time to move is now  and I usually pull the trigger without much hesitation, although that is not always true. Much depends on so many factors at play: market trends, gains on paper, greed vs. fear , where ‘the herd’ is moving, upcoming events like elections, where interest rates are trending, what ‘the smart money’ crowd is doing, and various other intangibles.

Last week I was sitting on a ton of cash (dry powder) waiting for the right time to invest, if at all. DOING NOTHING IS ALWAYS AN OPTION. TAKING A PASS. WAITING FOR MORE TO BE REVEALED.

All this cash was parked in an institutional money market fund paying .34%! Enough already, time to look through the Fidelity Mutual Fund Guide, published monthly and containing all the information about Fidelity Funds that I would need to make my choices. I’ve used Fidelity for 25 years with great satisfaction. Were I to start today I’d probably choose Vanguard because of the lower fees they charge.

I choose the funds based on MY POSITION/TAKE/OUTLOOK at that moment. What economies are likely to produce the most gains in the future, looking for the right mix of equities and fixed income instruments. I chose to put 50% of the cash to work, and selected five funds for equal bets. Here they are:

Dynamic Strategies: FDYSX (fund # 1960). Started Oct. 31, 2007. ‘Allocates the fund’s assets among stocks, bonds and short-term and money market instruments by investing in Fidelity funds and unaffiliated exchange traded fund (ETFs).’

Global Balanced: FGBLX (fund #334). ‘Invests in equity and debt securities, including lower-quality debt securities, issued anywhere in the world.’

Canada: FICDX (fund # 309).  ‘Normally invests at least 80% of assets in securities of Canadian issuers and other investments that are tied economically to Canada.’

Southeast Asia : FSEAX  (fund # 351). ‘Invests at least 80% of assets in securities of Southeast Asian and other investments that are tied economically to Southeast Asia.’

Strategic Income: FSICX (fund # 368). ‘Uses a neutral mix of approximately 40% high yield securities, 30% U.S. Government and investment-grade, 15% emerging markets securities, and 15% foreign developed market securities.’

There you are. Diversification to the max: equities, securities, capital appreciation, income, different parts of the world economy. And I still have half my ‘dry powder’ for future purchases. Although I moved these funds from the Institutional Money Market into my largest holding, Fidelity High Income (SPHIX) paying 8.15% on a 30 -day yield basis. NAV $8.14  as of yesterday. I FIRST STARTED BUYING THIS FUND FEB. 10-14TH WHEN IT WAS ABOUT $6.  Check ‘Archives Feb. 2009’ and you can read all about it. Back in February it was paying 11.5%!   PRICELESS!!!!!

My other large holding is Capital & Income (FAGIX) also paying 8.15% on a 30-day yield basis. Today I’m parking ‘cash’ in the New York Muni-Bond fund (FTFMX) paying 3.43% and tax-free for residents of New York City and New York State.

There we are. It’s not important what I say as much as where I am putting my money today. Next time a broker calls you to suggest you buy XYZ, ask them this question: ‘ HAVE YOU PUT YOUR OWN MONEY INTO THIS INVESTMENT YOU’RE SUGGESTING I BUY? ‘   And if the answer is “NO”, ask them why not?

The book I suggest for  people to educate themselves about investing is Andrem Tobias’s “The Only Investment Guide You’ll Ever Need.”  First published in 1979 and many updates and revised editions since then. What hasn’t changed is his dedication:


PAUL KRUGMAN REVIEWS ‘KEYNES: THE RETURN OF THE MASTER,’ by Robert Skidelsky in the London Observer.

In Uncategorized on September 24, 2009 at 13:52

“At research seminars, people don’t take Keynesian theorising seriously anymore; the audience starts to whisper and giggle to one another.” So declared Robert Lucas of the University of Chicago, writing in 1980. At the time, Lucas was arguably the world’s most influential macroeconomist; the influence of John Maynard Keynes, the British economist whose theory of recessions dominated economic policy for a generation after the Second World War, seemed to be virtually at an end.

But Keynes, it turns out, is having the last giggle. Lucas’s “rational expectations” theory of booms and slumps has shown itself to be completely useless in the current world crisis. Not only does it offer no guide for action, but it more or less asserts that market economies cannot possibly experience the kind of problems they are, in fact, experiencing. Keynesian economics, on the other hand, which was created precisely to make sense of times like these, looks better than ever.

But while Keynesianism is experiencing a revival, there are major questions about just what needs to be revived. Many economists agree that their field went off track, that in some important ways it lost touch with reality, and that a return to some of the ideas Keynes laid out more than 70 years ago is part of the cure for what ails us. But there is much less agreement about what, exactly, needs to change in the way we think about matters economic.

In this book, Robert Skidelsky, the great biographer of Keynes, searches for clues in the original work of “the master”. The book is part critique of the current state of economics, part biographical sketch (it’s worth your time just for Chapter 3, “The Lives of Keynes”), part programme for the future.

It also offers a brief but compelling account of the anti-Keynesian counter-revolution, the movement that began with Milton Friedman and reached its apex with Lucas’s whispers and giggles. Skidelsky’s book is an important contribution at a time of soul-searching, a must read even if one doesn’t fully accept its conclusions.

As you might guess, I do, in fact, have some questions about Skidelsky’s conclusions, though not so much about how we got here as about what we do next. And those questions, in turn, centre on a long-running dispute over what Keynesian economics are really about.

In Part I of his 1936 masterwork, The General Theory of Employment, Interest, and Money, Keynes asserted that the core of his theory was the rejection of Say’s Law, the doctrine that said that income is automatically spent. If it were true, Say’s Law would imply that all the things we usually talk about when trying to assess the economy’s direction, like the state of consumer or investor confidence, are irrelevant; one way or another, people will spend all the income coming in. Keynes showed, however, that Say’s Law isn’t true, because in a monetary economy people can try to accumulate cash rather than real goods. And when everyone is trying to accumulate cash at the same time, which is what happened worldwide after the collapse of Lehman Brothers, the result is an end to demand, which produces a severe recession.

Some of those who consider themselves Keynesians, myself included, agree with what Keynes said in The General Theory, and consider the rejection of Say’s Law the core issue. On this view, Keynesian economics is primarily a theory designed to explain how market economies can remain persistently depressed.

But there’s an alternative interpretation of what Keynes was all about, one offered by Keynes himself in an article published in 1937, a year after The General Theory. Here, Keynes suggested that the core of his insight lay in the acknowledgement that there is uncertainty in the world – uncertainty that cannot be reduced to statistical probabilities, what the former US defence secretary Donald Rumsfeld called “unknown unknowns”. This irreducible uncertainty, he argued, lies behind panics and bouts of exuberance and primarily accounts for the instability of market economies.

In this book, Skidelsky puts himself in the camp of those who argue, in effect, that Keynes 1937, not Keynes 1936, is the man to listen to – that Keynesianism is, or should be, essentially about uncertainty and how it leads to economic instability. And from this he draws some radical conclusions.

Most strikingly, Skidelsky declares that the traditional division between microeconomics and macroeconomics, which is based on whether one focuses on individual markets or on the overall economy, is all wrong; macroeconomics should be defined as the field that studies those areas of economic life in which irreducible uncertainty, uncertainty that cannot be tamed with statistics, dominates. He goes so far as to call for a complete division of postgraduate studies: departments of macroeconomics should not even teach microeconomics, or vice versa, because macroeconomists must be protected “from the encroachment of the methods and habits of mind of microeconomics”.

How far should we be willing to follow Skidelsky in this? I think we must trust the biographer in his assessment of Keynes himself; Skidelsky argues persuasively that Keynes spent much of his life deeply focused upon, even obsessed with, the question of how one acts in the face of uncertainty, which is why Keynes 1937 comes closer to the essence of the great man’s own thinking.

That’s not the same thing, however, as saying that Keynes was right – even about his own contribution. Surely it’s possible to make the case for a less profound reconstruction of economics than Skidelsky advocates. I’d point out that behavioural economists, who drop the assumption of perfect rationality but don’t seem much concerned by the essential unknowability of the future, have done relatively well at making sense of this crisis; I’d also point out that current disputes over economic policy, above all about the usefulness of government spending to promote employment, seem to be primarily about Say’s Law – that is, Keynes 1936.

No matter. You don’t have to agree with everything Skidelsky says to find this a wonderfully stimulating book, one that reflects the author’s unparalleled erudition. We’re living in the second Age of Keynes – and Robert Skidelsky is still the guide of choice.

• Paul Krugman won the Nobel Prize for economics last year.


In Uncategorized on September 24, 2009 at 00:37

September 23, 2009 “Information Clearing House” — At a little noticed meeting with Senate Democrats, Warren Buffett, the famous investors’ guru, told the lawmakers that rich people are not paying enough taxes.

A tax increase for the very wealthy? Many of the Senators backed away from that recommendation, even though it came from the world’s second richest man.

That is just one reason why Mr. Buffett plays a central role in my first work of fiction, Only the Super Rich Can Save Us! The title is derived from an exchange between Buffett and a woman from New Orleans. Buffett is leading a convoy of critical supplies right after Katrina to help the fleeing poor stranded on the highways without food, water, medicine and shelter. At one stop, Buffett was distributing supplies when a grandmother clasped his hands, looked right into his eyes and cried out: “Only the super-rich can save us!”

Her words jolted Buffett to his core. Arriving back at his modest home in Omaha, he knew what he had to do.

The next scene is early January 2006. Buffett and 16 enlightened super-rich elders gather at a mountaintop hotel in Maui, and devise an elaborate strategy to take on the corporate goliaths and their Washington allies, and to redirect the country toward long overdue changes.

What follows is a top-down, bottom-up mobilization of Americans from all backgrounds in a head-on power struggle to break the grip of the corporate titans on our government.

With four out of five Americans believing that the U.S. is in decline, imagining the super-rich powerful engine revving up an organized citizenry is a precondition to revitalizing democracy.

Tom Peters, the best selling author of In Search of Excellence summed up my book’s objective by calling it a work of fiction that he would love to see become nonfiction.

Step by step, week by week, Buffett’s super-rich, who call themselves “the Meliorists” build their campaigns—first privately and then openly launching their initiatives during the 4th of July weekend with media, fanfare and parades.

Turning real, well-known people into fictional roles does not mean that their past achievements and beliefs are overlooked. To the contrary, I extend their achievements and beliefs to a much more intense level of what I believe they wish to see our country become.

Over the years, I have spoken to many super-rich and found many of them discouraged and saddened about our nation’s inability to solve major problems—a society paralyzed because the few have too much political and economic power over the many.

Buffett, in my ‘political science fiction,’ to use my colleague Matt Zawisky’s phrase, selected people like George Soros, Ted Turner, Ross Perot, Sol Price, Yoko Ono, William Gates Sr., Barry Diller, Bill Cosby, Joe Jamail, Bernard Rapoport, Leonard Riggio, Phil Donahue, and others because each brought unique experience, determination, money and rolodexes to that secluded Maui hotel where they met every month.

The “Meliorists” address the enormous mismatch of resources between citizen groups and the corporate supremacists. This time the entrenched CEOs are challenged by the retired or elderly billionaires and megamillionaires who know the ways and means of business and political power, and can throw the resources, smarts and grassroot organizing talent against the corporate behemoths, who are not reluctant to counterattack.

In 1888, a Bostonian by the name of Edward Bellamy published a tremendous bestseller about a utopian U.S. in the year 2000 called Looking Backward. The book inspired the then-growing progressive movement.

Obviously, Bellamy’s utopian dream was not actualized. In my book, I show not a utopian society but a primer for how the super-rich, as a catalyst, could provide the means for millions of Americans to upgrade their quality of life and their livelihoods while confidently building civic and political institutions to hold and extend their gains.

I mean this book to interest anyone searching for ways to make fundamental, sustainable change. With this book you could see how your favorite big issue could be handled strategically and tactically. If you just want to escape your despair over our national gridlock and peer into the possible, into what could happen now if enough people and progressive super-rich come together, this book is for you, too.

Every week, leading reformers in our country produce documentations, diagnoses, denunciations of injustice and proposals to address it. Little happens. Too many mismatches. We need major catalysts. But first, we need imaginations rooted in fulfilling available potentials—transformations for us and for posterity.

By the way, my fictional Meliorists have a task force on posterity as well. For more, see OnlyTheSuperRich.Org. Take it from there.


In Uncategorized on September 23, 2009 at 19:13

3-ALARM Funds

(Fund data as of July 31, 2009)

[Highlights and Commentary | Home]

The table below lists all of this month’s 3-ALARM funds, in alphabetical order. (By definition, a 3-ALARM fund has underperformed its respective benchmark for the past 12 months, three years, and five years.) The second column indicates each fund’s risk rating, as assigned by FundAlarm.

The following excerpts are taken from the FundAlarm discussion, “Deciding to Sell a Mutual Fund”:

What is the significance of a 3-ALARM fund? In general, a 3-ALARM fund is a strong candidate for sale, but a 3-ALARM fund is not necessarily an automatic sale. This is a very important distinction! In addition to the 3-ALARM designation, you should consider other information about your fund before making the “sell” decision, such as:

What is your fund’s median market capitalization?

How rapidly is your fund gaining or losing assets?

How risky has your fund been?

How has it performed in relation to its peer group?

How long has your fund had the same manager?

All of this additional information can be obtained from the FundAlarm data table.

Should I be alarmed if I own a 3-ALARM fund? Not necessarily. For example, many index funds are 3-ALARM funds, but only by a very slight margin. If you own a 3-ALARM index fund, or any other fund that is 3-ALARM by a slight margin, you can probably ignore the 3-ALARM designation.

For additional information on any 3-ALARM fund, go to the Search form and call up the fund’s data table.

Note: Many browsers are equipped with a “find on page” function.

If your browser has this feature, it may be located under the browser’s

“Edit” menu, and it can help you search for specific funds on this page.

View funds that are new to this month’s 3-ALARM list


In Uncategorized on September 23, 2009 at 14:29

You’ve decided your portfolio needs bonds. Now you have to decide: Will you invest in mutual bond funds or individual bonds?

You’ll first want to weigh several factors. Your ultimate decision will depend on how much money you have to invest, your risk appetite and whether you have a goal, such as buying a house or funding college tuition. Then there’s the question of whether you want to spend much time researching and monitoring your holdings.

Bond mutual funds, in particular, have been popular since last fall’s financial meltdown. In July alone, investors poured $35.1 billion into bond mutual funds, according to the latest data from the Investment Company Institute. That’s more than triple the $9.8 billion stock mutual funds took in that same month.

“Buying an actively managed bond fund creates a more diversified portfolio and may mitigate the damage from defaults and ratings downgrades,” said Ford O’Neil, manager of Fidelity’s Total Bond Fund (FTBFX ) .

To be sure, there’s no right or wrong to the question of bonds versus bond funds. The two are  vastly different:

Individual bonds pay a fixed stream of income, generally semi-annually. They return your principal on a specific date if held to maturity

Bond funds invest in many securities with different interest, or coupon, payments. The income received from the bonds is distributed monthly to shareholders. The distribution may vary month to month. The fund’s value also varies daily

“We find people who own one or the other, and people who own both,” said Richard Carter, vice president of fixed-income inventory at Fidelity Investments.

Why bonds, otherwise known as fixed-income securities? Because bonds can generate steady income in a diversified portfolio, and they tend to move in the opposite direction of stocks – but not always.

“Bonds are an important way to buffer a stock portfolio and at the same time provide you with compounded interest,” said James Swanson, chief investment strategist at MFS Investment Management in Boston.

Safer, lower-yielding bonds include: Treasurys, investment-grade corporate bonds, municipal bonds and bonds issued by government-sponsored agencies such as Fannie Mae . Riskier, higher-yielding bets include corporate bonds rated below investment-grade, also known as “junk bonds.” Here are some of the pros and cons of bond funds and individual bonds.

Why bond funds

Diversification: Funds offer diversification with less money. With a few thousand bucks, you can buy shares in, say, a corporate bond fund. They often hold bonds from hundreds of companies, so you’re shielded if a few companies default. By contrast, your returns suffer if you own a limited number of bonds from a handful of companies and an issuer defaults. Plus, it’s not cheap to build a diverse portfolio.

“It would be difficult to efficiently create a diverse portfolio of corporate bonds with much less than $100,000,” said Clint Edgington, president of Beacon Hill Investment Advisory, a fee-only investment advisory firm in Columbus, Ohio.

Price: A fund lets you buy a bond portfolio at the bid, or buyer’s price – versus the higher selling, or ask, price in the market. By contrast, investors buying individual bonds often pay the higher price.

“When an investor buys a $1,000 face value individual bond they’ll always pay the ask price, which for even more widely traded corporate bonds can be $20 higher than the bid price,” said Todd Burchett, manager of ICON Bond Fund (IOBIX )  at ICON Advisers, a mutual fund company in Greenwood Village, Colo. The bid-ask spread for more thinly traded corporate junk bonds can be as much as $200.

Research: Bond funds rely on credit research departments to analyze an issuer’s credit risk.

“It’s probably difficult for most retail investors to have the background or the knowledge to buy individual bond holdings,” said Lowell Bennett, fixed-income strategist at Mellon Capital, which manages several Dreyfus Corp. funds.

Fidelity’s O’Neil noted that during the past few years “some of the worst performing bonds” have been large companies or other issuers that are commonly held in bond index mutual funds. “A firm with deep research can potentially avoid or sell these bonds before trouble arises,” he added.

Liquidity: You can sell fund shares any time at the fund’s current value. Selling an individual bond often is tougher, if you must sell before maturity. They trade less frequently than stocks. And bonds typically trade “over the counter,” meaning a broker hooks up buyers and sellers who negotiate price. Riskier bonds can be harder, and thus costlier, to unload.

Why individual bonds

Predictability: You know the date your bond matures, and the interest payment is fixed. A bond’s price will fall if market interest rates rise, but you’ll be paid the bond’s face value if you hold it until maturity – assuming the issuer doesn’t default. “You don’t have that security blanket with funds,” Beacon Hill’s Edgington said.

Income: Individual bonds allow you to generate a specific income stream. That’s important if you’re looking to fund, say, a new home or retirement. You can create a “ladder” of individual bonds with different maturities and income payment schedules to meet your income needs and investment time frame.

“A ladder plays on the notion that bonds have the ability to be modeled to create a specific cash flow,” said Fidelity’s Carter.

Cost: With some effort, you can slash costs in certain cases by buying bonds directly from an issuer, without a mark-up or commission.

The U.S. Treasury’s TreasuryDirect program allows you to buy securities directly from Uncle Sam. Municipal bond issuers such as states and cities offer “retail order periods” allowing you to spend $5,000 to buy munis directly. Similarly, Fidelity’s CorporateNotes program allows you to buy bonds directly from certain companies. Bond funds charge management fees. Some levy a charge when you buy or sell.

Control: You know exactly what you own when you buy individual bonds – the maturity date and interest rate. You choose what to buy. “There’s a bit of a sense of control when you own your own positions,” said Wes Moss, chief investment strategist at Capital Investment Advisors, a fee-only advisory firm in Atlanta.

Experts said wealthier individuals are good candidates for individual bonds. They’ve got cash to build diverse portfolios, although it doesn’t take as much money or effort to craft a portfolio if you’re focusing solely on safer and more widely traded securities such as Treasuries.

Individual bonds or bond funds can be a good bet. But which way is right for you depends on your own needs, your financial situation, your tolerance for risk, the time you have and the amount of research you want to do.

Given the complexities, bond funds probably are the right choice for many investors. Many, but not all.

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