The FDIC on Tuesday issued a report showing that the number of financial institutions on its so-called problem list rose to 117 from 90 which were reported at the end of the first quarter. That's an increase of 30% in three months, and things look to get worse before they get better. The number of banks on the list is the most visible thing to consumers, but the amount of assets held by those problem institutions is more troubling still. The total assets of institutions on the problem list tripled. That means some pretty big players are in the additions. While the FDIC doesn't give out the names of troubled banks on its list for fear of hurting them even more, we do know that Indymac Bank which failed in July was on the list. That bank alone had assets of $32 billion, so by deduction that's almost certainly the largest single bank on the list.

For investors of course, the prospect of bank closings should be scary. When a bank is taken over by the FDIC, all available assets are first used to repay depositors. If anything is left, once all the debts are paid, it is divvied up among shareholders. It's almost always a small part of the pre-closure value of the bank's shares. Usually the risk of a bank failure gets factored into the stock price over time. Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM) are two examples right now. While both institutions still claim they will not need a bail out, some important industry analysts are saying otherwise. Consequently the stock prices of both have fallen tremendously in recent months.

If you're an investor looking at or holding shares in financial institutions, it's buyer beware. Look closely at the balance sheets. Look also at loss reserves, most of the difficulty these banks are facing stems from unrecoverable loans, if sufficient loss reserves are not already in place, then adjustments can turn a positive quarter into negative very quickly. Loans to businesses as well as consumer loans are seeing a default rates that are increasing at a tremendous clip according to the FDIC's Quarterly Banking Report released on August 26th. Banks are also tightening restrictions on new loans. While that's smart and would have prevented most of the current problems had those restrictions been in place long ago, it does mean less new business coming into the banks at a time when they need it most.

So we'll end this entry the way we began it. The FDIC Quarterly Banking Report is out and things are definitely going to get worse before they get better for the financial sector.

Posted by Mike - Editor at 8:29 AM | Permalink

If you're tired of receiving sky-high electric bills each month, especially after staying cool in your air conditioned home, there is no reason to struggle any longer. By making a few changes in your life and the way you normally do things, you can save more money than you ever thought possible, and stop dreading each month when the mailman brings your electric bill. Instead of receiving electric bills that are becoming increasingly more expensive each month, you can start receiving bills that are less than ever before.

Just like many moms tell their children, anytime something is not being used, turn it off. There is no need to leave on a light, radio or TV in a room that no one is occupying. It may be a bad habit that's difficult to break, or you simply don't realize exactly how much energy is needed for these things, but by leaving on lights and electronics when not in use, you are increasing your electric bills a great deal. Even opting to use lower wattage bulbs in your lamps and light fixtures can save you a bundle and is something that you should look into if you're trying to trim your bill.

When the weather isn't so hot and the humidity is low, why not take advantage of nature instead of turning on your air conditioner? Opening your windows will not only bring in natural sunlight, but will also bring in some natural, cool breezes that should keep you comfortable. If merely having the windows open doesn't provide you with enough cool air, perhaps placing a fan in the window or someplace else in the room will sufficiently cool you down. Of course on extremely hot days you will undoubtedly use the air conditioner, but opting to use fans and open windows on cooler days will certainly reduce your electric bill.

If your home isn't properly insulated and you use electricity to heat your home during colder months, you could be paying higher electric bills pointlessly. Your expensive energy will seep out the windows and through barely noticeable openings, which will in turn require more energy to be used in order to properly heat your home. If you're not sure what to check for, you can easily check the web for instructions. Your utility company's website should contain information about insulation, as well. If you still don't feel comfortable or qualified to perform the check or apply the insulation yourself, you could hire someone to perform it for you. Having your home properly insulated will not only save you money, but will keep you warmer as well.

It's no secret that consumers want to save money, which has prompted more and more appliance manufacturers to create energy efficient appliances. These appliances require a lot less energy in order to function, which saves you money on your utility bills in the long run. Your initial investment may be slightly more, but you will be grateful for your choice once you notice the reduction in your subsequent electric bills. If you search around for sales, you may be able to purchase energy efficient appliances for the same or even less than traditional appliances. It all depends on where and when you shop.

There is no reason to waste money paying ridiculously expensive electric bills each month. Sure, providing air conditioning in a home can really become expensive, but there are ways around this. Although some energy reduction methods may appear troublesome, or even absurd, believe it or not, these things will make a huge difference in how much you pay for electric service. Even if you are able to reduce your monthly bill by only $10/month, that small savings still adds up to over $100 a year, and that $100 could be used for something more useful, such as a savings account or whatever you choose to use it for.

Posted by Mike - Editor at 8:33 AM | Permalink

If you're a parent, or will soon become one, chances are you've looked into childcare. As you've probably discovered, quality childcare doesn't come cheap, and unless you're a professional making a six figure income, you may find working a waste of time. After factoring in how much you pay in childcare and how much of a salary you're actually making, your actual bring home pay may not be very much. If you find yourself in this situation and you really like your job, there is no reason to put in your resignation just yet, because there are several ways to reduce the cost of childcare, enabling you to bring home a decent wage following daycare expenses.

One thing that you need to know is that you're not the only parent that feels childcare is too expensive. Chances are there are numerous other parents in your immediate area looking for cheaper yet quality childcare. One thing that you can do to help yourself as well as other parents experiencing the same problem is to "swap" childcare. You can achieve this by finding other parents in your neighborhood who need care for their children while they work or attend school. As long as the other parents needs are during times when you're home and vice versa, you can provide care for each other's children without the exchange of money. It's a win-win situation for everyone involved, including the children who will have other children to interact with.

One way that many couples have discovered as a solution to the high cost of childcare is to work opposite shifts. If your job or your spouse's has more than one shift, the two of you can decide which one of you could switch to another shift. For instance, you may work at a hospital from 7:00 - 3:00p.m and your spouse could work at his or her job from 4:00p.m to midnight. Such an arrangement would totally eliminate the need for a babysitter, but sometimes, unfortunately, the hours don't work out so smoothly. Your shift may not end until 4 yet your spouse's starts at the same time. In cases like this, you may have to put your children in daycare for an hour or less, which wouldn't cost you great deal in the least.

If you're fortunate enough to have family members living nearby, many will care for your children for a reduced price, and in some cases even free. Another advantage of having close family members care for your children is that you don't have to worry about neglect or abuse like you probably would if your child attends a daycare. Your family member's main goal will most likely be to love and care for the child, as opposed to a daycare's, whose ultimate goal is to make money. This is not to say that your children will be abused or neglected if they attend daycare, because most provide excellent care for children of all ages.

Individuals who offer childcare in their homes typically charge substantially less than large daycare centers do. There are also other advantages of choosing a home daycare as opposed to a larger center. First of all, there are usually smaller groups in home daycares. Due to limited amounts of space, as well as the fact that one adult can only handle so many children, your child will be able to receive more individualized care in someone's home than in a large daycare center with many children. Another advantage is that although many home daycares operate during the same hours as large centers, home childcare centers are more apt to have flexible hours. Not everyone works a typical 9 - 5 shift, and many caregivers who provide childcare in their homes realize this and try to cater to those who work second and third shift.

There are many alternatives to paying astronomical daycare costs, and you don't have to feel like you're working merely to pay for childcare. If you can't work out an acceptable childcare solution, perhaps you could work from home. Many employers understand the challenges that parents face and my allow you to work from home a majority of the time. If not, there are many things that you can do from home to make a living. Many companies, such as West at Home, allow you to take calls from customers from the comfort of your home. You would have the option of working the schedule of your choice, and could even choose to design your schedule around your children's nap time and after they've gone to bed.

If customer service isn't your forte there are many other legitimate companies looking for at-home workers. If you have a special talent such as sewing or ceramics, you could always start a crafting business and sell the items that you make. There are no limits to what you could do from home to make a living. Many parents who have decided to work from home have come up with ways of making more money than they were making at their previous jobs, which is a definite plus.

If after searching for a while you're unable to find more affordable childcare, you could always open your own home daycare, which would enable you to stay home with your children and earn an income simultaneously. Caring for several small children isn't for everyone, though, so if you don't have the desire to provide care for other's children, there is a way to make working and affording childcare easier. It may take a while to make arrangements to your satisfaction, but in the end you will realize that your peace of mind--and your increased bank account--is definitely worth the hard work.

Posted by Mike - Editor at 6:05 AM | Permalink

At first glance, the Gap Stores (NYSE: GPS) reporting of a 51% increase in net profit for the most recent quarter looks like great news. Looking a little deeper there are signs of trouble. A key measure of success for retailers, same store sales, shows that on average, sales fell by 10% in stores that have been open at least a year. Overall, sales were down 5.1% across the board for Gap owned stores. Sales are down and not expected to turn around in the short term. Each existing store is taking in less money. You can cut costs for a while, but there's a sharp limit to how much can be cut without doing long term damage to the business. Unless sales pick up in the next six months, Gap may be hard-pressed to meet their earnings estimate of $1.30 -$1.35 for the full year. At this point, they are still saying they will get there.

Gap Chief Executive Mark Murphy said he plans to consolidate some stores going forward to reduce costs even further. It remains to be seen whether he can shift sales from those closing stores to others in the chain. In the face of this consolidation, Gap is still opening new stores. It did, however, announce a reduction in the number of planned new stores for the year from 115 to 100.

Similar results have been reported by other clothing retailers, as they also moved to control costs during the first half of the year. The market has been bad for retailers and looks to remain that way for some time. Hot Topic (Nasdaq: HOTT), for example, also beat analysts' estimates for the quarter, but cautioned of a poor sales and earnings outlook for the rest of the year. Hot Topic shares plummeted by 21% on the day of the announcement. Gap may be able to hold out a little longer if they have additional room for cuts, but unless the outlook for sales changes, it's only a matter of time for them to start cutting expectations as well. Gap shares so far are holding up well, up nearly 5% to $19.88 at the close on Friday. This comes after hitting a 52 week low of $14.77 as recently as July 11th.

Gap hopes to breathe new life into Old Navy, one of the chains they own, by commissioning designers Todd Oldham and Patrick Robinson to rework the Old Navy line. Gap also awarded interim president Tom Wyatt that post on a permanent basis. Meanwhile, Old Navy sales were down 16% versus the same quarter a year ago. Congratulations on the well deserved promotion, Tom.

One piece of good news for Gap though was a growth in online sales. A strong focus here during the quarter saw online sales rise by 11% though it's still a small part of the overall business. Gap Stores owns Banana Republic and Old Navy, in additional to the self-named Gap Stores.

Posted by Mike - Editor at 5:52 AM | Permalink

As you monitor your stocks' performance there are five factors you should consider. These factors are: earnings; price and dividends; P/E and PEG ratios; insider transactions and stock buybacks; and sudden and large price changes on high volume.

1. Earnings. Pay attention to the company's quarterly and annual earnings statements, which include comparisons with the recent past, and quite often, reviews of what management expects for the next quarter and year. Look for the stock's earnings trend and how the company performs compared to analysts' estimates. Watch out for earnings "surprises," which can cause rapid price changes.

2. Price and dividends. Follow the stock's price compared to its 52-week highs and lows. Examine its trailing total returns year to date and over the last one-, three-, five-, and 10-year periods. Look for changes in the absolute dollar amount of dividends and the current yield (the annual dividend divided by the current price).

3. P/E and PEG ratios. Price to earnings (P/E) and price/earning growth (PEG) ratios are often better indications than the price of the stock as to how relatively expensive or cheap a stock is. The P/E ratio is useful for comparing the stock to other stocks and to the market in general; the PEG ratio is a strong indicator of whether the stock is overpriced or underpriced compared to its projected earnings growth rate over the next five years.

4. Insider transactions and stock buybacks. A company buying back its own stock or whose senior executives and directors are accumulating more shares is a bullish sign. On the other hand, when insiders are selling off major holdings of their own stock, it's quite often an indication that the stock price has already peaked.

5. Sudden and large price changes on high volume. When a stock makes a sudden, high-volume move -- particularly when it opens much higher or lower than the previous day's high or low -- it can be the start of a new, long-term trend in the direction of that move.

Posted by Emma - Editor at 7:05 AM | Permalink

First Solar (Nasdaq: FSLR) issued a press release on Monday announcing a major expansion of its manufacturing facility in Toledo, Ohio. At a time when we are used to hearing about companies shuttering their US manufacturing in favor of low cost overseas factories, First Solar is doing the opposite. The move relies on incentives offered by state and local government officials to help offset the cost of the expansion. Politically, this is a win-win for the politicians. With this move they can claim credit for creating 134 new jobs in Ohio while supporting "green" technologies that help reduce America's dependence on foreign oil. That should be worth some votes in the next election.

Ohio's Governor, Ted Strickland, was quoted in the press release as saying "The state of Ohio is proud to support industry leaders like First Solar who are using renewable energy to power the future." US Senators Voinovich and Brown echoed similar sentiments, "Solar energy reduces greenhouse gas emissions and strengthens our national and energy security. Ohio is proud of its partnership with First Solar - and that partnership has been a resounding success. This is a great example of how we can harness Ohio's manufacturing base to become the Silicon Valley of alternative energy."

The move, says First Solar, will reduce the cost per watt of the Solar panels produced at the Ohio plant to a level "comparable to our lowest cost facility in Malaysia." In today's environment of outsourcing, that's quite an accomplishment. The company expects to produce 192 megawatts of solar panels when the expansion is completed during the first half of 2010. Rather than using silicon-based photovoltaic cells like much of their competition, First Solar uses a Cadmium Telluride solar cell.

The announcement came after the market close on Monday which saw First Solar's shares drop 3% to $256.92/ share. Despite the fall, First Solar shares have tripled their 52 week low of $79.23 from August of 2007. In May of this year First Solar traded as high as $317/ share.

Just a few days earlier, Pacific Gas & Electric (NYSE: PCG) announced an 800 megawatt solar energy project in California which will supply enough power for nearly 240,000 homes. The contract for the plant was awarded by PG & E to two of First Solar's competitors, SunPower (Nasdaq: SPWR) and the privately held OptiSolar. Even though this contract benefits First Solar's competitors, the move was seen as a positive for First Solar as well since it signals a first step in the conversion of a major portion of the country's electrical generation to solar power. 800 megawatts is roughly equivalent to the output of a typical coal-fired power plant.

Posted by Mike - Editor at 7:08 AM | Permalink

Everyone has heard about the numerous types of weight loss surgeries available for the seriously obese, and if you find yourself considering such a drastic solution to your weight problem, the whopping $20,000 cost may cause you to reconsider. Even those with the best insurance usually end up spending some money out of pocket, but if you don't have insurance at all, or your insurance refuses the cover the surgery, don't allow the high cost of the surgery to deter you, because as the old saying goes, "where there's a will there's a way."

Although payment arrangements are often acceptable to pay for weight loss surgery, you could end up paying a substantial amount of money on a monthly basis. If you can't comfortably afford to pay the equivalence of a car payment each month yet your insurance refuses to cover all or most of your surgery, your best bet would be to appeal the insurance's decision. Have your doctor send letters on your behalf, describing health conditions that are caused by your obesity and how these conditions could end up being more expensive than the surgery as they progress.

If on the other hand, you have no health insurance, you should by all means check to see if you're eligible for your state's health insurance, such as Medicaid. Most state Medicaid plans cover weight loss surgery without any anticipated denials as long as it's proven that the surgery is medically necessary. The problem with state health insurance is that in order to qualify, your income must be extremely low. Unfortunately, if you're working even part time, then you most likely don't qualify for Medicaid. If you check your local Yellow Pages, you will be able to locate and contact any special insurance plans created specifically for those wishing to undergo surgery to lose weight.

If you have fairly good credit, obtaining a loan from your bank or credit union is always an option. Your payments may or may not be lower than if you receive financing through the bariatric center where you're having your procedure done. There are also numerous types of finance companies that specialize in providing loans for all types of medical procedures, including some specifically for weight loss surgery. These types of finance companies usually require good credit, so if yours is less-than-perfect than you may be better off choosing another option.

If you've made the decision to rid yourself of your excess weight by opting for surgery, don't worry about not being able to pay the costs that you're responsible for. Whether your insurance agrees to pay all, some, or nothing at all, if you're determined to get weight loss surgery, there are ways to finance your surgery. If your situation is dire, and you need the surgery to help reverse life threatening conditions, there are charities available that may donate money toward your surgery. Your bariatric surgeon can refer you to such organizations.

If you are very obese and your excess weight is minimizing your quality of life, yet you have exhausted all of your financing options, you should be aware that there are alternatives to weight loss surgery. By choosing a healthy, safe alternative, you'll not only be minimizing your chances of experiencing the life threatening complications of surgery, but you'll also save a great deal of money as well. There are wonderful, successful programs, such as Medifast, a medically supervised weight loss program, Weight Watchers, Nutri-System, and many others that cost substantially less than surgery, but work just as well.

Posted by Mike - Editor at 7:10 AM | Permalink

Republic Services Inc. (NYSE: RSG), currently trading at $33.15 at Friday's closing bell, is in demand. As the waste industry moves to consolidate, three of the top players are jockeying for the dominating position. The current industry leader, Waste Management (NYSE: WMI) originally announced $ 34/ share bid for Republic Services on July 11th, and more recently raised that offer to $37/ share. Republic Services has rejected both bids saying that the company is worth substantially more than that as an independent entity. Waste Management made its initial offer as a response to the merger, announced June 23rd, between Republic Services and Allied Waste Industries (NYSE: AW). The merger would combine the 2nd and 3rd largest solid waste services companies in a bid to rival the current dominance of Waste Management.

At What Price?

In what has been an uncivil discourse to date, Republic Services continues to tell Waste Management that its bids are unwelcome and the company is not for sale. Republic Services has refused to engage in ongoing talks with its insistent suitor. Waste Management has said it will evaluate its options in light of the most recent rejection. Does this mean an even higher bid? Waste Management seems determined to hold on to its number one position, but how much more can they offer? At some point, there is a number that Republic services must consider out of fiduciary duty to its shareholders. Some industry analysts have said $40/ share would be a fair valuation while others say that is too high a price and would negatively impact the buyer's financial status. Remember that Republic was trading for a low of under $28/ share as recently as July 11th. With news of the $37 offer, Republic briefly traded over $35 last week, but retreated as it became clear that its management would not accept the revised offer.

Anti-trust Issues?

A combination between Waste Management and Republic Services would dwarf the nearest remaining competitors, and position the giant well for future power plays. Such a deal would likely arouse the interest of the Justice Department's anti-monopoly watchdogs as well. So it isn't entirely clear that even if Waste Management could put together a deal acceptable to Republic Services that it would be allowed to go through anyway. Even without Justice Department approval, however, such a deal would have the effect of preventing or substantially delaying any merger between Allied Waste and Republic Services. The latest offer from Waste Management offer included a provision for a $250 million payment to Republic if the acquisition were to be blocked by the Justice Department.

Posted by Mike - Editor at 7:52 AM | Permalink

For some people, the prospect of buying a life insurance policy that pays out upon their death is too close a look at their own mortality. Yet, at the same time, none of us want to leave our families financially insecure when we die. That's why it's critical to have sufficient life insurance. How much life insurance should you have? Below are some questions to consider.

The most typical reason for purchasing life insurance is to ensure your spouse and dependents have sufficient funds to maintain their lifestyle. To determine how much is needed to do that, consider these questions:

1. What lifestyle do you want to provide to your spouse and dependents when you die? Review their needs in detail, taking a look at things like:

• What standard of living do you want to provide? Will your spouse and children live in the same house?

• Will the family have to make different child-care arrangements?

• How many and what kinds of automobiles will be needed?

• If your spouse works, will he/she decide to stay home with the children?

• If your spouse stays at home, will he/she return to the work force?

• Do you want to pay for your children's college educations?

• What other financial help do you want to provide to your children?

• Do you want to pay off a mortgage or other debt with insurance proceeds?

• What are your spouse's retirement plans? Is he/she counting on you for retirement income?

• Do you need to consider the support of elderly parents or other relatives?

2. How much will that lifestyle cost? Come up with an estimate of how much this lifestyle will cost. Include all of your current expenses that would remain the same as well as any new expenses you have identified, such as for child care. Remember to factor in hidden costs, such as providing for health insurance that was paid for by your employer. For large debts, such as a mortgage, determine if it makes sense to pay the loan off in full or to continue making monthly payments.

3. How much life insurance do you need? First, consider what other income sources your spouse and/or dependents will have. This could include your spouse's earnings, retirement plans, Social Security benefits, savings, and investments. Life insurance proceeds will be needed to provide the difference.

Your life insurance needs will change over time, so you should periodically go through this analysis.

Posted by Emma - Editor at 7:57 AM | Permalink

At first glance, asset correlation may seem like a complex topic. However, it is important to understand the concept and how it affects your portfolio. By combining assets with low correlation, you can potentially improve portfolio returns while reducing risk.

Correlation is a statistical measure of how one asset class performs in relation to another asset class. Correlations can range from +1 to -1. A correlation of +1 means the two assets move very closely together in the same direction. Combining assets with a high positive correlation will not provide much risk reduction. A correlation of -1 indicates the assets move in opposite directions, a rare event in the investment world. A correlation close to 0 means no relationship exists in the price movements of the two assets.

Combining assets with consistently high correlations to each other does little to reduce risk. The greatest combination benefit to a portfolio seems to be achieved by combining assets with consistently low correlations, which results in consistently reduced risk.

When selecting investments for your portfolio, consider the diversification aspects for your overall portfolio. While correlations change over time, general observations include:

• Stocks tend to have a low positive correlation with corporate and government bonds.

• Short-term bonds tend to have a low correlation with long-term bonds.

• Stock markets around the world are all positively correlated to some degree. In general, European stock markets are more closely correlated to each other and the U.S. than to markets in Japan or Asia. Correlations between developed countries tend to be higher than correlations between developed and emerging countries.

• Real estate tends to have a low correlation with stocks and bonds.

Past performance does not indicate future results.

Posted by Nickie - Editor at 7:37 AM | Permalink

After initially announcing job cuts of 6350 employees in July, Wachovia (NYSE: WB) this week said that as many as 6950 employees may now be out of work. That doesn't include recent announcements of the departure of CFO Thomas J. Wurtz, and Chief Risk Officer Don Truslow. Wachovia is expecting the job cuts to cost as much as $650 million as it restructures it workforce. Recent days have seen the announcement of a class action lawsuit from shareholders, regulatory investigations, and increases in the amount estimated losses originally announced just a few weeks ago. Wachovia stock closed Monday at $18.21 per share off from its 52 week highs of more than $50.

In addition to revising the expected job cut figure, Wachovia also revised its second quarter losses from the originally stated $8.86 billion to $9.11 billion. This represents a loss of $4.21 per share. The stock remained steady on Monday, gaining a little over 1.5%. In July, Wachovia stock hit a low of just $7.80 per share. Investors who picked it up at that level have more than doubled their investment in a single month.

In the lawsuit, the firm Brodsky & Smith alleges that the Wachovia made "materially misrepresentations" that led to inflated stock prices. The suit is being brought on behalf of stockholders who purchased Wachovia's stock at these alleged inflated levels between May 8th, 2006 and April 11th, 2008. While the class has not been certified at this point, Wachovia has vowed to fight the suit vigorously and has increased their reserves for legal expenses by half a million dollars.

That, though, seems the least of Wachovia's worries at the moment. Federal and state securities investigators are pressing Wachovia on its municipal bond bid practices. You'll recall that on July 17th, regulators raided the company's headquarters after the company failed to fully comply with states' subpoenas regarding auction-rate securities, according to the regulators. The municipalities and states that purchased these securities were left holding the bag after the market for them collapsed earlier this year. Wachovia says they are in "active discussions" to settle the matter.

Going forward, the company expects losses from the mortgage portfolio it acquired in 2006 as part of its acquisition of Golden West to reach as high as 12%. The purchase of Golden West carried a $25 billion price tag back in 2006 before the mortgage and housing mess began spiraling out of control. Wachovia appears to have the resources to weather the storm and there is no sign of imminent collapse.

Posted by Mike - Editor at 8:06 AM | Permalink

Saving enough by age 65 to ensure that you can maintain your standard of living through a long retirement has become increasingly difficult. Consider just this one fact. Current retirees receive close to 70% of their retirement income from Social Security and defined-benefit pension plans, while today's workers will probably only receive one-third of their retirement income from those sources (Source: Ibbotson Associates, 2007).

While that means you will be responsible for a significant portion of your retirement income, Social Security and defined-benefit plans are a valuable component of that income. For years, we have heard that Social Security benefits are modest at best and should not be counted on as our only source of retirement income. Sometimes, it's even suggested to completely forget about Social Security benefits when planning for retirement, because changes in the system will probably be necessary when the huge number of baby boomers start retiring. But the fact is that Social Security benefits are a very valuable benefit, especially since benefits are adjusted for inflation annually.

For instance, the maximum Social Security benefit in 2008 for workers retiring at full retirement age is $2,185 monthly. While that might not seem like that much money, consider how much you would need to accumulate to generate that monthly income. A 66-year-old male would have to pay approximately $377,000 for an annuity that would pay $2,165 monthly for life with annual inflation adjustments, while a 66-year-old woman would pay approximately $421,000 (Source: Vanguard, 2008).

While only 21% of the work force is currently covered by a defined-benefit plan, it is a valuable benefit if you are covered by one. Defined-benefit plans typically don't adjust your benefits for inflation, but they will pay a benefit for your life or the joint lives of you and your spouse, depending on the option you choose.

But despite the value of Social Security and defined-benefit plans, you will probably be responsible for the majority of your retirement income, whether you obtain that income from 401(k) plans, individual retirement accounts (IRAs), or taxable investments. Before retiring, you will want to ensure that you have sufficient savings to support yourself for 20, 30, or even 40 years, depending on your age when you retire.

Deciding how much you need to accumulate by retirement age is difficult, since so many of the variables that go into that calculation are uncertain. To come up with an estimate, you need to make assumptions about your life expectancy, how much income you will need during retirement, how much you will receive from other retirement sources, when you will retire, your long-term rate of return on investments, future inflation, and future income tax rates. If your estimates are inaccurate, you could end up with little in the way of income in the later years of your life.

Because of all the uncertainty, it is typically recommended that you only withdraw modest amounts from your retirement savings, especially in the early years of your retirement. A common rule of thumb is to withdraw no more than 4% annually from your retirement funds. So if you want to withdraw $75,000 annually from your retirement assets, you'll need to accumulate $1,875,000 by retirement age.

But that 4% figure is based on the value of your investments when you are ready to make the withdrawal and is not a static number based on your savings when you retire. During periods of market volatility, your asset balances can fluctuate significantly, causing major changes in the recommended withdrawal amounts. Market fluctuations are especially dangerous during the early years of your retirement, when it can be difficult to make up for market declines while you are withdrawing money from those reduced balances. If you are not able to overcome market declines, you could be forced to drastically change your retirement plans.

How can you ensure that your retirement savings will last a lifetime? Consider these points:

• Annuitize a portion of your retirement assets. This will provide you with a definite monthly income for the rest of your life. Annuities can be purchased with or without inflation protection. Since an annuity is paid for the rest of your life, it protects you from outliving your savings and from the risk that lower-than-expected investment returns will reduce your portfolio. Typically, the benefits will end once you (and your spouse if you elect joint benefits) die, although some annuities will pay a lump sum or periodic benefit to beneficiaries. Thus, it is important to understand that if you (and your spouse if you elect joint benefits) die at a relatively young age, your benefits may not equal the purchase price of the annuity. While you probably do not want to use all of your retirement assets to purchase an annuity, you may want to use enough to purchase an annuity that will cover your regular monthly expenses.

• Withdraw conservative amounts from your retirement assets. If you limit your withdrawals to 3% or 4% of your balance, the assets should last for decades. At least annually, reassess your retirement assets and make sure that your withdrawals are reasonable based on your current balances. Market fluctuations can cause your asset allocation to get out of line, so you should rebalance at least annually. Even during retirement, you should allocate your assets among a variety of investment types, ensuring that your allocation is appropriate for your specific situation.

• Maximize other sources of income. While Social Security benefits and defined-benefit plan benefits will likely only provide moderate income, don't totally discount these income sources. Delay Social Security benefits as long as possible, until age 70, to maximize the benefits you will receive. These benefits are also adjusted annually for inflation. While defined-benefit plans are becoming increasingly rare, make sure you apply for benefits if you are covered.

• Look for other ways to remove risk from your retirement investments. There are a variety of portfolio strategies that can help cushion the impact of market fluctuations. If your portfolio is properly diversified, downturns in one asset class can be offset to at least some extent by the performance of other assets in your portfolio.

• Reach retirement with minimal expenses. Cut back on your living expenses before retirement, and try to enter retirement with as few debts as possible. Mortgage and consumer debt payments consume a significant portion of most people's income. Pay off those debts by retirement, and you can significantly reduce your cost of living. This can have a two-fold impact on your retirement. First, it frees up money to set aside for retirement. Second, you get used to a lower standard of living, which should also reduce the cost of your retirement lifestyle.

• Work as long as possible. While there is something very alluring about totally retiring from the work force, the reality is that a long retirement is very costly. Working a few more years can go a long way in helping fund your retirement. Those years are typically your highest earning years, so hopefully you will save significant sums during that period. Also, every year you work is one year you don't have to support yourself with your retirement savings. Once you are ready to retire, try to work at least part-time during the early years of your retirement. That doesn't mean you have to stay at your current job. You can find a totally different job or start a business. Even modest earnings can help significantly with retirement expenses.

Posted by Mike - Editor at 7:43 AM | Permalink

The ailing housing market is driving widening losses at Fannie Mae (NYSE: FNM). According to their latest earnings report, released on August 8th, Fannie Mae showed a net loss of $2.3 billion for the second quarter alone. This comes on top of a $2.2 billion loss reported for the first quarter of this year. This time the loss was primarily driven by higher than expected mortgage defaults and foreclosures. Fannie Mae reports that based on their mortgage portfolio performance in July, they expect things to get worse going forward. Loss reserves were increased by $3.7 billion in the quarter with more cash expected to be reserved against losses in Q3.

According to President and CEO, Daniel H. Mudd, "Our second quarter results reflect challenging conditions in the housing and mortgage markets that began in 2006 and have deepened through 2007 and 2008."

The consensus of analysts' earnings estimate for Q2 was a loss of only 69 cents a share. The announcement of a $2.54 per share loss renewed expectations that Fannie Mae would need a government bailout package to survive. Mudd, however, told investors that Fannie Mae was still financially strong and a bailout would most likely not be needed. If Mudd is wrong and the government does indeed need to bail them out, the equity investors would be hurt the most.

The company predicted that 2008 would be the peak of the crisis and that conditions would likely improve starting next year. In the meantime, Fannie Mae has taken steps to preserve their working capital. One of the most visible of those steps for investors is the slashing of the common stock dividend from a previous 35 cents per share to a paltry 5 cents per share. This move reduced the stock's yield to about 2% annually, compared to the previous double digit yield.

As a result of the announcement, Fannie Mae was trading down more than 17% in early trading on Friday morning. Just minutes after the opening bell, Fannie Mae had plummeted to $8.30 per share, but recovered to $9.00 within the market's first hour. Indeed, with another bad quarter expected ahead, investors apparently see more downside for the stock in the near term. If Fannie Mae sees recovery more than six months away, it is difficult to see a reason to hold onto the stock, especially in the absence of a meaningful dividend.

Just two days earlier, Freddie Mac (NYSE: FRE) reported a loss of $821 million due to foreclosures and delinquent loans. Freddie Mac and Fannie Mae together account for nearly $1 of every $2 of outstanding mortgage debt in the United States.

Posted by Mike - Editor at 7:26 AM | Permalink

The stock market volatility of the past few years has taught some valuable lessons about the stock market. In essence, the stock market tends to revert to the mean. Avoid strategies designed to "get rich quick" in the stock market, and diversify, diversify, diversify.

• The market tends to revert to the mean. There is a tendency for the stock market, when it has an extended period of above or below average returns, to revert back to the average return. Thus, following an extended period of above-average returns in the 1990s, the stock market experienced a significant downturn, helping to bring the averages back in line.

• Don't chase performance. Investors often move out of sectors that are not performing well, investing that money in investments that are currently high performers. But the market is cyclical, and often those high performers are poised to underperform, while the sectors just sold are ready to outperform. Rather than trying to guess which sector is going to outperform, make sure your portfolio is broadly diversified across a range of investment sectors.

• Avoid strategies designed to "get rich quick" in the stock market. The stock market is a place for investment, not speculation. When your expectations are too high, you have a tendency to chase after high-risk investments. Your goal should be to earn reasonable returns over the long term, investing in high-quality stocks.

• Don't avoid selling a stock because you have a loss. When selling a stock with a loss, an investor has to admit that he/she made a mistake, which is psychologically difficult to do. When evaluating your stock investments, objectively review the prospects of each one, making decisions to hold or sell on that basis rather than on whether the stock has a gain or loss.

• Make sure an investment will add diversification benefits to your portfolio. Diversification helps reduce the volatility in your portfolio, since various investments will respond differently to economic events and market factors. Yet it's common for investors to keep adding investments that are similar in nature. This does not add much in the way of diversification, while making the portfolio more difficult to monitor.

• Check your portfolio's performance periodically. While everyone likes to think their portfolio is beating the market averages, many investors simply don't know for sure. So thoroughly analyze your portfolio's performance periodically.

• No one knows where the market is headed. No one has shown a consistent ability to predict where the market is headed in the future. So don't pay attention to either gloomy or optimistic predictions. Instead, approach investing with a formal plan so you can make informed decisions with confidence.

Posted by Nickie - Editor at 7:29 AM | Permalink

It should come as no surprise in this economy that US auto sales are down dramatically. General Motors (GM) last week posted a $15.5 billion loss for the most recent quarter. Fully $9.2 billion of this loss was related to one-time expenses as the company wrote down assets, dealt with restructuring costs and expenses related to ailing Delphi. For the balance of the loss, General Motors cited plummeting SUV prices and poor sales overall along with corresponding declines in its financing operations as the primary contributors to the loss. July 2008's sales for General Motors fell more than 27 percent compared to the same month a year ago. This compares to Ford's 15 percent year on year sales decline for July.

General Motors' Workforce Reductions

General Motors had earlier offered buyouts and early retirement to its workers and reported that approximately 19,000 workers had accepted the deal by the deadline of July 1st. Most of those employees have already left the payroll. With the new losses, General Motors stated that they may be offering a new round of buyouts for hourly workers in the coming months. As the overall economy continues to struggle, though, jobless claims are on the rise. Workers may do well to consider hanging on to the jobs they've got as long as they can.

Pain at the Pump Equals Pain for Car Dealers

While month to month results may vary going forward, we would expect auto sales to remain in decline for the rest of this year and substantially all of 2009. For the time being, the automakers are at the mercy of the broader US economy. Automakers are desperately trying to lower their inventories of SUVs and gas-guzzling trucks as these vehicles look to be the hardest hit by soaring gasoline prices. Once again fuel economy is a key concern for American consumers when searching for a new car.
General Motors' North American sales the most recent quarter were off by 20% or about $10 billion. Outside of North America, however, General Motors sales showed an increase of $1.7 billion.

General Motors Stock Outlook

In addition to this news, remember that GM announced the suspension of its dividend on July 15th in order to preserve liquidity and increase available cash. As long as fewer Americans are taking a ride in a new General Motors car, the stock looks to continue its own ride downhill. Coming off 52 week highs of over $44/ share, General Motors traded under $10/ share on Monday.

Posted by Mike - Editor at 8:57 AM | Permalink

Chevron (NYSE: CVX) announced its second quarter earnings on August 1st. Although Chevron didn't match Exxon's $1500 per second for the quarter, they did earn over $760 for each second of the second quarter. Chevron reported net income of $6 billion up 11% from the same quarter a year ago. That translates to earnings of $2.90/ share diluted, a shortfall from analysts' consensus estimates of $3.03. Strong oil prices were the biggest contributor to the gain. Natural gas prices were also a strong contributor.

Chevron also reported in their August 1st press release that their refining operations were hurt by the high cost of crude as the price of gasoline did not keep pace with the rising cost of oil. As a result Chevron reported a loss of $734 million in its refining operations.

Declines in Chevron Oil Production
Despite the high price of oil, Chevron was only able to produce 702,000 oil-equivalent barrels compared to over 750,000 in the same period a year ago. The company blames the decline on natural field declines. As an oil field becomes depleted over time, it can be increasingly difficult to pull the oil out. Many experts are predicting that oil production is at or near peak levels since many of the world's biggest oil fields are already in a period of steady decline. The search for new oil fields is increasingly focusing on areas that are more expensive to explore and operate, such as deep-water ocean locations. This points to oil prices remaining high for the foreseeable future. We may see some short-term downward pressures as the high cost of gasoline in the US has led to a substantial decline in the total miles driven in this country. China may also be enacting strong curtailing restrictions on automobiles during the run-up to the Olympic Games, in an effort to reduce smog over the Olympic venues. Over the mid to long term, however, we foresee oil demand continuing to rise while supply faces a difficult time in trying to keep pace.
Chevron's Exploration Spending Plan
In a speech made at the 2008 World Petroleum Conference, John Watson, Chevron's Executive Vice President of Strategy and Planning, announced that Chevron alone is planning $22.9 billion in capital and exploratory spending in 2008, a 15% increase over 2007. "These investments are being made along the entire energy value chain: from exploration and production; to refining and transportation; to geothermal, solar, cellulosic biofuels and other emerging technologies," he said.
Chevron stock closed at $84.42 on Friday after the release of the earnings announcement. This is down from the stock's high-water mark of $104/ share set back in May of 2008. Chevron currently pays a $0.65/ share quarterly dividend representing a very respectable 3.1% yield at the current price. Compare that to Exxon's 2% dividend yield.

Posted by Mike - Editor at 7:00 AM | Permalink

If you're tired of paying high telephone bills each month and are looking for a low cost option, there is a new, cutting-edge type of telephone service: Magic Jack. Magic Jack is a small device that easily plugs into a USB port on your computer. After plugging the device into your USB port, all you have to do is plug in the telephone of your choice, and you'll hear a dial tone, enabling you to start making phone calls. Of course, you have to have broadband internet service on your computer in order for Magic Jack to work. In order to start enjoying your new telephone service with Magic Jack, all you have to do is pay the $39.95 initial charge, plus shipping and handling, and then make one $19.95 payment each year. With Magic Jack, you get many popular phone features absolutely free. Call Id, voicemail, three-way calling, call waiting, directory assistance, and free long distance throughout the U.S and Canada.

If you're leery about purchasing Magic Jack and fear that you may receive poor quality service similar to traditional Voip service, there is no reason to worry because Magic Jack is superior to all the other Voip services. Positive reviews by BBC, CNBC, New York Times, and many other reputable companies have given Magic Jack positive reviews. Companies like these wouldn't sacrifice their reputations in order to stand by a product unless it had actually proven its reliability, just as Magic Jack has.

Due to the fact that each Magic Jack unit comes pre-programmed with a telephone number, you won't be able to transfer your current phone number, but most people who invest in this product feel that this is a small inconvenience and that the product is totally worth this minor inconvenience. This is especially true considering the offer Magic Jack is currently offering. With this special, when you purchase a Magic Jack device, you get your first year of service absolutely free. You also get a 30-day money-back guarantee if you aren't satisfied with your service.

Many Magic Jack users love their new phone service, because not only is it the most economical telephone service available, but it also has great portability. The device easily unplugs and goes wherever you and your computer go. It doesn't matter is you go to a hotel and want to avoid extra room charges for using their phone, or traveling out of the country and want to contact family and friends back in the U.S. for free, Magic Jack can help you achieve these goals for no additional cost.

Anyone can afford $19.95/year, and paying this amount for quality, dependable home telephone service is practically like receiving your phone service free. Most Voip telephone providers charge that amount or more each month, and landline telephone providers usually charge triple that amount each month. So if you want to save hundreds of dollars or more a year, forget Vonage or your local telephone provider and take advantage of the convenience, ease and low cost of Magic Jack.

Posted by Mike - Editor at 7:17 AM | Permalink | Comments (0)