Wage and Benefits Grow Slower Than Inflation

Wage and benefit costs, both before and after adjusting for inflation, grew more slowly 2009 than any year since the U.S. government began tracking data in 1982 as double-digit unemployment weakened workers’ ability to command higher pay.

Over the past 12 months, the cost of wages and benefits for workers other than those employed by the federal government rose 1.5%, according to the Labor Department’s employment cost index. Over the same period, consumer prices rose 2.7%.

Adjusted for inflation, wages and benefits fell by 1.3% after rising by 2.8% in 2008, the first year of the recession. The inflation-adjusted cost of wages and benefits at the end of 2009 stood just 1.1% higher than at the end of the previous recession in 2001, the Labor Department said.

The Employment Cost Index measures of the cost of labor free from the influence of changes in compensation caused when high-wage sectors grow more – or less — rapidly than low-wage sectors. Unlike widely cited data on wages, the index includes the cost of benefits, which account for about 30% of total compensation costs.

Before adjusting for inflation, the index rose 0.5% in the fourth quarter, slightly higher than the 0.4% increase in third quarter. “The weak labor market will help keep inflationary pressures benign, said economist Anika Khan of Wells Fargo Securities. “As such, the Federal Reserve continues to have the flexibility to keep short-term interest rates at the current level.”

State and local government workers’ compensation in 2009 grew by 2.4%, twice the pace of the 1.2% increases in the private sector. State and local government employees compensation has outpaced private-sector increases for the past several years.

Private employers’ health insurance costs rose 4.4% in 2009, after increasing by 3.5% the year before. The 2009 increase, though, was the second lowest rate of increase in more than a decade, according to the survey. The Labor Department noted that that this reflects, in part, employers’ reducing their contributions to employees’ health insurance or switching to lower-cost health plans. It added that the data in this part of its quarterly survey isn’t as reliable as the rest of the report.

Tips for novice investors

THE economy is picking up and most believe the worst may be over. If you’ve been hiding your hard earned money under your mattress for the better part of 2009, than now may be a good time to invest it.

Getting started

For the first-timers, or those not too familiar with the world of investments, jumping in head first into something without careful research can be costly, especially when it involves losing money. Speaking to an experienced financial planner is not a bad place to start.

“The first thing we recommend a first time investor to do is to develop a portfolio. This can be done by working with a financial planner or an asset manager. We also recommend that you carry out fundamental research first before investing ,” MyFP Services Sdn Bhd financial planner Robert Foo tells StarBizWeek.

Risks and returns

Knowing how much you’re willing to invest, and how much of a risk you’re willing to take, is the next step. Unfortunately, risk is inseparable from returns, as every investment involves some degree of risk.

Licensed financial adviser Jeremy Tan of Standard Financial Planner says: “You will need to know your investment goals and how long you want to continue investing.”

For the non-risk taker, Tan advises placing money in a fixed deposit account, but cautioned that wasn’t a very good option.

“In an environment of high inflation and low interest rates, if you are just going to leave your money in the bank, eventually you are going to lose out,” he says.

Naturally, the bigger the risk, the better the returns. The following are in no way a comprehensive and ideal list of what to invest in, but a simple guide of what our financial planners feel are natural choices for the eager investor.

Unit trusts

Unit trust is a good way for small investors to invest for their future. For those who are unable to divest a lot of money, unit trusts are a good source of returns, says Tan.

“Investing in unit trusts is good for beginners because you can invest with limited funds.

Unit trusts also offer a broader choice of funds. If you invest in a stock, the options are limited to that company’s core business. Unit trusts investors can also redeem their investments at any time.

“In a downturn, if you want to sell off your shares in the stock market, there are risks you may not find a buyer,” Tan says.

Financial planner Wilson Low says people who invest in unit trusts also have the advantage of being advised by professionals. “Their expertise ensures that the investment decisions made are structured and well planned. With the stock market, you don’t get that luxury.”

Gold

CTLA Financial Planners Sdn Bhd financial planner Mike Lee claims that gold is a “good investment bet” for 2010. With the US dollar forecast to remain tame for 2010, a lot of investors would be turning to the precious metal for a more secure investment, he says.

“If the dollar weakens, the price of gold will increase since it is denominated in US dollars but widely used in global markets and by central banks of foreign countries.”

Low says that gold was often considered a “safe haven” in a crisis. “If something happens to the world, like a global disaster and paper currency looses value, gold can become a valuable (alternate) tradable currency,” he says.

However, the stock market provides dividends and gold does not, Low adds. Gold futures rose Monday, boosted by strong Chinese imports data and after a Federal Reserve official emphasised that US interest rates are likely to stay low, pressuring the dollar. Gold for February delivery ended at US$1,151.40 an ounce, up $12.5, or 1.1% on the Comex division of the New York Mercantile Exchange.

Property

Regardless of whether you are a first time home buyer or an investor looking at property investments, the benefits are obvious.

While taking risks in the stock market may yield higher returns, property investment can provide a more stable, steady level of income and a more secured level of return on investment.

Property generally appreciates in value and rarely the reverse. But like other forms of investments, finding the right property requires a lot of research. “Property prices have been relatively stable but it all comes down to location,” Lee says.

An analyst from a local bank-backed brokerage says 2010 is a good year to invest in the property sector. “Many developers held back their launches last year and there should be some level of oversupply this year. However, many buyers have also shied away from the market so there could be a surge in demand as well,” he says.

Tan says property is a good hedge against inflation, but points out that investors may need to bear additional costs like repairs or risk not having a tenant in a downturn.

The stock market

The stock market can be a great source of income. To relatively new investors, Tan advises that the stock market should be their “last option.”

“You have to be a specialist if you want to excel in the stock market. You have to understand the fundamentals of the stock, price-earnings ratio, yield, etc. Unless you’re an expert and understand the stock well, this isn’t for you.

“If you do invest, the natural choice would be to invest in blue-chip companies, which tend to be more stable. If you’re a small-time investor, you can’t expect to earn much by investing in penny (small) stocks,” he says.

Foo shares a similar sentiment when advising newcomers: “We discourage stocks and shares if you don’t have experience.”

Diversification

Given the broad options above, Lee says the best way to maximise returns is to diversify one’s investment portfolio.

“Investors should diversify their investments and not place all eggs in one basket. If the market goes down, then you risk losing everything.

“If you’re willing to take risks, you should invest in a mix of equities and unit trust funds. And if you have the money, you should look at your portfolio and invest in something that you have not done so already,” he says.

Tan also concurs that diversification of investments is the best option. “To invest in just one area, you must be a specialist,” he says.

Foo says an investor should continuously review his portfolio to ensure that everything is “on-track,” adding that one could also try “diversifying offshore.”

“People today are not just spending in ringgit. A lot of them are sending their children overseas, like Australia. If you’re planning to send your kids overseas, than it’s best to start early and place your money in a foreign investment,” he explains.

He cautions that one should thoroughly research before diversifying into unknown territory.

“In diversifying, you need proper information. So work with planners that have the right tools that can help create the proper portfolio for you.”

NZ Unemployment Increase

Labour Party is accusing the National Government of doing nothing to prevent rising unemployment in New Zealand.

Today there were more than 2500 people had queued for hours for one of 150 jobs at a new supermarket in South Auckland yesterday. Only 0.06% chances of getting hired.

These are not dole bludgers, they are Kiwis who are desperate to work.

New Zealand's unemployment rate was still one percentage point higher than Australia's 5.5 per cent, he said.

An increasing number of people were still losing their jobs and struggling to feed their families, despite Prime Minister John Key's confidence late last year that jobless numbers were coming down, Mr Goff said.

Unemployment rose to 150,000 last year, while many more thousands of Kiwis were also forced to work reduced hours and wages were squeezed.

How to Assess a Share

How do you assess a stock in the markets?

This is how most of us buy our shares
1. Have inside tips
2. Hand over our hard earned money to fund manager
3. Get so called hot tips through friends, markets, friends and etc.

Assessing the value of a company

Choose for undervalue stock

Focus investing
- Look for undervalue stock
- Produce above average returns over the long haul
- Spread the risk in shares get you into more risk
- Fund managers tend to use shotgun rather than using rifle thou they claim to be sharp shooters

How to identify an outstanding company
1. Meeting non financial criteria
- It is simple and understandable
- It has consistent operating history
- It has favorable long term prospects

2. Meeting financial criteria
- Return on equity (not earning per share)
- Owner’s earning (the share of profits belongs to investor)
- Profit margin (high)
- Return on investment profits (which must create at least $1 of market value for every dollar reinvested)

The majority of quoted companies will fail at least one of the criteria
- Is the business truly worth?
- Is the market value significantly lower than that value worth

Putting your eggs in 1 basket
- Risk actually increases when investment are spread too thinly
- Put all your egg in 1 basket and watch over it

Our goal is to find an outstanding business at a sensible price, not a mediocre business at a bargain price

by Robert Heller

INVESTMENT RISK AND RETURN

Types of investment

Cash – bank deposits and cash management funds.

Fixed Interest – bank term deposits, finance company debentures, bonds and government stock.

Property – listed property trusts and commercial or residential property.

Shares – either in listed public company or in your own business.

Cash provides liquidity(easily access to it) and a small return. At times when investment markets are volatile or expected to underperform, it makes sense to hold more than usual.

Fixed Interest provides certainty of capital value and a regular income stream that can be compounded if necessary. An investment portfolio based largely on fixed interest investment will grow in value consistently but slowly. However it tend to be eroded over time by tax and inflation

Shares provide a small income stream dividend and the opportunity to make a capital gain over the long term. However they are volatile in value. The share market moves in cycles.

Business carries the potential to make good capital gain, but also the risk that your business may fail.

Property offers both a good income stream and the opportunity to make capital gain. The property market also moves in cycles, but less volatile compare to share market.

RISK and Return

Risk and return go together. Each of the asset classes has a different 'risk and return' profile.

Cash has the lowest risk and return.

Fixed interest has a higher risk than cash and a slightly higher return.

Property sits between fixed interest and shares.

Shares have the highest potential of return but the highest risk.

Your Money Personality

Have you known your own personality? Or which personality you would like to be from now on ?

These are analyze from

• Your level of desire to create wealth

• Your willingness to take risk

Here are the 4 money personalities:

• The Hoarder
  
• The Achiever
  
• The Entrepreneur
  
• The Thrill-Seeker

These personalities are defined by different level of desire to create wealth and willingness to create risks. These are shown in the chart above.

The Hoarder

Have low desire to create wealth and low willingness to take risk. Typically, Hoarders are careful, conservative money manager. They live by a strict budget and keep spending under tight control. Hoarders dislike debt, and if they have credit card they pay off every month. They prefer to see their wealth grow slowly and steadily, rather than take risk. They are only comfortable with safe and secure investment for low investment return. They are primary fixed-interest investors.

If you are a hoarder, you will miss opportunities to make your money work for you.

The Achiever

Have low willingness to take risk, but they have a high desire to create wealth. Achiever will be analytical and cautious in approach of money. They are mostly highly paid professional with status conscious. They will spend money on things to create an impression of affluence and success such as big house and expensive car and etc.

Sometimes an achiever will fall into bad habits, such as spending money they cant afford.

The Entrepreneur

Have both a high desire to create wealth and willingness to take risk. Entrepreneurs are the true creators of wealth, people prepared to take an initial level of risk in the expectation of high returns. They can succeed despite having few assets or a small income. If you are an entrepreneurs you will not feel restricted by lack of money because you will use someone else money.

Unfortunately, you can fall into bad habits with money such as debts.

The Thrill-Seeker

Have a low desire to create wealth and have high willingness to take risks. Thrill-seekers are gamblers. They take risk for the sheer enjoyment of it, and would rather continue taking new risks than accumulate wealth. They live by the motto " Easy come, Easy go ". Credits cards are used to the limits.

Tips for investing

• Reduce risk and increase your peace of mind by getting advice from an expert.
  
• Make 2 investment portfolio, 1 for safe investment and another fund for investment purpose.
  

Economy Still Bleeding Jobs

Crude prices edged higher to end the week, despite huge supplies and tens of thousands of lost jobs in the U.S. last month. Employers cut another 85,000 jobs last month, dashing hopes of a turnaround in employment, even as the U.S. economy grows.

Energy prices have rallied for weeks on some signs that manufacturing activity had picked in the U.S. and China, but again it was the falling dollar that inflated the price of crude Friday.

Crude and gasoline futures are up 15 percent since mid-December and prices at the pump this week are higher than at any point last year.

Prices are rising steadily even as the job picture grows worse.

With December's losses, there were 7.2 million fewer jobs than in December 2007, when the recession began. Although the unemployment rate was unchanged at 10% from November, that's only because many workers stopped looking for work and weren't counted in the numbers. A broader measure of unemployment, including those who have quit job hunting as well as those working part time because they can't find full-time work, remained about the same at 17.3% in December from 17.2% in November.

Recession Story

This is a very interesting tale to tell during these times.

This Story is about a man who once upon a time was selling Hotdogs by the roadside.He was illiterate, so he never read newspapers.He was hard of hearing, so he never listened to the radio.His eyes were weak, so he never watched television.But enthusiastically, he sold lots of hotdogs.He was smart enough to offer some attractive schemes to increase his sales.His sales and profit went up.He ordered more and more raw material and buns and used to sell more.He recruited a few more supporting staff to serve more customers.He started offering home deliveries. Eventually he got himself a bigger and better stove.As his business was growing, the son, who had recently graduated from College, joined his father.

Then something strange happened.The son asked, “Dad, aren’t you aware of the great recession that is coming our way?”The father replied, “No, but tell me about it.” The son said, “The international situation is terrible.The domestic situation is even worse.. We should be prepared for the coming bad times.”The man thought that since his son had been to college, read the papers, listened to the radio and watched TV.He ought to know and his advice should not be taken lightly.So the next day onwards, the father cut down his raw material order and buns, took down the colourful signboard, removed all the special schemes he was offering to the customers and was no longer as enthusiastic…He reduced his staff strength by giving layoffs.Very soon, fewer and fewer people bothered to stop at his hotdog stand.And his sales started coming down rapidly, same is the profit.The father said to his son, “Son, you were right”.“We are in the middle of a recession and crisis. I am glad you warned me ahead of time.”

Moral of The Story: It’s all in your MIND! And we actually FUEL this recession much more than we think we do!!

What can we take away from this story??
1. How many times we confuse intelligence with good judgment?
2. Choose your advisers carefully but use your own judgment
3. A person or an organization will survive forever, if they have the 5 Cs
Character
Commitment
Conviction
Courtesy
Courage

The tragedy today is that there are many walking encyclopaedias that are living failures.The More practical and appropriate views on this economic recession is:“This is the time to reunite together for any small or a big organization, this is the time to motivate and retain people which are the biggest asset, this is the time to show more commitments to the customers,this is the time show values of our company to the world, and this is the time to stand by our Nation”.

Personal Bankruptcy Filings Rising Fast

I just read some interesting news to share today. Is the economy recovering or will this even recover so fast from what we heard from the news? I had copy a new of personal bankruptcy in US for the year 2009. What the heck ! 1,410,000 people was filled bankruptcy in 365 days.Its an average of 3863 person was filled bankruptcy per day. Below attachment was the summary of the article i read today.

The number of Americans filing for personal bankruptcy rose by nearly a third in 2009, a surge largely driven by foreclosures and job losses.

The worst U.S. recession in a generation is testing the effectiveness of these laws. The economic downturn also has prompted more middle-class Americans to file for bankruptcy protection.

Overall, personal bankruptcy filings hit 1.41 million last year, up 32% from 2008, according to the National Bankruptcy Research Center, which compiles and analyzes bankruptcy data. It is the highest level of consumer-bankruptcy fillings since 2005. Consumers rushed to file in 2005 before the new bankruptcy laws took effect in October of that year.

"That suggests it was largely ineffective," Ronald Mann, a law professor at Columbia University, said of the 2005 overhaul. "I don't think anybody who's knowledgeable about the bankruptcy system thought the statute was well crafted."

During this recession, the housing crisis and high unemployment rate have prompted more people to file for bankruptcy who may never have considered the option before, experts said. Filings from 2008 showed more people with high income and high education levels resorting to bankruptcy petitions, according to an annual survey of consumer-bankruptcy filers' demographics by the Institute for Financial Literacy, a nonprofit that provides bankruptcy-related counseling and education services. Those demographic trends appeared to continue last year.

Mr. Mann said he believes bankruptcies reached their peak sometime last year, but bankruptcy attorneys from across the country said there was no sign that business was slowing. The 113,274 filings in December alone were a third higher than the same month a year earlier.

"I can't see over the top of the files on my desk," said Cathleen Moran, a bankruptcy attorney at Moran Law Group in Mountain View, Calif., likening it to the rush of clients before the revised law went into effect. In a three-month period before those rules changed in 2005, her firm filed five times as many cases as usual.

Ms. Moran's clients in 2008 typically were people who earned between $40,000 and $80,000. That changed last year when a rash of people who earned $100,000 to $300,000 began filing as well, she said.

"Expenditures that were rational when these people were working at the peak of their salary just are no longer sustainable when they lose jobs or take jobs at a third or a half of what they were making before," Ms. Moran said.

By Sara Murray at and Conor Dougherty
The Wall Street Journal

Happy New Year 2010

Happy New Year to every living thing on earth, and especially to those who wanted to earn more money, and invest smartly.

Year 2010 Resolutions

1. Hit my mark of earning.
2. Buy new house.
3. Buy new car.
4. Have lots of cash to invest in stocks.
5. Boost Savings, Cut of bad debt.
6. Increase earning.
7. Enjoy my life more.

Good Luck and God Bless !!