Cash Is King !!

When recession rules, cash is king.

It's tough to figure out where the economy is headed, and some folks think today's biggest risk is inflation, not recession. Still, in trimming the federal-funds rate last week, the Federal Reserve noted that "the tightening of credit conditions" could "restrain economic growth."

Indeed, the signs are ominous. August's jobs data were notably dismal, with nonfarm payrolls shrinking by 4,000, instead of the 112,000 job increase expected by Wall Street. Americans are getting squeezed by tumbling home prices, rising mortgage payments and $80-a-barrel oil, and all this could cut into consumer spending.
If the economy turns sluggish, it will be rough on those who lose their jobs, while offering buying opportunities to those still employed. But either way, there's one thing you'll want -- and that's access to cash.

• Taking advantage.
A mountain of cash would, of course, be a great comfort if you're laid off. But even if you hang on to your job, a little extra money in a high-yield savings account or a money-market fund could prove mighty useful.

Maybe a recession will further pummel the housing market, and you can put your savings toward buying a vacation home or trading up to a larger house. Maybe a slowing economy will knock shares lower, and you can use your cash to buy stocks at bargain prices.

For the cash-rich, a recession can also be a good time to purchase a car, as dealers slash prices to unload inventory. Alternatively, you might seize the chance to remodel the kitchen, knowing that contractors will likely bid more aggressively for your business

• Reclaiming savings.
With all this in mind, stockpile savings. But where? If you think your job is in jeopardy, forget funding the kid's college account and don't make extra-principal payments on your mortgage. The problem: If you lose your job, it may be hard to get your hands on this money.

You might also be tempted to skip your 401(k) plan. But in fact, sticking enough in your 401(k) to get your employer's full matching contribution should remain your top financial priority.

True, if you're laid off and strapped for cash, you might be forced to tap your 401(k), triggering income taxes and possibly tax penalties. That double whammy, however, will likely be more than offset by today's twin benefits, in the form of an initial tax deduction and the matching employer contribution.

After you have funded your 401(k), direct additional savings into a Roth individual retirement account. You can fully fund a Roth if you are single with income below $99,000 or married filing jointly with income under $156,000.

One of the Roth's little-known benefits: At any time, you can withdraw your contributions -- but not the account's investment earnings -- without paying taxes or penalties. That means this year's $4,000 Roth contribution could be next year's unemployment fund or next year's home-improvement fund.

Got additional money to save? Stuff it in a savings account or a money fund held in a regular taxable account. If you lose your job or buy a vacation home, this is the first place you should go for cash.

• Downsizing debt.
As you prep your finances for a possible recession, also get your debts under control.

Buy yourself some financial breathing room by paying off your credit cards. If you're worried you might get laid off, think twice before taking on new financial obligations, such as car leases and loans.

Also, set up a home-equity line of credit and check whether it's worth refinancing your mortgage to lower your monthly payments. You will likely find the mortgage company more receptive today, while you are still employed and still creditworthy.

If the economy slips into recession, and you lose your job or undertake major home improvements, the credit line could be a godsend. What if there's no recession? This extra borrowing power might still come in handy -- and you will no doubt find some use for all that extra cash you've saved.

- The Wall Street Journal Online

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Consumer spending tops forecasts

August gain comes despite mortgage, housing woes; key inflation reading improves.

By Chris Isidore, CNNMoney.com senior writer

September 28 2007: 11:00 AM EDT

NEW YORK (CNNMoney.com) -- Consumer spending stayed strong in August, despite the problems in mortgage and real estate markets that some feared would put a brake on Americans' willingness to open their wallets, according to a government report issued Friday.Spending by consumers rose 0.6 percent in August, an improvement from the 0.4 percent rise in July.

Economists surveyed by Briefing.com had forecast another 0.4 percent rise in August.
The solid gain in spending came even as individuals' incomes rose by only 0.3 percent in August, down from the 0.5 percent rise in July. That was a bit weaker than economists' forecast of a 0.4 percent rise in income in the period.

The Commerce Department report also included a key inflation reading, the so-called core PCE deflator, which measures prices paid by individuals for goods other than food and energy.

The Federal Reserve is believed to want to see that reading post between a 1 and 2 percent increase on a year-over-year basis. The August report showed a 1.8 percent rise on that basis, after a 1.9 percent rise in the previous readings for both June and July.

That would appear to give a green light to the Fed if it should decide it wants to cut interest rates again at its next meeting Oct. 31.

"If the Fed wants to cut, inflation isn't going to enter into the equation," said Gus Faucher, the director of macroeconomics for Moody's Economy.com.

Still strong consumer spending is also suggesting that the risk of a slowdown in the economy may be less than many economists and the Fed believed when the central bank cut interest rates by a half percentage point earlier this month.

Spending by consumers is crucial to the nation's economic growth, accounting for nearly three quarters of economic activity.

David Kelly, economic advisor for Putnam Investments, said he now believes that the economy will at least initially show annual growth above 3 percent in the third quarter.

The first estimate of third quarter gross domestic product, the broadest measure of U.S. economic activity, is due out Oct. 31, the same day as the Fed meets. It's possible that strong growth in that report could convince the Fed another cut isn't warranted at that time. Some economists are already questioning need for another cut.

"It's clear that consumers aren't rolling over any time soon. A worst case scenario is that consumers will be spending at more than twice the pace of increase in the third quarter that they did in the second," said Rich Yamarone, director of economic research at Argus Research. "A Fed rate cut in this scenario is like pouring gasoline on a fire. That blows up in your face."

But Faucher said that early indications are that major retailers are seeing tougher sales in September after a very strong August. No. 2 discount retailer Target (Charts, Fortune 500) warned on Tuesday it now expects softer than expected September sales.

In addition, two readings on consumer confidence this week, one on Tuesday from the Conference Board, the other on Friday from the University of Michigan, both showed confidence falling more than forecast this month.

So Faucher and David Wyss, chief economist with Standard & Poor's, said the strong consumer spending report for August doesn't necessarily mean that a slowdown in consumer spending and the economy as a whole still doesn't lie ahead.

"The question is if this spending will hold up, given what's going on in the labor market," said Faucher, pointing to the fact that August saw the first decline in U.S. payrolls in four years.

"A lot of the growth [in spending] is because auto sales rebounded from miserable levels in July and because it was so hot, which prompted consumers to run their air conditioners," said Wyss. "So I think we need another one or two more rate cuts may not be a bad idea at this point. Certainly the inflation numbers in this report are very encouraging for the Fed."

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This is a big news in my home country

Let me explain you this in an easy way...

Between South and North Korea, there is the Military Demarcation Line where nobody can enter. The President of South Korea will walk through that area to enter North Korea.

President May Cross Border on Foot

By Jung Sung-kiStaff ReporterPresident Roh Moo-hyun may cross the Military Demarcation Line (MDL) dividing the two Koreas into North Korea on foot next week for the second inter-Korean summit in Pyongyang, a report said Thursday.

The second batch of the 34-member summit preparation team, which left for Pyongyang Thursday morning, will consult on the matter with North Korean authorities, the Ministry of Unification said.

``If President Roh is going to cross the MDL, traveling by car is too plain to highlight the symbolism of the historic cross-border summit talks. In that context, I believe Roh had better travel on foot,'' a government official was quoted by the Pusan Ilbo as saying.

Cheong Wa Dae spokesman Cheon Ho-seon, however, did not rule out the possibility that Roh would fly to the North Korean capital in case of an emergency or bad weather. Cheon said a presidential plane will be deployed to a Pyongyang airport.Unification Minister Lee Jae-joung told reporters that the government is considering all options on the table regarding methods travel for Roh's trip to the North.

``Given this is the first overland trip (South Korea's President) to North Korea, we are considering various ways to convey the summit's symbolism to the Korean and world people in an effective way,'' Lee said. ``We'll make a final decision on the issue later.
''It is unclear, however, whether Pyongyang will accept Seoul's suggestion of Roh crossing the MDL on foot as security guarantees for the head of state in the MDL would be involved, North Korea experts say. Roh is scheduled to cross the MDL, a legacy of the 1950-53 Korean War, through the Gyeongui Road that links Seoul to the North Korean border city of Sinuiju bordering China.

The Korean War ended with an armistice, signed by the U.S.-led United Nations Command, North Korea and China, leaving the two Koreas technically at war. The Seoul government originally wanted Roh to travel to Pyongyang using a reconnected cross-border railway. But the North was reluctant to accept the request, citing military security guarantees for the trip, government officials said. In 2000, former President Kim Dae-jung flew to Pyongyang for the landmark first-ever inter-Korean summit. Meanwhile, Lee said after the summit, the government will dispatch special envoys to the United States, China, Russia and Japan to help coordinate North Korean policies. A 298-member entourage for President Roh and first lady Kwon Yang-suk has been decided upon, Lee added.gallantjung@koreatimes.co.kr
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Do you know what's going on in Myanmar now?

"Myanmar Government Cuts Internet Link"

"Myanmar's internet activists blog to save nation"

Myanmar's internet activists blog to save nation
Phil Black / CNN
London: Ko Htike is a man with a laptop, sitting in London, a long way from his home in Myanmar.

He has become a key middleman in the effort to expose events in his country.
Ko Htike is emailed a photo, apparent visual evidence that police raided a monastery that Buddhist monks inside were beaten and arrested.

He logs on from 3 am every day to receive the latest digitally smuggled photos, video and information.

"It's too dangerous for them. If they get caught you will never know their future. Maybe they’ll just disappear or be in prison for life or die,” says Htike.

Around 20,000 people are visiting the site every day. But maintaining it is taking its toll.
"I even feel like crying because I can't bear it,” says Htike.

But Htike isn't alone. There is a global force of individual online activists and from Norway's Capital to provide regular broadcasts from the Democratic Voice of Burma.

"We have people on the ground. We have been running us a radio station for the past 15 years. We have our trained journalists. And also we do have a lot contacts through of the country who give us information as it's happening,” says Aye Chan Naing from Democratic Voice of Burma.
When the government used brutal force to put down the democratic uprising of 1988, few people saw it.

Technology and courage means that can't happen again. Htike says he longs to be protesting on the streets with his countrymen but believes he can make a bigger difference at his computer.

"I just trying to support inside the protest and just trying to stop killing our people inside Burma. So if I can publish these kind of photos and this kind of news to the world they may stop a little bit,” says Htike.

It’s one man and a laptop fighting to change a nation.

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How low will the greenback fall?

Slip-sliding away
Sep 27th 2007 WASHINGTON, DCFrom The Economist print edition
How low will the greenback fall?

WHEN does a gentle slide become a dangerous skid? That is the big question as the dollar's decline gathers pace. The greenback fell almost 2% against a basket of major currencies in the week after the Federal Reserve cut America's short-term interest rates on September 18th, hitting a new low for the post-1973 floating era. The fall was particularly pronounced against the euro, where the dollar fell to a record $1.41 per euro on September 25th.

Those nervously inclined see plenty of reason to fret. Some worry that central banks and other official investors may be about to dump dollars. Saudi Arabia's decision not to follow the Fed's lead and cut interest rates fuelled speculation this week that the oil kingdom was about to break its 21-year peg with the greenback. Others fear that a plunging dollar will fuel inflationary pressure in America and thus limit the Fed's ability to cut interest rates further. In Europe there are worries that a stratospheric euro will imperil the region's growth. Nicolas Sarkozy, France's president, recently declared that the currency's rise above $1.40 was a “problem” for euro-zone competitiveness.

Some of this nervousness is exaggerated. With inflation rising fast in Saudi Arabia, the link to a falling dollar is causing a growing headache. A revaluation against the dollar or, better, a link to a basket of currencies—similar to the one Kuwait now has—would make more sense. But the Saudi government has denied that it plans anything of the sort. Its central-bank governor repeated a commitment to the dollar peg on September 26th. More important, a change in Saudi Arabia's currency regime—or that of other oil exporters—need not cause a dollar crash. Shifting to a currency peg does not mean a central bank would suddenly dump its dollar assets.

The inflationary risks from a weaker dollar are also easily overdone. Most economists reckon that the pass-through from a weaker dollar to higher import prices has weakened in recent years, and is particularly low in America. A new study by Robert Vigfusson, Nathan Sheets and Joseph Gagnon, three economists at the Federal Reserve, suggests that countries are more willing to absorb a rising exchange rate in their profit margins when exporting to America than when they export elsewhere, perhaps because they are keen to protect their share of America's huge market. Such a profit squeeze cannot continue indefinitely, of course, but as yet there is little sign that the dollar's weakness is aggravating price pressure.

For the moment, the dollar's decline is reflecting investors' expectations of Fed policy rather than tying the central bankers' hands. Financial markets increased the odds of more short-term interest-rate cuts this week after a barrage of grim economic news. The pace of home sales fell again in August; the backlog of unsold existing homes rose to ten-months' worth of supply; and consumer confidence plunged. As the gloomy economic news piled up, yields on ten-year Treasury bonds, which had risen on inflation jitters after the Fed's rate-cut, fell back.

Today's pessimism is centred on America—hence the tumbling dollar. But there may soon be reasons to worry about Europe. Germany's Ifo index of business confidence fell again this week for the fourth consecutive month, to a 19-month low. The aftershocks of the credit crisis coupled with a surging euro could make life difficult for Europe's firms.

So far, the European Central Bank has played down these risks and is signalling the likelihood of higher rates ahead. That hawkishness is part of the reason for the euro's rise. But if America's economy is truly in trouble, the outlook for the euro zone will darken too. America's currency will become others' problem.

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Rate Cut Spurs Emerging Mkts

From WSJ 09/20/2007


Now that the fallout from the downturn of the housing-loan market has prompted the Federal Reserve to cut interest rates, the race is on to find the next bubble.

Emerging markets are a popular answer.


Stock markets around the world rallied in response to the Fed's half-percentage-point cut on Tuesday, with shares in emerging markets -- generally defined as countries that have modest incomes but are growing fast -- posting the biggest gains. Mexico's benchmark IPC index on Tuesday rose 2.8% and Brazil's Bovespa rose 4.3%, trumping the Dow Jones Industrial Average's 2.5% gain.

Yesterday, Asian markets, which had been closed when the Fed announced its rate cut, joined the party, with India's Bombay Sensex climbing 4.2% to cross 16000 for the first time.

The rush into emerging-market stocks is in part because of a belief that the Fed's rate cut, as well as easier policy stances at the European Central Bank and the Bank of England, will end up bolstering fast-growing emerging-market economies more than any others. Proponents of this view say that in 1998, easy money flowed into fast-growing technology stocks following the Asian financial-market crisis and collapse of the hedge fund Long-Term Capital Management. The belief that tech stocks were immune to any downturn helped fuel the dot-com bubble.

'It's like 1998 in reverse,' says Michael Hartnett, an emerging-markets strategist at Merrill Lynch. 'A bubble is more likely than not. But I think we're only at the beginning of that process.' He is bullish on emerging markets as a result.

Mr. Hartnett isn't the only one to draw the 1998 analogy, or point to the possibility of a bubble developing.

A month ago, Morgan Stanley emerging-markets strategist Jonathan Garner wrote that the current market environment is 'the mirror image of 1998.' In early August, Christopher Wood, a Hong Kong-based analyst at CLSA Group, wrote that 'just as, first, American tech stocks and then American housing finance were bubble beneficiaries of Fed easing post-LTCM and post-Nasdaq collapse, so Asia and emerging-asset markets will be the likely bubble beneficiaries of the coming Fed easing.'

A key reason emerging markets have become so attractive is that they have posted robust economic and earnings growth even amid rising U.S. interest rates. This suggests that their economies have become less volatile and that their shares should carry higher valuations.

And, in fact, stocks in emerging markets, long less costly than their developed-market counterparts, are becoming pricier. At the end of last month, the stocks that make up the MSCI Emerging Markets index were trading at 17 times their earnings for the prior 12 months. In comparison, the stocks in an MSCI index that tracks developed markets other than the U.S. and Canada were trading at 15.3 times earnings.

Bulls on U.S. home builders made a similar point after the housing market remained robust through the 2001 recession. They argued that home-building stocks -- traditionally highly cyclical -- deserved higher valuations than in the past since the companies had broken out of the cycle. And just as with the home builders, everyone isn't convinced that emerging markets have escaped their dependence on the U.S.

'Maybe the Fed is cutting so aggressively because they know something about growth in the U.S. falling off a cliff,' says Arjun Divecha, a portfolio manager at GMO LLC who oversees more than $20 billion in stocks in emerging markets. 'That can't possibly be good for emerging markets.'

But emerging markets, at least so far, have been remarkably well-shielded from the downturn in the U.S. housing market and the credit troubles that have ensued. Gustavo Dolfino, president of WhiteRock Group, a Wall Street executive recruiter, says he got worried about frothy U.S. credit markets six months ago and decided, 'I had to hedge myself.'

He turned to Asia, opening offices in Shanghai, Singapore and Hong Kong, where he has been placing bankers and traders into derivatives jobs. He says he will bring in at least $10 million to $15 million in revenue in each office, exceeding his expectations. 'I hired a recruiter to help us find more recruiters,' he says.

What is striking, says Investment Technology Group economist Robert Barbera, is that the idea that there could be a bubble on its way in the emerging markets is a cause for glee rather than caution. 'Very few people are saying, 'Oh my God, it's a bubble,'' he says. 'They're saying, 'Whoopee, it's a bubble.''

Investors' enthusiasm to get in early on the next bubble may come down to human nature. In market experiments conducted by Vernon Smith, a George Mason University professor who shared in the 2002 Nobel Prize for economics, participants invested in a dividend-paying 'stock' with a clear fundamental value and a bubble invariably formed. If the experiment was repeated, the bubble would form again -- and participants would say they were surprised they couldn't get out before the collapse.

'The thing about bubbles is that they're rather fun when you're in them, since you're making a lot of money,' says Julian Mayo, investment director at Charlemagne Capital, a London firm that manages $5 billion in emerging-market stocks. 'If one thinks a bubble could emerge, you want to fill your boots with the sector, as long as you get out when valuations are overstretched.'

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Be The Intelligent Investor!~

Everyone who invests in stock market likes to gain the margin.
But how can you be the one who earn the money?
TO BE THE INTELLIGENT INVESTOR!! (2BTII!)
This Blog is meant to teach you how to be one,
So stop by every couple day!

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