How to be Rich, Happy and Free from Scams

Did I Marry The Right Person?

2009-07-11T12:18:00.002+08:00

from: http://lavanyalife.blogspot.com/2009/07/did-i-marry-right-person.html

This is a very good article. Those who are still single may learn something from here...
Those who are already married may take it as a guideline to improve your marriage & relationship ...

DID I MARRY THE RIGHT PERSON?

During one of our seminars, a woman asked a common question. She said, 'How do I know if I married the right person?' I noticed that there was a large man sitting next to her so I said, 'It depends. Is that your husband?' In all seriousness, she answered 'How do you know?'

Let me answer this question because the chances are good that it's weighing on your mind.

Here's the answer.

EVERY relationship has a cycle. In the beginning, you fell in love with your spouse/partner. You anticipated their call, wanted their touch, and liked their idiosyncrasies (unconventional behavior/habit).

Falling in love with your spouse wasn't hard. In fact, it was a completely natural and spontaneous experience. You didn't have to DO anything. That's why it's called 'falling' in love... Because it's happening TO YOU.

People in love sometimes say, 'I was swept off my feet.' Think about the imagery of that expression. It implies that you were just standing there; doing nothing, and then something came along and happened TO YOU.

Falling in love is easy. It's a passive and spontaneous experience. But after a few years of marriage, the euphoria (excitement) of love fades. It's the natural cycle of EVERY relationship. Slowly but surely, phone calls become a bother (if they come at all), touch is not always welcome (when it happens), and your spouse's
idiosyncrasies, instead of being cute, drive you nuts.

The symptoms of this stage vary with every relationship, but if you think about your marriage, you will notice a dramatic difference between the initial stage when you were in love and a much duller or even angry subsequent stage.

At this point, you and/or your spouse might start asking, 'Did I marry the right person?' And as you and your spouse reflect on the euphoria of the love you once had, you may begin to desire that experience with someone else. This is when marriages breakdown. People blame their spouse for their unhappiness and look outside their marriage for fulfillment.

Extramarital fulfillment comes in all shapes and sizes. Infidelity is the most obvious. But sometimes people turn to work, a hobby, a friendship, excessive TV, or abusive substances.

But the answer to this dilemma does NOT lie outside your marriage. It lies within it. I'm not saying that you couldn't fall in love with someone else. You could.

And TEMPORARILY you'd feel better. But you'd be in the same situation a few years later. Because (listen carefully to this):

THE KEY TO SUCCEEDING IN MARRIAGE IS NOT FINDING THE RIGHT PERSON; IT'S LEARNING TO LOVE THE PERSON YOU FOUND.

SUSTAINING love is not a passive or spontaneous experience. It'll NEVER just happen to you. You can't 'find' LASTING love. You have to 'make' it day in and day out. That's why we have the expression 'the labor of love.' Because it takes time, effort, and energy. And most importantly, it takes WISDOM. You have to know WHAT TO DO to make your marriage work.

Make no mistake about it. Love is NOT a mystery. There are specific things you can do (with or without your spouse) to succeed with your marriage.

Just as there are physical laws of the universe (such as gravity), there are also laws for relationships. Just as the right diet and exercise program makes you physically stronger, certain habits in your relationship WILL make your marriage stronger. It's a direct cause and effect. If you know and apply the laws, the results are predictable... you can 'make' love.

Love in marriage is indeed a 'decision'... Not just a feeling.

Remember always this:

'God determines who walks into your life.It is up to you to decide who you let to walk away,who you let to stay, and who you refuse to let go.

A true life story on WHAT GRUDGES CAN DO‏

2009-07-11T12:17:00.002+08:00

from: http://lavanyalife.blogspot.com/2009/05/true-life-story-on-what-grudges-can-do.html

Got this thru email from friends, it's really a story worth reading and taken as example in life.... don't lose the moments in life just because of a small quarrel...

This is long but worth reading and is a true story ... you may have received it... but it is worth to be reminded of it again.

WHAT GRUDGES CAN DO....
=======================

This is for all the single, married, divorced, widowed individuals, who take life for granted. Please I BEG YOU, read this story until the end, it is such an opener. You never Know…………………….!

Just two years after our marriage, hubby brought up the idea of asking Mother to move from the rural hometown and spend her remaining years with us. Hubby's father passed away while he was still very young.

Mother endured much hardship and struggled all on her own to provide for him, see him through to a university degree. You could say that she suffered a great deal and did everything you could expect of a woman to bring hubby to where he is today.

I immediately agreed and started packing the spare room, which has a balcony facing the South to let her enjoy the sunshine and plant greenery. Hubby stood in the bright room, and suddenly just picked me up and started spinning round and round. As I begged him to put me down, he said: "Lets go fetch mother." Hubby is tall and big sized and I love to test on his chest and enjoy the feeling that he could pick me up at any moment put the tiny me into his pockets.

Whenever we have an argument and both refuses to back down, he would pick me up and spin me over his head continuously until I surrender and beg for mercy. I became addicted to this kind of panic-joy feeling.

Mother brought along her countryside habits and lifestyle with her.

For example: I am so used to buying flowers to decorate the living room, she could not stand it and would comment: "I do not know how you young people spend your money, why do you buy flowers for? You also can't eat flowers!" I smiled and said: "Mum, with flowers in the house, our mood will also become better." Mother continues to grumble away, and hubby smiled: "Mum, this is a city-people's habit; slowly you will get use to it."

Mother stopped saying anything. But every time thereafter, whenever came home with flowers, she would ask me how much it costs. I told her and she would shake her head and express displeasure.

Sometimes, when I come home with lots of shopping bags, she would ask each and every item how much they cost, I would tell her honestly and she would get even more upset about it. Hubby playfully pinched my nose and said: "You little fool, just don't tell her the full price of everything would solve it."

There begins the friction to our otherwise happy lifestyle.

Mother hates it most when hubby wakes up early to prepare the breakfast. In your view, how could the man of the house cook for the wife? At the breakfast table, mother facial expression is always like the dark clouds before a thunderstorm and I would pretend not to notice. She would use her chopsticks and make a lot of noise with it as her silent protest.

As I am a dance teacher in the Children's Palace and am exhausted from along day of dancing around, I do not wish to give up the luxury of that additional few minutes in the comfort of my bed and hence I turned a deaf ear to all the protest mother makes.

From time to time, mother would help out with some housework, but soon her help created additional work for me. For example:she would keep all kinds of plastic bags accumulating them so that she sell them later on, and resulted in our house being filledwith all the trash bags; she would scrimp on dish washing detergent when helping to wash the dishes and so as not to hurt her feelings, I would quietly wash them again.

One day, late at night, mother saw me quietly washing the dishes, and "Bam" she slams her bedroom door and cried very loudly in her room. Hubby was placed in a difficult position, and after that, he did not speak to me for that entire night.

I pretended to be a spoilt child, tried acting cute, but he totally ignored me.... I got mad and asked him: "What did I do wrong?" Hubby stared at me and said: "Can't you just give in to her once? We couldn't possibly die eating from a bowl however unclean it is, right?" After that incident, for a long period of time, mother did not speak to me and you can feel that there is a very awkward feeling hanging in the house. During that period of cold war, hubby was caught in dilemma as to who to please.

In order to stop her son from having to prepare breakfast, mother took on the "all important" task of preparing breakfast without any prompting. At the breakfast table, mother would look at hubby happily eating his breakfast and cast that reprimanding stare at me
for having failed to perform my duty as a wife. To avoid the embarrassing breakfast situation, I resorted to buying my own breakfast on my way to work.

That night, while in bed, hubby was a little upset and asked me: "LD, is it because you think that mum's cooking is not clean that's why you chose not to eat at home?" He then turned his back on me and left me alone in tears as feeling of unfairness overwhelmed me. After some time, hubby sighed: "LD, just for me, can you have breakfast at home?" I am left with no choice but to return to the breakfast table.

The next morning, I was having porridge prepared by mother and I felt a sudden churn in my stomach and everything inside seem to be rushing up my throat. I tried to suppress the urge to throw up but I could not. I threw down the bowl, rushed into the washroom, and vomited everything out.

Just as I was catching my breath, I saw mother crying and grumbling very loudly in her dialect, hubby was standing at the washroom doorway staring at me with fire burning in his eyes.. I opened my mouth but no words came out of it, I really did not mean it.

We had our very first big fight that day; mother took a look at us, then stood up and slowly made her way out of the house. Hubby gave me a final stare in the eye and followed mother down the stairs. For three days, hubby did not return home, not even a phone call.

I was so furious, since mother arrived; I had been trying my best and putting up with her, what else do you want me to do? For no reason, I keep having the feeling to throw up and I simply have not appetite for food, coupled with all the events happening at home, I was at then low point in my life.

Finally, a colleague said: "LD, you look terrible; you should go and see a doctor." The doctor confirmed that I am pregnant. Now it became clear to me why I threw up that fateful morning, a sense of sadness floated through that otherwise happy news. Why didn't hubby, and mother who had been through this before, thought of the possibility of this being the reason that day?

At the hospital entrance, I saw my hubby standing there. It had only been three days, but he looked haggard. I had wanted to turn and leave, but one look at him and my heart soften, I couldn't resist and called out to him. He followed my voice and finally found me but he pretended that he doesn't know me; he has that disgusted look in his eyes that cut right through my heart. I told myself not to look at him anymore, and hail a cab.

At that moment, I have such a strong urge inside me to shout to my hubby: "Darling, I am having your baby!" and have him lift me up and spin me around in circles of joy. What I wanted didn't happen and as I sat in the cab, my tears started rolling down. Why? Why our love couldn't even withstand the test of one fight?

Back home, I lay on the bed thinking about my hubby, and the disgusted look in his eyes. I cried and wet the corner of the blanket. That night, sound of the drawers opening woke me up. I switched on the lights and I saw hubby with tears rolling down his face. He was removing the money. I stared at him in silence; he ignored me, took the bank deposit book and some money and left the house.

Maybe he really intends to leave me for good.. What a rational man, so clear-cut in love and money matters. I gave a few dried laugh and tears starting streaming down again. The next day, I did not go to work. I wanted to clear this out and have a good talk with hubby. I reached his office and his secretary gave me a weird look and said: "Mr. Tan's mother had a traffic accident and is now in the hospital."

I stood there in shock. I rushed to the hospital and by the time I found hubby, mother had already passed away. Hubby did not look at me, his face was expressionless. I looked at mother's pale white and thin face and I couldn't control the tears in my eyes. My god, how could this happen?

Throughout the funeral, hubby did not say a single word to me, with only the occasional disgusted stare at me. I only managed to find out brief facts about the accident from other people. That day, after mother left the house, she walked in dazed toward the bus stop, apparently intending to go back to her old house back in the countryside.

As hubby ran after her, she tried to walk faster and as she tried to cross the street, a public bus came and hit her! ... I finally understood how much hubby must hate me, if I had not thrown up that morning, if we had not quarreled, if....In his heart, I am indirectly the killer of his mother..

Hubby moved into mother's room and came home every night with a strong liquor smell on him. And me, I am buried under the guilt and self-pity and could hardly breathe. I wanted to explain to him, tell him that we are going to have our baby soon, but each time, I saw the dead look in his eyes, all the words I have at the brink of my mouth just fell back in.

I had rather he hit me real hard or give me a big and thorough scolding though none of these events happening had been my fault at all. Many days of suffocating silence went by and as the days went by, hubby came home later and later. The deadlock between us continues, we were living together like strangers who don't know each other. I am like the dead knot in his heart.

One day, I passed by a western restaurant, looking into the glass window, I saw hubby and a girl sitting facing each other and he very lightly brushed her hair for her, I understood what it meant. After recovering from that moment of shock, I entered the restaurant, stood in front of my hubby and stared hard at him, not a tear in my eyes. I have nothing to say to him, and there is no need to say anything. The girl looked at me, looks at hubby, stands up and wanted to go, hubby stretched out his hand and stopped her. He stared back at me, challenging me. I can only hear my slow heart beat, beating, one by one as if at the brink of death.

I eventually backed down, if I had stood that any longer, I will collapse together with the baby inside me.. That night, he did not come home; he had chosen to use that as a way to indicate to me:Following mother's death so did our love for each other...

He did not come home anymore after that. Sometimes, when I returned home from work, I can tell that the cupboard had been touched - he had returned to take some of his stuff. I no longer wish to call him; the initial desire to explain everything to him vanished.

I lived alone; I go for my medical checkups alone, my heart breaks again and again every time I see a guy carefully helping his wife through the physical examination. My office colleagues hinted to me to consider aborting the baby, I told them No, I will not.. I insisted on having to this baby, perhaps it is my way of repaying mother for causing her death.

One day, I came home and I saw hubby sitting in the living room. The whole house was filled with cigarette smoke. On the coffee table, there was this piece of paper. I know what it is all about without even looking at it. In the two months plus of living alone, I have gradually learned to find peace within myself. I looked at him, removed my hat and said: "You wait a while, I will sign." He looked at me, mixed feelings in his eyes, just like mine.

As I hang up my coat, I keep repeating to myself "You cannot cry, you cannot cry..." my eyes hurt terribly, but I refused to let tears come out from there. After I hung up my coat, hubby's eyes stared fixed at my bulging tummy. I smiled, walked over to the coffee table and pulled the paper towards me. Without even looking at what it says, I signed my name on it and pushed the paper to him. "LD, are you pregnant?" Since mother's accident, this is the first time he spoke to me. I could not control my tears any further and they fell like raindrops. I said: "Yes, but its ok, you can leave now." He did not go, in the dark, we sat, facing each other.

Hubby slowly moved over me, his tears wet the blanket. In my heart, everything seems so far away, so far that even if I sprint, I could never reach them. I cannot remember how many times he repeated "sorry" to me. I had originally thought that I would forgive him, but now I can't. In the western restaurant, in front of that girl, that cold look in his eyes, I will never forget, ever.

We have drawn such deep scars in each other's heart. For me, it's unintentional; for him, totally intentional. I had been waiting for this moment of reconciliation, but I realized now, what had gone past is gone forever and could not repeated.

Other than the thought of the baby inside me that would bring some warmth to my heart, I am totally cold towards him, I no longer eat anything he buys for me, I don't take any presents from him and I stopped talking to him..

From the moment I signed on that piece of paper, marriage and love had vanished from my heart. Sometimes, hubby will try to come into the bedroom, but when he walks in, I will walk out to the living room.

He had no choice but to sleep in mother's room. At night, from his room, I can hear light sounds of groaning, I kept quiet. This used to be his trick; last time, whenever I ignore him, he would fake illness and I will surrender and find out what is wrong with him, he would then grab me and laugh.

He has forgotten that last time I cared for him and am concerned because there was love, but now, what is there between us? Hubby's groaning came on and off continuing but I continuously ignored him.

Almost everyday, he would buy something for the baby, infant products, children products and books that kids like to read.. Bags and bags of it stacked inside his room till it is full. I know he is trying to use this to reach out to me, but I am no longer moved by his actions. He has no choice but to lock himself in his room and I can hear his typing away on his computer keyboard, maybe he is now addicted to web surfing but none of that matters to me anymore.

It was sometime towards the end of spring in the following year, one late night, I screamed because of a sudden stomach pain, hubby came rushing into the room, its like he did not change and sleep, and had been waiting for this moment. He carried me and ran down the stairs, stopped a car, holding my hand very tightly and kept wiping the sweat off my brow, throughout the journey to the hospital.

Once we reached the hospital, he carried me and hurried into the delivery suite. Lying on the back of his skinny but warmth body, a thought crossed my mind: In my lifetime, who else would love me as much as he did?

He held the delivery suite door opened and watch me go in; his warm eyes caused me to manage a smile at him despite my contraction pain. Coming out of the delivery room, hubby looked at our son and me, eyes tear with joy and he kept smiling. I reached out and touched his hand.

Hubby looked at me, smiling and then he slowly collapsed onto the floor. I cried out for him in pain... He smiled, but without opening that tired eyes of his... I had thought that I would never shed any tear for him, but the truth is, I have never felt a deeper pain cutting through my body at that moment.

Doctor said that by the time hubby discovered he had liver cancer, it was already in terminal stage and it was a miracle that he managed to last this long. I asked the doctor when he first discovered he had cancer. Doctor said about 5 months ago and consoled me saying: "Prepare for his funeral."

I disregarded the nurse's objection and rushed home, I went into his room and checked his computer, and a suffocating pain hits me.

Hubby's cancer was discovered 5 months ago, his groaning was real, and I had thought that... the computer showed over 200 thousand words he wrote for our son: "Son, just for you, I have persisted, to be able to take a look at you before I fall, is my biggest wish now... I know that in your life, you will have many happiness and maybe some setbacks, if only I can accompany you throughout that journey, how nice would it be. But daddy now no longer has that chance. Daddy has written inside here all the possible difficulties and problems you may encounter during your lifetime, when you meet with these problems, you can refer to daddy's suggestion.....

Son, after writing these 200 thousand words, I feel as if I have accompanied you through life journey. To be honest, daddy is very happy. Do love your mother, she has suffered, she is the one who loves you most and also the one who loves me most..."

From play school to primary school, to secondary, university, to work and even in dealing with questions of love, everything big and small was written there.

Hubby has also written a letter for me:

"My dear, to marry you is my biggest happiness, forgive me for the pain I have caused you, forgive me for not telling you my illness, because I want to see you be in a joyful mood waiting for the arrival of our baby...My dear, if you cried, it means that you have forgiven me and I would smile, thank you for loving me...These presents, I'm afraid I cannot give them to our son personally, could you help me to give some of them to him every year, the dates on what to give when are all written on the packaging... "

Going back to the hospital, hubby is still in coma. I brought our son over and place him beside him. I said: "Open your eyes and smile, I want our son to remember being in the warmth of your arms..." He struggled to open his eyes and managed a weak smile. Our son still in his arms was happily waving his tiny hands in the air. I press the button on the camera and the sound of the shutter rang through the air as tears slowly rolled down my face.....

A fatal misunderstanding and the person who loves me the most in this world is gone forever..."Cruel misunderstandings! one after another disrupted the blissful footsteps to our family. Our originals intend of having Mother enjoy some quiet and peaceful moments in her remaining years with us went terribly wrong as destiny's secret is finally revealed at a price, every thing became too late.".........

This is a true story...
LEARNING POINT - DO NOT EVER HOLD ON TO OFFENCES!!!

I am totally speechless, this story brought tears to my eyes as I read through each line eager to know what would happen next. It truly showed the devastating power of grudges and anger!

Simple humility and communication would have resolved most of the problems in that story, as well as patience.... This story has really touched my heart and life as a whole and it has stimulated a paradigm shift.. Though it is very sad, it is also very refreshing to know that from today, I can consciously start to live a life free of grudge. People please let’s live a life devoid
of grudges.

Communication with your loved ones is THE key.

Search: Unionised sector sees retrenchments fall in Q2: labour chief

2009-07-11T11:36:00.000+08:00

SINGAPORE: The second quarter of this year saw only one—third of the number of lay—offs experienced in the previous quarter for the unionised sector, said labour movement chief Lim Swee Say.

And while this showed an improvement over the nearly 10,000 retrenched in the first quarter, Mr Lim said Singaporeans must not assume the downturn is over.

When the economic downturn hit Singapore, the labour movement set itself three targets, said NTUC Secretary—General Lim Swee Say. These were: to avoid record retrenchments, a high unemployment rate as in 2003 when SARS hit, and to be among the first to bounce back when the upturn returns.

Mr Lim said: "After six months of tripartite efforts, we believe we are on track. We cannot say for sure that by the end of this year, whether we would be able to succeed to achieve all these three targets. But we will continue to pursue our ’Upturn the Downturn’ strategy."

Mr Lim reminded Singaporeans that the downturn was not over yet despite recent reports that companies have started hiring.

A survey by consultancy firm Hudson said that for the first time since 2007, hiring expectations are up across the board.

The Singapore National Employers Federation also found from its regular quarterly surveys that the percentage of companies saying they were hiring had gone up from 20 to 25 per cent between March and June this year.

Stephen Lee, president, Singapore National Employers Federation, said: "Certainly this is a positive sign, but the question is how long will we be bottom—bumpy and how long will we stay at the bottom.

"Certainly there are no strong signs to indicate a fast recovery. So most companies are prepared that it will stay where it is and wait till the first quarter of next year to see whether it will pick up."

Mr Lim added: "Let us remember that not all industries will recover at the same time and at the same pace. So when we see some companies starting to recover and starting to hire workers, we should be happy, but don’t be too happy.

"We cannot keep retrenchment down to zero. But we can make sure that when the worker is retrenched, he does not necessary become an unemployed worker."

Hence the need to remain focused on the fundamentals, with cutting costs to save jobs being key.

Although there may be some signs of improvement in hiring, the National Trades Union Congress (NTUC) and the Singapore National Employers Federation said it is not time for companies and workers to rest on their laurels.

They encourage both employers and workers to take full advantage of the various training and re—training schemes available to enhance the employability of their workers. — CNA/vm

A (Covered) Call for Caution on the Market

2009-07-11T05:04:00.001+08:00

by James B. Stewart

Last week, HSBC Chairman Stephen Green offered these thoughts to a British banking conference: “We are almost two years into a financial and economic crisis which is still far from over. We cannot even say that we are past the worst or that the way out of the woods is clear.”
Mr. Green’s remarks may prove to be unduly pessimistic, but they caught my attention because it was HSBC that issued some of the earliest warnings about the subprime mortgage crisis when it wrote down the value of its Household International acquisition in what now seems a long-ago 2007. With unemployment rising last week to a grim 9.5%, with California issuing IOUs instead of cash, and with real estate prices still falling, it does indeed seem premature to declare that the financial crisis is at an end.

This newfound sobriety has been reflected lately in the stock market. The Standard & Poor’s 500-stock index was at 946 on June 12; it closed at 881 on Tuesday. A drop of about 7% is hardly cause for alarm, but it is a reminder that the current rally—which some have compared to the rally in 1938—won’t go on indefinitely.

Indeed, historical examples like that give me pause. They’re so aberrational that they’re unlikely to repeat themselves. Few people comparing the recent rally to 1938 mentioned that stocks subsequently dropped and didn’t begin a steady rise again until 1942, when the tide of World War II turned in favor of the Allies.

While I find these historical comparisons interesting, by no means am I predicting anything similar. But there are times when a cautious approach seems warranted, especially after aberrational gains in the market. Earlier this year, I sold “covered calls” on Amazon.com, which is a strategy I often recommend at times like these.

A call is an option to buy a security at a specific price. When selling covered calls, I own the stock but sell the right to buy those shares at a fixed price at some point in the future. If the stock is at or above the price on that date, I either sell the stock at the strike price or buy back the option, depending on my outlook for the stock. If it is below the strike price, I do nothing and simply keep the proceeds of the call-option sale.

In addition to my Amazon moves, I also sold some covered calls on Goldman Sachs as part of my effort to realize gains from the current rally. These call options expire at the end of next week, so the results are nearly in. Both Amazon and Goldman Sachs are stocks I like and have recommended, but nothing rises indefinitely.

Calls Sold

Still, there have been times over the past few months when both stocks seemed to defy gravity. Amazon shares hit nearly $88 on June 5 before dropping to under $76 on Tuesday. I sold the July 80 calls, which means they’ll expire worthless if Amazon trades below $80 on July 18. In that case I’ll keep the shares and sell calls again, this time at a higher strike price. If they’re more than $80, I’ll deliver the shares, keeping the proceeds of the calls I sold plus profit on the shares, which I bought for $60.

I sold the Goldman Sachs calls for a strike price of $125. Given that they’re now trading at more than $142, and were recently even higher, I would have been better off simply holding the shares. But no one has benefit of hindsight. At this rate, it’s likely I’ll deliver the shares for $125, while keeping the proceeds from selling the calls. At the time I sold the calls, I realized that I was capping my potential gains in the event the stock rose significantly above the strike price. I told myself back then that I’d be happy to get $125 for the shares, and I’m still happy now. If I want to continue to own Goldman Sachs shares, I can simply buy more and reduce the price by again selling calls. Even Goldman won’t rise forever.

Curbing Greed

To me, selling covered calls is a good lesson in curbing greed. If a stock on which I’ve sold calls continues to rise, I’ll still make money, even if it’s not quite as much as I would have by simply owning the shares.

If I can’t tolerate earning a good profit just because I could have made even more, then something is wrong.

James B. Stewart, a columnist for SmartMoney magazine and SmartMoney.com, writes weekly about his personal investing strategy. Unlike Dow Jones reporters, he may have positions in the stocks he writes about. For his past columns, see: www.smartmoney.com/commonsense.

How to Overcome Financial Chaos

2009-07-11T05:02:00.001+08:00

by Laura Rowley

In his book "Managing at the Speed of Change", Atlanta-based consultant Daryl Conner writes, "The key difference between equilibrium and chaos is...the degree to which one's expectations are met. Some of the most frightening situations are those in which we not only lack a sense of control over our environment but we are shocked that this lack of control could occur."

The past 18 months in the financial markets have been characterized by a shocking disruption of expectations -- the housing and financial market meltdown, vanishing credit, rocketing unemployment, money-manager scandals. Conner, a former counselor who facilitates organizational change for companies, has studied change for 35 years, and he argues that there are universal traits and behaviors of people who are successful at change. Here are the highlights of our recent interview:

Q: Millions of Americans have lost their jobs; their homes and retirement savings have declined in value -- and this has been true for people who did the right things as well as those who made irresponsible choices. You write that most people learn "victimization lessons" from their change experiences. How can someone make a negative change an empowering experience?

A: The typical experience is that change is something that happens to me -- I didn't ask for this, I didn't orchestrate it; it's not anything I have control over. Add on top of that the sense that ‘I did everything you were supposed to do and this happened to me, it's unfair' -- that adds to the sense of victimization, and it continues to spiral. Victimization is when I'm trapped in a negative situation and have no options. But I'm not trapped; I'm in a situation I hate, and none of the options are preferable. The tendency of victims is once they see that none of the options are good, they fold into ‘therefore there's nothing I can do.' But by making a decision among horrible options, the person has the ability to regain some sense of control.

Q: You have found that resilient people handle change in a more positive way. What's different about their strategy?

A: The resilient person faces exactly the same circumstances -- they are not protected from the trauma of life -- but their first reaction is, ‘How am I going to get around this thing?' Their basic DNA is optimistic rather than pessimistic; so when a negative change happens, they don't have a clue how they're going to come out of it in good shape, but their sense is that they will. Resilient people are very focused, very mission-oriented. They are flexible and creative.

Change blows you off course, but that's the whole point of change. They know what the course is -- they are clear about what they are trying to do with their lives -- so they know how to get back on course. They might say, ‘Even though what I thought the next five years were going to mean for my retirement has changed, I have a core sense of where I'm headed.' They go into problem-solving mode rather than blaming mode. Low-resilient people take a great deal of energy being lost.

Q: You say that resilient people are also organized.

A: It has nothing to do with what your closet looks like at home. This is a psychological organization -- the ability to walk into a chaotic environment where nothing makes sense and quickly determine what's relevant and what's noise. When faced with chaos, resilient people go into categorization -- this is relevant, that's not -- and they start moving toward the adversity. Victims pull away. The victim's reaction is, ‘I don't think I'm going to succeed, I'm not sure where I'm headed, this has been so disruptive, I'm overwhelmed with the chaos -- fetal position is not such a bad option here.'

Q: You suggest that the loss of control is the most disorienting aspect of change.

A: We have the highest control need of any animals on the planet. That's what allowed us to float to the top of the food chain. We are addicted to control -- physiologically and psychologically. When you have direct control, you know what you want and you know what button to push to make it show up. The trouble is, in a changing, turbulent environment, it gets harder and harder to have direct control -- you're not sure what buttons to push because the buttons you pushed yesterday don't work today.

Q: Are there ways to increase your sense of perceived control in situations such as job loss or financial loss, such as the Bernie Madoff scandal?

A: Rather than telling people what they should do or say, let me tell you the patterns that people apply who typically succeed with this. This is a little zen, but the people who self-counsel typically say three things to themselves: It is what it is. It is as it should be. It is in my best interest.

‘It is what it is' is a wake-up call for me not to make this bigger or smaller than it is -- don't add drama or deny what has happened: ‘I lost my money. I did not lose my life.' Secondly, ‘It is as it should be' tells me that in order to get through this I have to learn some important lessons. What are those lessons?

The third is the kicker -- ‘It is in my best interest.' The idea is, let me think back on every negative thing that's ever happened to me. How many turned out to my advantage? This doesn't excuse the horrible person or event. I don't have to like what's going on to believe that it will be yet another example of how a negative situation turned out to be positive. Can you go into the change with that attitude?

I've seen many successful people do this. Some do it from a spiritual standpoint, for some it's just practical. They say, ‘There are some important lessons in here for me, and I will operate through it as if it's in my best interest.' It's a kind of mindfulness. The antithesis of mindfulness is reactive: I'm angry or resentful. Clearly I have a great case to be angry -- but when I look back, that anger or blaming doesn't help me very much. What if I were to make a decision to go in a different direction? That's the difference between being mindful and reacting to the moment.

Q: Your research has found the volume, speed, and complexity of change has continued to increase every year. What does that mean for personal finance?

A: In past eras we have mostly had periods of stability punctuated by significant change -- now it's kind of an ongoing blur that may occasionally be punctuated by a sense of calm. What's particularly sobering is there is no evidence all this is going to slow down. We've found that nimble organizations are calibrated toward non-equilibrium. Losers in the change game get surprised by change -- they waste time and energy saying, ‘How could this happen?' Winners are not surprised when they are surprised by change -- they say, ‘Now what am I going to do about this?' because it was in their expectation that change was going to happen.

How to Overcome Financial Chaos

2009-07-11T05:02:00.000+08:00

Mortgage scams costing more

2009-07-08T23:01:00.001+08:00

WASHINGTON - MORTGAGE fraud cost the embattled US lending industry more than one billion dollars last year and is on track to cost it even more in 2009, a report by the FBI showed on Tuesday.

Suspicious activity reports filed by financial institutions in 2008 showed losses of more than US$1.4 billion (S$2.05 billion), or a massive 83.4 per cent more than in 2007, due to mortgage fraud.

'Losses reported in the first six months of fiscal year 2009 exceed the same period in fiscal year 2008 by US$208 million,' the annual report on mortgage fraud showed.

Financial institutions reported 63,713 incidents of mortgage fraud in 2008, or more than a third over the previous year. The FBI predicts that the number of cases of mortgage fraud will exceed 70,000 this year.

Fraudsters were often industry-insiders including mortgage brokers, lenders, property appraisers, underwriters, accountants, real estate agents and others, according to the report.

They perpetrate the frauds because they are 'relatively low-risk with high-yield returns,' the annual report said.

The ailing US economy is likely to force the fraudsters to look for new ways to scam people and the industry out of money.

The fraudsters could turn their attention to a new source of money: federal programs designed to stimulate the economy.

In addition to traditional industry 'conspirators", the FBI says organised criminal groups and gang members have become more involved in mortgage fraud activity.

To fight the still-growing scourge, the FBI at the end of last year created the National Mortgage Fraud Team (NMFT) and continues to work with the mortgage industry and law enforcement to try to curb the fraudsters. -- AFP

Economic danger signs

2009-07-08T23:00:00.000+08:00

L'AQUILA (Italy) - LEADERS of the world's industrialised powers warned on Wednesday that the global economy remains in danger and backed away from pledges on global warming as they started their annual summit.

The build-up to the Group of Eight gathering in L'Aquila, which was devastated by an earthquake less than 100 days ago, was overshadowed by turmoil in China which prompted President Hu Jintao to hurry back to Beijing.

Summit preparations were also marred by protests on the eve of the arrival of US President Barack Obama and about two dozen other heads of state and government. Italian police made around 40 arrests when demonstrators hurled bottles and set fire to tyres on the streets of Rome.

As talks started in a military barracks, it emerged that a draft summit declaration made no mention of a previous pledge to halve greenhouse gas emissions by 2050 and there were few concrete measures to bolster the global economy.

The summit brought together leaders from the United States, Canada, Japan, Russia, Britain, France, Germany and Italy. But in a sign of the shifting balance of power, much of the discussion will be expanded to include emerging powers India, China, Brazil and South Africa.

While the focus is largely on the global economy, leaders will thrash out issues such as climate change, world trade and food security as well as the Iranian and North Korean nuclear programmes.

It is the biggest international gathering since a landmark Group of 20 summit in April when one trillion dollars was committed to the International Monetary Fund and other global bodies to help struggling economies. -- AFP

IMF expects slow recovery from global recession

2009-07-08T22:59:00.000+08:00

By Christopher S. Rugaber, AP Economics Writer

WASHINGTON (AP) -- The global economy is beginning a sluggish recovery from its worst recession since World War II, the International Monetary Fund said Wednesday.

Financial conditions have improved faster than it expected when it made its last global forecast in April, the fund said, largely due to government support for banks and other financial companies.

The IMF expects the world economy to shrink by 1.4 percent in 2009, slightly worse than its earlier estimate of 1.3 percent. But it boosted its estimate for global economic growth in 2010 to 2.5 percent, up from its April projection of 1.9 percent.

"The global recession is not over, and the recovery is still expected to be slow," the IMF said in an update to its world economic outlook. Banks are still hampered by bad loans on their balance sheets, the fund said.

Advanced economies such as the United States, Europe and Japan aren't expected to show sustained growth until the second half of next year.

Central banks that still have room to cut interest rates should do so, the IMF said, and governments should continue to stimulate their economies through 2010 with measures such as greater spending or tax cuts.

The IMF expects the U.S. economy to shrink by 2.6 percent this year, a slight improvement from its earlier estimate of a 2.8 percent decline and in line with many private forecasts.

The U.S. will grow 0.8 percent in 2010, the IMF said, up from its expectation of no growth in April.

China and India are both expected to grow faster than previously estimated, with China's growth forecast at 7.5 percent this year and India's economy to grow at a 5.4 percent pace.

The IMF provides loans and other assistance to troubled countries and has 185 member nations. It saw its influence decline earlier this decade as developing country economies boomed due to higher oil and other commodity prices.

But the worldwide recession has caused countries in Eastern Europe and elsewhere to turn to the fund for loans to support their crippled economies.

The Obama administration pledged $100 billion earlier this year to support an IMF emergency loan fund.

Conducting Layoffs: 'Necessary Evils' at Work

2009-07-08T00:07:00.001+08:00

Q&A with: Joshua D. Margolis and Andrew L. Molinsky
Published: July 6, 2009
Author: Martha Lagace

In this uncertain economic climate, downsizing and layoffs are a sadly frequent occurrence. Although bad news is always painful to deliver and to hear, the process of conducting "necessary evils"—such as layoffs or firings—can be managed in a way that is clear yet respectful. It can also be handled in a way that allows for the emotional cauldron that people experience when they are the ones who actually carry out these tasks. According to research by Joshua D. Margolis of HBS and Andrew Molinsky of Brandeis, the emotions and preparation of the person performing a necessary evil are crucial to the subsequent response of those on the receiving end.

"We define a necessary evil as a work-related task that requires a person to cause physical, emotional, or material harm to another human being in order to advance a perceived greater good," say Margolis and Molinsky.

Margolis, an associate professor of business administration in the Organizational Behavior unit at HBS, and Molinsky, an assistant professor of organizational behavior at Brandeis University International Business School, have described their work in two papers: "The Emotional Tightrope of Downsizing: Hidden Challenges for Leaders and their Organizations," in the journal Organizational Dynamics, and "Navigating the Bind of Necessary Evils: Psychological Engagement and the Production of Interpersonally Sensitive Behavior," in the Academy of Management Journal.

The researchers joined forces and shared their insights on this tricky topic in an e-mail Q&A with HBS Working Knowledge.

Martha Lagace: Why did you focus on those people who carry out "necessary evils" in the workplace?

Joshua Margolis and Andrew Molinsky: We became interested in necessary evils because students in our undergraduate, MBA, and executive education classes were being called upon to do these tasks and found them so difficult that they often failed to perform them effectively.

When we turned to the academic research, we found a fair amount of research on what victims need when they're on the receiving end. But little attention had been devoted to the challenges faced by those who must perform these tasks. We really wanted to understand their experience so that we could help people equip themselves to get these crucial tasks done effectively and compassionately.

Q: How did you conduct this research? What are your main findings?

A: In our study, we interviewed over 100 professionals in four different occupations—management, medicine, law enforcement, and addiction counseling—and noticed three surprising patterns that cut across all four occupations.

First, in contrast to the stereotypical image of an emotionally numb performer callously or robotically executing a necessary evil, we found that most people in our study experienced an intense mix of emotions when performing these tasks. These emotions included sympathy, sadness, guilt, shame, anxiety, and even anger at times.

A second unanticipated pattern emerged in our data: Many people remained psychologically engaged with these emotions throughout the performance of the task, acutely aware of the pain experienced by those on the receiving end of their actions. This finding was surprising to us in light of previous research, which has emphasized how people distance themselves from their emotions when causing pain or harm.

Finally, as we analyzed our data, we were struck by the resourcefulness and creativity of the managers, doctors, police officers, and addiction counselors whom we interviewed. Necessary evils are often done under difficult conditions, with lots of unpredictable twists and turns—in how the victim will react, for example. Rather than simply following an automated routine, many people in our study would often tailor their conduct toward the victim in ways that reflected the specific challenges of the situation or the needs of the victim. They frequently had to improvise.

It is important to note, however, that we did not gather data about outcomes in this study, so we cannot conclude that any particular method of handling the task resulted in better or worse outcomes for performers or for those on the receiving end. However, our data do suggest a high level of psychological engagement that we did not anticipate based on conventional wisdom and our reading of prior academic literature.

When we put these patterns together and analyzed our data systematically, we found that people were more likely to customize their treatment of victims when they were able to stay connected with their own emotional experience. Our conclusion, however, is that this approach is not for everyone. In fact, we identified four different approaches people used to perform necessary evils effectively, so that the task got done and the victims were treated with decency and respect.

For those who have to perform necessary evils, this suggests that best practice means, first, understanding yourself and recognizing your limitations. As we learned in our study, some people are able to remain connected to intense emotions and improvise as the situation unfolds, customizing the way in which they treat those on the receiving end of their actions. For these individuals, following a scripted response to the situation might feel like a burden. It could also constrain their ability to improvise effectively. In contrast, a scripted response to a necessary evil is a critical resource for someone who is unable to manage his or her emotional reactions and who would become overwhelmed without a routine.

Organizations often prepare managers through role-playing and by equipping them with scripts, all of which help. But it is equally important for managers to prepare for the spark of emotion they will experience during the actual situation. Therefore, for everyone who must perform a necessary evil, best practice entails understanding ahead of time the emotional cocktail that you will likely experience as well as recognizing the potential impact those emotions will have on your conduct during a layoff.

It is also helpful to devise methods for managing yourself under such intense emotion: for example, asking yourself, "When I feel the heat of the situation, how will I coach myself?" Taking this added step can enable you to complete the task proficiently and respond constructively to the needs of those on the receiving end.

Q: At a company level, did you find best practices around necessary evils?

A: For companies, best practice means focusing not only on getting the task done and ensuring the well-being of victims, but also on the well-being of those who perform the necessary evils. In addition to the typical training that many companies run for managers, and the individual preparation managers do on their own before performing a layoff, we found three practices to be common across multiple types of necessary evils:

* Have pairs or teams perform these tasks together.
* Create ample time and space after these tasks for people to decompress and debrief.
* Provide the right physical environment—a quiet, private area for delivering layoff news.

Q: Did emotions change whether people delivering the bad news were performing a layoff or firing someone?

A: In general, we found very few people who welcomed these tasks, but a few did feel that they were best equipped to take on the responsibility because of their experience—both performing layoffs and being laid off. These managers felt they understood the magnitude of the responsibility—that the health and welfare of the company and the victims rested on their shoulders—and were ready to take on that responsibility.

A common question that gets debated is whether it is harder to lay someone off because of economic conditions or to fire someone because of poor job performance. We did not find any clear patterns, but we did find strong opinions. Some managers expressed the view that because layoff victims' own performance was not responsible for their fate, delivering the news did not amount to a negative judgment of the victim. Therefore, they felt that layoffs were not as difficult as firing someone, where the decision involves a verdict on a person with whom you've worked, often quite closely.

But other managers felt just the opposite. Precisely because layoff victims did nothing to warrant their fate, that news was harder for some in our study to deliver than firing someone for poor performance. Direct reports had to be let go through no fault of their own, and for some managers that felt worse.

Overall, whether firing someone or laying someone off, the typical experience is captured in what one experienced manager told us: "The day it doesn't bother you is the day you need to leave your job." But people adopted different approaches for getting that job done. Some remained connected to their emotions, whereas others set their emotions aside until after they had delivered the news.

Q: Who are the best personnel in a company to conduct layoffs? How should they prepare?

A: We do not believe there are better or worse people to perform these tasks. And much like the debate about which is harder, a layoff or a firing, we found that some people preferred to have a personal relationship with the victim, whereas others found those the hardest layoffs to perform. In our study, a key difference lay in the challenges faced by novices and veterans.

The core challenge for everyone who performs necessary evils comes from having to do two seemingly contradictory things at once: be compassionate and be direct. Those being laid off want to sense that the person giving them the news is empathic and caring. However, the message must also be delivered in a clear and direct way. In an effort to be compassionate, and out of a desire not to appear hard-hearted, it is all too easy to try to sugarcoat the message or to ease into it. But that simply confuses victims and prolongs the process. So doers must actually behave in ways that can feel contradictory, at once delivering a clear, concise, and direct message while providing the time, support, caring touch, and assistance necessary to help the victim digest the message and begin the process of moving forward.

Novices sometimes veer to one extreme or the other, delivering the hard news without the compassion, perhaps to demonstrate their toughness or ability to handle the task, or succumbing to a burst of sympathy that causes them to cushion and obfuscate the message. Veterans, on the other hand, need to be careful not to become too routinized in how they deliver the message or in how they express care and concern. Ideally, personnel should be chosen who are able to strike a balance between these two extremes. We also believe that companies can train people to learn how to achieve this balance.

In terms of preparing beforehand, we found that it was essential for equipping those who perform necessary evils with the ability and tools to handle the task effectively. Preparing ahead of time gives performers a realistic preview of the experience they are about to encounter. This enables them to develop strategies for managing their own emotions, as well as those of the people on the receiving end, in order to facilitate successful task performance.

Watching others, role-playing with a colleague, doing a dry-run in front of a mirror or with a recording device, and even getting accustomed to the setting where the news will be delivered all help managers develop and internalize the way they will perform these tasks. These different forms of practicing enable them to develop and begin to customize their own way of handling a layoff.

Finally, as part of this preparation, managers should figure out what they will do after the task. Building in a process for releasing stress and reviewing task performance helps managers at any level of experience to learn, to improve, and to move on to subsequent tasks. Some companies have formal meetings at the end of each day in a layoff procedure, so that those delivering the news can find comfort in debriefing the experience. Some managers find these helpful, while others prefer time alone to reflect or to do physical exercise. Stress relief and learning, though, are the two key components for taking care of yourself after performing a necessary evil.

Q: What are the main risks to avoid? And what defines success?

A: There are three main risks people who perform necessary evils should avoid:

The first risk is going in unprepared. These tasks may seem simple, but it is quite complex telling people they are being let go in a way that they can hear. Many managers believe they can easily handle these tasks because they have performed them before. However, each layoff is unique, and although it is tempting for managers to believe they can walk in, improvise, and adjust on the fly, preparation is critical for understanding the specifics of a case and for handling the potential emotional onslaught: for example, prepare what you plan to say, how you will manage your own emotions, how you will treat the victim, how he or she may react, and how to outfit the setting. The aim is not to become a robot sticking to that script. The aim is by doing a run-through of what to expect, managers can be better poised to handle whatever comes their way—especially the victim's reaction and their own reaction—when they are in the thick of executing the task.

A second risk is failing to achieve the delicate balance of compassion and directness that is required to handle these tasks effectively. A manager can easily become overwhelmed by emotion and erupt in anger when challenged in the meeting, or even break down in tears. Participants in our study related examples of each of these missteps. Managers can also fall off the other side of the emotional balance beam, becoming overly rigid, scripted, and automated in their conduct, and victims can walk out feeling mistreated. No matter how dire the company's economic state or how poorly the employee performed, all human beings want to be respected for the effort they have devoted to the company, and they want to leave with their dignity intact. It is not easy to make them feel appropriately treated, while still making sure the news is delivered clearly. It means striking a chord that is simultaneously firm, direct, compassionate, and respectful. That is exactly the challenge of necessary evils.

The third risk is neglecting one's own well-being. These are hard, demanding tasks that take a toll on the most experienced managers—even those who have done it multiple times before. To believe that one can simply set emotions aside because that is what "good" managers do is unrealistic. Instead, we found that successful managers are able to channel heartfelt emotion into gestures that victims appreciate (such as following up with them afterward), and to find ways to restore themselves, physically and psychologically, following the completion of the task.

Our research suggests three criteria of success:

1. The task actually gets done. In the case of layoffs, this means that the victim grasps the message (for example, that today is his or her last day of work) and knows the process to follow.
2. The victim feels that he/she has been treated in a way that respects his/her dignity and—as important—lays the groundwork to allow him/her to rebound and move on in a constructive way.
3. Typically overlooked is that the task must be done in a way that enables the manager performing the deed to sustain his/her own well-being, ongoing effectiveness, and moral sensitivity.

The task does not magically get done. There is a person who needs to do it, and it is that person whose conduct will determine whether the victim feels respected and cared for. Our research reveals that getting the task done and treating victims in the appropriate way is taxing. It can burn people out or cause them to become callous to the experience. Neither is a good outcome. Success means attending to the performer's well-being, so that he or she can continue to function effectively in the role, which likely will be even more demanding after the layoff.

Q: What are you working on now?

A: We are each broadening our focus to understand how people can get other essential but taxing managerial tasks accomplished.

Joshua is currently working on research designed to help managers and executives handle complex ethical tasks in organizational settings. For example, people often hesitate to raise sensitive ethical issues because of how their concerns will be received. So how can a person do so effectively in ways that will enable others to listen and that will mobilize them to respond constructively?

Andy is currently working on helping people cope with the challenges of psychologically demanding tasks in a different domain: international management. His current research project examines the challenges that foreigners face in adopting practices central to effective management in their new national culture that seem inauthentic in light of their native-born culture.

We are also pooling our expertise to collaborate on a project about effective ways people can manage themselves over the duration of complex and taxing managerial tasks—and how companies can help them succeed in this endeavor.
About the author

Martha Lagace is the senior editor of HBS Working Knowledge.

Global recovery still uncertain

2009-07-08T00:06:00.000+08:00

MADRID - THE global economy could start to recover at the beginning of 2010 but the degree of uncertainty remains substantial, Bank of Spain governor Miguel Angel Fernandez Ordonez said on Tuesday.

'Today, the majority of institutions that are developing forecasts agree that the restoration of the global economy could take place early in the year ahead. But the level of uncertainty is enormous,' he told a conference in Madrid.

'There is a Chinese proverb that says we cannot say that a man was happy before the last day of his life. We should probably take the same precautions to discuss resolution of the crisis,' added Mr Fernandez Ordonez, who is also a European Central Bank Governing Council member.

In April the International Monetary Fund predicted global economic growth of 1.9 per cent in 2010, after a contraction of 1.3 per cent in 2009. In January, the IMF had predicted an economic contraction of just 1.1 per cent next year.

Mr Fernandez Ordonez added that governments and policymakers had largely avoided the mistakes of the financial crisis of 1929 when governments adopted protectionist and nationalist measures.

'One of the worst scenarios of the crisis may have been avoided: the de-globalisation of the financial system,' he said. -- AFP

H1N1 spread unstoppable

2009-07-04T12:05:00.001+08:00

CANCUN (MEXICO) - THE H1N1 flu virus is running wild in the Southern Hemisphere, spreading rapidly through Europe, and showing signs of rebounding in Mexico. That indicates it may be unstoppable, warns World Health Organisation (Who) director-general Margaret Chan.

She was speaking to health ministers from around the globe at the opening on Thursday of a two-day summit to design strategies for battling the pandemic. 'As we see today, with well over 100 countries reporting cases, once a fully fit pandemic virus emerges, its further international spread is unstoppable,' said Dr Chan.

Nations attending the summit include the United States, Canada, China, Britain and Brazil.

Mexican officials wanted the meeting held in the Caribbean resort city of Cancun - where tourism has plunged - to highlight the country's success in controlling its epidemic with a five-day national shutdown of schools and businesses in May. The measures were applauded by the US Centres for Disease Control and international health officials. 'Our presence here is an expression of confidence,' said Dr Chan.

But Mexico is starting to see an increase in H1N1 flu cases in isolated areas, in a worrying sign that the country may see a resurgence, especially when its winter flu season begins in November.

Mexico has confirmed a total of 10,687 cases to date, including 119 deaths. Officials blamed the spike on outbreaks in schools, which have since closed a few weeks early for summer break.

'Unfortunately, we let our guard down, especially after classes started, and the outbreak is unstoppable,' Yucatan health secretary Alvaro Quijano told local news media.

With the Southern Hemisphere in the midst of its winter flu season, Dr Chan said officials are keeping a close watch on those countries.

The virus is spreading in Chile, and Argentina - with 1,587 cases and 26 deaths - ranks third behind Mexico and the United States. In Europe, the hardest-hit nation is Britain, which has officially reported 7,447 H1N1 flu cases. Many flu experts believe numbers could jump exponentially now that the virus is entrenched.

Worldwide, there were 332 deaths and more than 77,000 confirmed cases as of Wednesday, according to WHO's latest figures.

Wealth managers must up their game to survive: PwC

2009-07-04T09:49:00.001+08:00

By CHEW XIANG

The economic crisis has brought the soaring wealth management industry down to earth and it must change to survive, according to a new study by PricewaterhouseCoopers (PwC).

The report, titled A New Era: Redefining Ways to Deliver Trusted Advice, argues that falling asset values and the number of high-profile scandals in the industry have hurt trust between clients and their relationship managers. 'There is a sense that some wealth managers might have placed short-term revenue goals - and not client interests - at the heart of their businesses,' PwC says.

The report, which surveyed 240 private banks and wealth managers in 40 countries around the world, says firms losing clients and assets will now have to focus on providing quality advice and invest in technology. 'Wealth managers must up their game. The industry is at an historic crossroads. Quality of advice is the real differentiator,' says Justin Ong, Asia Pacific private banking and wealth management leader at PwC and one of the authors of the report.

While wealth managers have fed deeply from the trough in the past few years, the 'economic crisis has presented (them) with challenges that they have neither the experience nor the skills to deal with', PwC says. As clients turn away from risk and demand more transparency, it will no longer be possible to sustain profitability by pushing products, the report notes, and that means wealth managers will have to focus on providing quality advice. 'Wealth managers can no longer afford to be all things to all people.'

While many firms profess to focus on their clients, the reality of delivery is often different, the report says. Many do not have formal client retention programmes and clients are seldom asked to comment on the quality of service they receive. While most wealth managers now report spending more time on cultivating relationships with clients, some clients have become disillusioned with the poor quality of their relationship managers and the advice given.

Over half of clients said their primary source of financial advice was their own research and knowledge. Wealth managers identified the three most common areas of weakness for front-office staff as an inability to adapt to change, lack of client relationship skills, and poor appreciation of risk.

While there is some consensus that reform of reward systems is needed to drive better service, 55 per cent of wealth managers say they have no plans to change this in the next two years, the report says. 'There is a strong sense of 'first-mover disadvantage',' the report notes. Average retention of relationship managers is still very low and only a quarter of them have discussed medium-term career development plans with their firms, the report says.

Worse for the industry, their relatively fixed-cost base means they have little scope to cut expenses and improve efficiency, the report says. Cutting front-office staff could cause clients to leave. 'The best way to escape from this cost trap is to grow through acquisition of new clients or increasing the share of wallet from existing clients,' PwC says. The wealth managers with the best performance, however, poached relationship managers at twice as much as the average rate, the report says, noting that the best firms also had the lowest ratio of clients to relationship managers.

On the other hand, size does not matter, as the industry does not have great economies of scale, PwC says. 'Our survey suggests very clearly that there is no direct link between size and profitability (in terms of cost/income ratio).'

What firms can do is make better use of technology and improve their process management, PwC says. For instance, at the peak of the crisis, many wealth managers were unable to keep up with clients' demands for regular, even real-time, updates of their financial position. Sharing services and back-office functions, as well as outsourcing what need not be done in-house, are also suggested ways of cost-cutting, the report says.

This article was first published in The Business Times.

Wealthy investors still cautious, fear further price falls: Poll

2009-07-04T09:43:00.000+08:00

By Gabriel Chen

HIGH net worth individuals are sitting on the fence because they are afraid of major price corrections, according to a new survey by Barclays Wealth and the Economist Intelligence Unit.

The report - based on a world poll of 2,100 high net worth individuals, more than 100 of whom are from Singapore - found the majority thought there were buying opportunities, but believed the risk of price falls was too high to take advantage of them.

Compiled between March and May, the data showed that 59 per cent of investors held this view in Singapore, compared with an Asia-Pacific average of 66 per cent.

Around the world, investors have questioned whether the recent 12-week rally is a prelude to the next bull market.

Many have stayed out of the stock market, fearing that the speed and severity of the downturn may lead to further market plunges.

This, despite global stock indices surging since the lows of March 9.

The MSCI index of Asia-Pacific stocks outside Japan has jumped more than 50 per cent from the March trough to late last month.

'For the average investor, they missed out on the early boom because they were too nervous,' said Barclays Wealth head of behavioural finance Greg Davis.

Private bankers agreed that the mood among wealthy investors in Singapore was still generally cautious.

'They are hesitant to jump feet first back into the market for fear of a pullback from the recent market rally - particularly so for those who missed the rally over the last few months,' said Mr Raj Sriram, RBS Coutts' head of private banking in Singapore.

Mr Rajesh Malkani, Standard Chartered Private Bank's head of South-east Asia, said that it is stepping up its communication with clients, keeping them informed of market conditions and reviewing their portfolios regularly.

This article was first published in The Straits Times.

Wheelock chief urges separate listing regulator

2009-07-04T09:32:00.000+08:00

David Lawrence takes a critical view of safeguards offered by Chinese walls

By KALPANA RASHIWALA

WHEELOCK Properties (Singapore) CEO David Lawrence has joined the ranks of those calling for a separate authority to regulate listed companies in Singapore as the existing authority, Singapore Exchange, faces an inherent conflict of interest as it is a listed company.

'I think what is needed is a separate regulatory authority in Singapore. Not the MAS, but a separate regulatory authority for the listing of companies in Singapore. So that Singapore can maintain its international reputation and integrity.
'It is better to expand slowly with better companies than to expand quickly with nonsense companies with directors you can't trust,' Mr Lawrence said in a recent interview with BT.
Being a listed company, SGX, its CEO and directors have a duty to make money for their shareholders and expand the business, he added. 'The SGX is competing with me for investors' capital. Why should a competitor regulate me? Maybe I should regulate them!' he quipped.
Mr Lawrence observed that the same problem exists in Hong Kong, where a discussion has been raging on the topic for years.
Mr Lawrence debunked the notion of Chinese walls. 'SGX will probably say, like all the investment bankers have been saying to me for the last 10 to 20 years, 'Well, we have Chinese walls between departments.

'I've been saying to these investment bankers for 20 years, 'Have you ever walked along (the Great Wall of China)?' No, they haven't. I have, and I can tell you there are more holes than there are actual built walls.'
Market watchers note there's been a long-standing discussion on the potential conflict facing the SGX because of its dual role as a commercial entity and markets regulator. Some have criticised the SGX for not taking a tougher regulatory stand against errant companies listed on the bourse here, arguing that SGX may see tough actions as working against its attractiveness as a listing platform. Critics also point out that SGX's earnings and losses are shared by both the regulatory and listing departments.
The race to attract China companies or S-Chips to list here in the past may have led to SGX pulling in some poor-quality issuers whose share prices have been punished by the market. Those monitoring the real estate investment trust market also wonder how some Reits that don't have any raison d'ÃƒÂªtre ever got listed in Singapore.
Observers also point out that SGX's top regulator, Yeo Lian Sim, receives performance shares from the company, which could potentially create conflict.
Agreeing, Mak Yuen Teen, co-director of the Corporate Governance and Financial Reporting Centre, said: 'I hold the view that those involved with managing risk, internal audit or regulatory functions should not have variable pay tied to the bottomline or stock price of the organisation. The company has to think of other ways of measuring their performance and rewarding them.'
SGX has maintained that it has a robust framework of checks and balances to ensure that its regulatory and commercial goals are not divergent.
For instance, a Regulatory Conflicts Committee comprising SGX's independent directors oversees the handling of regulatory conflicts within SGX. The committee in turn accounts for its actions to MAS.

Courtesy of Conrad: The Camel’s Back Slides

2009-07-04T01:33:00.000+08:00

The worst jobs data in 26 years, the worst pre-4th-of-July performance in 100 years, 5 more bank closures to bring the year’s total to 51 banks gone bust, the lowest close on the DOW since May this year, a second round of soon-to-be-useless stimulus programs after the first round did nothing but waste money, interest rates to remain low, the start of the year’s worst quarter and the worst earnings quarter is upon us next week … can we expect any worse?

Yes, we can.

And it doesn’t look any rosier in Singapore either … private housing prices fall more than 5% month on month, unemployment and job losses steadily mounting, shipping slowing down, retail sales taking a hit in spite of GSS, deferred payment defaults have started, more and more are paying minimums on their credit cards debts, government begins raising funds through bond sales made convenient through ATMs and the housing bubble continues to swell unabated as Singaporeans pour their remaining reserves late into the rally … can we get any more ignorant?

Yes, we can.

DOW completed the neckline retest of its Head & Shoulders pattern and confirmed the weekly Evening Star from three weeks ago with three consecutive down weeks. Now it looks set for a short-term downside XOP at 7,900 by mid-to-late August and XXOP at 7,280 by late September. It looks like we’ll get another October stinker this year if this goes on. And if that happens, I might just get my DOW 6,000 to 5,800.

It was always suspected that the March-June rally was not sustainable. As the big players stayed sidelined and fund managers focused on improving their portfolios’ performance, the market’s leadership by Energy and Materials together with the underlying lack of fundamentals was always going to falter that rally spectacularly in the near term. And now we have it, late, like everything else in life.

America’s Recession is now 20 months old. Although they would deny it, they are technically in Depression and have been since half a year ago;

From Wikipedia:

In economics, a depression is a sustained, long downturn in one or more economies. It is more severe than a recession, which is seen as a normal downturn in the business cycle.

Considered a rare and extreme form of recession, a depression is characterized by abnormal increases in unemployment, restriction of credit, shrinking output and investment, numerous bankruptcies, reduced amounts of trade and commerce, as well as highly volatile relative currency value fluctuations, mostly devaluations. Price deflation or hyperinflation are also common elements of a depression.

America is in Depression. There can be no doubt about it except that they haven’t officially acknowledged it just like they did not acknowledge their Recession till a year after the fact in December 2008. (America had been in Recession since December 2007.)

Singapore is no better except that we’re cash rich from the outstanding 2003 to 2007 rally that saw us reap in and stack up cash reserves that are currently keeping us comfy and safe. But the truth is in the pudding, as they say and the pudding I am looking at every week is the amazing rate at which the government is discharging bankrupts. Discharge rates are outpacing new bankrupts by about 3 to 2 as seen in today’s Classifieds. And that trend is picking up in pace.

What is even more obvious (and disturbing) is the obvious fact that those getting discharged were from the previous recessions (1997 through 2005) with the bulk of discharged individuals coming from that most painful time in the last recession between 2001 and 2002. A distant Aunt of mine was even discharged without paying up much of her debt.

Although speculative, I am looking at a situation that is out of control with regard to credit in Singapore. It’s a funny thing but it would seem the banks have shot themselves in the foot on this one. To me, it’s a good thing because it tells me how much pain the banks and our economy are in.

Imagine this; just looking at the number of bankrupts being discharged today alone (79, plus one annulment), you have to wonder just how many more there are out there. And if more than half of these bankrupts are through credit defaults, then it’s because the banks put them into bankruptcy in the first place back in 2001 and 2002. I know because I was one of them. So here’s the irony …

Banks have been and are still dishing out Credit facilities to everyone and anyone who vaguely qualifies for one. In most cases, you only need to have a salary of $4,000 and you get a credit line of $20,000 (per bank). This means you get up to five times the leverage on your current outlay. This increases your chances of over-spending by five times. Now do the math by the number of banks you can apply to for the same credit leverage.

And when you can’t afford to pay the debt, you can choose to pay the minimum to cover the interest. What happened in 2001 and 2002 is that many people who used these facilities ended up losing their jobs and were unable to even pay the minimum. They were promptly bankrupted.

The numbers and dates of today’s (and the past 9 weeks) bankrupts being discharged and the circumstances of their discharge has prompted me to make an obvious assumption - this profitable line of “credit” is running thin for the banks.

You see … before the banks are able to rid themselves from the mess they made from the last recession, the mess is piling up higher with this recession’s new mess. We know that most of the bankrupts are from credit defaults simply by checking on the Notices pages in the Classifieds. And this is where the banks shot themselves in the foot …

The banks have united to form a database of discharged bankrupts and have a very efficient system to disqualify recently discharged bankrupts from getting financial assistance or certain financial facilities. The government says you are a free person upon your discharge but the banks keep you in financial jail for another seven years. (Strange that they have such an efficient system to recognize ex-bankrupts but is incapable of recognizing and warning their clients of their dangerous and obvious over-spending and over leveraging!)

Now that so many have gone bust, the banks are finding less and less people to take up their credit facilities and continue their profitable minimum payment scheme. And with so many more on the seven year blacklist, their database of qualified creditors is getting smaller every day. You know this to be true because of the increasing number of telemarketing calls you’ve been getting of late. (Strange that their efficient system also fails to disqualify ex-bankrupts from their telemarketing exercise because I’ve been getting quite a few calls lately!)

Thus, the solution is to get more discharged earlier and reduce the seven year financial jail term to three.

There you go … another pain indicator to tell us that our financial system is not all well and doing fine. This recession is going to be longer than we can imagine and if I am right about this, then the banks are going to be hurting to raise funds as their creditors slowly but surely dwindle. (Strange that they cut our savings rate from pathetic to ridiculous but kept mortgage and loan rates at intolerable!)

And now the fireworks display is all set for a great September/October show when no less than 7 condominium projects will T.O.P. and hundreds of new home owners will be expected to shell out the 50% stage of their deferred payment plan. If you’ve never seen shit hitting the fan before, you’d be advised to carry a really big umbrella in October because the Monsoon Season of 2009 is about to bring a new kind of rain that is going to put us deep in it.

So can this economy get any worse? Can we make it any more painful than it should be? Can we drag out this pain for a longer time than necessary? Can we get any greedier than Wall Street? With the “help” of our banks …

Yes, we can.

God help America while we, in Singapore repeat their mistakes.

Happy Independence Day on the 4th of July, 2009.

http://www.conradalvinlim.com/

A Second Job: The Right Choice for You?

2009-07-04T01:15:00.001+08:00

by Laura Rowley

Kelli Conway, 23, graduated from the University of Louisiana last year. By day she’s a junior publicist in a small public relations firm in New York City, by night a restaurant hostess. She works at the agency weekdays from 10:00 a.m. until 4:00 p.m., then pulls a shift at the restaurant from 4:30 to 10:30 three weeknights and one Saturday or Sunday night each week.

Conway told her boss at the PR firm about the restaurant gig when she was hired. “The founder of the company was great about it from the get-go; he completely understood that I need two jobs to be able to survive in the city,” she says.

Moonlighting is becoming ever more popular as households struggle with layoffs, wage cuts, furloughs, and rising expenses. Unemployment is at 9.5 percent, and employees are averaging a workweek of 33 hours, according to the Labor Department -- a record low. In the first six months of 2009, 7.5 million people held multiple jobs, or 4.8 percent of workers, according to the Bureau of Labor Statistics.

In a Yahoo! survey of 2,000 Americans conducted in April by Decipher, 12 percent of respondents said they had taken a second job in response to the recession. Separately, the survey found 28 percent of workers felt less satisfied in their jobs than a year ago; of that group, 68 percent said they were not making as much as they desired, and 42 percent were concerned about job security.

Consider the Toll

But carefully consider the toll of moonlighting before jumping in, says Andrea Kay, an author and career consultant based in Cincinnati: “If the second job detracts from time with your family, will you be creating new problems in your life? Who do you need to have a conversation with about that? How will it affect your health? People can get easily overwhelmed when they take on second roles.”

Conway admits “there are days, especially after working 12 or 13 hour shifts a few days in row, where I come in exhausted, I’m not completely up to par. But at the end of the day, I’m getting my job done.”

Lay out the financial costs -- commuting, day care, taxes on the extra earnings, or equipment a second job may require. For example, several legitimate call center companies allow employees to work at home and earn $7 to $8 an hour, such as liveops.com, alpineaccess.com, and willow.com. But workers have to have a designated landline to answer calls -- which can run $25 or $30 a month. Make sure you know what your full-time employer’s policy is on moonlighting, and be wary of conflicts of interest.

In addition, put a time limit on your moonlighting plan -- three months, six months -- so you can see a light at the end of the tunnel. To stay motivated, attach a specific goal to the timeframe, whether it’s saving a certain amount of cash, paying off a debt, or gaining skills that will boost your salary in your day job.

Look Into Other Options

Moreover, if the motivation is strictly extra cash, first consider other options to boost your paycheck in your current industry, says Kay: “Is there something you can do on the side -- education, training -- that would enhance your value so you’ll be paid more at your current job or at another one? Or help you build toward that goal in the future?”

On the other hand, a career change often motivates workers to put in a double shift. When I was transitioning from a print journalism job to television, for example, I worked as a freelance writer on a morning news program from 2:00 a.m. to 7:00 a.m. and then put in a 9-to-5 shift at my day job. (It was brutal.) After five months, I was hired by the new company.

Nearly one-third of dissatisfied workers in the Yahoo! survey said they “don’t feel part of a career path.” Robert Lorber, president of Lorber Kamai Consulting and a professor at University of California, Davis, advises career-shifters to ask themselves four questions before jumping into a second job:

1. Who are you and what do you want?
2. Where are you and why are you there?
3. What will you do and how will you do it?
4. Who are your allies and how can they help?

“Think about what you’d like to learn and what gets you excited,” says Lorber, author of several career books.

Mark Mansfield, 37, is vice president of sales and marketing for a Minnesota company that sells point-of-sale systems and other technology to restaurants. At night he works on his start-up, boolaka.com, a social-networking site for independent filmmakers that's something like LinkedIn meets YouTube meets the Sundance Film Festival. Filmmakers and others in the business can post their needs for a project or resumes seeking work; find resources, tools, and expert advice to get a project done and noticed; and upload finished films for visitors to watch.

Mansfield argues that there's an upside to having a second job. "It's an enormous challenge -- but it's a blast; it evolves and changes every day," he says. "It keeps me from getting burned out on my day job because it's not all that I think about. I can unplug from my day job and come back with a totally new perspective on how to tackle a problem. That's been very valuable."

If a second job is out of the question, consider asking for an unpaid leave of absence or a one-day-a-week furlough for a period of time to explore the new career, says Kay, since many employers are looking for ways to reduce costs in the current environment. “Be careful about how much detail you share with the company” regarding why you want the time off, she adds.

There’s also the allure of launching a small business. In 2008, 1.6 million workers, or 1 percent of the workforce, earned wages and salaries in a primary position and were self-employed in a second job, according to the Bureau of Labor Statistics.

Bridging the Gap

Even if the job that pays the bills seems unrelated to the passion, look for potential “allies” who can bridge the gap. Kay knew an artist who took a second job as a hostess at a popular restaurant and eventually convinced her employer to display her artwork on the walls, which helped drive her business.

Just beware “daylighting” -- the practice of managing a side business while you’re on the clock. Although there are no formal statistics on daylighting, a 2008 Salary.com survey found that 73 percent of respondents admitted to doing activities unrelated to their jobs while at work -- up 10 percent from the year before.

Lorber says daylighting is a major no-no. “If you take another job while doing your own job, it’s totally out of integrity,” he says, especially if there are conflicts of interest or you are competing with your employer. On the other hand, “if you are doing something additional at night that’s not taking away from what you’re doing at work, that’s a personal choice” and doesn’t necessarily need to be revealed.

Conway works on commission at the PR firm, so she can’t always count on a weekly paycheck. But she’s making the most of her opportunity. “I get to go to some events -- it’s a great way to meet people in the city,” she says. “When you want to move up, networking is everything.”

The Million Dollar Secret (Republished)

2009-07-04T01:13:00.001+08:00

In Jun 2007 (during the economy boom time), I wrote an article called Million Dollar Secret. Some of our early members may have read it. If you've read it 2 years ago, I hope you've benefited from it as much as I do. Time flies. Two years have passed. I think it's timely to tell the same secret again.

If you are in your 20s or 30s, this secret is going to turn you into a Millionaire. If you are in your 40s and 50s, you may be a little too late to benefit from this secret, unless you are already prepared.

Here's the secret that I wrote in Jun 2007 (without changing a word)......

The economy works in a predictable cycle. Let's start from the end of a depression. When the market revives from a depression, stock prices will be the first thing that climbs up. Then, all kinds of interest rates will increase. This is followed by a drop in unemployment rate and companies posting good annual report. Stock prices begin to skyrocket and everyone starts to talk about how much they make in stocks. Those who have earned enough from the stock market will start to pump their money into properties. Property hype begins. Property prices shoot up. Interest rates continue to increase. Salaries increase. Economy is now in a boom.

During economic boom, more money is channeled into properties. Property prices continue to rise. Stock prices begin to stagnate due to lack of fund. Interest rate and rental rise to an all-time-high, businesses manage to survive because consumers' spending is still high. Consumers' spending is high because of good salaries, good bonus and good earning from stocks.

Usually when this happens, some bad news will set in and the market crashes. Stock prices fall sharply. Money in the market suddenly dries up because everyone withdraw their money out of fear. Economy begins to slow down. Rental falls, property prices begin to fall. Everyone starts to tighten their spending, resulting in poor business for every company. Business is bad, unemployment increases. The economy is now in a depression.

During economic depression, businesses with poor business model or poor products will be phased out. Interest rate starts to drop to help businesses to survive. The market begins its correction process. After the correction, the economy cycle repeats. Stock market will be the first indication, followed by interest rate, and finally property.

The rich understands this economic cycle. Unlike the poor, the rich will start to park their cash in the stock market towards the end of the depression. The rich will wait patiently for 1, 2 or 3 years. They are not bothered by the daily fluctuation in stock prices. When stock market revive, they easily make 200-300% return. The next thing they watch out for is the property prices. When property prices begin to show its first quarter increase, they will sell off some of their shares and grab a few properties. In another 1 or 2 years, their properties appreciate in value and they easily make a few millions. When the economy reaches its peak, they will sell off some of their properties, keep some to earn rental income and park the rest of their money in fix deposit, survive through the depression (which can last for about 5 years!) and wait for the next cycle!

Guess what the poor will be doing? They do the exact opposite. When the market is good, they got their pay rise and bonuses. They feel rich and start to think of some investment. Usually, they will turn to a bank and listen to those unit trust managers who show them all kinds of track record about the superb performance of their unit trusts. The poor will then put their hard earned cash into those unit trusts and become a victim of the next economy depression.

I hope you know where your economy is at right now. In Singapore, property hype has just began. Property prices are increasing at astonishing rate and it's getting harder to find good investment. Economic boom may continue for another 1-2 years (that's my guess), but the days of getting 100% return in stock market is gone. Property investment is still viable, but 100-200% return is not likely. For those who have just started work, this round of economic boom is not for you. You should use the next 5-7 years to accumulate your cash and get ready for the next boom.

Remember, history repeats itself. You don't have to be a swami guru to predict the future.

...... end of my article in Jun 2007.

Today, we're at the opposite of the economy in 2007. But history will still repeat itself. You don't have to be a swami guru to predict the future.

To your success,
Kenneth Koh
Founder, EmailCashPro.com

Pay-Cut Cities

2009-07-03T00:17:00.000+08:00

by Joshua Zumbrun

It's not the best time to make a new start of it in New York state. Although the state's unemployment rate is better than much of the country's, a recent study shows that average wages are falling more rapidly in New York cities than metropolitan areas elsewhere in the country.

Six of the 10 cities where wages have fallen the fastest this year are in New York, according to a study from the Brookings Institution, released last week. From the fourth quarter of 2008 to the first quarter of 2009, average wages fell in Rochester, Syracuse, Albany, New York, Poughkeepsie and Buffalo--and the decline is wreaking havoc on the state's finances.

Everyone knows there are job losses in a recession, but curiously, it is unusual--even in the depths of recession--for wages to fall. Wages are considered "sticky": Employers generally prefer to cut jobs than to cut the salaries of their staffs. When employers ax more higher-paid jobs than lower-paid ones, average wages fall.

Wage changes vary widely from region to region, as highlighted by the Brookings Institution's MetroMonitor report, which parses economic data on the country's 100 largest metropolitan areas. The report compares the change in real average wages for the 100 regions from Q4 2008 to the Q1 2009.

Recessions always have different effects from one region to the next. The bursting of the housing bubble hit hardest in Florida, California, Arizona and Nevada, but left much of Texas unharmed. Unemployment has climbed in housing-bubble cities and manufacturing centers, but has remained relatively low in the agriculturally centered Midwest.

The data from Brookings shows wage declines in 2009 have been particularly severe in the state of New York, while wages are starting to rise in many of the cities that suffered the worst of the housing bust.

"Employers are generally reluctant to cut nominal wages," says Howard Wial, a fellow at Brookings' Metropolitan Policy Program, so regions seeing a fall in average wages are likely experiencing something other than across-the-board wage cuts. "Higher-wage people are likely being laid off to a greater degree than lower-wage people, or moderately high-wage workers are being replaced by temps or contractors who are paid less," says Wial.

That explains much of what's happening in New York and Chicago. Wages fell 1.5% in New York and 0.7% in Chicago in the first quarter of 2009 from the previous quarter. Many high-paid financial workers lost their jobs or suffered sharp drops in performance-based compensation. So even though New York's unemployment rate of 7.6% is significantly better than the national average of 9.4%, the loss of high-paid jobs means average wages fell sharply. Rather than everyone losing income, the economy's mix of workers is changing.

The picture is even worse in upstate New York, where average wages fell 2.3% in Rochester and 2.2% in Syracuse. Wial suspects that the plunge in New York City is big enough to skew wage data across an already weak state. Because of the way data are gathered for this indicator, "you're probably seeing the influence of the city throughout the state," says Wial. "I don't think there's any other state where one city would be quite as much of a factor statewide."

Falling wages have a devastating impact on the state's tax revenues, which draw heavily on high-earners. The New York State Comptroller's Office reported that, in May, personal income tax revenues plummeted 44% compared with a year earlier. In the Big Apple, the mayor's office estimates tax revenues for fiscal year 2010 will be 30% below those of 2008.

The New York governor's office did not return calls for comment, but it's clear the state is acutely aware of the problem. "The economy continues to be shaky, and state revenues continue to be below prior-year levels," said New York State Comptroller Thomas P. DiNapoli, in a statement accompanying the release of the state's plunging tax revenues. "The Division of the Budget projected that the first quarter of the fiscal year would be tight, so this is not a surprise. The General Fund is at historically low levels."

Although falling wages are always a sign of economic sickness, rising wages are not a surefire indication of economic health. Phoenix, Cape Coral-Fort Myers, Fla., and Fresno, Calif., where home value declines have been among the sharpest in the country, have logged a rise in average wages. Fresno's average wages rose even as unemployment spiked to 15.5% in the first quarter.

"The indication is there's a slowdown in migration to those places," explains Wial. "Workers are not perfect substitutes for one another and it may be that there is a decline in demand for lower-paid kinds of workers."

When higher-paid workers lose their jobs, it lowers average salaries. When lower-wage workers lose their jobs but people like bankruptcy lawyers and doctors all keep working, it raises average salaries. And the bottom falling out of a city's economy is not a healthy development.

But in some cities, rising wages do indicate relatively healthy economies. Average wages in Tulsa, Okla., rose 2.6% while unemployment registered a fairly benign 6%.

Wial says the data help to sharpen the picture on regional economies. "We're learning there are two sun belts and two manufacturing belts. The Sun Belt that is dependent on retirement and tourism has really suffered a lot--Florida, Nevada, much of California. The energy Sun Belt and government-military Sun Belt--Texas, Oklahoma--[has] done quite well and [is] at or near the top of our rankings."

The same trends are emerging with manufacturing, he says. "You might generally think a lot of manufacturing makes a region more vulnerable to recession, but it differs quite a bit from the auto industry to something else. The auto industry and auto suppliers--places that depend heavily on those industries have been hit very hard. But other types of manufacturing have done fairly well and sometimes quite well."

View from the Top: crimes of convergence

2009-07-02T18:52:00.001+08:00

The author is a senior banker based in Singapore, with three decades in commercial and investment banking at major international firms.

Original sins

For many years before the global financial crisis, marketing gurus and strategists from the likes of McKinsey, Boston Consulting Group etc were engaged by major banks to assist them in strategic innovations for the future.

Almost all these highly-paid consultants started preaching that to create higher shareholder value, banks needed to adopt the following common practices:

1. Aspire to become a global investment bank for top corporations, benchmarking against Goldman Sachs, Morgan Stanley etc. A high percentage of revenue should come from fee income, with minimum assets-on-balance-sheet and exceptional returns on core capital.

2. Be a top-tier arranger/structurer of financial-market products, but always be able to sell down most of the risk to other banks or to SIVs (keeping the fees) - i.e. CDOs, asset securitisation etc.

3. Take on substantial amounts of credit risk at relatively good margins, but make sure it is always kept off balance sheet - i.e. writing CDSs.

4. Focus on selected target-market segmentation to the nth degree, for example mass market, priority and high-net-worth for consumer-banking clients; emerging, enterprise, mid caps and large caps (and even further segmentation into globals, regionals and locals etc) for corporates. Further divide into industry sectors like telecoms, power, energy etc.

5. Wallet size customers. Roll out expansive training programmes for cross-selling banking products and services to ensure that banks gravitate up the value food chain - i.e. high return on low capital usage.

6. Institutionalise product management.

The gospel of convergence

In essence, almost every bank in the world started CONVERGING – using the same strategies, targeting the same customer segments, and offering the same suites of products and services. They also started competing for the same type of skill sets, and paying huge guaranteed bonuses to keep rivals away from their talent.

The banks then encouraged a massive culture of risk taking, with ever-loosening credit terms and lower pricing. They essentially created a buyers’ market in their quest for greater market share.

Retail and commercial banks copied the investment-bank strategy of taking upfront fees while selling down risky assets and repackaging them in special asset vehicles, or booking them off-balance-sheet via CDSs to achieve a very high return on core capital.

As this orgy of convergence continued, major banks started buying each other to eliminate competition and gain more specific market share, customers and quality employees. And of course huge acquisition goodwill premiums were paid.

Judgement day: divergence

Roll forward into 2009 and the world of banking has now completely changed because of the global financial, credit and confidence crisis. Now every bank wants to return to focusing on its historical markets, roots and core strengths. The current market has the following characteristics:

1. The Goldman Sachs and Morgan Stanleys of this world now want to become commercial banks because their pure investment-bank strategy is no longer viable and sustainable. In the past, these banks would have never in their lofty minds contemplated descending so low. It was unthinkable for an i-bank to be sold to a commercial bank.

2. Almost all the super-banks are now government owned or supported and have started to scale down assets and businesses. They are all shying away from risk. Structuring has become a dirty word.

3. Many firms have taken back on their balance sheet all the bad assets that they sold off to special investment/asset vehicles.

4. Many super-regional or global banks have retreated to home markets.

5. Local banks are going back to their core SME and local corporates, with support offered by local governments’ stimulus packages.

6. Banks have walked away from guaranteed bonuses and slashed existing bonuses. Stakeholders have very little patience for employees who are not prepared to make sacrifices.

7. Highly paid arrangers and product-structuring professionals have quietly retired. Many of them are currently rich but unemployed.

8. Although not admitted publicly, many banks have very limited appetite for any risk today.

Future revelations

To be perfectly honest, no one really knows what will happen next in the world of banking. The only thing that appears certain is that the industry will have fewer players and those firms that remain will employ fewer workers. Profitability and returns will be much lower than before, especially because of the higher level of core capital required.

There will be fewer specialised banking employees and these professionals will be paid much less than before. Inevitably, all banks will face increased scrutiny and monitoring, as well as regulations which will limit their risk-taking abilities and prevent systematic risk.

We will know what banking will evolve into sometime in the near future. But right now, banks are still in a state of flux – in other words, purgatory.

View from the Top: crimes of convergence

2009-07-02T18:52:00.000+08:00

Weak recovery in sight but damage from crisis likely to be long-lasting, says OECD

2009-07-02T17:42:00.000+08:00

The slowdown in OECD economies is reaching the bottom following the deepest decline for more than 60 years, says the OECD’s latest Economic Outlook. But recovery is likely to be weak and fragile, and the economic and social damage caused by the crisis will be long-lasting.

The latest edition of the Economic Outlook is the first in two years to see previous projections for economic growth revised upwards – most clearly for the large emerging economies and the United States – rather than downwards. But the prospects for the euro area this year have worsened and Japan’s have changed little since the OECD’s previous projections were published in March.

“Thanks to firm action to stimulate our economies it appears that we have escaped the worst during this crisis,” said Angel Gurría, Secretary-General of the OECD. “But the next few months will be equally testing. There needs to be a clear and credible plan and timeline for phasing out the emergency measures as the recovery takes hold. It is critical to consider these exit strategies now in order to prevent new risks in the years ahead.”

US economic activity this year is expected to fall 2.8%, against the 4.0% decline projected in March. Growth in 2010 is now forecast at 0.9% compared with 0% previously. The trough in US activity is expected during the second half of this year but the Outlook warns that as the impact of the stimulus measures fades, increased savings by corporations and consumers to reduce their indebtedness will continue to hold back growth. The recovery will not be strong enough to stop unemployment rising to around 10% over the next two years.

Madoff: Many Questions Remain

2009-07-01T23:49:00.003+08:00

by Ben Stein

So, Bernard Madoff has been sentenced to life plus a century and a quarter in federal prison for destroying the lives of thousands -- tens of thousands, hundreds of thousands -- of innocent men and women. That's a good thing, and I think we can assume that he won't enjoy his prison time a great deal. Many friends of mine from the Nixon days went to prison, and I can tell you that none of them enjoyed it much (although former Nixon aide Chuck Colson did start a prison fellowship that has done great work).

But now that Madoff is in prison for good, many questions remain:

1. We now have reports that 10 others could be arrested in connection with the Madoff scandal, and that is certainly not a surprise. How could he possibly have juggled thousands of non-existent "trades" each month by himself? It is like saying that one man assembled all of the Buicks made in the past 30 years. Madoff had to have received help from not just one but many men and women. He had a huge trading operation. What were they trading? The idea that one man did all of this by himself is infuriatingly preposterous.

Let's see some real resources devoted to getting this case going. It has just been started and is not anywhere near finished.

2. By the same token, the investment advisors who guided billions into Madoff's phony accounts have to be held to account. They are required to behave according to fiduciary standards. That means they have to put the client's interest ahead of their own, do stringent investigation, and avoid even the appearance of conflict of interest. Clearly, in many, many cases, none of these requirements were met.

The idea that Madoff could have generated great returns in every kind of market year after year should have set off alarm bells in every advisor's mind. (I can tell you that when some princes of Lehman tried to get me to invest in Madoff a few years ago and when I looked up his returns, they smelled fishy to me right through the Internet screen.) Clearly, only rarely did any advisor see further than the immense kickback fees Madoff paid.

These people bear serious investigation and punishment.

3. It is quite literally inconceivable that Madoff's wife and family did not know what he was doing. His brother, Peter ("Thou art Peter, and on this rock, ‘bro', I will found my scam") was the compliance officer, for Pete's sake. How could he not know what was going on? The sons had grown up in the business. How could they not know? The eagle-eyed wife, who made her first public statement yesterday, was said to have watched the accounts closely. How could she not have known?

4. This is by far the most important part: The SEC is supposed to be watching for exactly these kinds of scams. Yet the SEC missed them, and they even brought in Madoff family members to monitor markets! That is how much they missed what was going on.

It gets a lot worse. A man named Harry Markopoulis repeatedly warned the SEC that this was a scam, that results such as what Madoff claimed were simply not possible. He sent detailed accusations about Madoff to the SEC. They were completely ignored.

Now, when do the people who ignored these vital communications go on trial? Madoff at least has the excuse that he wanted to be rich -- and, in a way, while it's a pitiful excuse, it's at least understandable.

What excuse do the regulators have? Why are they not being tried for criminal dereliction of duty? When they go on trial, we really will have a new day in securities law.

And now we come to the most important part (and pardon me for shifting gears): Now we have a new administration. It is going for a national energy policy largely formulated and regulated by bureaucrats. We have seen in Madoff how bureaucrats behave. Do we really trust them to keep the lights on and the air conditioning going? Do we really believe they can make 15 percent of our power needs from wind and solar in a few years? Do we trust a bunch of pointy-headed bureaucrats to guard the bedrock of our economy -- energy -- to decide who is allowed to make fuel and who isn't?

I don't, and I am extremely frightened to think that the same people who allowed Madoff to put across the worst scam in securities history will be in charge of keeping America's energy pipeline going.

Think about it. Is this what you want?

Madoff: Many Questions Remain

2009-07-01T23:49:00.002+08:00

The next crisis could come from anywhere

2009-07-01T23:49:00.001+08:00

SINCE its earliest days, the United States has suffered periodic financial crises. The first dates to 1792. In the 19th century, bank panics occurred regularly. Then, of course, came the great stockmarket crash of 1929 and the failure of two-fifths of the nation's banks in the Great Depression. Now we're in the midst of another crisis. It would be reassuring to think that the Obama administration's financial 'reforms' - or, indeed, any conceivable alternative - would prevent these collapses for all time. Dream on.

Every financial crisis originates in a failure of imagination. It's not that, before the crisis, no one foresees problems, 'excesses' and losses. There are usually warnings. But what's routinely overlooked is the fatal interconnections that transform problems into panic. People panic because the future goes dark. They don't know what to expect, and so they expect the worst. Markets cascade uncontrollably downwards.

The present crisis did not occur merely because 'sub-prime' mortgages experienced unexpectedly large losses or even because many of these loans were 'securitised' in complex bonds, argues Yale economist Gary Gorton. The crux of the matter, he says, was the failure of the 'repo' market. The term comes from 'repurchase agreements' - short-term loans (usually overnight) that require the borrower to pledge collateral (usually bonds) in return for cash; the collateral is then 'repurchased' by repayment of the loan. No one knows the size of the repo market; Mr Gorton thinks perhaps US$10 trillion at any moment. Banks relied heavily on repo loans, which were routinely renewed. But when doubts arose about banks' sub-prime securities, the repo market panicked. Loans vanished or became costlier. Deprived of credit, Bear Stearns and Lehman Brothers failed; other institutions were vulnerable. Hardly anyone expected the panic; once it happened, large - but bearable - losses became a crisis.

In a crisis, government is the last bulwark against a complete financial collapse. That's the main justification for regulation. Just because all crises can't be prevented doesn't mean that some can't. Though complex, the Obama plan would essentially broaden regulation in three ways. First, it would empower the Federal Reserve to designate some financial institutions as so important that their failure would 'pose a threat to financial stability'. These institutions would face stiffer capital requirements - capital being mainly shareholders' investment. More capital would provide a larger buffer against losses and a crisis.

Second, it would create a Consumer Financial Protection Agency to police unethical lending practices and to ensure loan documents for mortgages, auto loans and other types of consumer credit are understandable. (The Securities and Exchange Commission would retain power over stock markets.) Third, it would change some rules of financial markets. For example, financial firms issuing securitised bonds would have to hold 5 per cent of the bonds themselves. By keeping some bonds, it's argued, sellers would scrutinise the underlying loans more carefully.

Though these proposals sound sensible, they have potential drawbacks. Writing in The Wall Street Journal, Peter Wallison of the American Enterprise Institute argued that the very largest financial institutions would become the protected and pampered wards of the state. 'Larger firms will squeeze out smaller ones,' he said. Consumer regulation sounds great. But if the protections are cumbersome and expensive, consumer credit will, paradoxically, become costlier. Lenders will compensate by raising interest rates or lending only to the safest borrowers.

Up to a point, some retrenchment of the financial sector is healthy. It absorbed too much of America's talent while pursuing strategies that, with hindsight, misallocated the nation's investment capital. But there are perils to over-regulation; it could dampen the normal risk-taking required for solid economic expansion.

However the debate concludes, regulation isn't a panacea against future crises. The idea of 'enlightened regulators' who are vastly more perceptive than the bankers, traders and money managers they regulate is a fiction. Even in early 2007, when the problems of sub-prime mortgages had emerged, few regulators or economists anticipated a wider financial meltdown. They didn't see the impending chain reaction. The problem wasn't a lack of regulation; it was a lack of imagination.

So the next crisis could come from anywhere - perhaps the follies of government, not finance. Between now and 2019, the US federal debt could rise US$11 trillion, projects the Congressional Budget Office. American Treasury bonds are the bedrock of the global financial system; they're considered safe and reliable. What if a glut of bonds causes investors to lose faith? What are the implications? Good questions. The seeds of the next crisis almost certainly won't be found in the debris of the last. -- The Washington Post Writers Group