Petroleum May Be Nearing a Peak

Some observers of the oil industry predict that this year, maybe next - almost certainly by the end of the decade - the world's oil production, having grown exuberantly for more than a century, will peak and begin to decline.

And then it really will be all downhill. The price of oil will increase drastically. Major oil-consuming countries will experience crippling inflation, unemployment and economic instability. Princeton University geologist Kenneth S. Deffeyes predicts "a permanent state of oil shortage."

According to these experts, it will take a decade or more before conservation measures and new technologies can bridge the gap between supply and demand, and even then the situation will be touch and go.

There will be warning signs before global oil production peaks, the bearers of bad news contend. Prices will rise dramatically and become increasingly volatile. With little or no excess production capacity, minor supply disruptions - political instability in Venezuela, hurricanes in the Gulf of Mexico or labor unrest in Nigeria, for example - will send the oil markets into a tizzy. So will periodic admissions by oil companies and petroleum-rich nations that they have been overestimating their reserves.

Oil producers will grow flush with cash. And because the price of oil ultimately affects the cost of just about everything else in the economy, inflation will rear its ugly head.

The pessimism stems from a legendary episode in the history of petroleum geology. Back in 1956, a geologist named M. King Hubbert predicted that U.S. oil production would peak in 1970.

But Hubbert was right. U.S. oil production did peak in 1970, and it has declined steadily ever since. Even impressive discoveries such as Alaska's Prudhoe Bay, with 13 billion barrels in recoverable reserves, haven't been able to reverse that trend.

A few years ago, geologists began applying Hubbert's methods to the entire world's oil production. Their analyses indicated that global oil production would peak some time during the first decade of the 21st century.

Deffeyes thinks the peak will be in late 2005 or early 2006. Houston investment banker Matthew Simmons puts it at 2007 to 2009. California Institute of Technology physicist David Goodstein, whose book "The End of Oil" was published last year, predicts it will arrive before 2010.

And there are many who doubt the doomsday scenario will ever come true. Most oil industry analysts think production will continue growing for at least another 30 years. By then, substitute energy sources will be available to ease the transition into a post-petroleum age.

"This is just silly," said Michael Lynch, president of Strategic Energy and Economic Research in Winchester, Mass. "It's not like industrial civilization is going to come crashing down."

CBOT debt traders flip to long positions

Many traders have held onto short positions on ideas that monetary policy tightening by the Federal Reserve will ultimately drive up long-term interest rates.
Instead, although the overnight fed funds rate is up 200 basis points since June 2004, 10-year yields are some 60 bps lower now than when the Fed started its tightening campaign.
Large speculators, such as hedge funds, had a net long position in CBOT 10-year notes of 74,544 contracts as of Tuesday, compared with their net short of 126,874 contracts a week earlier.

Payday Lender Problems

Payday loan chains are the latest layer of the subprime lending industry to come under the eye of federal and state regulators, following in the footsteps of pawnshops and rent-to-own businesses. The trend follows a familiar pattern: As these businesses grow in popularity, regulators, politicians and consumer advocates point out unfair or abusive practices and seek to curtail them. The worst abusers go under, and the more legitimate operators adapt and keep going.

The regulatory crackdown on these loans is good for consumers, but bad for payday lenders such as Advance America Cash Advance Centers (
AEA), Cash America International (CSH), Ace Cash Express (AACE), Dollar Financial (DLLR), EZCorp (EZPW), Compucredit (CCRT) and First Cash Financial Services (FCFS). These stocks tumbled by an average of 35% immediately after the FDIC announced its revised rules in March. Shares have recovered little since.

What's Next for Real Estate?

According to Dave Seiders, chief economist for the National Association of Home Builders, the underlying fundamentals of the real-estate market look healthy, and there are no signs of a slowdown in sight. Even if interest rates rise, as he expects, price appreciation will merely slow down, and prices won't decline on a national level. A bust, he argues, doesn't always follow a boom.

Dean Baker couldn't disagree more. The chief economist for the Center for Economic and Policy Research, a Washington, D.C.-based think tank, says the market is dangerously overextended. It's a classic bubble, he says, and when it pops, home values could drop by up to 30%.

National Association of Realtors Fighting Fires On Several Fronts

Enter the Department of Justice which has alleged that the NAR “opt out” policy is anti-competitive; that NAR has illegally adopted policies that aim to restrict Internet competition and specifically discount brokers. DOJ has also objected to another part of the NAR policy that tries to restrict the use of contact information obtained by a VOW in connection with referrals of business to non-real estate brokerages.

Fed's Ferguson: house prices high

"A concern is that changes in the underlying conditions that fostered this pattern or a policy misstep could cause a quick reversion to the historical norm," Ferguson said, adding that the Fed was "on the lookout" for any such patterns as it keeps lifting rates.
Ferguson noted that, with global economies increasingly linked, it was possible for big changes in asset prices in one country to "spill over into the markets of others." That meant policy-makers must be conscious that their decisions can have a farther reaching impact than intended or foreseen.
"If synchronizations of asset price movements come about mainly in this way, the suggestion is that excess liquidity in one country could move asset prices in another, perhaps significantly, even if liquidity was well contained in the latter," Ferguson said

New savings program for poor gaining attention

IDA holders receive their free money under one condition: they must undergo financial literacy education that is intended to prepare them for a life of cautious savings and no debt. President Bush has steadily increased the yearly budget for IDAs, but this year Sen. Rick Santorum has been the accounts' most tireless promoter.
"IDAs are one of the most promising tools that enable low-income and low-wealth Americans to save, build assets and enter the financial mainstream," Santorum told members of his subcommittee at an IDA hearing last month.
The nonprofit Corporation for Enterprise Development runs IDA pilot programs under which low-income residents of major cities have opened more than 10,000 privately administered accounts. CFED's most recent study, in 2001, found an average monthly savings rate of 2.2% for their IDA holders, the majority of whom made no more than $2,000 per month
The Earned Assets Resource Network has also started IDA pilots as part of its work with the California state government and Citibank to generate low-income savings opportunities. IDA holders in EARN's programs "put away 6% of their gross income, while the national savings rate is effectively zero," said EARN director Ben Mangan.

Mangan exaggerates the national savings rate, but not by much. The average savings rate for all Americans in 2004 was less than 1% of U.S. gross domestic product, according to government figures.

Business Owners; Always be networking

The best entrepreneurs are usually masterful networkers. They use their people skills to build good reputations in their communities and to continuously generate new customer leads. But even if you're one of those rare entrepreneurs who's intimidated by a room full of strangers, you can't let social awkwardness stand in the way of your professional success. Networking is easy, and it happens every time you open your mouth, says Olivia Fox Cabane, a networking lecturer and the executive director of New York-based Spitfire Communications. "Networking is what you do from your first conversation in the morning to your last conversation at night," she says.

Trump University Founded For Student 'Customers'

Trump University will be comprised of Internet courses, information-rich CDs, consulting services and quick, intensive classes for students, referred to as "customers." The Associated Press quoted the chairman and chief executive of Trump Hotels & Casino Resorts (otc: DJTCQ - news - people ), which is freshly emerged from bankruptcy--as explaining, "In today's hyper-competitive business climate, the need for the highest-quality education has become more crucial than ever. But people are looking beyond the traditional business education model, which involves hours in the classroom and relies primarily on book learning." Courses will cost $300 and will take one to two weeks to complete. Will the embryonic online hall of learning attract students? According to the AP, the real estate developer sounds unsurprisingly confident. "When I make speeches, a lot of people show up," he said. "A lot of people." (Read about Trump's recent media-fest: "Salty Trump Decries Freedom Tower 'Junkyard' ") Management consultant Michael Sexton, who served with Accenture (nyse: ACN - news - people ) in New York, will sit as the school's president. Unfortunately, on such an auspicious day as the founding of a university, there is sad news: Trump's protégé Martha Stewart--slated to star in her own Apprentice franchise--can never be granted an honorary diploma by her mentor's school: The for-profit university will offer neither degrees or grades. More...

Government Waste Affliction 2005

This year, Washington will spend an eye-popping $22,039 per household. That is the highest inflation-adjusted total since World War II, and $5,000 per household more than Washington spent just four years ago.
First, the federal government cannot account for $25 billion it spent in 2003. That's billion with a "b." Federal auditors know that $25 billion was spent by someone, somewhere, on something, but don't know who spent it, where it was spent or on what it was spent. That amount is more than the total federal taxes paid by all of the residents in each of 28 states. It's enough to fund the entire Department of Justice budget.
Credit-card fraud is another problem. Federal employee credit-card programs were designed to streamline government procurement rules by allowing government employees to purchase job-related products with credit cards that would be paid by their agency. But this well-intentioned idea was quickly abused. Over one recent 18-month period, Air Force and Navy personnel used government-funded credit cards to charge at least $102,400 for admission to entertainment events, $48,250 for gambling, $69,300 for cruises and $73,950 for exotic dance clubs and prostitutes.
Not to be outdone, investigators randomly sampled 300 Department of Agriculture employee credit cards. They found that, over six months, 15 percent of them charged a total $5.8 million in personal expenses that included Ozzy Osbourne concert tickets, tattoos, lingerie, bartender school tuition, car payments and cash advances.

Housing Bubble Bust? FDIC Hopes Not

The study concluded that a housing boom does not necessarily lead to a real estate market crash. While 21 housing busts have occurred since 1978, only 9 of them happened in the wake of a housing market bubble.

he study reached two other conclusions. The first was that those housing bubble bursts that occurred almost always followed significant distress in the local economy. In other words, even if a real estate bubble burst followed a home price bubble, the former may have had little to do with the prior run-up of housing prices but were aligned more with underlying economic factors. The second conclusion was that the manner in which a boom ends matters most to mortgage lenders and homeowners or investors. The most common historical way for a housing boom to end was through a period of price stagnation which allowed the local economy to catch up with inflated home prices.

The Corporation which insures and to an extent regulates the nations' banks has good reason to hope that it won't soon encounter the kind of real estate downturn that most recently occurred in 1990-1993. At that time the Corporation was forced to close some 300 banks, largely in the Northeast and California. This was merely the frosting on the massive savings and loan mess which forced closure of over 750 S&Ls throughout the Midwest and Southwest. FDIC initially had nothing to do with managing that ugliness which had its roots in agricultural and energy based loans although they did ultimately assume responsibility from the Resolution Trust Corporation for final liquidation of the assets of the failed S&Ls.

But the FDIC still had its hands full. The failure of the banks was largely due to their unbridled enthusiasm for real estate and FDIC inherited billions in real estate secured loans and bank owned (foreclosed) properties from the banks it closed. Clearing it all up took almost a decade and nearly bankrupted the bank insurance fund.

US Pressures China to Unpeg Currency

A preliminary vote put China on notice it could face a 27.5 percent tariff on exports to U.S. markets unless it moved to a flexible currency within six months.

The measure is expected to come up for a vote in the Senate again in July.

Snow said the dark mood on Capitol Hill represented "a dangerous situation" and he hoped China recognized and understood that was the case.

Tougher talk from Washington risks getting China's back up over currency reform, and Beijing has indicated it won't be pressured into acting before it feels its banking and financial system can handle increased flexibility.

"The fixed exchange rate coupled with large capital inflows deprives China of the ability to run its own monetary policy or alter domestic interest rates -- greatly diminishing the ability of economic policy-makers to avoid the cycle of boom and bust that has occurred in the past," Snow said

Spitzerism reaches Pension Advisors

Many pension consultants fail to disclose conflicts of interest to their clients and accept undisclosed compensation from money managers and brokerages. It comes in the wake of long-held suspicions that the 1,700-member pension consulting industry operates a "pay-to-play" system in which the advice it dispenses to pension funds is tainted by its own financial interests.
The commission conducted focused examinations of 24 pension consulting firms. Among its findings: Many consultants fail to disclose to pension clients that they also receive compensation from the money managers, brokerages and affiliates that they recommend. Although the SEC did not announce specific enforcement proceedings against pension consultants, it is likely that such action will become public in coming months, a person familiar with the situation said.

Mother Nature in trouble


The Flight of the Sell-Side Analyst

Sell-side analysts are fleeing smaller issuers, leaving executives at those abandoned companies to fend for themselves in dealing with large investors. Indeed, analysts who work for the sell-side research units of large brokers and investment banks are heading en masse for the economic shelter of large-cap companies.

The effects of the analyst migration extend beyond the orphans to those companies that are hanging on by a thread. Reuters reports that 380 are down to a pair of analysts tracking their stock, while 473 companies have just one. At such companies, executives will surely be under increasing pressure to keep from losing their existing coverage or to replace lost analysts in some way.

That's because decreasing coverage means a dwindling exposure to investors — a situation that makes raising capital difficult. "If you don't have analyst coverage, investors don't really know about you," warns Ashwani Kaul, a senior market analyst at Reuters Research. At the same time, Kaul reckons, the analyst rush to big-caps creates "a void for investors who are interested in small- and mid-cap companies."

Investment banks and brokerage houses derive operating profits from investment-banking fees and share-trading commissions, not analyst reports. In the end, sell-side research tends to be a loss leader, bundled for clients along with lucrative services.

Private Equity's New Challenge


For more than two decades, buyout funds — or nonventure private equity funds — have been an important force in global corporate finance and restructuring. Top-quartile funds, in particular, have turned in consistently strong performances, generating attractive returns for their investors

That model, however, may soon look quite different. A convergence of market forces has altered the competitive landscape in which private equity firms have thrived. More and more, they are encountering heavier competition for opportunities to invest, often against new competitors. The rise of the auction sales process is eroding the buyout players' ability to gain privileged access to investments from their once-legendary networks of relationships. The creative financial-engineering skills once guarded by a few top practitioners have become commodities, and a tougher stock market has worked against players looking to purchase, restructure, and then quickly sell a company. Taken together, these changes threaten to lower median returns over the next five to ten years, compared with the public equity markets, and could make standout performance considerably more difficult.

An excess supply of capital. Throughout the 1980s and most of the 1990s, well-positioned players could rapidly deploy their capital because the demand for private equity financing generally exceeded the available capital. That situation has reversed dramatically, however. In the late 1990s, buyout funds collectively raised as much as $50 billion to $60 billion per year. Yet by the early 2000s, annual deployment had fallen to the $30 billion to $40 billion range (in equity value), and today a significant pool of capital — some $90 billion in the United States and €39 billion in Europe — is awaiting deployment (see Exhibit 2). The result is more competition for each new investment opportunity, more marginal or high-priced deals, and greater pressure from institutional investors to return some previously invested capital.

Commodity financial-engineering skills Vendors are beginning to use so-called stapled finance, where assets and businesses are auctioned with aggressive buyout leverage already in place or preapproved by the financing banks, for instance. Even the sales of businesses with lower leverage tend to attract multiple bidders, each with its own access to similar sources of debt through the financial sponsors' groups of large investment and commercial banks. Acquisition prices therefore tend to reflect most of the upside from leverage.

Cyclical difficulties in ensuring attractive exit. Particularly during the 1990s, strong equity markets frequently permitted buyout firms to use initial public offerings (IPOs) to divest their interests. Beginning in 2000 that became more difficult, as markets plummeted, and even today this approach is a harder sell. As a result, buyout firms increasingly are changing their divestment strategies. Some are selling via secondary buyouts, while others are holding onto their investments longer. Indeed, Initiative Europe has reported that average holding periods increased from 37 months in 2002 to 52 months in 2003. (Founded in 1988, Initiative Europe is a leading independent provider of specialist and in-depth information focused purely on European private equity and venture capital markets.)

Fewer pull-through opportunities for banks. Buyout funds within financial institutions can create value both by earning a basic investment return and by creating opportunities to pull through fee-based business such as M&A advisory and underwriting fees. Indeed, much buyout activity has been carried out within broader corporate-form financial institutions (predominantly investment banks) using both their own capital and that of third-party investors. A number of such bank funds historically have been very strong performers, although investors, unlike those in partnership-form peers, have suffered from double taxation of fund returns.

SOMETHING that must be DONE Some firms will want to focus on a limited number of industry segments. Truly superior strategic and operational insights and the development of potentially privileged networks for sourcing require deeper industry knowledge in today's environment. Firms that quickly develop their knowledge of a few narrowly defined industry segments and geographies will be better positioned to translate this expertise into a perspective on value-creation potential, transaction price, and potential returns.

Mexico President slurs US Blacks

Mexican President Vicente Fox slammed U.S. steps to slow illegal immigration yesterday, saying that Mexican migrants do jobs "that not even blacks want to do."

Spreads on Mexican Bonds Attractive

Always a currency risk, the more stable Mexican peso has invited higher risk astute investors a spread unlike that of its northern neighbor. CPI is running at about 4.4% and short term yields are running over 9%. GDP should be growing at about 3.88%. There is a current account deficit of 2% of GDP. The upcoming elections will no doubt add volatility to the market and the debt yields.


There has been a 2.5% YTD gain in the Peso vs. Dollar. Rolling the ladder on the 28 day cetes minimizes that risk by almost a half for the yield. The dollar has been gaining some strength in global currencies so this could lead to higher risk


REIT's, A new institutional Paradigm

In 2004, the lead issuer for REIT common and preferred stock offerings was Citigroup, with 30 common stock deals totaling $4.1 billion and 17 preferred stock deals totaling $1.1 billion, according to Thomson Financial data. Citigroup was also the lead issuer of common stock offerings in 2003 with 15 deals totaling $2.3 billion. The overall amount of REIT common stock offerings totaled $25 billion in proceeds, spread across 177 deals. REIT preferred stock offerings totaled $5.7 billion, and included 62 deals. MORE:

Real Estate and REIT Investing

The danger in owning REITs at this point in time is two-fold: There are risks based on property values plummeting due to a real estate bubble (nature's way of controlling excess, irrational exuberance, etc.) and a credit bubble. Did you know that:

* Real estate loans have expanded at a 14.9% rate during the first 17 weeks of 2005 to $2.67 trillion.

* Interest-only loans climbed to 70% in 2004 from less than 20% in early 2002.

* The current 55 residential real estate boom markets are more than twice the peak of the late-1980s booms



Defined Benefit Plans in trouble

But for some its already tooooo LATE
A defined benefit plan is one in which you are promised a specific monthly outlay that is paid out
of your employer's pension fund. Such pension fund are the subject of
much scrutiny lately as
450 out of Fortune 500 companies have under-funded pensions.
Why? Because they promised
their employees the moon and the stars to lock them in and
figured they worry about how to pay
for it later. So 90% of defined benefit plans are
not going to be able to deliver on the promises
If you belong in such a plan, you should not take any comfort in knowing that the Pension
Benefit Guaranty Corp. (PBGC) is on the job. Ironically, that organization
overseen by the federal
government is broke. They too have $96 billion in under-funde
obligations and they are the bailout!
Even if you are lucky enough to get a bailout from the PBGC because your company's pension fund
is deemed insolvent, you will only see about 25 cents on the dollar of
what you were promised in the
defined benefit plan.

Four Out of 10 Americans Fear Real Estate Bubble

Four out of 10 Americans think we're in a real-estate bubble that's likely to burst within three years, according to a poll released last Thursday by Costa Mesa-based Experian and The Gallup Organization.

And for the second straight month, consumers appeared concerned about their credit ratings and their ability to pay their debts, survey authors said.

The monthly Experian-Gallup Personal Credit Index, launched in March, dropped from an initial "baseline" score of 100 to 82 in April, company officials said. May's survey shows only slight improvement, with a score of 86.

"We're starting to see some real concerns out there on the consumers' part about what is the prospect for the economy," said Ed Ojdana, group president of Experian Interactive.

Interest rates aren't a major worry. Seventy-five percent of those polled expect mortgage rates to rise, but half of those respondents thought they wouldn't go up more than one percentage point.

That may be why one in five consumers planning to take out a home loan in the next six months will choose an adjustable-rate mortgage, the survey found.

Day-Trading Pioneer Shuts Prop Shop

Online brokerage giant E-Trade Financial Corp. recently closed its proprietary trading unit, a facility housing employees who traded for the firm's own account on the same platform provided to active trader clients. The move will allow the New York-based brokerage firm to focus on its agency trading services, removing the risk of conflicts inherent in trading for its own account.

The last trading day of the unit--comprising fewer than 50 traders--was Friday, May 7, and it closed formally on Monday, May 10, according to an E-Trade spokesperson. The firm's decision comes as active traders have suffered from several years of stagnant securities markets and increasing competition from hedge funds and other high-volume traders. The elimination of the unit also puts an end to questions from clients of its agency trading services, who may have harbored concerns about how well the firm could maintain the line between trading on behalf of clients and trading for its own account.

Inland Empire California Faces Base Closes

Closing the 1,160-employee Naval Surface Warfare Center would have a $78 million economic impact on Norco and surrounding communities because of a loss in payroll spending, according to a 2004 study by Redlands-based economist John Husing.

"The Norco base is the Navy's only independent assessment facility," said Rep. Ken Calvert, R-Riverside. "It is my belief that the Department of Defense should not only retain the base but enhance this special function."

Barstow could be economically and culturally devastated if the Pentagon shutters the Army's Fort Irwin and the Marine Corps Logistics facility in its latest round of closures, which could come as early as Friday.

The two nearby installations account for about 52 percent of Barstow's economic base a combined $724 million in annual military and civilian payrolls and government contracts and purchases.

Identity Theft Solutions

8 Calls to Make if Your Identity is Stolen
A step-by-step guide to clearing your good name.
14 Ways to Avoid Identity Theft
Former thief Frank Abagnale offers some suggestions to protect your credit.
Quiz: Do You Protect Your Identity?
Check to see if you're protecting yourself from identity thieves.

Housing Affordability Rises in First Quarter

The index shows the nation’s typical household had 132.9 percent of the income needed to purchase a home at the first quarter median existing-home price, which was $188,800. This means a median-income family, earning $56,323, could afford a home costing $250,900 in the first quarter.

This index measures affordability factors for all homebuyers making a 20 percent downpayment, with an index of 100 defined as the point where a median-income family has the exact amount of income needed to purchase a median-priced existing home.

NAR’s composite Housing Affordability Index was 132.9 during the first quarter, up 1.1 percentage points from 131.8 in the fourth quarter of 2004; the index was 8.3 points below the first quarter of last year when it stood at 141.2.

David Lereah, NAR’s chief economist, said the reason for the improvement may surprise some analysts. “Rising family income offset higher mortgage interest rates and home prices in the first quarter, boosting the overall home-buying power of the typical family,” he said. “Generally, home prices have been rising faster than income over the last four years, but the biggest factor – the monthly mortgage payment – remains historically low.”

For homes purchased during the first quarter, the median mortgage payment consumed only 18.8 percent of family income. In the early 1990s, more than 20 percent of family income went to mortgage payments on a typical home purchase, while in the early 1980s mortgage payment was more than 30 percent of income.

NAR calculates that interest rates would have had to rise to an average of 8.6 percent in the first quarter to bring the Housing Affordability Index down to 100; the 30-year fixed-rate mortgage is expected to reach 7.1 percent in the second half of next year, with one-year adjustable rate mortgages projected at 5.7 percent in the same timeframe.

The association’s First-Time Homebuyer Affordability Index shows a typical first-time buyer household, aged 25 to 44, with an income of $31,909, had 76.6 percent of the income needed to purchase a typical starter home in the first quarter with a 10 percent downpayment. The median starter home price was $160,500, during the first quarter; the typical first-time buyer could afford a home costing $122,900.

Life Insurance Secondary Market

Banks and institutional investment firms have now realized the value in acquiring and holding life insurance policies. A recent Wall Street Journal article places the secondary life insurance market at over $2 billion a year and growing at an estimated rate of 20% annually. As a result, financial and insurance professionals can access the secondary insurance market using an established system to perform insurance valuations. An industry study conducted in 2002 at the University of Pennsylvania’s Wharton Business School found that life insurance policies sold in the secondary market for an average of 3.6 times the policy’s (cash) surrender value. Now professionals can offer more favorable options than surrendering a policy, lapsing coverage, or continuing on with burdensome premium payments. Two recent examples illustrate this point. A 77 year old gentleman had an $8.7 million life insurance policy with a $993,714 cash surrender value and could no longer comfortably meet the premium payments of $36,074 annually. His advisor helped him obtain a life insurance valuation which resulted in an offer of $2,600,000; a total of $1,606,286 above his current surrender value.

Key Person Business Insurance Explained

Key Person Insurance provides funds when a business needs them most: when money is needed to support continued business function during the uncertain days following the death or disability of a key employee. In the Key Person Insurance concept, a company purchases a life insurance policy on the life of the key employee. The employee is the insured, while the business is the owner and beneficiary. This traditional life insurance protects the business should the insured employee pass away. However, today there are even better alternatives available.

Key person insurance is a vital part of the overall “protection plan” for any business. However, in today’s marketplace, there are far too many businesses without this important insurance coverage. By offering a business owner a free look at how a Key Person Insurance Protection Plan would look for their business you may gain new clients and, at the same time, you will be protecting the future success of the business in the event a key employee becomes disabled or passes away.

Evaluating Your Funds Investment Performance

If you didnt know, Monte Carlo Simulations, or MCS, are a superior backdrop for evaluating investment performance. This article shows how MCS has been used in practice to evaluate the performance of both long-only traditional managers, as well long-short hedge fund managers.

Health Savings Accounts exploding

More than a million people currently receive health coverage through lower-premium, high deductible health insurance plans offered in conjunction with health saving accounts, twice as many as six months ago, a study by America's Health Insurance Plans shows.
These lower-premium plans are an important option, especially for those who might not otherwise be able to afford coverage, Ignagni said, noting that among the companies tracking the information, previously uninsured people purchased 37% of the individual policies. Twenty-seven percent of the policies in the small group market have been sold to employers who did not previously offer coverage to their employees.
"Most of these plans rely on networks of doctors and hospitals to give consumers access to the same kinds of negotiated discounts available to participants in other health insurance plans, stretching the consumers' health care dollar and increasing the value of the HSA-eligible plan," Ignagni said.

Hispanic Money Power Surges to $700 Billion

U.S. Hispanic purchasing power has surged to nearly $700 billion and is projected to reach as much as $1 trillion by 2010, according to new estimates by HispanTelligence®.The rate of growth is nearly three times the overall national rate over the past decade. I'm curious to know when this will be called investment power.

Appraisal Fraud: Part 2

Several appraisers including TH from Texas claimed that pressure on appraisers does not typically come from banks or credit unions which do "want to know the true value of the home. The bottom line is mortgage brokers (who) want their loan to close and they do not want the necessary evil of an honest appraisal. Even fairly honest mortgage brokers will use a 'special appraiser' to get the value needed when their 'honest appraiser' will not comply with their value needs. It is 'greed' driven, or as a mortgage broker will say, 'a business decision.'"

GH from Carlsbad, California had an interesting solution: "Appraisals are more closely related to the underwriting process than they are to the origination process. Take the loan originators and everyone in the production side of the deal out of the appraisal engagement loop, and (the cause of) 90 percent of all misleading appraisals would be cured overnight."
"The appraiser is the ultimate mortgage insurer. The problem is they do not know it. They only find out when they start getting sued. The antics of the loan originations departments are different than that of the loss recovery actions of the legal department'.
So where is all of this going?

Steve said that in California "over half of the original appraisers who were licensed 15 years ago have left the business. Now over half of the residential appraisers are Trainees (an official designation in some states). Many residential appraisal shops employ unlicensed people who go out and see the properties or prepare the reports which are then signed by someone who never saw the property."

Mexico Vs. US in Immigration Issues

President Vicente Fox said Thursday his government will formally protest recent U.S. immigration reforms, including the decision to extend walls along the border and make it harder for illegal migrants to get driver's licenses.
Fox didn't give details of Mexico's plan, but officials in his administration have raised the possibility of taking their case to the United Nations or other international organizations.
"We think it is useless to pursue walls, barriers, the use of force and violence," he said.
MY TAKE= "FOX'S lame duck administration was crushed by the PRI elitists before he took office. PRI will take over again and continue to steal the countries wealth from its people. Why does INDIA and NOT MEXICO have the economic growth and prospects, why do the people of Mexico not learn English AISLE in grade school by default. Why doesn't Mexico privatize PEMEX? As inflows from ex-pat's become the second biggest infusion of capital into Mexico, the government doesn't want to see that stop. When will MEXICO's people finally think FIRST CLASS and take over the country from the Elites and govern themselves. The recent victory of Mexico's National Soccer Team against the US in Mexico City might give the underdogs something to celebrate. The gracious people of Mexico are napping. What to do?? Get rid of those that stop progress, request US assistance in getting rid of the DRUG CARTELS, and privatize and educate the nation.

March's Economic Numbers

The University of Michigan's consumer sentiment index showed a larger-than-expected drop in confidence with the index falling at mid-month to a reading of 85.3, down from 87.7 in April. One of the components — consumers' expectations about the future — fell sharply to 73.7, down from 77 in April.

American businesses increased inventories by 0.4 percent in March as total sales accelerated sharply following a February setback, the Commerce Department reported Friday.

In other economic news, the Labor Department reported Friday that the prices of imported goods rose by 0.8 percent in April, the slowest pace in three months. The slowdown reflected the fact that oil prices last month retreated from record highs. Import prices had surged by 2 percent in March, the largest gain in nearly 15 years.

Words from Robert Rubin

ROBERT E. RUBIN: "The United States has tremendous economic strengths but it also faces great challenges: the need to ensure national security; a newly competitive China and India; serious shortcomings in public education, basic research, infrastructure and other requisites for meeting that competition; and much else. An immediate and critical imperative is to redress fiscal imbalances. Most pressing is the 10-year federal deficit, which most independent analysts project at $4.5 trillion to $5 trillion, assuming that the tax cuts passed in 2001 and 2003 are made permanent and that the alternative minimum tax is adjusted to avoid unintended effects on middle-income taxpayers. And while 10-year numbers can be highly unreliable, deficits are as likely to be higher as to be lower. Over the longer term, Social Security has a 75-year estimated deficit of $4 trillion, while the different components of Medicare, including its new prescription drug benefit, represent a fiscal problem of roughly $20 trillion."

Headed to Vegas for Conference

Heading to the MONEY SHOW for two days starting Tommorrow. Hope to have a writeup for you readers soon. Hope everyone had a great Mothers Day

Greenspan Warns On Fannie, Freddie Debt

The Fed chief warned that the two firms' towering debt piles could damage U.S. financial markets. His warnings came wrapped in a speech devoted to the broader matter of derivatives. Greenspan urged caution in the use of the often byzantine financial instruments, but he is leery of increasing government regulation.

Kirk Kerkorian vs. Standard and Poors

Tracinda Corporation today announced that it intends to make a cash tender offer for up to 28,000,000 shares of common stock, par value $1 2/3 per share, of General Motors Corporation (GM) at a price of $31.00 per share. The offer price is without regard to General Motors' regular quarterly dividend of $.50 per share expected to be paid in June 2005.

Tracinda Corporation, of which Mr. Kirk Kerkorian is the sole shareholder, currently owns 22,000,000 shares of General Motors common stock, which represents approximately 3.89% of the outstanding shares. Tracinda's average cost for such shares is approximately $26.33 per share.

TODAY however; Standard & Poor's Ratings Services cut its corporate credit ratings to junk status for both General Motors Corp. and Ford Motor Co., a significant blow that will increase borrowing costs and limit fund-raising options for the nation's two biggest automakers. The credit ratings agency said its downgrade of GM's long-term rating below investment-grade status reflects its conclusion that management's current strategies may not be effective in dealing with the automaker's competitive disadvantages. The rating reductions are significant because some big bondholders such as some pension funds are prohibited from buying bonds that are considered by the major rating houses as speculative, or junk. Both GM and Ford had held credit ratings from S&P that were at the lowest level of the agency's investment grade spectrum. As a result of the new ratings, the automakers may have to pay higher rates of interest to attract enough buyers for their bonds.

GM's consolidated debt as of March 31 was $291.8 billion, while Ford's outstanding consolidated debt totaled $161.3 billion.
GM said it had $19.8 billion in cash at the end of the first quarter, and GMAC had $18.5 billion in cash and securities.


Univision increasingly Threatens Big Four Networks

Spanish-language broadcaster Univision has seen its ratings rise at such a rapid pace that the Los Angeles-based network now often beats the Big Four networks. Since the season began in September, Univision was the top network among 18-to-34-year-old viewers on 19 nights, according to Nielsen Media Research.

The Wall Street Journal (subscription required) (5/2)

Appraisal Fraud: no end in site??

Demos charges that federal efforts in the area have been ineffective and that recent U.S. Treasury standards calling on lenders to respect the independent judgment of appraisers do not carry the force of law. The federal government also has little control over mortgage brokers who originate the lion's share of mortgage loans.
So, why has appraisal fraud gained the foothold that it apparently has in the mortgage granting process? Is anyone watching the store? According to the Demos Report, there are a lot of people who might be or maybe even are watching, but few who have both the power and the motivation to crack down on abuses.
The states have also dropped the ball, only a few even have laws that deal with lender pressure on appraisers. Many states, in fact, do not license mortgage brokers or originators.
Appraisers, in contrast, are regulated by both state and federal agencies, but much of the regulation is concerned with appraisal standards and appraiser training. Appraisers complain that the regulations under which they operate are not at all concerned with the pressure they claim they are constantly under from lenders and real estate agents.
"According to a 2003 study by the General Accounting Office on oversight of the real estate appraisal industry, state agencies overseeing appraisers only have an average of three staff members. The report, which surveyed all states, found that "about two-thirds of the states said that they needed additional funding to conduct investigations, and over three quarters said they needed additional staff'."

Loss of Mexico attorney general may hurt drug war

Attorney General Rafael Macedo -- liked by Washington for his tough line on drugs -- was forced out last week by Fox to allow a popular leftist mayor to run for president in 2006 despite legal charges hanging over him.
His replacement by lawyer Daniel Cabeza de Vaca, sworn in on Monday, leaves Mexico's crackdown on drug gangs along the northern border with a little-known man in charge just as killings and violence escalate."The fact we have a new attorney general with no experience in law enforcement will certainly have an impact," said Jorge Chabat, security analyst at Mexico's CIDE think tank.
Drug gangs regularly gun down rivals as they fight for control of smuggling routes for cocaine, marijuana and amphetamines to the United States.
While Macedo has jailed key drug bosses like Benjamin Arellano Felix and Osiel Cardenas, that has set off a desperate war on the border for market share left by the captured capos.
Some 400 people have been killed this year, many shot execution-style with their hands tied behind their backs, as upstart groups from the state of Sinaloa move in on territory controlled by the Gulf Cartel in northeast Mexico.

THE TALK about controlling the borders, the minutemen border campaigns, the media coverage of Governor Arnold's statement and more are really meaningless. Mexico is slowly become a anarchy state of feudal drug lord's who are taking over and corrupting everything from the government of Mexico to the Border Agents paid to protect our borders. I estimate that for every minute-man captured or repelled illegal crossing, there are 3x as many getting in THROUGH the permeable US Customs process along known border crossings. These drugs and corruption within Mexican politics are what is causing the fight of the poorest distraught from all over Latin America into the US. Stop the corruption and drugs, educate the population and attractive investments and the ILLEGAL problem will be minimized.