Rising bond rates offer some investors new strategies

Rising bond rates offer some investors new strategies

Investors are ditching short-term bonds, and home buyers are reconsidering options in the wake of a recent bond-market rout marked by rising long-term rates. The new strategies are evidence that some investors, particularly income-oriented investors, can benefit from the bond market's woes.

THE RATE GAME
With long-term rates now higher than short-term rates, investors and home buyers should consider new strategies.

• Fixed-income investors may want to consider buying longer-term bonds and CDs.
• Building 'ladders' of investments that come due at different dates can hedge against interest-rate risk.
• Some borrowers are taking another look at hybrid ARMs, mortgages that carry a fixed rate for several years.

Long-Term Rate Rise Prompts Strategy Shift
As Yield Curve Returns to 'Normal,' Investors Start to DitchShort-Term Bonds, While Home Buyers Reconsider Options

By JANE J. KIM and RUTH SIMON
June 20, 2007; Page D1

The recent bond market rout is prompting some fixed-income investors and mortgage shoppers to rethink their strategies.

Some investors have begun buying bonds with longer maturity dates, taking advantage of yields that moved higher as bond prices fell. Meanwhile, as rates on 30-year mortgages also jumped, some borrowers have begun taking another look at adjustable-rate mortgages. Bank of America Corp., for instance, says it's seeing increased interest in hybrid ARMs that carry a fixed rate for the first three, five, seven or 10 years and then adjust annually.

The new consumer strategies reflect a significant shift in the yield curve, or the difference between the yields on short-term and long-term bonds. For the first time in about a year, long-term bonds are returning more than short-term instruments. That represents a more normal state of affairs, because investors expect to reap greater rewards for locking up their money for a longer period of time.

Mike Bangs, a Houston retiree, says he started buying longer-term municipal bonds in the past two weeks as yields rose on the long end. "Until recently, I wasn't getting good prices in the 15- to 20-year range," says the 62-year-old, who has typically bought bonds with terms ranging from 10 to 15 years. "Recently, it's gotten" to where the longer-dated issues are attractive.

Of course, rising rates are generally bad news for investors' existing bond holdings, because newer issues make the older lower-yielding bonds less attractive. Indeed, bond mutual funds, which had seen record inflows through May, saw two of the biggest single-day outflows in the past two weeks in over two years, according to TrimTabs, an independent research firm that tracks fund flows.

What's more, some money managers expect long-term interest rates will continue to move higher amid concerns over global inflation and other factors. And some investors are keeping their powder dry. "Fair value? Yes, but I think they can get cheaper before the green light to buy bonds is turned on," says Dan Shackelford, portfolio manager of T. Rowe Price Group Inc.'s New Income fund and Inflation-Protected Bond fund.

The yield on 10-year Treasury notes -- a benchmark that influences many long-term interest rates, including home mortgages -- was at 5.085% yesterday after hitting a recent end-of-day peak of 5.249% last week. That's nearly half a percentage point above three-month Treasury bills, which yielded 4.643% at yesterday's close. About a month ago, the roles were reversed, with the yield on the three-month bill topping that of the 10-year note.

The steepening of the yield curve creates new planning opportunities for income-oriented investors, who have gravitated to cash and other short-term investments in recent years. Retail investors are likely to start slowly in coming weeks by rolling over their short-term CDs into intermediate-term bonds, with three- to five-year maturities or longer, says Tom Ricketts, president and chief executive of Incapital LLC, a Chicago investment bank that specializes in underwriting bonds for retail investors.

Municipal bonds are looking increasingly attractive. Marilyn Cohen, president of Envision Capital Management Inc., a Los Angeles investment firm, has been buying more intermediate-term municipal bonds with four- to eight-year maturities, now paying more than 4%. Previously, investors would have had to buy bonds that mature in 10 to 15 years to get the same level of yields, she says.

One investing strategy that is expected to get a boost is "laddering," where investors buy bonds scheduled to come due at several different dates in the future, rather than all in the same year. The idea is that, if interest rates rise, investors may be able to take advantage of higher rates by buying new bonds with money coming from maturing issues. And even if rates fall, investors will have some protection because their overall portfolio return is going to be higher than the market rates.

"It makes sense that bond investors are finally starting to play the curve. Finally something is happening," says James Bianco, president of Bianco Research LLC, a market-research firm in Chicago.

The rise in long-term rates is unwelcome news for most borrowers looking to refinance a mortgage or buy a home. The rate on 30-year fixed-rate loans climbed to 6.86% last week, according to HSH Associates. Though still low by historical standards, that's well above the recent low of 6.16% in December and the highest rate in nearly a year. Mortgage rates fell slightly yesterday to an average of 6.8%, according to HSH.

Fixed-rate loans remain the mortgage of choice for many borrowers in the current environment. Dan Arrigoni, president of U.S. Bank Home Mortgage, a unit of U.S. Bancorp, says more than 80% of the bank's borrowers are opting for a fixed-rate loan. Nationwide, ARMs accounted for just 17.8% of loan applications in May, down from nearly 30% last year, according to the Mortgage Bankers Association.

But as rates move higher, some borrowers are taking another look at adjustables. Peter Foley, an insurance underwriter, was considering both a fixed-rate loan and an ARM to finance his purchase of a 2,600-square-foot home in Canton, Conn. But after rates moved higher, Mr. Foley opted for a $375,000 ARM that carries a 5.99% rate for the first four years. "As we got closer to ... closing time, the fixed-rate option has pretty much come off the table," says Mr. Foley, who believes the ARM's four-year fixed-rate period provides sufficient protection against future rate increases. Michael Menatian, the mortgage banker who arranged for the loan, says he has seen a jump in the number of borrowers taking such loans.

The benefits of taking out a hybrid ARM have increased recently, although the spread between rates on hybrids and fixed-rate loans is small by historical standards. Borrowers can cut the rate on their loan by about 0.28 percentage point by opting for a hybrid ARM that's fixed for five years instead of a 30-year fixed-rate mortgage. That spread is the widest since October, but well below the 0.68 percentage-point average over the past 14 years, according to HSH Associates.

For now, hybrid ARMs are likely to get more attention from borrowers with larger loan balances. "The jumbo category [loans above $417,000] is where you're probably going to see the most movement," says Brad Blackwell, a national sales manager for Wells Fargo & Co., in part because borrowers with larger loan amounts tend to be more sophisticated. The potential savings from switching to an ARM can be greater, too, for borrowers with larger loans.

As mortgage rates moved upward, many borrowers rushed to lock in a loan ahead of future increases. "When interest rates go up, traditionally, the fence sitters kind of scamper to do something," says Mr. Arrigoni. He says U.S. Bank's loan volume climbed 40% the day after 10-year Treasury rates jumped.

For borrowers facing a rate increase on their adjustable-rate mortgage, "there's still some benefit to refinancing," says Keith Gumbinger, a mortgage analyst with HSH Associates. "But it's not nearly the compelling sort of move it was a few weeks ago."

Some borrowers considering a cash-out refinancing might decide to postpone that move because of higher rates, although there's no assurance that rates will fall substantially, says Greg McBride, a senior financial analyst with Bankrate.com. On a $300,000 loan, the recent half-percentage-point increase in rates will cost borrowers about $100 a month, he says.

Mitch Ohlbaum, a mortgage broker in Los Angeles, says he's counseling clients looking to refinance to wait until rates fall or, if they need to pull out cash, to take out a fixed-rate home-equity loan, particularly if they have a low rate on their current mortgage. Rates on fixed-rate home-equity loans currently average 8.12%, according to HSH.

Write to Jane J. Kim at jane.kim@wsj.com and Ruth Simon at ruth.simon@wsj.com
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interest rates, fixed income investments, bonds, market rates, mortgage rates

One in three Americans worried about retirement

One in three Americans worried about retirement

One in three Americans describes himself as "apprehensive," "panicked" or "clueless" about retirement preparation, according to a survey for SIFMA. People between the ages of 45 and 54 are more concerned about retirement, and the survey found that the apprehension is not likely to decline as they near retirement. "The first step is stop panicking and start planning," said SIFMA President and Chief Executive Officer Marc Lackritz.

Nearly one in three adults is apprehensive, panicked or clueless about funding retirement.

Retirement savings, investing and planning for retirement preparedness
Tuesday, June 19, 2007
By James Langton

A survey conducted on behalf of the Securities Industry and Financial Markets Association found that nearly a third of American adults describe themselves as either “apprehensive,” “panicked” or “clueless” about their retirement preparedness.

A quarter of those on the verge of retirement (ages 55-64) acknowledge they have not done enough to prepare. The survey also found: as retirement approaches, but is still some distance away, reality begins to sink in and Americans become increasingly apprehensive. Discomfort about the prospect of retirement is higher for the 45-54 age group than it is for those younger or older -- with 38% of Americans in this age cohort expressing some level of apprehension or related concern about retirement.

For many of them, that apprehension is not likely to decline as they get closer to retirement. Among those 55-64, 30% still describe their emotional state regarding their financial preparation for retirement as well short of comfortable.

Respondents who have consulted a financial professional are much more likely to be comfortable/confident about retirement than those who have not (78% vs 58%).

“The first step is stop panicking and start planning,” said Marc Lackritz, president and CEO of SIFMA. “As the survey results show, talking to a financial professional can jumpstart a person’s confidence about retirement readiness.”

SIFMA also noted that for a substantial portion of Americans, even many who are near retirement age, the problem is not as simple as “they aren’t saving enough.” Nearly 30% of respondents are truly focused on finding the money that could potentially be saved. Another third feels they may have the money, but they don’t know how to manage it. The last third (34%) continue to struggle with the challenges of getting started, of focusing on saving, or of finding the right kinds of help.

Trends among the young tech-savvy population to take interest in their retirement planning are encouraging, SIFMA added. Those 18-34 are equally as likely to have either used Tivo (23%) or voted for an American Idol contestant (24%) as to have used a retirement calculator (22%).

“It’s encouraging to see younger generations taking time to learn about retirement planning,” noted Lackritz. “They will need more retirement savings than their parents do. By saving early and saving often – they will have a huge advantage on a sound retirement plan.”

Lackritz adds, “Perhaps these younger generations will prove to us older folks they are not American Idles.”

The survey is the result of a telephone poll of 1,000 respondents, and was conducted from May 29-31, by Artemis Strategy Group. The data are weighted to give appropriate representation on various demographic factors, including: age, income, the four national census regions and gender.

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retirement, guaranteed lifetime income, household debt, investments, savings

Housing market prepped for a "blood bath"

Housing market prepped for a "blood bath"

The U.S. housing market could be facing a two- to three-year downturn, with the supply of unsold homes creeping up to 4.2 million, a record. The national median home price is poised for its first decline since the Great Depression, and confidence among U.S. home builders dipped this month to its lowest level since February 1991. Nouriel Roubini, a Clinton administration Treasury Department director who now runs Roubini Global Economics, said the housing recession had now expanded to an across-the-board economic recession.

Mortgage Rate Rise Pushes U.S. Housing, Economy to `Blood Bath'
By Kathleen M. Howley
June 20 (Bloomberg) --

The worst is yet to come for the U.S. housing market.

The jump in 30-year mortgage rates by more than a half a percentage point to 6.74 percent in the past five weeks is putting a crimp on borrowers with the best credit just as a crackdown in subprime lending standards limits the pool of qualified buyers. The national median home price is poised for its first annual decline since the Great Depression, and the supply of unsold homes is at a record 4.2 million, according to the National Association of Realtors.

``It's a blood bath,'' said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. ``We're talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit.''

Confidence among U.S. homebuilders fell in June to the lowest since February 1991, according to the National Association of Home Builders/Wells Fargo index released this week. Housing starts declined in May for the first time in four months, the Commerce Department reported yesterday. New-home sales will decline 33 percent from 2005's peak to the end of this year, according to the Realtors' group, exceeding the 25 percent three-year drop in 1991 that helped spark a recession.

`Economic Recession'
``It's not just a housing recession anymore, it looks more and more like an economic recession,'' said Nouriel Roubini, a Clinton administration Treasury Department director and economic adviser who now runs Roubini Global Economics in New York.

Goldman Sachs Group Inc., the world's biggest securities firm, and Bear Stearns Cos., the largest underwriter of mortgage-backed securities in 2006, said last week that rising foreclosures reduced their earnings. Bear Stearns said profit fell 10 percent, and Goldman reported a 1 percent gain, the smallest in three quarters. Both firms are based in New York.

The investment banks, insurance companies, pension funds and asset-management firms that hold some of the U.S.'s $6 trillion of mortgage-backed securities have yet to suffer the full effect of subprime loans gone bad, said David Viniar, Goldman's chief financial officer. Subprime mortgages, given to people with bad or limited credit histories, account for about $800 billion of the market.

``I continue to believe that we haven't seen the bottom in the subprime market,'' Viniar said on a June 14 conference call with reporters. ``There will be more pain felt by people as that works through the system.''

He didn't return calls this week seeking additional comments.

Homebuilder Stocks
Homebuilding stocks are down 20 percent this year after falling 20 percent in 2006, according to the Standard & Poor's Supercomposite Homebuilding Index of 16 companies. Before last year, the index had gained sixfold in five years.

``There isn't a recovery about to happen,'' said Ara Hovnanian, chief executive officer of Hovnanian Enterprises Inc., the Red Bank, New Jersey-based homebuilder. The company's stock tumbled 42 percent this year through yesterday.

The share of people taking out all types of adjustable-rate home loans averaged 29 percent during the past three years, compared with the 17 percent average of the prior three years, according to data compiled by Mclean, Virginia-based Freddie Mac.

Higher fixed mortgage rates and stricter lending standards mean some of those borrowers won't be able to refinance into fixed-rate loans. Many of them have seen their home's value drop even as their interest rates adjust higher.

`Millions of People'
``When all these people see their mortgage payment and it's up 40 or 50 percent, they're going to say, `We can't stay in this house,''' Pimco's Kiesel said. ``And there are millions of people in this situation.''

The average U.S. rate for a 30-year fixed mortgage was 6.74 percent last week, up from 6.15 percent at the beginning of May, according to Freddie Mac, the second-largest source of money for home loans. That adds $116 a month to the payment for a $300,000 loan and about $42,000 over the life of the mortgage.

The recent increase in mortgage rates is the biggest spike since 2004. The change means buyers can afford 8 percent less house than they could five weeks ago, Kiesel said.
``Prices are going lower,'' he said.

The housing sector will push the U.S. economy into recession unless the Federal Reserve cuts its benchmark rate at the first surge in unemployment, said Kiesel, who expects the Fed to reduce rates.

Home Equity Loans
In addition to their primary mortgages, homeowners had $913.7 billion of debt in home equity loans in 2005, more than double the $445.1 billion in 2001, according to a paper by former Federal Reserve Chairman Alan Greenspan and James Kennedy on equity extraction issued by the Fed three months ago.

About a third of that money, extracted as home values surged 53 percent from 2000 to 2005, was used to buy cars and other consumer goods, according to the paper. The interest rate on those loans doubled to 8.25 percent in 2006 from 4 percent in 2003.

If the Federal Reserve lowers the rate it charges for overnight lending to banks, that would cut the prime rate that moves in tandem with it and reduce the interest on many types of adjustable home loans, including home equity mortgages.

Federal Reserve policy makers probably will keep the overnight bank lending rate unchanged at a six-year high of 5.25 percent when they next meet on June 27, according to a Bloomberg survey of 72 economists.

Boom and Bust
Homebuyers who got an adjustable-rate mortgage, a so-called ARM, in 2004 have seen their rate climb by about 40 percent. That's enough to add $288 to the monthly payment for a $300,000 mortgage. The average adjustable rate last week was 5.75 percent, an 11-month high, according to Freddie Mac.

Roubini predicts the decline in U.S. home sales will last at least another 12 months, reducing the median house price by 5 percent this year and next. That would take home prices back to 2004, when the national median was $195,200.

The primary cause of the 1990 to 1991 recession was a real estate boom and bust similar to the past seven years, Roubini said. A real estate ``bubble'' in the mid-1980s led to speculative buying and lower credit standards that resulted in widespread foreclosures, he said. The defaults triggered a credit crunch that turned into an economic recession in the spring of 1990, said Roubini, who is an economics professor at New York University's Stern School of Business.
He put the chance of a recession this year at ``50-50,'' above former Fed chief Greenspan's 33 percent estimate. A recession is a decline in gross domestic product for two consecutive quarters.

`Significant Drag'
Greenspan warned of ``froth'' in the real estate market in 2005, before leaving the central bank in January 2006. Three months ago Greenspan said there was a ``one-third probability'' of an economic recession this year, in large part due to the unsteady housing market. He reiterated that view last month at a conference hosted by Merrill Lynch & Co. in Singapore
``There is no doubt there is a slowdown going on in the U.S.,'' Greenspan said at the conference. ``We are clearly having troubles in the capital investment area, as well as potentially in the consumption area and obviously housing being a significant drag.''

A Fed survey of senior loan officers issued in April said that 45 percent of lenders had restricted ``nontraditional'' lending, such as interest-only mortgages, and 15 percent had tightened standards for the most creditworthy, or prime, borrowers. More than half had raised standards for subprime borrowers, according to the survey.

Subprime mortgages have rates that are at least 2 or 3 percentage points above the safest so-called prime loans. Such loans made up about a fifth of all new mortgages last year, according to the Mortgage Bankers Association in Washington.

Housing Chain
Making it harder for those people to buy houses is going to create trouble all the way up the housing chain as people who own starter homes find it more difficult to sell their real estate and buy bigger properties, said Neal Soss, chief economist at Credit Suisse Holdings USA Inc. in New York.

``The subprime market has changed character dramatically, and that takes a number of entry-level buyers out of the picture,'' said Soss, who was an adviser to former Fed Chairman Paul Volcker.

Home sales won't increase in any sustained way until 2008, though the stumble probably won't cause a recession because the housing market hasn't reduced consumer spending, he said.

Retail Sales Endure
``Here we are a year and a half into the housing slowdown and retail sales are off the chart,'' Soss said. The economy expanded at a 1.9 percent pace in the first quarter, compared with a year earlier, the smallest gain since the 1.8 percent rate in the second quarter of 2003, ``but it hasn't collapsed, and I don't think it will,'' he said.

Bank of America Corp. Chief Executive Officer Kenneth Lewis yesterday said the U.S. housing slump is almost over. ``The drag stops in the next few months,'' said Lewis, whose bank relies on the U.S. market for almost 90 percent of its revenue. ``We do not see a recession. Because that drag stops, you'll see the economy begin to pick up in the third and fourth quarters.''

The median U.S. price for a previously owned home fell 1.4 percent in the first quarter from a year earlier, the third consecutive decline, according to the National Association of Realtors. Before the third quarter of 2006 prices hadn't dropped since 1993. The quarterly median may dip another 2.4 percent in the current period, the Chicago-based industry trade group said in its June forecast.

Measured annually, the national median hasn't dropped since the Great Depression in the 1930s, according to Lawrence Yun, an economist with the trade group.

Increase in Foreclosures
The share of mortgages entering foreclosure rose to 0.58 percent in the first quarter, the highest on record, from 0.54 percent in the final three months of 2006, the Mortgage Bankers Association said in a report last week. Subprime loans going into default rose to a five-year high of 2.43 percent, up from 2 percent, and late payments from borrowers with poor credit histories rose to almost 13.8 percent, the highest since 2002.

Prime loans entering foreclosure increased to 0.25 percent, the highest in a survey that goes back to 1972. That's a sign that even the most creditworthy borrowers are being squeezed, Roubini said.

``We have a lot of people, even prime borrowers, who are at the edge because they either bought with no equity, they have an ARM that's seen a rate spike, or they used their house like an ATM and turned their equity into cash,'' Roubini said. ``Many of those people are under water today, and if they have to sell, it's going to drag down values in their neighborhood.''

Adjustable Rates
Some owners are selling their homes at ``fire sale'' prices to avoid foreclosure after seeing their adjustable mortgage rates spike, said Lawrence White, an economics professor at the Stern School of Business.

``Prices will continue to soften for as long as we have distressed sellers,'' White said. Some regions of the U.S. could see price declines of 10 percent in the next six to 12 months, he said. The slump probably won't cause a recession, he said.

``It's not going to be the 1929 stock-market disaster, with people jumping out of buildings, but there is going to be widely dispersed pain for the next few quarters,'' he said.

The biggest problem is volatile home prices, said Gary Shilling, head of A. Gary Shilling & Co., an economic forecasting company in Springfield, New Jersey. Shilling put the chance of a recession this year at 75 percent.

``A lot of people went out on a limb to pay the record high prices for homes, and they're in trouble now,'' he said.

`Exploding ARMs'
Borrowers who got loans with so-called teaser rates are in the biggest bind, according to Shilling. Prices surged a record 12 percent in 2005, spurring buyers to ``stretch'' to qualify for bigger loans by using interest-only ARMs or so-called option ARMs with low introductory payments.
Some have payments based on interest rates as low as 1 percent. At the end of an introductory period, the rate can more than quadruple, leading them to be called ``exploding ARMs,'' he said. Some loans allow borrowers to choose how much they want to pay, with the balance added to the loan's principle, making it possible to owe more than the home's purchase price.

``Homeowners with adjustable-rate mortgages are getting squeezed on all sides,'' said Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago. Real estate taxes have surged along with home prices, and many U.S. homeowners saw their property insurance double after Hurricane Katrina ravaged Louisiana and Mississippi, she said.

Swonk said the housing slide will last into next year. Still, she doesn't expect the economy to slow because of it.

``The economy could easily beat expectations in the second half of this year,'' she said. ``The housing correction remains the primary threat to that happening.''

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net .

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mortgages, housing, real estate, ARM, fixed rate mortgage, financial plan

Lenders move to stop credit repair schemes

Mortgage industry tries to block credit-repair schemes

Federal regulators and lenders are reviewing a growing practice that allows borrowers with low credit scores to pay money to piggyback on accounts with good scores. Fair Isaac Corp., developer of the FICO score, said it would change its credit-scoring system by the end of the year to end the loophole.

Lenders move to stop credit repair schemes
Shaky borrowers pay cash to piggyback on acounts with good scores.

Only a low credit score stood between Alipio Estruch and a mortgage to buy a $449,000 Spanish-style house in Weston, Fla., a few miles west of Fort Lauderdale.

Instead of spending several years repairing his credit rating, which he said was marred by two forgotten cell phone bills and identity theft, the 37-year-old real estate agent paid $1,800 to an Internet-based company to bump up his score almost overnight.

The result was a happy ending for Estruch, but the growing practice is sending shivers through the mortgage industry. Federal regulators are also reviewing the practice. And after being contacted by The Associated Press for this story, Fair Isaac Corp., the developer of the widely used FICO score, said it will change its credit scoring system beginning later this year in a way it contends will end this little-known but potentially high-impact mortgage loan loophole.

Instantcreditbuilders.com, or ICB, helped Estruch boost his score by arranging for him to be added as an authorized user on several credit cards of people with stellar credit who were paid to allow this coattailing. Parents also use this practice when they add their children to their credit cards to help them build solid credit.

The pitch to those who are essentially renting their credit history for pay is seductive: You don’t need to worry about users of this service receiving duplicate copies of your credit cards, account numbers or any of your personal information. It’s essentially free money, they are told.

Brian Kinney, 44, a retired Army officer in Glendale, Calif., pulls in more than $2,500 a month by lending out 19 credit card spots on two old Citibank cards with strong payment histories. Kinney, whose FICO score is above 800 on the scale of 300 to 850, quit his job working at a Farmers Insurance agency and uses the ICB income to tide him over until he starts his own insurance agency.

Buying a better score
Lenders are worried, however, that they’re taking on greater default risks by unknowingly offering lower interest rates than they otherwise would to applicants who artificially boost their credit scores. Their trade group has complained to the Federal Trade Commission and is talking with the credit reporting bureaus in case the practice becomes more widespread.

Estruch paid $1,800 in December for three credit card spots, and by January, his FICO score jumped from 550 to 715. In mid-March, he closed on his four-bedroom beige stucco house after obtaining a 30-year fixed-rate mortgage from a unit of American Home Mortgage Investment Corp. It carried a 7.5 percent interest rate and required no down payment.

"Everything now is score driven. I had a great mortgage history, but I got hurt because of my credit score," said Estruch, who also works as a mortgage broker, had bought and sold two houses previously, and currently owns another home in New York. Estruch said he’s current on his mortgage payments.

Companies like Largo, Fla.-based ICB are sprouting on the Internet with little overhead and no-frills marketing. They post ads on community Web sites like Craigslist and have sponsored links on Google and Yahoo. Competitors of ICB have even reached out to mortgage brokers, lenders and real estate agents, flooding their e-mail with advertisements.

Jason LaBossiere, who founded ICB a year and a half ago, said his company receives 100 to 150 new leads daily — a number that has been growing — and those inquiries lead to 10 to 20 new clients a week.

ICB charges $900 for the first credit card account, with a discount for additional ones. The cardholder allowing the piggybacking on his or her credit history can receive $100 to $150 per slot, depending on the age and credit limit of each card. ICB pockets the rest.

The effect on a credit score can vary depending on what else is in a client’s report. But one borrowed credit card account can increase a score between 30 and 45 points, two between 60 and 90 points, and five between 150 and 205 points, according to ICB. That’s because the computer program that calculates scores is essentially tricked into believing the credit renter has a better repayment history when it sees the added accounts, and that helps lift the credit score.

Once the credit card company files an updated report to credit bureaus — leading to a higher FICO score — the credit renter is removed from the account of the person allowing the piggybacking. However, the credit card’s payment history remains on the authorized user’s credit report forever, and lenders have no way of knowing how the credit borrower is related to the cardholder.

High scores bring lower ratesA higher credit score can save a consumer an enormous amount of money because it usually means a lower mortgage interest rate. It also can mean the difference between qualifying for a loan or not, as in Estruch’s case.

According to Fair Isaac, lenders would probably demand about a 9.8 percent interest rate on a $300,000, 30-year fixed mortgage for an applicant with a credit score between 500 and 579. That would translate into a $2,585 monthly payment for principal and interest.

But a borrower with a score between 760 and 850 seeking the same loan would qualify for about a 6 percent rate that would cost just $1,796 a month for principal and interest. That savings of $789 each month would total $284,040 over 30 years.

Kinney, the retired Army officer in California, said those borrowing his good credit history don’t get his personal information, full credit card number or credit card expiration dates. Any sensitive data is handled through ICB, and Kinney adds the users himself by calling his credit card company. ICB also destroys any duplicate cards that are issued to the credit renter, according to its contract.

Instead of being worried about risks he may be assuming, Kinney said borrowers are the ones vulnerable to scammers posing as do-gooders. Those seeking a credit hike give the cardholder their names and Social Security numbers, which, in the wrong hands, could lead to identity theft. Kinney said he also receives credit card offers in the mail for the credit borrowers on his accounts, opening up another possibility for fraud, but he throws them away.

"I know the whole thing sounds kind of odd and not very legitimate, but it is for now," Kinney said. "I don’t know how long before someone will decide it’s illegal. But I’m not counting on this for the long-term."

Ginny Ferguson, a mortgage broker in Pleasanton, Calif., and a credit expert for the National Association of Mortgage Brokers, considers the practice mortgage fraud, and the trade organization is about to release a policy statement against it.

"These companies are encouraging consumers to commit fraud. On a standard home loan, there’s a clause that says the consumer is not omitting pertinent facts that could impact his or her ability to repay the loan," Ferguson said.

ICB’s LaBossiere said he sees his business as a second chance for the consumer who has had little financial education to make good decisions.

"People who are our clients are spending an incredible amount of money to get their finances back in order," he said. "They’ve learned through a school of pain that it’s such an important aspect of regaining control of their lives again."

So far, federal authorities have yet to make a ruling on the practice. "What I’ve gathered from attorneys here is that it appears to be legal" technically, said FTC spokesman Frank Dorman. "However, the agency is not saying that it is legal."

Lenders, who depend on credit scores to assess a person’s ability to pay back a loan, are closely watching the practice’s growth. It also comes at a time when the industry is reeling from the a soaring default rate on subprime mortgages, home loans for people with bad credit. As a result, they’ve tightened lending standards, but the credit-renting practice threatens to undermine their efforts to reduce exposure to risky borrowers.

Score system under revisionNinety percent of the largest U.S. banks base their loan decisions on FICO scores, which currently includes authorized user accounts. However, after discussions with lenders and industry officials, Fair Isaac said it intends to announce this week that all future versions of its FICO score methodology will no longer consider authorized user accounts, said Tom Quinn, Fair Isaac’s vice president of scoring solutions.

The next version is slated to roll out in September to one of the three main credit reporting agencies — Equifax Inc., Experian Information Solutions Inc. or TransUnion LLC — with the other two agencies receiving the new version some time in 2008.

The change won’t be a quick-fix for lenders trying to weed out credit renters. Corey Carlisle, senior director of government affairs for the Mortgage Bankers Association, said it takes time for lenders to transition from one scoring system to another.

"All lenders have their own guidelines and parameters on how to use and incorporate the FICO score. It would take time to understand what’s in a new credit score," Carlisle said.

Quinn also noted that some lenders generate their own scores using authorized user accounts in their calculations, so the practice may not be easily negated.

"It’s an industrywide issue and there are other scores out there," he said. This is a phenomenon that impacts more than just FICO scores."

Other consumers besides credit renters stand to lose with the change, namely those for whom authorized user accounts were designed: college students on their parents’ cards and spouses with little to no credit of their own.

But there’s no way to distinguish these from the latest crop of strangers trying to augment their scores. Lenders who want to find out more information about others on credit card accounts are hindered by the Fair Credit Reporting Act and privacy laws.

"As with any decision, there’s a trade-off," Quinn said. "The many honest consumers who learn good credit skills with the help from a family member, that feature will be removed. But the challenge for us is maintaining the integrity of the FICO score."

mortgages, credit repair, FICO score, credit consultation

21 Power Principles for Business Builders

There are 21 “Power Principles” in this report and, while each one has a dynamism of its
own, all of them have a common theme:

They are designed to help you put more cash and more customers in your business!
And I can assure you that my Power Principles will do just that. For almost 25 years, I
have used them to help thousands of businesses jump-start their sales and profi ts – in many cases overnight and, in some cases, on a scale that is truly mind-boggling.

The Principles aren’t theoretical. They are all practical techniques of proven value and
wide applicability. They can be used successfully by the smallest “Mom and Pop” store, or
by a megacorporation. Whether you are a dentist or a designer, a “captain of industry” or the
struggling owner of a start-up business, these “21 Principles” can do for you what they have
done for so many others:
…help you rise to new levels of business and personal success.

read Jay's report.

21 power principles, business building, business plan, marketing , customer retention, cash management, HR, networking

Do you want a Million Dollar business?

We're looking for small business owners who want to make their business more efficient. If chosen, you'll receive a consultation with a business expert in one of five areas: marketing, finance, organization, technology or team building. You take their advice and we'll pay for their recommendations. For a copy of the Official Rules and to apply now, go to www.bizbreakthrough.com
Apply online

Million-Dollar Second Acts
Meet 11 people who left full-time jobs to work for themselves. Today each one's business or franchise has yearly revenues of $1 million-plus.
full article

Starting your own small business has its risks—one-third of all new businesses fail by the two-year mark, and almost 60% fold within four years, according to a 2005 Monthly Labor Review study. But it also has its rewards. Just ask the 11 entrepreneurs profiled in this slide show. They've all left a full-time job to work for themselves. Today their businesses or franchises have yearly revenues of $1 million or more.

A few lucky entrepreneurs are leaving secure jobs behind to start businesses that break the $1 million threshold in annual revenue .

today's uncertain job climate, some workers feel that the rewards of starting their own business outweigh the risks of leaving the corporate world (see BusinessWeek.com, 1/16/07, "Lure of Entrepreneurship Beckons Boomers"). Just ask Allison Karl O'Kelly, founder and chief executive officer of Mom Corps, a staffing agency that pairs experienced women looking for flexible work with companies seeking seasoned talent.

In January, 2004, O'Kelly left her executive role at Toys "R" Us, where she launched the Babiesrus.com Web site and oversaw an $11 million store, to start her family. But returning to the corporate world was difficult; her 8 a.m.-to-4 p.m. schedule was still not flexible enough for her to meet her family responsibilities. "I didn't mind working full-time (which I do), but I needed the flexibility to take my children to the doctor or go to school activities without difficulties. I started Mom Corps to meet my own needs for flexibility and provide that luxury to other moms at the same time," she says.

Going her own way has been invaluable for O'Kelly. Her company, founded in 2005, grossed $1.3 million in its first full year in business, 2006, and she's built her workdays to allow the flexibility to be the kind of mother she wants to be.

Seven-Figure Club
A few entrepreneurs have been pushing their businesses past the $1 million mark in recent years. Between 2000 and 2003, the number of firms reporting at least $1 million in revenue increased by about 6%, according to the IRS. Entrepreneurs' Organization, an Alexandria (Va.)-based group open only to businesses with at least $1 million in revenue, saw its ranks swell from 4,525 in 2002 to more than 6,400 in 2006, a 41% increase.

Of course, most entrepreneurs do not break the $1 million threshold in annual revenue. Take women-owned businesses, for example. Although women entrepreneurs constitute one of the largest and fastest-growing segments of the small-business sector, few of them generate $1 million or more in revenue. Indeed, according to the Washington-based Center for Women's Business Research, while 48% of all privately held U.S. firms are 50% or more owned by women and produce $2.5 trillion in sales, only 3% of them have reached seven-figure success (see BusinessWeek.com, 6/19/06, "Minting Women Millionaires: The Winners").

The keys to founding a successful second-act business, say entrepreneurs who have done it, are the same as founding any business. They include dedication, passion, financial and business savvy, and some degree of financial risk-taking.

Sense of Achievement
Many of these entrepreneurs say the experiences gained from the corporate world were invaluable in pushing their second act into the million-dollar realm. Dan Mahaney, whose 30-employee CertaPro commercial and residential painting franchise grossed about $1.8 million last year, worked as a CPA within larger firms for almost 20 years before starting his franchise. "A lot of franchisees are very good at selling the work and producing the work, but lose control of the financial end of the business. [My experience as a CPA] helped keep my thumb on the financial pulse of the business as well as the planning," says Mahaney.

Second actors rarely regret taking the plunge. Mahaney says he left his corporate gig "mainly just to have more control over my own destiny, maybe a little burnout, and just do something different. It was one of the best moves I ever made in my life."

Overwhelmingly, those who take the risk and achieve the goal of building their own $1 million business ooze with pride. "What do I love most about being an entrepreneur? Freedom. The freedom to set the direction of the company, the freedom to make changes, the freedom to set my own schedule…it's all good!" says Bill Macon, founder, president, and CEO of St. Louis-based Macon Electric Coil, an 80-employee, $8 million company that manufactures electric coils and solenoids for original equipment manufacturers.

"I had wanted to have my own company since I was a kid," he says. "After 10 years [at Emerson Electric] I decided that, if I stayed longer, I'd never do it. The higher [in the organization] you get, the tighter the golden handcuffs get."

For a slide show profiling million-dollar second acts from Calgary, Alta., to Temecula, Calif., click here.

Quiz: Are You Ready for Your Second Act?
Take this simple quiz to find out if you're ready to fly solo and runyour own business.
take the quiz

how to start a business, startups, new businesses, baby boomers

Best Entrepreneurs Under 25

Best Entrepreneurs Under 25

Here some great article to inspire young entreprenuers. It's not about age. It's all about ideas, your dreams and the passion to make it work.

Young, Fearless, and Smart
More and more young people are looking for startup success across the U.S. They've got their feet on the ground and some great ideas Slide Show: America's Best Young Entrepreneurs

Slide Show: America's Best Young Entrepreneurs
Check out 25 smart new businesses from some of the brightest entrepreneurs in the U.S. aged 25 and under.

Europe's Young Entrepreneurs
With promising ideas and an inherently international outlook, more young Europeans are aiming for startup success. These 15 have found it.

Asia's Young Entrepreneurs
They come from lands ranging from dirt poor to First World. But nothing could cool the raging work ethic and ambition of these startup stars.

Hitting The Books
How to get your degree and start your company at the same time!


more articles

young entrepreneurs, business development, business ideas, youth marketing, fast growth companies

Lure of Entrepreneurship Beckons Boomers

Lure of Entrepreneurship Beckons Boomers
by Jeffrey Gangemi

Instead of retiring, boomers are starting second-act businesses; someare motivated by an independent lifestyle, others by economic necessity.

In May, 2004, at age 50, Bob Axisa, then vice-president of enterprise technology services for JP Morgan Chase (JPM), had his position eliminated when the company merged with Bank One. "It was really scary," says Axisa. "I started at the bottom and worked up to a good position—what do you do when it gets pulled out from under you?"

Axisa decided not to return to the uncertainty of the corporate world because, he says, "with offshoring and outsourcing of work, no one really has a secure position. At least that's what I think." Rather, he used part of the 49 weeks of severance-package funds he received from his buyout to start a CertaPro Painters franchise (see BusinessWeek.com, 4/12/05, "Extending the Front Lines of Franchising") in Staten Island, N.Y., where he lives. Axisa is entering his third year of business and says his second act provides the kind of security he needs.

Corporate Jobs Too Insecure
Like Axisa, many boomers—or those 78 million Americans born between 1946 and 1964—are leaving corporate jobs to start their own businesses. And it's not just because they're ready to retire; though some have the time and money to try life as an entrepreneur, many don't. They, like Axisa, are often worried about disturbing corporate trends like layoffs and pension cuts that are leaving many in their age bracket with a tough road through retirement.

"Baby boomers are looking at starting real businesses—looking for another 10- to 12- to 15-year career, God willing," says Paul Magelli, senior scholar-in-residence at the Kansas City (Mo.)-based Kauffman Foundation, a center promoting entrepreneurship. "Just the topic of whether Ford (F) and GM (GM) would engage in consolidation talks sends a huge tremor among a huge, experienced workforce—they need to be thinking about opportunities with some kind of income security. It's somewhat subdued, but that anxiety is still very much in the workplace, from the reports we get." Entrepreneurship is, somewhat surprisingly, increasingly seen as a stable way to ensure financial security, Magelli says.

About one in three self-employed workers ages 51 to 69 made the transition to self-employment at or after age 50, according to a 2003 AARP Baby Boomers Study, and 15% of the 1,200 adults between 38 and 57 who were surveyed planned to start their own businesses. "I think we are likely to find more people likely to go into self-employment. The [15% planning to start businesses] is not a statistic to sneeze at, even if the proportion of older workers who are self-employed remains stable," says Sara Rix, strategic policy adviser for the AARP.

Business Experience Reapplied
And these boomers aren't just dreaming up part-time gigs for some extra spending cash. Some are opening high-growth, angel-worthy second acts. Bill Payne, a consultant at the Kauffman Foundation and an active angel investor for more than 20 years, says he's seen a marked increase in boomer-led companies seeking funding. He prefers funding such companies because of their founders' level of expertise and competence. "From an investor who looks at hundreds of business plans per quarter, we are encouraged when we see some senior guys who have a lot of vertical experience—we know they're bringing business savvy and that they're reasonable, rational people. We definitely are seeing more people in the boomer age bracket," says Payne.

Diane Smith, co-founder and chief executive officer of Aurorus Entertainment, an Internet Protocol TV (IPTV) services company based in Kalispell, Mont., says having a corporate background—she had been at Alltel Wireless for 15 years, most recently as senior vice-president of government affairs—helped her find funding for her business. "I wouldn't say [securing angel investment] was easy because I had deep experience, but it certainly helped us gain an audience more easily," says Smith. "You've still got to have a great business plan, and you have to show that you know how to execute."

Despite female-boomer success stories like Smith's and the fact that Census Bureau numbers depict a rapid increase in the number of women starting businesses—between 1997 and 2006, the number of women-owned firms grew by 42.3%—their combined annual sales grew only 4.4%. That's largely due to the inability of many women-owned firms to get the kind of funding they seek, at least partially due to cuts to the SBA loan program, says Margot Dorfman, executive director of the U.S. Women's Chamber of Commerce (see BusinessWeek.com, Winter, 2006, "Paying the Piper"). "The broadest trend that I see is that the majority of women-owned firms are in the service sector, because of the smaller financial investment to start up service companies," she says.

Other Self-Employment Ingredients
Pension cuts are another huge element in the number of boomers going out on their own.

Controlling for wealth, having pension coverage in current wage and salary employment reduces the likelihood of becoming self-employed by a factor of three or more for both men and women, according to "Self-Employment and the 50+ Population," a March, 2004, study conducted by the Santa Monica (Calif.)-based research group RAND Corp. for AARP. Since 2004, many companies have cut pension or eliminated it altogether, so many older folks are seeing self-employment as the key to financial security in their older age.

Household wealth is also a predictor of who transitions into entrepreneurship. Men and women in the highest wealth quartile are more than twice as likely to pursue self-employment than their counterparts in the lower wealth quartiles, according to the RAND study. And overall, the number of wealthy people in the baby-boomer generation is high. According to the Government Accountability Office analysis of the 2004 Survey of Consumer Finances, 97% of baby boomers are in the top 50% of population by net wealth.

For Smith, starting her own business was something she could afford to do monetarily. "We had the resources to be able to take some time off and entertain new ideas. It is a second act and feels like a second act. It's invigorating and energizing, and it just feels right in a lot of respects," she says.

For Axisa, it was out of necessity.

Gangemi is a reporter for BusinessWeek.com in New York.

baby boomers, retirement, income, business owner, entrepreneurship

Financial aid officers agree to new policies

Financial aid officers agree to new policies

In a joint news conference with New York Attorney General Andrew Cuomo, National Association of Student Financial Aid Administrators President Dallas Martin admitted that conflicts of interest exist in the student-loan arena and adopted a new code of conduct pushed by Cuomo. "I was wrong," Martin said. "We didn't have all the facts."

Wells Fargo, New York state reach accord
Bloomberg News05/30/2007 03:26:54 AM PDT

Wells Fargo & Co., the nation's fifth-biggest bank by assets, became the latest lender to agree to a code of conduct for student loans, according to New York Attorney General Andrew Cuomo. Cuomo, who's investigating the $85 billion student-loan industry, said Monday that with the addition of the San Francisco-based bank, the five largest U.S. student loan providers have adopted his code, which bans revenue-sharing with colleges, payments for steering students to "preferred lenders" and compensation to financial aid officers who serve on lender advisory boards.

"The message is clear — lenders large and small must adhere to best practices and help restore integrity to the student loan industry," Cuomo said.

Doreen Woo Ho, president of Wells Fargo Education Financial Services, said in a telephone interview that Wells Fargo sent Cuomo a letter saying "most of the items in the code have been longstanding practices" at the bank, and that it had its own policies in place that it believed addressed Cuomo's concerns.

"We don't disagree with the New York code but we did not sign the New York code of conduct," Woo Ho said. "We believe our own lending principles and marketing practices really represent the way we would like to do business."

Woo Ho said the Wells Fargo code is more extensive than the New York code. She said the company would no longer provide printing services related to student lending, such as loan comparison charts.

Jeffery Lerner, a spokesman for Cuomo, said the attorney general interpreted Wells Fargo's letter as saying they've agreed to abide by the code. "Wells Fargo has demonstrated that in the student lending industry, it's now a race to the top rather than a race to the bottom, by saying that they want to abide by the best practices embodied in our code of conduct."
Besides Wells Fargo, Cuomo said he has reached accords with SLM Corp., the biggest student lender, also known as Sallie Mae; Citigroup Inc.; JPMorgan Chase & Co.; and Bank of America Corp., among other lenders.

Sallie Mae, Citibank, Education Finance Partners, a San Francisco-based lender, and New York-based CIT Group Inc. also agreed to contribute $9.5 million to educate students and their families about college loans.

full article and Video

financial aid, student loans, preferred lender, college, university, NYState district attorney, DA

S&P 500 stocks are a bargain in 2007

Despite record, S&P 500 stocks a bargain

Stocks that make up the Standard & Poor's 500 are 45% less expensive relative to historical profits than when the index last peaked, and 30% cheaper than when it fell to a decade low nearly five years ago. The S&P 500 closed at 1,530.23 Wednesday, surpassing a previous high in March 2000.'

S&P 500 Stocks Are 45% Cheaper Than When Index Last Hit Record
By Michael Patterson

May 31 (Bloomberg) -- Companies in the Standard & Poor's 500 Index may still be a bargain after the benchmark for U.S. equities surpassed its 2000 record.

The index's 500 members are 45 percent less expensive relative to historical profits than when the index last peaked, and 30 percent cheaper than when it fell to a decade low in October 2002. Price-to-earnings ratios declined after companies reported 14 straight quarters of 10 percent-plus profit growth, the longest streak since 1950.

The S&P 500 rose 0.8 percent to 1530.23 yesterday, eclipsing its previous high of 1527.46 set March 24, 2000, led by Exxon Mobil Corp., Goldman Sachs Group Inc. and Apple Inc. The gauge, whose members have a median market value of $14 billion, rallied 7.9 percent this year after first-quarter earnings climbed three times more than analysts' estimates.

``The market is definitely much more fairly priced than it was back in 2000,'' said Michael Mullaney, who helps manage $10 billion at Fiduciary Trust Co. in Boston. ``It's on a much more solid fundamental footing -- we're in pretty good standing for at least the remaining part of the year.''

Investors plowed $199 billion into mutual funds dedicated to U.S. equities during the 10-month stretch leading up to the 2000 record, including $36.5 billion in February of that year, the biggest increase in any month during the past nine years, according to data compiled by TrimTabs Investment Research in Sausalito, California.

Price-Earnings
The flood of money into the U.S. stock market helped boost the average price-earnings multiple for S&P 500 shares to 32.8 in March 2000. That compares with a 25.7 average earnings multiple when the market fell to a low in October 2002 and an 18 multiple today.

The S&P 500 plunged 49 percent between March 2000 and Oct. 9, 2002, dragged down by an 82 percent decline in computer- related shares. Those stocks had surged more than 12-fold during the 1990s and led the S&P 500's record-breaking rally.

The index climbed 26 percent in 2003 as the Federal Reserve trimmed interest rates to the lowest since 1958. The so-called federal funds target remained at 1 percent for a year before policy makers raised it 17 straight times.

Other U.S. equity benchmarks have performed better than the S&P 500 since March 2000. The 30-stock Dow Jones Industrial Average has climbed 23 percent during the period, while the Russell 2000 Index, consisting of companies with a median market value of $664 million, has gained 47 percent.

Asia, Europe
Shares in Asia and so-called emerging markets have also outperformed the S&P 500 since 2000. The Morgan Stanley Capital International Asia-Pacific Index has jumped 26 percent since 2000 and is valued at 19.2 times historical profits. The MSCI Emerging Markets Index has soared 94 percent and trades for 15.2 times past earnings.

The Dow Jones Euro Stoxx 50, a measure for the 13 nations sharing the euro, has a price-earnings multiple of 13.9 after it declined 17 percent.

The Nasdaq Composite Index, which gets more than two-fifths of its value from computer-related shares, is still 49 percent below its March 10, 2000, peak.

Energy and utilities shares led the S&P 500's rally, climbing about threefold since October 2002.
Exxon, the world's largest oil company, contributed the most to the advance as it surged 156 percent. Williams Cos., the biggest U.S. pipeline operator by market value, jumped more than 21-fold for the top gain in the index.

``Lingering nervousness'' about the market's plunge from the 2000 peak spurred many investors to reduce their holdings of U.S. stocks even as the S&P 500 rallied, said Kevin Bannon, chief investment officer at Bank of New York Co. Pension plans, wealthy individuals and other investors poured money into hedge funds and international stocks instead, Bannon said.

Fund Flows
About $8.6 billion was siphoned from U.S. equity mutual funds since May 2006, just before the S&P 500 fell to a seven- month low, according to TrimTabs data. Meanwhile, mutual funds that invest in international stocks raised $113 billion during the same period.

Hedge funds globally attracted $120 billion during the past three quarters, according to Chicago-based Hedge Fund Research Inc. Total hedge fund assets ballooned to $1.6 trillion last quarter from $490.6 billion in 2000. Hedge funds are private, largely unregulated pools of capital whose managers can buy or sell any assets and participate substantially in profits from money invested.

``The crash in the market scared people -- most of the traditional buyers are re-allocating assets into alternatives,'' said Bannon, who helps oversee $120 billion in New York. ``All these private equity buyers see the real value.''

Takeovers
The S&P 500's 25 percent rally from its 2006 low in June was fueled by a record pace of takeovers.

Mergers and acquisitions totaled about $1.7 trillion in 2006, breaking a record set in 2000, according to data compiled by Bloomberg. Announced deals this year amount to more than $1.1 trillion, 61 percent ahead of last year's pace.

Dow Jones & Co. jumped 55 percent on May 1 after Rupert Murdoch's News Corp. bid $5 billion for the publisher of the Wall Street Journal. TXU Corp. climbed 25 percent this year after investors led by Kohlberg Kravis Roberts & Co. and TPG Inc. bid $32 billion for the largest power producer in Texas.

The surge in acquisitions was spurred in part by the widening gap between what companies yield in earnings and the cost of borrowing, said Sean Clark, chief investment officer at Clark Capital Management.

Estimated profit at companies in the S&P 500 represented a yield of 6.53 percent at the end of the first quarter, when 10- year U.S. Treasuries yielded 4.65 percent. The 1.88-percentage- point advantage was the biggest since at least 1986. As of yesterday, the gap totaled 1.24 percentage points.

``One reason why there's been so much M&A activity with the private equity firms is because valuations are so palatable right now,'' said Clark, who oversees about $1.2 billion in Philadelphia. ``The market is more reasonably priced, especially compared to bonds.''

To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net

full article

s&p, stocks, equity markets, economics

Retirement age edges up

Retirement age edges up

The retirement age for U.S. workers is edging up after falling for 100 years. The Bureau of Labor Statistics says 29% of people in their late 60s still have jobs, up from 18% in the mid-1980s. More than 25% of baby boomers plan to never retire, according to a recent survey by the National Association of Realtors.

In reversal, U.S. retirement age rises
By UPI May 31, 2007, 0:30 GMT

EL SEGUNDO, CA, United States (UPI) -- The age U.S. workers choose to retire is rising, after falling for more than 100 years, U.S. government statistics show.

In the mid-1980s, 18 percent of people in their late 60s still had jobs, the U.S. Bureau of Labor Statistics reported. The figure is now up to 29 percent, it said.

And experts say it will continue to rise as workers face the prospect of a lengthy and expensive old age, with limited retirement benefits, the Los Angeles Times reported.

More than one in four baby boomers -- born from 1946 to 1964 -- say they never plan to retire, a recent survey by the National Association of Realtors showed.

In contrast to the latter half of the 20th century -- with Social Security retirement benefits, Medicare health insurance and guaranteed income through employer pensions -- workers today face a hazardous landscape, the Times said.

Traditional pensions are rare. Companies have cut back retiree healthcare benefits. Even Social Security is retrenching.

Workers born in 1960 and later will have to wait until age 67, rather than 65, to get their full retirement benefits.

And more Social Security benefits will be subject to income tax and higher Medicare premiums.

full article

retirement, social security, benefits, pensions, health care costs