Business CEOs call for raising retirement age

Caesar's Entertainment, speaks in Boston. An influential group of business CEOs chaired …more
WASHINGTON (AP) — An influential group of business CEOs is pushing a plan to gradually increase the full retirement age to 70 for both Social Security and Medicare and to partially privatize the health insurance program for older Americans.
The Business Roundtable's plan would protect those 55 and older from cuts but younger workers would face significant changes. The plan unveiled Wednesday would result in smaller annual benefit increases for all Social Security recipients. Initial benefits for wealthy retirees would also be smaller.
Medicare recipients would be able to enroll in the traditional program or in private plans that could adjust premiums based on age and health status.
"America can preserve the health and retirement safety net and rein in long-term spending growth by modernizing Medicare and Social Security in a way that addresses America's new fiscal and demographic realities," said Gary Loveman, chairman, president and chief executive of casino giant Caesars Entertainment Corp.
Loveman, who chairs the Business Roundtable's health and retirement committee, said the business leaders will be meeting with members of Congress and the administration to press them to enact their plan.
The proposal comes as Republican leaders in Congress are calling for spending cuts as part of an agreement to increase the government's authority to borrow. Treasury Secretary Timothy Geithner says the U.S. will exhaust its borrowing authority as soon as mid-February, raising the possibility of a first-ever national default.
President Barack Obama has said he is willing to negotiate deficit reduction with GOP leaders but insists that those talks be separate from decisions to raise the $16.4 trillion debt ceiling. Obama has warned that if Congress does not raise the debt ceiling, the economy could crash and Social Security checks and veterans' benefits would be delayed.
The Business Roundtable is an association of CEOs of some of the largest U.S. companies. Member companies account for nearly a third of the total value of the U.S. stock market, according to the group.
The group has been an ally of Obama in the past, endorsing his proposal to raise taxes on high earners during negotiations over the so-called "fiscal cliff" in December. Obama has embraced some parts of the business group's plan for Social Security and Medicare, but he opposes any plan to privatize Medicare, and has backed away from his earlier support for raising the eligibility age.
The proposal to offer private plans as part of Medicare is similar to a proposal by Republican Mitt Romney when he ran for president last year. Obama and Democrats in Congress campaigned against it, making it unlikely to pass any time soon.
"These ideas were soundly rejected in the last election only a few months ago," said Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare.
The CEOs' plan puts them at odds with many groups that lobby on behalf of older Americans.
In a speech this week, A. Barry Rand, AARP's CEO, denounced proposals to increase the eligibility age for Medicare, saying it would shift costs to employers, state governments and individuals.
"This is pure folly and very dangerous," Rand said.
Retirees can now get reduced Social Security benefits starting at age 62. Retirees must wait until they are 66 to get full Social Security benefits, a threshold that is gradually rising to 67. The eligibility age for Medicare is 65. The business group's plan would make unspecified accommodations for people with physically demanding jobs.
Social Security and Medicare both face long-term financial problems as aging baby boomers reach retirement, leaving relatively fewer workers behind to fund the massive benefit programs.
The trustees who oversee Social Security say the trust funds that support the retirement and disability program will run out of money in 2033, unless Congress acts. At that point, payroll taxes would generate only enough money to pay about three-fourths of benefits.
Medicare is in worse shape. Its trust fund for inpatient care is projected to run dry in 2024, leaving the program unable to cover all its bills.
"The facts are clear: If we want future generations to have access to Social Security and Medicare, America can no longer afford to wait," said Randall L. Stephenson, Chairman and CEO of AT&T Inc. "The time to act is now."
Among the CEOs' proposals:
—Adopt a new government inflation measure that would result in smaller annual increases in Social Security benefits.
—Make initial Social Security benefits more progressive by guaranteeing low-wage workers enough benefits to stay out of poverty, while lowering initial benefits for retirees with higher incomes.
—Require newly hired state and local workers to join Social Security. Some state and local agencies are not part of the system.
—Expand means testing for Medicare benefits so that wealthier recipients must pay more for services.
—Improve Medicare services for low-income people by better coordinating prevention and care for chronic conditions.

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Silver Lake nears $15 billion financing for Dell buyout: report

(Reuters) - Private equity group Silver Lake Partners is close to arranging about $15 billion in financing for a buyout of Dell Inc , Bloomberg reported, citing people familiar with the matter.
Talks to take Dell Inc private are at an advanced stage with at least four major banks lined up to provide financing, two sources with knowledge of the matter earlier told Reuters.
Silver Lake could not immediately be reached for comment by Reuters outside of regular U.S. business hours. (http://link.reuters.com/hup35t)

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JPMorgan's Jamie Dimon gets big pay cut

NEW YORK (AP) — America's best-known banker is getting a big pay cut.
JPMorgan Chase said Wednesday that it will dock the pay of CEO Jamie Dimon by more than half, to $11.5 million from $23 million.
It's the latest fallout from an embarrassing trading loss at the bank last year, one that eventually ballooned to $6 billion. Its ripple effects have already been numerous, forcing Dimon to appear contritely before Congress and putting the bank squarely in the cross hairs of regulators and lawmakers.
The pay cut didn't come as a surprise on Wall Street. What set it apart was that it amounted to a reprimand from the bank against a CEO who remains popular and well regarded, despite the stain of a trading loss that Dimon once dismissed as a "tempest in a teapot."
And even as it cuts his pay, the board of directors praised Dimon for responding "forcefully" to the trading loss, presiding over an overhaul of the bank's risk management and booting out responsible executives. A report from a bank task force placed most of the blame on other executives and traders who have since left.
Compensation consultant James F. Reda was underwhelmed. He called Dimon's pay cut "ceremonial," a way for the bank to show that it is paying penance.
"He doesn't need the money," Reda said. "He was probably very proactive in accepting this to keep people off his back. To get punished, if you will, so he can then point to that and say, 'Look, I was punished. Isn't that enough? Leave me alone. Let me run my business.'"
Dimon's job was never seriously in danger, even with the trading loss, and the pay cut hasn't changed that perception. Wall Street saw it less as an indictment of Dimon and more as a sign of the board's commitment to taking the trading loss seriously.
"It's bitter medicine, but he swallowed it and is moving on," said James Post, an expert on corporate governance who teaches at Boston University. "I think that still leaves him in a very strong leadership position in both the bank and the industry."
JPMorgan, and Dimon, are essential players in U.S. banking. JPMorgan emerged from the financial crisis as one of the strongest banks in the country, a winner in a meltdown that forced other banks to their knees. Its blockbuster fourth-quarter earnings, which were released Wednesday, will almost certainly cement it as the most profitable U.S. bank of 2012.
Such accomplishments have made Dimon one of the best known, and most outspoken, bank leaders of his generation, even in a time of heightened scrutiny and public anger against the industry.
While some of his peers have tried to stay under the radar, he has spoken out against many new regulations — including some, the bank's critics say, that could have prevented the trading loss.
Dimon has publicly chafed at criticism of banking's big pay packages, including President Barack Obama's famous "fat-cat bankers" comment. "Acting like everyone who's been successful is bad and because you are rich, you are bad — I don't understand it, I don't get it," he told an investment conference.
On calls with reporters and analysts Wednesday, he was his usual swashbuckling self, intensely proud of the bank he runs and sometimes impatient with critical questions.
He said the portfolio where the troubled bets were made is "very close to being a non-issue" as far as trading losses are concerned. Asked for thoughts on his pay cut, Dimon said he respected the board's decision. Pressed for his "gut feeling," he replied, "Nope, you're not gonna get it."
When analyst Guy Moszkowski asked about the "exotic investment strategies" of the Chief Investment Office, where the loss occurred, he shot back, "It has got not a damned thing to do with exotic investment strategies — zero, nada, nothing. OK?"
For 2012, Dimon will get $1.5 million in salary and $10 million in restricted stock awards. It likely means that he'll no longer be the highest-paid CEO among the country's six mega-banks.
Even with the pay cut, and even by the lofty standards of big-time CEOs, the 56-year-old Dimon will still be well paid. The median pay for CEOs of S&P 500 companies for 2011 was $9.6 million, according to the latest data from executive compensation firm Equilar.
Though Dimon made clear that he is eager to put the so-called London whale loss behind him, there could be more reminders in store.
The bank has said it received requests for information related to government inquiries and investigations by Congress, the Department of Justice, the Securities and Exchange Commission, the Commodity Futures Trading Commission, the U.K. Financial Services Authority, the state of Massachusetts and others.
On Monday, the Federal Reserve and the Office of the Comptroller of the Currency, both bank regulators, slapped sanctions on JPMorgan for the trading loss and ordered it to tighten up its risk management procedures. The bank neither admitted nor denied wrongdoing, but said it was working to correct any issues identified by the regulators.
The bank released two reports Wednesday on the loss, one from bank executives and the other from the board of directors. These said that traders and executives in the Chief Investment Office didn't understand the risks they were taking, didn't adequately question risky decisions and didn't properly report ballooning losses.
The board of directors said executives didn't keep them adequately informed about potential problems and used unapproved models for calculating risk.
Despite the fallout from the trading loss, JPMorgan turned in a strong fourth quarter. Earnings shot up 55 percent over the same period a year ago to $5.3 billion after paying preferred dividends, up from $3.4 billion.
Per share, those earnings amounted to $1.40, blowing away the $1.16 expected by analysts polled by financial data provider FactSet. The bank's stock rose 47 cents to $46.82, up 1 percent.
Revenue also beat Wall Street's forecasts, rising 10 percent to $24.4 billion, after stripping out an accounting charge. Mortgage originations jumped 33 percent.

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Judge asks Hostess to mediate with union

WHITE PLAINS, N.Y. (AP) -- Twinkies won't die that easily after all.
Hostess Brands Inc. and its second largest union will go into mediation to try and resolve their differences, meaning the company won't go out of business just yet. The news came Monday after Hostess moved to liquidate and sell off its assets in bankruptcy court citing a crippling strike last week.
The bankruptcy judge hearing the case said Monday that the parties haven't gone through the critical step of mediation and asked the lawyer for the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, which has been on strike since Nov. 9, to ask his client, who wasn't present, if the union would agree to participate. The judge noted that the bakery union, which represents about 30 percent of Hostess workers, went on strike after rejecting the company's latest contract offer, even though it never filed an objection to it.
"Many people, myself included, have serious questions as to the logic behind this strike," said Judge Robert Drain, who heard the case in the U.S. Bankruptcy Court in the Southern District of New York in White Plains, N.Y. "Not to have gone through that step leaves a huge question mark in this case."
Hostess and the union agreed to mediation talks, which are expected to begin the process on Tuesday.
In an interview after the hearing on Monday, CEO Gregory Rayburn said that the two parties will have to agree to contract terms within 24 hours of the Tuesday since it is costing $1 million a day in overhead costs to wind down operations. But even if a contract agreement is reached, it is not clear if all 33 Hostess plants will go back to being operational.
"We didn't think we had a runway, but the judge just created a 24-hour runway," for the two parties to come to an agreement, Rayburn said.
Hostess, weighed down by debt, management turmoil, rising labor costs and the changing tastes of America, decided on Friday that it no longer could make it through a conventional Chapter 11 bankruptcy restructuring. Instead, the company, which is based in Irving, Texas, asked the court for permission to sell assets and go out of business.
It's not the sequence of events that the maker of Twinkies, Ding Dongs and Ho Ho's envisioned when it filed for bankruptcy in January, its second Chapter 11 filing in less than a decade. The company, who said that it was saddled with costs related to its unionized workforce, had hoped to emerge with stronger financials. It brought on Rayburn as a restructuring expert and was working to renegotiate its contract with labor unions.
But Rayburn wasn't able to reach a deal with the bakery union. The company, which had been contributing $100 million a year in pension costs for workers, offered workers a new contract that would've slashed that to $25 million a year, in addition to wage cuts and a 17 percent reduction in health benefits. But the bakery union decided to strike.
By that time, the company had reached a contract agreement with its largest union, the International Brotherhood of Teamsters, which urged the bakery union to hold a secret ballot on whether to continue striking. Although many bakery workers decided to cross picket lines this week, Hostess said it wasn't enough to keep operations at normal levels.
Rayburn said that Hostess was already operating on razor thin margins and that the strike was the final blow. The company's announcement on Friday that it would move to liquidate prompted people across the country to rush to stores and stock up on their favorite Hostess treats. Many businesses reported selling out of Twinkies within hours and the spongy yellow cakes turned up for sale online for hundreds of dollars.
Even if Hostess goes out of business, its popular brands will likely find a second life after being snapped up by buyers. The company says several potential buyers have expressed interest in the brands. Although Hostess' sales have been declining in recent years, the company still does about $2.5 billion in business each year. Twinkies along brought in $68 million so far this year.

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Just Explain It: What is the Strategic Petroleum Reserve?

Eliminating America's dependency on foreign oil has been a policy goal for at least the last two U.S. Presidents.  According to the International Energy Agency, by 2020,  the U.S. will overtake Saudi Arabia as the world's number one oil producer.
However, there's still some work to do.  The United States Energy Information Administration reported that 45% of the petroleum consumed by the U.S. in 2011 was from foreign countries.   Even though the country is well on its way to becoming self reliant, there's always a chance we could hit a major bump in the road.  The good thing is we have protection.  It's called the Strategic Petroleum Reserve or S.P.R.
So here's how the S.P.R. works:
The reserve was created after the 1973 energy crisis when an Arab oil embargo halted exports to the United States.  As a result, fuel shortages caused disruptions in the U.S. economy.
The reserves are located underground in four man-made salt domes in Texas and Louisiana.  All four locations combined hold a total of 727 million barrels of oil.  The inventory is currently at 695 million barrels.  That's around 80 days of import protection.  It's the largest emergency oil supply in the world -- it's worth about $63 billion.
Only the President has the ability to tap the reserves in case of severe energy supply interruption.  It's happened three times.  Twice within the last decade.  In 2005, President Bush ordered the emergency sale of 11 million barrels when Hurricane Katrina shutdown 25 percent of domestic production.  In 2011, President Obama ordered the release of 30 million barrels to help offset disruptions caused by political upheaval in the Middle East.
Following the release order, the reserve issues a notice of sale to solicit competitive offers.  In the most recent sale involving the Obama administration, the offers resulted in contracts with 15 companies for delivery of 30.6 million barrels of oil.  To put that in context, last year the U.S. consumed almost seven billion barrels of oil — that's 19 million per day -- or about 22% of the world's consumption.

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Apple to produce line of Macs in the US next year

NEW YORK (AP) -- Apple CEO Tim Cook says the company will move production of one of its existing lines of Mac computers from China to the United States next year.
Industry watchers said the announcement is both a cunning public-relations move and a harbinger of more manufacturing jobs moving back to the U.S. as wages rise in China.
Cook made the comments in part of an interview taped for NBC's "Rock Center," but aired Thursday morning on "Today" and posted on the network's website.
In a separate interview with Bloomberg Businessweek, he said that the company will spend $100 million in 2013 to move production of the line to the U.S. from China.
"This doesn't mean that Apple will do it ourselves, but we'll be working with people and we'll be investing our money," Cook told Bloomberg.
That suggests the company could be helping one of its Taiwanese manufacturing partners, which run factories in China, to set up production lines in the U.S. devoted to Apple products. Research firm IHS iSuppli noted that both Foxconn Technology Group, which assembles iPhones, and Quanta Computer Inc., which does the same for MacBooks, already have small operations in the U.S.
Apple representatives had no comment Thursday beyond Cook's remarks.
Like most consumer electronics companies, Apple forges agreements with contract manufacturers to assemble its products overseas. However, the assembly accounts for a fraction of the cost of making a PC or smartphone. Most of the cost lies in buying chips, and many of those are made in the U.S., Cook noted in his interview with NBC.
The company and Foxconn have faced significant criticism this year over working conditions at the Chinese facilities where Apple products are assembled. The attention prompted Foxconn to raise salaries.
Cook didn't say which line of computers would be produced in the U.S. or where in the country they would be made. But he told Bloomberg that the production would include more than just final assembly. That suggests that machining of cases and printing of circuit boards could take place in the U.S.
The simplest Macs to assemble are the Mac Pro and Mac Mini desktop computers. Since they lack the built-in screens of the MacBooks and iMacs, they would likely be easier to separate from the Asian display supply chain.
Analyst Jeffrey Wu at IHS iSuppli said it's not uncommon for PC makers to build their bulkier products close to their customers to cut down on delivery times and shipping costs.
Regardless, the U.S. manufacturing line is expected to represent just a tiny piece of Apple's overall production, with sales of iPhones and iPads now dwarfing those of its computers.
Apple is latching on to a trend that could see many jobs move back to the U.S., said Hal Sirkin, a partner with The Boston Consulting Group. He noted that Lenovo Group, the Chinese company that's neck-and-neck with Hewlett-Packard Co. for the title of world's largest PC maker, announced in October that it will start making PCs and tablets in the U.S.
Chinese wages are raising 15 to 20 percent per year, Sirkin said. U.S. wages are rising much more slowly, and the country is a cheap place to hire compared to other developed countries like Germany, France and Japan, he said.
"Across a lot of industries, companies are rethinking their strategy of where the manufacturing takes place," Sirkin said.
Carl Howe, an analyst with Yankee Group, likened Apple's move to Henry Ford's famous 1914 decision to double his workers' pay, helping to build a middle class that could afford to buy cars. But Cook's goal is probably more limited: to buy goodwill from U.S. consumers, Howe said.
"Say it's State of the Union 2014. President Obama wants to talk about manufacturing. Who is he going to point to in the audience? Tim Cook, the guy who brought manufacturing back from China. And that scene is going replay over and over," Howe said. "And yeah, it may be only (public relations), but it's a lot of high-value PR."
Cook said in his interview with NBC that companies like Apple chose to produce their products in places like China, not because of the lower costs associated with it, but because the manufacturing skills required just aren't present in the U.S. anymore.
He added that the consumer electronics world has never really had a big production presence in the U.S. As a result, it's really more about starting production in the U.S. than bringing it back, he said.
But for nearly three decades Apple made its computers in the U.S. It started outsourcing production in the mid-90s, first by selling some plants to contract manufacturers, then by hiring manufacturers overseas. It assembled iMacs in Elk Grove, Calif., until 2004.
Some Macs already say they're "Assembled in USA." That's because Apple has for years performed final assembly of some units in the U.S. Those machines are usually the product of special orders placed at its online store. The last step of production may consist of mounting hard drives, memory chips and graphics cards into computer cases that are manufactured elsewhere. With Cook's announcement Thursday, the company is set to go much further in the amount of work done in the U.S.

Read More..

Just Explain It: What is the Strategic Petroleum Reserve?

Eliminating America's dependency on foreign oil has been a policy goal for at least the last two U.S. Presidents.  According to the International Energy Agency, by 2020,  the U.S. will overtake Saudi Arabia as the world's number one oil producer.
However, there's still some work to do.  The United States Energy Information Administration reported that 45% of the petroleum consumed by the U.S. in 2011 was from foreign countries.   Even though the country is well on its way to becoming self reliant, there's always a chance we could hit a major bump in the road.  The good thing is we have protection.  It's called the Strategic Petroleum Reserve or S.P.R.
So here's how the S.P.R. works:
The reserve was created after the 1973 energy crisis when an Arab oil embargo halted exports to the United States.  As a result, fuel shortages caused disruptions in the U.S. economy.
The reserves are located underground in four man-made salt domes in Texas and Louisiana.  All four locations combined hold a total of 727 million barrels of oil.  The inventory is currently at 695 million barrels.  That's around 80 days of import protection.  It's the largest emergency oil supply in the world -- it's worth about $63 billion.
Only the President has the ability to tap the reserves in case of severe energy supply interruption.  It's happened three times.  Twice within the last decade.  In 2005, President Bush ordered the emergency sale of 11 million barrels when Hurricane Katrina shutdown 25 percent of domestic production.  In 2011, President Obama ordered the release of 30 million barrels to help offset disruptions caused by political upheaval in the Middle East.
Following the release order, the reserve issues a notice of sale to solicit competitive offers.  In the most recent sale involving the Obama administration, the offers resulted in contracts with 15 companies for delivery of 30.6 million barrels of oil.  To put that in context, last year the U.S. consumed almost seven billion barrels of oil — that's 19 million per day -- or about 22% of the world's consumption.

Read More..

Apple to produce line of Macs in the US next year

NEW YORK (AP) -- Apple CEO Tim Cook says the company will move production of one of its existing lines of Mac computers from China to the United States next year.
Industry watchers said the announcement is both a cunning public-relations move and a harbinger of more manufacturing jobs moving back to the U.S. as wages rise in China.
Cook made the comments in part of an interview taped for NBC's "Rock Center," but aired Thursday morning on "Today" and posted on the network's website.
In a separate interview with Bloomberg Businessweek, he said that the company will spend $100 million in 2013 to move production of the line to the U.S. from China.
"This doesn't mean that Apple will do it ourselves, but we'll be working with people and we'll be investing our money," Cook told Bloomberg.
That suggests the company could be helping one of its Taiwanese manufacturing partners, which run factories in China, to set up production lines in the U.S. devoted to Apple products. Research firm IHS iSuppli noted that both Foxconn Technology Group, which assembles iPhones, and Quanta Computer Inc., which does the same for MacBooks, already have small operations in the U.S.
Apple representatives had no comment Thursday beyond Cook's remarks.
Like most consumer electronics companies, Apple forges agreements with contract manufacturers to assemble its products overseas. However, the assembly accounts for a fraction of the cost of making a PC or smartphone. Most of the cost lies in buying chips, and many of those are made in the U.S., Cook noted in his interview with NBC.
The company and Foxconn have faced significant criticism this year over working conditions at the Chinese facilities where Apple products are assembled. The attention prompted Foxconn to raise salaries.
Cook didn't say which line of computers would be produced in the U.S. or where in the country they would be made. But he told Bloomberg that the production would include more than just final assembly. That suggests that machining of cases and printing of circuit boards could take place in the U.S.
The simplest Macs to assemble are the Mac Pro and Mac Mini desktop computers. Since they lack the built-in screens of the MacBooks and iMacs, they would likely be easier to separate from the Asian display supply chain.
Analyst Jeffrey Wu at IHS iSuppli said it's not uncommon for PC makers to build their bulkier products close to their customers to cut down on delivery times and shipping costs.
Regardless, the U.S. manufacturing line is expected to represent just a tiny piece of Apple's overall production, with sales of iPhones and iPads now dwarfing those of its computers.
Apple is latching on to a trend that could see many jobs move back to the U.S., said Hal Sirkin, a partner with The Boston Consulting Group. He noted that Lenovo Group, the Chinese company that's neck-and-neck with Hewlett-Packard Co. for the title of world's largest PC maker, announced in October that it will start making PCs and tablets in the U.S.
Chinese wages are raising 15 to 20 percent per year, Sirkin said. U.S. wages are rising much more slowly, and the country is a cheap place to hire compared to other developed countries like Germany, France and Japan, he said.
"Across a lot of industries, companies are rethinking their strategy of where the manufacturing takes place," Sirkin said.
Carl Howe, an analyst with Yankee Group, likened Apple's move to Henry Ford's famous 1914 decision to double his workers' pay, helping to build a middle class that could afford to buy cars. But Cook's goal is probably more limited: to buy goodwill from U.S. consumers, Howe said.
"Say it's State of the Union 2014. President Obama wants to talk about manufacturing. Who is he going to point to in the audience? Tim Cook, the guy who brought manufacturing back from China. And that scene is going replay over and over," Howe said. "And yeah, it may be only (public relations), but it's a lot of high-value PR."
Cook said in his interview with NBC that companies like Apple chose to produce their products in places like China, not because of the lower costs associated with it, but because the manufacturing skills required just aren't present in the U.S. anymore.
He added that the consumer electronics world has never really had a big production presence in the U.S. As a result, it's really more about starting production in the U.S. than bringing it back, he said.
But for nearly three decades Apple made its computers in the U.S. It started outsourcing production in the mid-90s, first by selling some plants to contract manufacturers, then by hiring manufacturers overseas. It assembled iMacs in Elk Grove, Calif., until 2004.
Some Macs already say they're "Assembled in USA." That's because Apple has for years performed final assembly of some units in the U.S. Those machines are usually the product of special orders placed at its online store. The last step of production may consist of mounting hard drives, memory chips and graphics cards into computer cases that are manufactured elsewhere. With Cook's announcement Thursday, the company is set to go much further in the amount of work done in the U.S.

Read More..

US economy adds 146K jobs, rate falls to 7.7 pct.

WASHINGTON (AP) -- The pace of U.S. hiring remained steady in November despite disruptions from Superstorm Sandy and employers' concerns about impending tax increases from the year-end "fiscal cliff."
Companies added 146,000 jobs, and the unemployment rate fell to 7.7 percent — the lowest in nearly four years — from 7.9 percent in October. The rate declined mainly because more people stopped looking for work and weren't counted as unemployed.
The government said Superstorm Sandy had only a minimal effect on the figures.
The Labor Department's report Friday was a mixed one. But on balance, it suggested that the job market is gradually improving.
November's job gains were roughly the same as the average monthly increase this year of about 150,000. Most economists are encouraged by the job growth because it's occurred even as companies have reduced investment in heavy machinery and other equipment.
"The good news is not that the labor market is improving rapidly — it isn't — but that employment growth is holding up despite all the fears over the fiscal cliff," said Nigel Gault, an economist at IHS Global Insight.
Still, Friday's report included some discouraging signs. Employers added 49,000 fewer jobs in October and September combined than the government had initially estimated.
And economists noted that the unemployment rate would have risen if the number of people working or looking for work hadn't dropped by 350,000.
The government asks about 60,000 households each month whether the adults have jobs and whether those who don't are looking for one. Those without a job who are looking for one are counted as unemployed. Those who aren't looking aren't counted as unemployed.
A separate monthly survey seeks information from 140,000 companies and government agencies that together employ about one in three nonfarm workers in the United States.
Many analysts thought Sandy would hold back job growth significantly in November because the storm forced restaurants, retailers and other businesses to close in late October and early November.
It didn't. The government noted that as long as employees worked at least one day during a pay period — two weeks for most people — its survey would have counted them as employed.
Yet there were signs that the storm disrupted economic activity in November. Construction employment dropped 20,000. And weather prevented 369,000 people from getting to work — the most for any month in nearly two years. These workers were still counted as employed.
All told, 12 million people were unemployed in November, about 230,000 fewer than the previous month. That's still many more than the 7.6 million who were out of work when the recession officially began in December 2007.
Investors appeared pleased with the report, though the market gave up some early gains. The Dow Jones industrial average was up 53 points in mid-day trading.
The number of Americans who were working part time in November but wanted full-time work declined. And a measure of discouraged workers — those who wanted a job but hadn't searched for one in the past month — rose slightly.
Those two groups, plus the 12 million unemployed, make up a broader measure that the government calls "underemployment." The underemployment rate fell to 14.4 percent in November from 14.6 percent in October. It's the lowest such rate since January 2009.
Since July, the economy has added an average of 158,000 jobs a month. That's a modest pickup from an average of 146,000 in the first six months of the year.
In November, retailers added 53,000 positions. Temporary-help companies added 18,000. Education and health care also gained 18,000.
Auto manufacturers added nearly 10,000 jobs. Still, overall manufacturing jobs fell 7,000. That was pushed down by a loss of 12,000 jobs in food manufacturing that likely reflects the layoff of workers at Hostess.
Paul Ashworth, an economist at Capital Economics, noted that hiring by private companies was actually better in October than the government first thought. The overall job figures were revised down for October because governments themselves cut about 38,000 more jobs than was first estimated.
The U.S. economy grew at a solid 2.7 percent annual rate in the July-September quarter. But many economists say growth is slowing to a 1.5 percent rate in the October-December quarter, largely because of the storm and threat of the fiscal cliff.
The storm held back consumer spending and income, which drive economic growth. Consumer spending declined in October, the government said. And work interruptions caused by Sandy reduced wages and salaries that month by about $18 billion at an annual rate.
Still, many say economic growth could accelerate next year if the fiscal cliff is avoided. The economy is also expected to get a boost from efforts to rebuild in the Northeast after the storm.

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US economic growth improves to 2 pct. rate in Q3

WASHINGTON (AP) -- The U.S. economy expanded at a slightly faster 2 percent annual rate from July through September, buoyed by an uptick in consumer spending and a burst of government spending.
Growth improved from the 1.3 percent rate in the April-June quarter, the Commerce Department said Friday.
The pickup in growth may help President Barack Obama's message that the economy is improving. Still, growth remains too weak to rapidly boost hiring. And the 1.74 percent rate for 2012 so far trails last year's 1.8 percent growth, a point GOP nominee Mitt Romney will emphasize.
The report is the last snapshot of economic growth before Americans choose a president in 11 days.
The economy improved because consumer spending rose 2 percent in the July-September quarter, up from 1.5 percent in the second quarter. Spending on homebuilding and renovations increased more than 14 percent. And federal government spending expanded sharply on the largest increase in defense spending in more than three years.
Growth was held back by the first drop in exports in more than three years and flat business investment in equipment and software.
The economy was also slowed by the severe drought this summer in the Midwest. That sharply cut agriculture stockpiles and reduced growth by nearly a half-point.
The government's report covers gross domestic product. GDP measures the nation's total output of goods and services — from restaurant meals and haircuts to airplanes, appliances and highways.
The first of three estimates of growth for the July-September quarter sketched a picture that's been familiar all year: The economy is growing at a tepid rate, slowed by high unemployment and corporate anxiety over an unresolved budget crisis and a slowing global economy.
While growth remains modest, the factors supporting the economy have changed. Exports and business investment drove growth for most of the recovery, but are now fading. Meanwhile, consumer spending has ticked up and housing is adding to growth after a six-year slump.
Consumer spending drives nearly 70 percent of economic activity.
Businesses have grown more cautious since spring, in part because customer demand has remained modest and exports have declined as the global economy has slowed.
Many companies worry that their overseas sales could dampen further if recession spreads throughout Europe and growth slows further in China, India and other developing countries. Businesses also fear the tax increases and government spending cuts that will kick in next year if Congress doesn't reach a budget deal.
Since the recovery from the Great Recession began in June 2009, the U.S. economy has grown at the slowest rate of any recovery in the post-World War II period. And economists think growth will remain sluggish at least through the first half of 2013. Some analysts believe the economy will start to pick up in the second half of next year.

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Has Obama Been Good for Millionaires?

The question of whether Americans are better off than they were four years ago depends, of course, on the American.
For the 12 million unemployed, the answer is most certainly no.
But for many of America's millionaires, the answer may be more affirmative.
A new study from WealthInsight, the London-based wealth-research and data firm (and yes, they are non-partisan), showed that the United States added 1.1 million millionaires between Jan. 1, 2009 and the end of 2011, the latest period measured. There were 5.1 million millionaires in America at the end of 2011, compared with around 4 million at the end of 2008.
That works out to more than 1,000 millionaires a day under the Obama administration. (They defined millionaires as people with total net worth of $1 million or more, excluding primary residence).
(Read more: Rich Will Spend More Under Romney: Poll)
"It's true that Obama has been good for millionaires, at least in absolute terms," said Andrew Amoils, analyst at WealthInsight. "He certainly hasn't been bad for millionaires."
Amoils said that quantitative easing and financial bailouts especially helped the finance sector, which accounts for the largest share of millionaires. It also helped that markets recovered in 2009.
The timeframe is worth noting. Measured against the 2007 peak, when 5.27 million Americans had a net worth of at least $1 million, the nation lost 165,360 millionaires. Their combined wealth is down six percent, to $18.8 trillion from a peak of more than $20 trillion in 2007.
We don't know how 2012 will turn out, though if stock markets continue to strengthen, the millionaire count for 2012 is likely to increase. Wealth Insight says the number of millionaires in America will grow to more than six million by 2016, and their combined fortunes will jump 25 percent over the same period.
(Read more: Millionaires Give Nine Percent of Income to Charity)
Where did all the millionaires come from between 2008 and 2011?
Mainly from retail, tech and finance -- and in both blue and red states.
Of the sectors adding the largest number of people worth $30 million or more, the retail, fashion, and luxury goods sector ranked first. That was followed by energy and utilities, then tech, telecoms and finance. Transportation and construction saw the biggest drops.
The number of people worth $30 million or more grew 26 percent in Connecticut since 2008, 20 percent in Kansas, 12 percent in Michigan, showing that the wealth creation was nationwide.

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Avis buying Zipcar in deal worth nearly $500M

 Avis is leaping into the car-sharing service business by buying Zipcar for $491.2 million, aiming to capture a new type of customer and technology that will vastly expand its car rental options.
Car sharing has become a popular alternative to traditional rentals in metropolitan areas and on college campuses, allowing members to get a vehicle for an hour or two for short trips instead of renting a car for a day or using mass transit. The segment has been growing while traditional car rentals have struggled in the current slow-growth economy.
Zipcar, which was founded in 2000, has more than 760,000 members, triple what it had in 2008. It went public in 2011 and 2012 is expected to be its first-ever profitable year. Avis Budget Group Inc. is the third-largest U.S. rental car company, behind Enterprise Rent-a-Car and Hertz Global Holdings Inc.
"I've been somewhat dismissive of car sharing in the past but what I've come to realize is that car sharing, particularly on the scale that Zipcar has achieved and will achieve, is complementary to our traditional business," Avis' Chairman and CEO Ron Nelson said in a conference call after the deal was announced.
Nelson said the acquisition means Avis will now be able to reach younger, more tech-savvy consumers that prefer sharing services.
Zipcar parks cars throughout cities and college campuses, which allows renters to avoid waiting in lines at traditional car rental counters. Some areas provide reserved parking for the cars, which can be located online or through the companies' smartphone applications. That technology was attractive to Avis, which hopes to expand Zipcar's vast technological capabilities to its own business.
The car-sharing companies pay for fuel and insurance, costs not included in standard car rentals. Although the hourly rental options are quicker and cheaper than renting a car by the day, Zipcar and other car-sharing services are generally more expensive for rentals longer than 24 hours.
To join Zipcar, members pay a $25 application fee and $50 a year. Rates run from $7.50 an hour and include gas, insurance and 180 miles a day.
The acquisition will help Avis better compete with Enterprise and Hertz, which have their own smaller car-sharing services. And having access to Avis' fleet of cars will help Zipcar meet high demand on weekends when most people take a trip to the grocery store or run other errands.
Avis estimates it will save about $50 to $70 million a year through combining the two businesses into one.
Avis Budget Group Inc. will pay $12.25 per share, which is a 49 percent premium to Zipcar's closing price on Friday. The stock lost more than half its value in early 2012 year as its results and outlook spooked Wall Street. But late last year, the stock began to recover as the company saw growth in members and revenue. And on Wednesday, the stock soared 48 percent to close at $12.18.
The boards of both companies unanimously approved the buyout. If Zipcar shareholders approve the deal, it's expected to close in the spring.
Avis, which is based in Parsippany, N.J., said it expects certain members of Zipcar management, including Chairman and CEO Scott Griffith and President and Chief Operating Officer Mark Norman, to help run its day-to-day operations.
Avis also maintained its 2012 adjusted earnings forecast Monday of about $2.35 to $2.45 per share on revenue of approximately $7.3 billion. Analysts predict earnings of $2.42 per share on revenue of $7.3 billion.
Avis shares jumped 4.8 percent to close at $20.77, after earlier hitting a 52-week high of $21.10.

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Microsoft acquires start-up id8: source

 Microsoft Corp bought start-up id8 Group R2 Studios Inc as it looks to expand further in technology focused on the home and entertainment, a person familiar with the situation said on Wednesday.
id8 Group R2 Studios was started in 2011 by Silicon Valley entrepreneur and investor Blake Krikorian. It recently launched a Google Android application to allow users to control home heating and lighting systems from smartphones.
Krikorian's Sling Media - which was sold to EchoStar Communications in 2007 - made the "Slingbox" for watching TV on computers.
Krikorian will join Microsoft with a small team, according to the Wall Street Journal, which reported the acquisition earlier on Wednesday. Microsoft also purchased some patents owned by the start-up related to controlling electronic devices, the newspaper added.
Krikorian and a Microsoft spokesman declined to comment.
Krikorian resigned from Amazon.com Inc's board in late December after about a year and a half as a director at the company, the Internet's largest retailer.

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Boehner agrees to Sandy aid vote on Friday

WASHINGTON (AP) — Under intense pressure from angry Republicans, House Speaker John Boehner agreed Wednesday to a vote this week on aid for Superstorm Sandy recovery.
The speaker will schedule a vote Friday for $9 billion for the national flood insurance program and another on Jan. 15 for a remaining $51 billion in the package, Republican Rep. Peter King of New York said after emerging from a meeting with Boehner and GOP lawmakers from New York and New Jersey. The votes will be taken by the new Congress that will be sworn in Thursday.
King left the session with Boehner without the anger that led him to rip into the speaker Tuesday night.
"It was a very positive meeting," King said, adding that Boehner, R-Ohio, assured the lawmakers present that the money from the two House votes would roughly equal the $60 billion package of aid that passed the Senate.
Since the votes will be taken in the new Congress, the Senate also will have to approve the legislation. If the House, as expected, approves the $9 billion flood insurance proposal, the Senate plans to move quickly in hopes of approving the aid on a voice vote Friday. The flood insurance money will help pay for claims by home and business owners with coverage.
Sandy was the most costly natural disaster since Hurricane Katrina in 2005 and one of the worst storms ever in the Northeast.
"Getting critical aid to the victims of Hurricane Sandy should be the first priority in the new Congress, and that was reaffirmed today with members of the New York and New Jersey delegations," Boehner said in a joint statement with House Majority Leader Eric Cantor, R-Va.
Boehner's decision Tuesday night to cancel an expected vote on Sandy aid before Congress ends its current session provoked a firestorm of criticism from New York, New Jersey and adjacent states where the money will go, including many lawmakers in his own party.
According to King, Boehner explained that after the contentious vote to avoid major tax increases and spending cuts called the "fiscal cliff," Boehner didn't think it was the right time to schedule the vote before the current Congress went out of business.
"What's done is done. The end result will be New York, New Jersey and Connecticut will receive the funding they deserve. We made our position clear last night. That's in the past," King said.
Rep. Chris Smith, R-N.J., added, "We do believe we have an iron clad commitment."
The Senate approved a $60.4 billion measure Friday to help with recovery from the October storm that devastated parts of New York, New Jersey and nearby states. The House Appropriations Committee has drafted a smaller, $27 billion measure for immediate recovery needs and a second amendment for $33 billion to meet longer-term needs.
The $9 billion in flood insurance money to be voted on Friday was originally in the $27 billion measure. The votes on Jan. 15 will be for $18 billion in immediate assistance and $33 billion for longer-term projects, including projects to protect against future storms, King said.
Much of the money in the proposals is for immediate help for victims and other recovery and rebuilding efforts. The aid is intended to help states rebuild public infrastructure such as roads and tunnels and help thousands of people displaced from their homes.
Some $5.4 billion is for the Federal Emergency Management Agency's disaster relief fund, $5.4 billion is to help transit agencies in New York and New Jersey rebuild and another $3.9 billion is for the Housing and Urban Development Department's development fund to repair hospitals, utilities and small businesses.
New Jersey Gov. Chris Christie, a Republican, was among those sharply criticizing Boehner before the speaker changed course.
Christie said he was frustrated after Boehner withdrew the bill Tuesday night and tried to call him four times that night, but none of the calls were returned. Christie complained about the "toxic internal politics" of the House majority. Christie said he had worked hard to persuade House members to support Sandy aid, and was given assurances by GOP leaders that the bill would be voted on before Thursday.
"There is no reason for me at the moment to believe anything they tell me," Christie said before Boehner announced there would be votes this month.
King had branded Boehner's initial decision to pull the bill a "cruel knife in the back" to New York and New Jersey.
King was among an angry chorus of New York and New Jersey lawmakers from both parties who blasted Boehner, with some saying his move was a "betrayal."
In considering the Sandy aid package, the speaker was caught between conservative lawmakers who want to offset any increase in spending and Northeast and mid-Atlantic lawmakers determined to help their states recover more than two months after the storm hit.
The criticism of Boehner on the House floor was personal at times, and reflected in part the frustration among the rank-and-file over the decision to press ahead with a vote on the fiscal cliff deal engineered by the White House and Senate GOP leader Mitch McConnell. Boehner had been struggling with conservatives who complained that the economic package didn't include enough spending cuts.
Reps. Michael Grimm, a Republican, and Jerrold Nadler, a Democrat, said in angry House floor remarks that while they did not agree on much, Boehner's decision amounted to a "betrayal" and a crushing blow to states battered by the storm.
President Barack Obama also called for an immediate House vote. Sen. Kirsten Gillibrand, D-N.Y., raised the political temperature even more. She said Boehner should come to Staten Island and the Rockaways to explain his decision to families whose homes and businesses were destroyed. "But I doubt he has the dignity nor the guts to do it," Gillibrand said.
Obama, meanwhile, called for House Republicans to vote on the Sandy aid "without delay for our fellow Americans." The president said in a written statement that many people in New York, New Jersey and Connecticut are trying to recover from the storm and need "immediate support with the bulk of winter still in front of us."
The White House said Obama spoke Wednesday with Christie about the importance of the disaster aid bill, and that the president's staff was in touch with New York Gov. Andrew Cuomo's team too as Obama lobbied for House action.
Christie and Cuomo, a Democrat, issued a joint statement, saying, "The fact that days continue to go by while people suffer, families are out of their homes, and men and women remain jobless and struggling during these harsh winter months is a dereliction of duty."
Rep. Frank Pallone Jr., D-N.J., blamed tea party lawmakers and conservatives who were reluctant to approve new spending soon after the debate over the "fiscal cliff" budget issues for the sudden move by GOP leaders. He said the move was "deplorable."
More than $2 billion in federal funds has been spent so far on relief efforts for 11 states and the District of Columbia struck by the storm, one of the worst ever to hit the Northeast. The Federal Emergency Management Agency's disaster relief fund still has about $4.3 billion, enough to pay for recovery efforts into early spring, according to officials. The unspent FEMA money can only be used for emergency services, said Pallone.
New York, New Jersey, Connecticut, District of Columbia, West Virginia, Virginia, Maryland, New Hampshire, Delaware, Rhode Island, Pennsylvania and Massachusetts are receiving federal FEMA aid.
Sandy was blamed for at least 120 deaths and battered coastline areas from North Carolina to Maine. New York, New Jersey and Connecticut were the hardest hit states and suffered high winds, flooding and storm surges. The storm damaged or destroyed more than 72,000 homes and businesses in New Jersey. In New York, 305,000 housing units were damaged or destroyed and more than 265,000 businesses were affected.

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Ex-directors of Satyam win ruling in U.S. class-action suit

NEW YORK (Reuters) - A U.S. federal judge dismissed claims against seven former directors of Satyam Computer Services Ltd in shareholder lawsuits stemming from the massive fraud at the heart of India's largest corporate scandal.
U.S. District Judge Barbara Jones in New York ruled on Wednesday the lawsuits failed to allege that the ex-directors recklessly failed to discover the fraud, which came to be known as "India's Enron."
The lawsuits center on the revelation by Satyam's founder and former chairman, Ramalinga Raju, that what had been India's fourth-largest outsourcing firm had for several years inflated its revenue, income and cash balances by more than $1 billion.
In her decision Wednesday, Jones said the allegations primarily focused on the actions of a small group of insiders, reinforcing an inference the audit committee's members "were themselves victims of the fraud."
Lawyers for the directors welcomed the decision.
"It was truly unfortunate that these directors, diligent individuals of the highest integrity, were ever named as defendants," said Irwin Warren, a lawyer for five of the seven directors involved in the case.
Gordon Atkinson, a lawyer for former board member Vinod Dham, in an email said the decision would hopefully help vindicate his client and the other outside directors, "who were themselves victims of the Satyam fraud, not perpetrators or otherwise responsible for it."
Lawyers for the plaintiffs did not respond to requests for comment.
Satyam shareholders began filing lawsuits in 2009 after the scandal broke.
In 2011 Satyam, now called Mahindra Satyam Ltd, and its auditor, PricewaterhouseCoopers, agreed to pay $125 million and $25.5 million, respectively, to settle claims filed by shareholders.
That same year, Satyam and PwC agreed to pay a combined $17.5 million to settle claims made by the U.S. Securities and Exchange Commission and Public Company Accounting Oversight Board.
The 2011 settlements did not include Satyam's former directors, who continued to litigate the case that ultimately ended in Wednesday's ruling.
In her ruling, Jones also said the investors could not file claims arising from stock purchases made on the National Stock Exchange of India, citing a 2010 U.S. Supreme Court case restricting investor claims in U.S. courts involving stocks bought on overseas exchanges.
Investors had also filed claims involving Satyam American depositary shares, which were not impacted by the Supreme Court ruling.
The lead plaintiffs include Public Employees' Retirement System of Mississippi, Mineworkers' Pension Scheme, SKAGEN AS and Sampension KP Livsforsikring A/S.
Jones also dismissed claims brought by a former Satyam employee on behalf of employees who exercised stock options. The judge also voided claims on jurisdictional grounds against two companies owned by the Raju family - Maytas Infra Ltd. and Maytas Properties.
Adam Finkel, a lawyer for Maytas Properties, in an email said his clients were pleased with the decision.
The case is In re Satyam Computer Services Ltd. Securities Litigation, U.S. District Court, Southern District of New York, 09-2027.

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DoubleLine launches stock management division

NEW YORK (Reuters) - DoubleLine Capital LP, the $53 billion firm run by star bond investor Jeffrey Gundlach, said on Wednesday it is now managing stock portfolios in a new division called DoubleLine Equity LP.
The firm, which surpassed $50 billion in bond assets last year after launching in 2009, said in a news release that it has tapped former TCW Group Inc portfolio managers Brendt Stallings and Husam Nazer to expand its stock division.
In an interview on Wednesday, Gundlach, DoubleLine's chief executive officer and chief investment officer, said stock mutual fund strategies suffer from a lack of new ideas.
"We think the equity business is ripe for creative thinking," he said.
Gundlach said he plans to start with one or two mutual funds that offer a strategy focusing on U.S. stocks, and quickly follow with a hedge fund whose strategy would focus on "best ideas" in international stock investing.
"We're really not prepared to do a lot of individual stock selection outside of the United States," he said.
Gundlach had hinted at the firm's move into stocks in a webcast on September 11, citing the broad disinterest in equities and their potential as a hedge against inflation.
He said on Wednesday that some of the stock funds he plans to offer will have a strategy that focuses on specific sectors among small and mid-cap stocks, while others will have a broader strategy that could vary widely in its stock selection.
Gundlach said DoubleLine's business plan had been to build the firm's bond management side to between $50 billion and $60 billion in assets before diversifying into areas such as stocks, a goal it has achieved.
"This is our first move to diversify. There's very likely to be one if not two more over the course of 2013," Gundlach said. He said he is seeking to reach a maximum of about $10 billion in assets within DoubleLine's equity division.
Gundlach has made pointed calls on stocks in the past, including one at the Ira Sohn investing conference in May to buy natural gas while betting on a decline in the shares of Apple Inc, the world's most valuable technology company.
On Wednesday, Gundlach recommended trading the volatility in Apple's stock price.
"Apple's flopping around like a fish in a boat. When it has a big rally, you should probably sell it. When it goes down a lot, you should probably buy it," he said, and reiterated a call he on CNBC in November that its stock price may drop to $425 a share. Apple's stock was up 3.2 percent to $549.03 at the close of trading on Wednesday.
DoubleLine Total Return Bond Fund, the firm's flagship, earned a return of 9.2 percent in 2012, beating 97 percent of other U.S. mortgage-focused funds, according to Lipper. The fund, which oversees $37.1 billion, took in $19.7 billion last year, making it the most popular mutual fund by asset growth.
Pacific Investment Management Co, the world's largest bond fund manager with $1.92 trillion in assets as of September 30, 2012, began moving into equities when it launched its first actively managed stock mutual fund in 2010.
Gundlach told Reuters that his foray into stock investing could also come with a downturn in the stock market, which he said he could overcome through active management.
"There's a really good argument that you could have a major correction in the S&P 500 in 2013," he said. He cited the heavy influence of U.S. policymakers on markets.
Stallings and Nazer were previously group managing directors at TCW, the highest title for managers at the firm, where they oversaw $5 billion in assets in stock portfolios.
Gundlach founded DoubleLine after a nasty split with TCW, where he was fired as chief investment officer in December 2009. The two sued one another in 2010, but settled in December of that year without disclosing terms.
Private equity firm Carlyle Group struck a deal in August to buy a 60 percent stake in TCW from French bank Societe Generale. TCW management and employees will own the remaining 40 percent stake in the Los Angeles-based investment firm, which has $135 billion in assets.
DoubleLine, which is also based in Los Angeles, employs more than 80 people. Stallings and Nazer plan to hire at least five investment professionals this year, the news release said.
Nazer said in an interview on Wednesday that dividend-paying stocks in general and consumer staple stocks are particular bright spots.

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Why the Slowest Investors Win the Race

Anyone who attended kindergarten remembers Aesop's fable about the tortoise and the hare. The story's moral has implications for investors: Slow but steady wins the race.
Hare investors try to sprint to the finish line of a comfortable retirement without girding their portfolios against the perils of volatility — frequent ups and downs in asset value. So they tend to lag far behind tortoise investors, who take these precautions, which I'll explain in a moment.
Volatility reflects uncertainty, and markets tend to punish uncertainty with lower prices. Yet just because an investment is volatile doesn't mean it has no place in your portfolio. Because they may be less likely to go down with other assets in the portfolio, volatile investments may add highly beneficial variety, known as diversification.
Let's say you own tech stocks like Apple and IBM. Adding more tech stocks to your portfolio doesn't decrease overall risk, so you add a gold-mining stock instead. Though highly volatile in itself, the gold-mining stock is less likely to go up or down with tech stocks, so it increases the portfolio's diversification.
Because there's little correlation between gold-mining stocks' price movements with those of tech stocks, these categories are said to have a low correlation. That sounds complicated, but you can easily look up the differences in price movements between different types of investments to see whether they're correlated, and if so, how closely.
Aware of the downsides of volatility, tortoises avoid it by assembling highly diversified portfolios. That means traditional investments such as U.S. stocks and bonds, mixed with a dash of non-traditional (alternative) assets. These may include emerging market stocks, Treasury bonds and real estate securities. The price movements of these investments have a history of not being highly correlated with U.S. stocks or bonds.
Tortoises are like a savvy retailer on a tropical resort island who wisely sells umbrellas as well as sunscreen to help cover losses during rainy periods. Every once in while, the rain falls on everything -- which is what happened in late 2008, much to the dismay of investors. In the financial meltdown, stocks, bonds and real estate both in the US and abroad swooned, leaving little quarter for investors.
Tortoise-style investors add a touch of alternative investments, knowing this may cut their overall returns some years, but they'll sleep more peacefully with the knowledge that it can counter-balance heavy losses in traditional investments.
Hares aren't focused on this balanced approach. Instead, they assemble highly aggressive portfolios of assets that tend to rise or fall in lockstep. They're not concerned with cutting their losses because, compelled by greed, they're not planning to have any losses ior they believe they can defy gravity. This was not unlike the employees who loaded up on their company's shares before the recession, only to see their investment go south along with their job.
Like the Aesop's hare, hare investors are overconfident and turn a blind eye to the ravages of volatility, which take a long time to recover from. Tortoises, having sustained less damage, continue their slow but steady progress.
The math of recovering from hits may astonish you. Let's say your portfolio loses 33 percent of its value, leaving you with two thirds of what you had. Many believe they'd be back where they started if they gain 33 percent. But this gain wouldn't restore their losses. They would actually need to make a 50 percent gain to get back to where they started. The reason is that the gain is based on a lower value than what you started with.
Heavy gains followed by just a large losses from volatile investments is comparable to the hare in Aesop's fable sprinting for periods and then, winded, lying down to take a nap. Like the tortoise, investors with adequately diversified portfolios don't tend to need as much recovery time.
Such losses are even more damaging than they appear at first blush. Not only do hare portfolios lose time that could be used to make progress toward the goal, but they also miss out on the benefits of compounding from reinvested gains . Though tortoises' gains may be far lower than those made by hares during their sprints, they're more likely to enjoy the benefits of compounding.
These awkward reptiles plod steadily toward the finish line while the halting progress of hares leaves them far behind.

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US rate on 30-year mortgage hits record 3.83 pct.

WASHINGTON (AP) — Average U.S. rates for 30-year and 15-year fixed mortgages fell to fresh record lows this week. Cheap mortgage rates have made home-buying and refinancing more affordable than ever for those who can qualify.
Mortgage buyer Freddie Mac said Thursday that the rate on the 30-year loan ticked down to 3.83 percent. That's the lowest since long-term mortgages began in the 1950s. And it's below the previous record rate of 3.84 percent reached last week.
The 15-year mortgage, a popular option for refinancing, dropped to 3.05 percent, also a record. That's down from last week's previous record of 3.07 percent.
Low mortgage rates haven't done much to boost home sales. Rates have been below 4 percent for all but one week since early December. Yet sales of both previously occupied homes and new homes fell in March.
There have been some positive signs in recent months. January and February made up the best winter for sales of previously occupied homes in five years. And builders are laying plans to construct more homes in 2012 than at any other point in past 3 1/2 years. That suggests some see the housing market slowly starting to turn around.
Still, many would-be buyers can't qualify for loans or afford higher down payments required by banks. Home prices in many cities continue to fall. That has made those who can afford to buy uneasy about entering the market. And for those who are willing to brave the troubled market, many have already taken advantage of lower rates — mortgage rates have been below 5 percent for more than a year now.
Mortgage rates are lower because they tend to track the yield on the 10-year Treasury note. Slower U.S. job growth and uncertainty about how Europe will resolve its debt crisis have led investors to buy more Treasurys, which are considered safe investments. As demand for Treasurys increases, the yield falls.
To calculate the average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.
The average rage does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for 30-year loans was 0.7 last week, down from 0.8 the previous week. The fee on 15-year loans also was 0.7, unchanged from the previous week.
The average on one-year adjustable rate was 2.73 percent last week, down from 2.7 percent the previous week. The fee on one-year adjustable rate mortgages was 0.5, down from 0.6.

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US rate on 30-year mortgage rises to 3.71 pct.

WASHINGTON (AP) — Average rates on fixed mortgages rose this week, the first increase in seven weeks. But mortgage rates remain near historic lows, boosting prospects for home sales this year.
Mortgage buyer Freddie Mac said Thursday that the average rate on the 30-year loan increased to 3.71 percent. That's up from 3.67 percent last week, the lowest since long-term mortgages began in the 1950s.
The average rate on the 15-year mortgage, a popular refinancing option, rose to 2.98 percent. That's up from 2.94 percent last week, also a record low.
The rate on the 30-year loan has been below 4 percent since early December. Low rates are a key reason the housing industry is showing modest signs of a recovery this year.
In April, sales of both previously occupied homes and new homes rose near two-year highs. Builders are gaining more confidence in the market, breaking ground on more homes and requesting more permits to build single-family homes later this year.
Low rates could also provide some help to the economy if more people refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend.
Still, the pace of home sales remains well below healthy levels. Economists say it could be years before the market is fully healed.
Many people are still having difficulty qualifying for home loans or can't afford larger down payments required by banks. Some would-be home buyers are holding off because they fear that home prices could keep falling.
The economy is growing only modestly and job creation slowed sharply in April and May. U.S. employers created only 69,000 jobs in May, the fewest in a year.
Mortgage rates have been dropping because they tend to track the yield on the 10-year Treasury note. Uncertainty about how Europe will resolve its debt crisis has led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.
To calculate average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.
The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for 30-year loans was 0.7 point, unchanged from last week. The fee for 15-year loans also was unchanged at 0.7 point.
The average rate on one-year adjustable rate mortgages slipped to 2.78 percent from 2.79 percent last week. The fee for one-year adjustable rate loans was 0.5, up from 0.4.

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US fixed mortgage rates fall to new record lows

WASHINGTON (AP) — Fixed U.S. mortgage rates fell again to new record lows, providing prospective buyers with more incentive to brave a modestly recovering housing market.
Mortgage buyer Freddie Mac said Thursday that the average on the 30-year loan dropped to 3.62 percent. That's down from 3.66 percent last week and the lowest since long-term mortgages began in the 1950s.
The average rate on the 15-year mortgage, a popular refinancing option, slipped to 2.89 percent, below last week's previous record of 2.94 percent.
The rate on the 30-year loan has fallen to or matched record low levels in 10 of the past 11 weeks. And it's been below 4 percent since December.
Cheap mortgages have provided a lift to the long-suffering housing market. Sales of new and previously occupied homes are up from the same time last year. Home prices are rising in most markets. And homebuilders are starting more projects and spending at a faster pace.
The number of people who signed contracts to buy previously occupied homes rose in May, matching the fastest pace in two years, the National Association of Realtors reported last week. That suggests Americans are growing more confident in the market.
Low rates could also provide some help to the economy if more people refinance. When people refinance at lower rates, they pay less interest on their loans and have more money to spend. Many homeowners use the savings on renovations, furniture, appliances and other improvements, which help drive growth.
Still, the pace of home sales remains well below healthy levels. Many people are still having difficulty qualifying for home loans or can't afford larger down payments required by banks.
And the sluggish job market could deter some would-be buyers from making a purchase this year. The U.S. economy created only 69,000 jobs in May, the fewest in a year. The unemployment rate rose to 8.2 percent last month, up from 8.1 percent in April.
The government reports Friday on June employment.
Mortgage rates have been dropping because they tend to track the yield on the 10-year Treasury note. A weaker U.S. economy and uncertainty about how Europe will resolve its debt crisis have led investors to buy more Treasury securities, which are considered safe investments. As demand for Treasurys increase, the yield falls.
To calculate average rates, Freddie Mac surveys lenders across the country on Monday through Wednesday of each week.
The average does not include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
The average fee for 30-year loans was 0.8 point, up from 0.7 percent last week. The fee for 15-year loans also was 0.7 point, unchanged from the previous week.
The average rate on one-year adjustable rate mortgages fell to 2.68 percent, down from 2.74 percent last week. The fee for one-year adjustable rate loans rose to 0.5 point, up from 0.4 point.
The average rate on five-year adjustable rate mortgages was unchanged at 2.79 percent. The fee stayed at 0.6 point.

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