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Abby Joseph Cohen, the investment strategist at Goldman, Sachs, says that, whatever might happen to high-flying Internet stocks, her analysis shows the market is modestly undervalued. `We also think that is the case for all of the mainline technology companies,' Cohen said. In previous bull runs, stocks haven't peaked until the market was 15 to 20% overvalued. One big reason for optimism - profits are expected to grow quickly. Analysts surveyed by First Call/Thomson Financial forecast 17% growth in profits for S&P 500 companies this year and next, the fastest growth since 1995 and more than double the long-term average.
Respondents said they read magazines for info on fashions, recipes and health and to reward themselves. They perceived magazine readers as being physically attractive. Reading magazines gave them feelings of sexiness, self-esteem, luxury and creativity. Radio was perceived as a background medium, a morning medium, or used while doing other things. Listeners were seen as young and hip. Radio gave them feelings of peacefulness, relaxation, inner harmony and youthfulness. Respondents said they read newspapers first thing in the morning and to obtain in-depth news, financial and sports information, and movie reviews. Readers were perceived as middle-aged or older, more often male than female. Reading newspapers gave them feelings of tradition, stability, security, maturity, respect and intelligence.
Related: German Goals to Reduce Government - NYT 12-7 Though German taxes are high in comparison with the United States, the government also provides far more services -- from national health care to free universities. Top tax rates are high and special tax breaks plentiful. The result is that the tax burden falls disproportionately on personal income taxes and social security payments. That has made labor expensive and hindered job creation. Over the next four years, Hans Eichel (the German finance minister) said, he hopes to reduce the government's share of the economy from 48% now to 45.5%. That is still far higher than in the United States, where government consumes about 30% of the economy. Related: Forecast - WSJ 12-6 'European markets have stopped looking cheap' after recent rallies, says Mark Howdle, head of equity strategy for Salomon Smith Barney in London. 'But they don't look significantly expensive yet. The market should be able to squeeze 12% to 15% higher before valuations start to become a constraint.' Earnings momentum in Europe is starting to overtake that of the U.S., according to some analysts. A recent report by Dresdner Kleinwort Benson found that 53% of all earnings revisions in October in Europe were positive, while Credit Suisse First Boston has found that for the first time in 12 months, European equities are seeing more upgrading activity than their U.S. counterparts. Related: Market Update - NYT 12-5 In local currencies, the British FTSE-100 index is up 14.6% so far this year, while the French CAC-40 index is up 38.7%. Other gains include 22.3% for the DAX index in Germany and 5.6% for the Milan MIB 30 in Italy. As is the case in the United States, positive performances mask a fairly narrow bull market. Only about one-third of Europe's top 300 stocks have outperformed expectations (driven by a surge in technology and telecommunications stocks), while most of the rest have languished. The price-to-earnings multiple on the FTSE-100 and CAC-40, at 29 and 30, respectively, are just a bit lower than that of the S&P 500-stock index. The P/E's on the DAX and MIB 30 are higher.
The correlation between stock and bond prices went negative for the first time in 30 years, reaching a maximum inverse correlation of -40 percent on Dec. 15, 1998, according to Jim Bianco, president of Bianco Research. `No bond rally in the last two years has occurred when stock prices were rising,' Bianco says. While the technology-heavy Nasdaq has set a record for the last five days running, the Dow and S&P 500 Index fell yesterday and today. Bonds are continuing the rally that began with relief after Friday's employment report. What happens when the Dow and S&P start to rally again? A rallying stock market ensures a continued wealth effect, the waning of which has been on the Federal Reserve's wish list for a year. Wealth gives consumers extra purchasing power. And with consumer spending accounting for about two-thirds of economic growth, it's hard to get a meaningful slowdown when the consumer isn't on board. Why is it bond prices are rising? A new paradigm has cropped up with the euro at its core. Europe's distressed currency managed a bounce on stronger-than-expected factory orders for October. Today it was reported that the German unemployment rate fell to 10.4% in November after being stuck at 10.6% for six consecutive months. What's more, the German economy grew 0.7% in the third quarter, or 1.2% at an annualized rate, the strongest pace in 1.5 years. But the euro is supposedly rallying because recent economic reports from Germany have been more upbeat. The rally in European bonds gave renewed life to the US bond market. If the world's third-largest economy can mount a respectable recovery, won't that put bond markets under pressure, with countries such as the US already straining at the seams? `A shopkeeper in Hamburg hires a new clerk, and the repercussions are felt around the world,' Bianco says. `It's a virtuous cycle -- until it becomes vicious.'
That should read as: Cash out price minus tax basis, times 100 minus ordinary income tax rate, minus the long-term capital gains rate times tax basis, times the inverse of the long-term capital gains rate = Break-even sales price Let's run through it using the hypothetical example of Gina Rocks. She paid $28 per share for her stock. If she sells Monday, she'd 'cash out' with about $384 per share. So her taxable gain would be $356 per share. Multiply that by her ordinary income tax rate of 36% and you see she'd pay $128.16 in tax on each share. That would leave her with net, after-tax proceeds of $255.84 (the sales price minus the tax owed on the profit). Now, from the $255.84, she'd subtract the product of the long-term capital gains rate (LTCG) times her tax basis in the stock (TB). That's 20% (or 0.20) times $28, which works out to $5.60. The result: $250.24 ($255.84 minus $5.60). Finally, she'd divide $250.24 by the inverse of the long-term capital gains rate, or 0.80, to get $312.80, the break-even sales price (BESP). As long as she sold her stock for more than that number, she'd be ahead by waiting for the lower capital gains rate. Related: Online Calculators - Robert Barker, Business Week 12-10 Quicken.com has a free, simple collection of four online calculators that answers important questions about how selling stock might affect your taxes. You'll find the new features at http://www.quicken.com/taxes/investing/12month/. One of the calculators asks: "Should you hold your shares for 12 months?" To test this calculator, I pretended that I had bought 100 shares of Motorola last winter at $70 a share. I then also plugged in a 31% tax rate on my ordinary income and clicked "Calculate." I learned that at Motorola's price of $118 that day (the calculator automatically fetches a current quote), I would save $528 by waiting for my shares to qualify as a long-term holding. It also told me that as long as the price stayed above $111.40, I'd be better off waiting until I'd held the shares at least a year. The other three calculators help an investor come to grips with these issues: --What will you pay in capital-gains tax? --How many shares must you sell to pay the tax on your gain and get the cash you need? --Which stock lot should you sell to minimize taxes? These calculations do not offer complete solutions. For instance, neither state taxes nor brokerage commissions (which increase your cost basis in a stock or other asset) are considered. Other sites have some similar calculators, including a bunch of good ones at www.financenter.com and a promising new free service called GainsKeeper (http://www.gainskeeper.com/home/default.asp).
In recent weeks, total Nasdaq volume versus total NYSE volume hit its highest level in about 3 1/2 years at a 3-2 ratio, said Dick McCabe, chief market analyst at Merrill Lynch. 'The last time we saw volume like that was late May-early June 1996, which led to a sharp market correction,' McCabe said. The final warning flag that technicians are waving is the advance/decline line, which hit a new four-year low Wednesday. Most U.S. stocks have been declining since April 1998.
This is also a good place to check up on individual funds that you own. Morningstar will give you several pages detailing the fund's performance over time, its relative performance against its peers over time, its rank in its specific category and Morningstar's opinion of the fund. Another option for checking asset allocation is www.investmentdiscovery.com. Once you type in all the funds you own, this site will calculate how your total holdings are allocated among stocks, bonds and cash. Plus, it will tell you how much money you've invested in specific sectors and how much you've invested in specific stocks through those funds. You may learn, for instance, that you have no money in technology stocks. Or conversely, you may find out that you have too much money in the volatile technology sector for your risk tolerance. Mutual fund information on this site is free, though you will have to pay for information about individual stocks. This site offers the option of receiving e-mailed monthly reports on each fund, letting you know how they're doing, what they're buying and selling, and how they're allocated.
The pool of available workers was 65,000 higher at roughly 9.5 million in November than in October, which was an all-time low for the unadjusted data series. What's 65,000 among employers? It's too little for Greenspan. The `quit rate', back in the days of the `jobless recovery' (circa 92-94) was 9.5% of the unemployed. An increased willingness to leave a job emerged in the last three years, with the quit rate rising to a 9-year high of 14.6% last month. The smaller-than-expected 0.1% increase in average hourly earnings is only comforting if the Fed is waiting for that beast erroneously known as wage inflation to emerge before it lowers the boom again. The employment report should do nothing to alleviate the bond market's sour stomach. Related: More Bond Market Comments - Bloomberg 12-3 `We're still concerned' about bonds, said Gary Madich, a senior managing director at Banc One Investment Advisors. `Economic growth and consumer spending are strong, and the labor market is tight. I see one or two rate increases next year and then we can' look into buying Treasuries again. If stocks hold gains or rise further, spurring spending during the current holiday season, `the economy will carry significant momentum into next year, thereby necessitating another Fed rate increase,' said Tony Crescenzi, government bond trader at Miller Tabak. With no signs that the stock market's enthusiasm will ebb, the Fed will probably raise rates in February, driving 30-year yields above 6.50%, said William Dawson, chief investment officer for fixed-income at Federated Investors. Yields on the 30yr bond are currently at 6.26%. `It's going to take more than (high bond yields) to slow the economy and stock market down,' Dawson said. `The Fed is going to have to get a lot more serious, especially if the rest of the world continues to grow.' `The bond market just stinks,' says Glenn Migliozzi, managing director of fixed-income at Boston-based Fleet Investment Advisors. `Stocks have had a glorious run and investors are taking money out of bond funds, so there are less players putting less capital into fixed-income.' Should yields rise to 6.50%, they would entice baby-boomers to reallocate some assets into bonds, he said. That surely won't happen in the near-term. Related: Bad News for Bond Funds - Chet Currier, Bloomberg 12-2 At their mid-1990s peak, bond funds commanded almost 30% of the assets invested in all types of funds, as measured by ICI. At the end of October this year, their share was 13%. Since the end of 1994, bond fund assets as tallied by the ICI have risen 59%. Over the same span, the Bloomberg average of bond funds, which tracks the combined return produced by asset appreciation and dividends from bond interest payments, has gained about 39%. In other words, two-thirds of bond funds' modest asset increase has come from price appreciation and only about one-third from new money flowing into the funds. Stock funds now account for more than 55% of the fund industry, up from 36% six years ago. In recent years, many fund investors looking to balance their stock-market holdings have chosen money market funds rather than bond funds, despite the fact that money-fund yields of around 5% have lagged behind bond-fund returns by 1.5 percentage points or more. Money-fund assets have almost tripled since 1993. Related: One More Fact - John Berry, Wash Post 12-5 The market was also encouraged by figures for the total number of hours worked, which appear to be increasing at about a 2 percent annual rate this quarter. With economic growth likely to be 5 percent or more, that suggests another strong quarterly gain in productivity, which will help keep inflation low and could keep the Federal Reserve on hold for some time to come. Related: Irwin Kellner, CBS MarketWatch 12-3 The number of people age 16 to 74 years who are neither employed nor looking for work is about 57.7 million, little changed from 1997's 57.9 million, and well above 1989's 56.2 million. If all these 57.7 million people were to suddenly decide to enter the workforce and were able to find a job, the number of employed would jump by a whopping 44% overnight! The labor force participation rate, which measures the percentage of the total population 16 and over who are either employed or officially unemployed is about 67%. In the 1980s, it averaged about 65%, in the 1970s, about 62%, and in the 1960s, less than 60%. And that does not even considering new immigrants, who may not be officially counted. People working part-time voluntarily are now 13% of the labor force. They represent yet another group who might be enticed into putting in more hours. Who is to say how big the labor pool really is? No one knows - not even Alan Greenspan. Related: More on the Quit Rate - Gene Epstein, Barrons 12-6 As BLS economist Tom Nardone used to point out, the ups and downs in the quit rate are far too small to be of any real significance. For example, as of November, these "job leavers" accounted for a mere 0.6% of the labor force, up from 0.5% in October. So even put aside that these figures are prone to statistical error: A rise of a tenth of a percentage point can hardly tell you very much about the intentions of the 99% -- plus who haven't been spoken for. Related: James O'Sullivan, Vice President, JP Morgan 12-6 Despite the small increase in average hourly earnings in November, the trend has clearly stopped slowing. And while it is a stretch to say that a reacceleration is under way, the 'over-year-ago' change were 3.6% oya in November, up from 3.4% oya in August. Most likely, the pace will pick up further in coming months. The main reason earnings slowed over the last year and a half was the sharp drop in inflation expectations after the overall CPI was dragged down by lower oil prices and a stronger dollar when global growth collapsed two years ago. With headline inflation having picked up again, led by oil, that downward pressure on nominal wage demands has faded. Meanwhile, the upward pressure from the low unemployment rate has only intensified. Related: Kathy Jones, Economist, Prudential Securities 12-6 Everyone has a theory about why wages have remained so tame. There are several possible explanations. First, it seems apparent that the Fed has underestimated the size of the labor pool. Some who were considered unemployable due to lack of education or training have entered the workforce, received training and become employable. This might also explain why average wages are not rising. If the bulk of new entrants are the lowest skilled, their wages are likely to be the lowest and thereby pull down the average. (WSJ 12-7: Tight labor market helps those who often are the last hired: The jobless rate for high-school dropouts was 6.5% last month, down from August's 7.1%, says the BLS.) Secondly, reduced inflation expectations and the substitution of other forms of compensation (such as stock options) for wages may account for some of the tame wage gains. The recent industrial production numbers provide some clues to why inflation has remained under control. Most of the increase in industrial output in the past two years has been linked to information technology. Excluding IT, industrial production would have risen only 0.8% in 1999 instead of 4.5%. It appears to be a classic case of substitution of capital for labor. So while the NAPM index points to ongoing health in the manufacturing sector, the outlook for further gains in factory employment may not be that strong.
Joanne Hill, co-head of equity derivatives research at securities firm Goldman Sachs Group, notes that correlations of certain groups of U.S. stocks with their overseas counterparts -- including telecommunications and technology companies -- are increasing and will likely continue to increase. As those sectors become more global, "people should allocate along sector lines, not country lines," she says. "You can't get a good look at a single sector without looking at all companies involved in the sector around the globe." But others say foreign technology and telecommunications companies are good diversifiers for U.S. investors because the foreign companies are at very different stages of development than their U.S. counterparts.
To explain the magnitude of the change, market strategists point back to 1963. That's when Italian highway operator Autostrade kicked off the pan-European bond market by issuing the first Eurobond, a bond issued outside the borrower's own country, and often denominated in a currency other than that of the borrower's country. For the most part, Europe lacked anything resembling the big, liquid bond market that companies in the U.S. have known since the last century. Hindering the evolution of a pan-European fixed-income market were laws mandating that insurance companies and pension funds invest a large portion of their assets in their base currency. Before the euro, Fiat sold most of its bonds to individuals, especially Italians. But individual investors are now being supplanted by institutional money: The single largest order for Fiat's five-year bond issued in March, for example, came from a Spanish pension fund. The euro changed everything, by binding a hodgepodge of national bond markets into a single, integrated whole, creating for companies a large critical mass, and for investors new opportunities and new risks. Nowhere perhaps is the impact of Europe's revitalized bond market more obvious than in the current M&A boom. The burgeoning bond market has also unleashed a raft of opportunities for lesser-known and lower-rated companies that were either previously trapped in their home markets or dependent on bank loans. As recently as 1997, bank lending accounted for 89% of European corporate financing. So far this year, that has fallen to 70%, according to Morgan Stanley. The numbers mark a gradual but significant shift toward the practices of American corporations, which do up to 80% of their borrowing in capital markets.
No more. The country desperately needs more foreign investment to help companies restructure, to develop its Internet economy, and soak up some of its massive government debt, now clocking about 130% of gross domestic product. That's why Japan eased taxes on foreign ownership of Japanese government debt and has hardly raised an eyebrow about some big cross-border takeovers this year. Japan is quietly sounding out central banks in Singapore, Thailand, Indonesia, and the Philippines to rebalance their foreign exchange holdings away from dollars and into more yen and euros. Japan's rationale: It will better reflect trading relations in the Pacific Rim. The U.S. isn't crazy about this effort, "but the regional central banks aren't saying no," says Yoshimasa Hayashi, state secretary for Japan's Finance Ministry. In return, Asian governments are insisting that Japan finally drop its formal and informal trading barriers and soak up a lot more imports from East Asia. If Japan wants the yen to be a heavyweight currency, then it has to become an import superpower -- not just an export machine. A more open economy would give the outside world a better reason to hold yen. The upshot: Sure, Japan could open its markets some more. But if foreign investors and central banks started losing their appetite for dollar assets, average Americans might actually start caring a great deal about the exchange markets. American interest rates could swing more dramatically if foreign investors stopped buying U.S. Treasuries or stopped financing America's monstrous current-account deficit. Stocks could get hit, too. So far, Americans haven't had to pay a big price for their buy-now, save-later ways. But if Japan succeeds in its effort to internationalize the yen, the U.S. economy could actually suffer some indigestion a couple of Thanksgivings down the road.
A study Stanford University economics professor John Shoven conducted with Sylvester Schieber, vice president at consulting firm Watson Wyatt Worldwide, estimates that as early as 2005, benefits being paid out of retirement programs will catch up with new contributions being paid in. After that, contributions will continue to rise, but not as fast as benefits, as retiring baby boomers start withdrawing more money than is being deposited. But retirement funds also earn investment returns. So the funds won't start paying out more than they take in until about 2024. What are the demographics behind those numbers? In 1955, Americans of working age -- from 20 to 64 years old -- outnumbered those older than 65 by a 6-to-1 ratio. By 2010, the authors estimate, the ratio will have fallen to 4.5 to 1, and by 2050, it will be 2.6 to 1. There are factors that can change the estimates above. With annual gains of 20% and more having been the norm since 1994, expectations for stock gains "are very high at the present time and probably won't be realized," Mr. Siegel says. "Into the next decade, that could sow seeds of discontent with the U.S. market that could lead to more moderate levels of valuation -- which could mean money shifts to other assets." Also, boomer retirement savings may be overemphasized as a factor driving the market. It doesn't look as if there is a lot of saving going on in America these days. Federal Reserve data suggesting that since 1990, people have been moving money into stocks and stock mutual funds -- not fresh income, but money they're taking out of other investments such as real estate and bank accounts. But now, people are starting to run out of assets that they want to shift. That means new investment in stocks has to come from new savings. Lehman Brothers investment strategist Jeffrey Applegate concludes that the engine of the bull market is not the baby boom, but rather low interest rates and strong corporate earnings. They've simply made companies more valuable. Stocks have been going up as a percentage of household assets not because people are buying more stocks, but because the value of their stockholdings has risen.
Visa is testing an electronic check-processing service that allows merchants to "swipe" checks at the checkout, hand them back to customers, and process payment over the Visa network. The goal is to get a share of the payments still made by cash and check -- nearly 70% of all consumer spending. The new service works much like debit cards that automatically deduct funds from checking accounts. So why not just use a debit card? Many inveterate check-writers shun debit cards. Visa hopes in-store processing will wean customers away from paper checks, which are more costly for banks to process. (WSJ 12-9) The 115 'developing economies' are home to 80% of the world's people, most subsist on less than $2 a day. Though poor, developing economies account for about 40% of world income, says Joseph Stiglitz, chief economist of the World Bank. And they are growing. The developing countries will add 2 billion people to the world's current 6 billion in the next 25 years. (James Flanigan, LA Times 12-8) Only one in three Americans who will give to charity this season plans to claim their gift on their tax returns, according to a TurboTax survey. The main reason they're giving: It's the right thing to do. (WSJ 12-8) While assets in Latin American mutual funds have plunged to $1.6 billion from $5.5 billion in late 1997 and the five-year records of many funds remain in the red, the tide may have turned. Latin American mutual funds gained 4.01% for the week ended Thursday. The strong showing pushed the typical Latin American fund's year-to-date gain to a heartening 38.36%, compared with the average 38.21% loss in 1998. (WSJ 12-8) Money flows into Latin America mutual funds have dwindled to $1.6 billion this year from $4.2 billion in 1997, according to Merrill Lynch. The region accounts for about 80% of emerging-market bonds. The yield spread over U.S. Treasury bonds for emerging-markets bonds is 9.57 percentage points, according to the JP Morgan Emerging Markets Bond Index Plus. While narrower than the high of 14.94 points reached on Jan. 14, the day after Brazil's currency was devalued, it's still twice as wide as March 1998 when the yield spread was 451. The default by Russia in 1998, followed by recent defaults by Ecuador and Pakistan have made investors wary. A tripling in oil prices played a part in the rebound of emerging-market debt since some countries such as Mexico, Venezuela and Russia - all big gainers - are large oil producers. (Paul Sullivan, Bloomberg 12-8) A survey, released by technology and product data Web site CNET, compared prices of 24 items such as DVD players, portable televisions and digital cameras between online retailers and real-world stores. Of the two dozen products, only three were cheaper in a brick-and-mortar store than online. The survey, conducted from November 11-17, checked prices at Best Buy, Circuit City, Comp USA , Office Depot and Sears in 10 major U.S. cities. Online retailers included Amazon.com, CNET.com, Microsoft's MSN eShop, MySimon.com, Yahoo! Shopping and ZdNet.com. (NYT 12-8) In the past 13 weeks, the money supply M-3 has been growing at an annual rate of 12 percent -- more than twice as fast as gross domestic product growth. Its effects in the financial markets are already visible. The stock market has run up sharply since the middle of October, reflecting this extra liquidity looking for a home. Both bond prices and the dollar have declined, as these markets have begun to fear the inflationary impact of this massive injection of funds. Once we pass into the New Year and the Fed starts removing this excess liquidity, the stock market might thirst for buyers and prices could take a header. (Dr Irwin Kellner, CBS MarketWatch 12-7) The law exempts from overtime pay workers who earn a salary rather than an hourly wage, whose duties involve managerial skills and whose pay level befits management status. But the standard hasn't been adjusted for inflation since 1975, so workers making more than $250 a week -- just $1.10 an hour more than minimum wage for a 40-hour week -- can be denied overtime. Adjusted for inflation, the cutoff would be about $757 a week. Of course, exempt employees are more than twice as likely to put in more than 40 hours a week: About 15% of exempt employees work more than 50 hours, a GAO study found. (WSJ 12-7) There are a number of uncertainties that could threaten the current business cycle. Among them is a potential backlash in the marketplace against today's mind-boggling pace of technological innovation. None other than Intel Chairman Andrew Grove worries that rapid advances in the computer industry might not be digestible by society, leading to lower consumer spending and lower corporate investment. (Jeffrey Garten, Business Week 12-13) Technology and Internet-related issues make up only about 22% of the stock market's value, based on the Russell indexes of the market's 3,000 largest companies. Technology dominated the most-active lists this year: Twelve of the 15 busiest stocks on the Nasdaq were technology or Internet-related, as were seven of the 15 busiest on the NYSE. In the first 11 months of the year, 10 technology stocks accounted for 20% of the total trading in the Big Board's 3,000 companies. In November alone, technology names accounted for about two-thirds of the volume in Nasdaq's 200 busiest stocks. (WSJ 12-6) The yen's uptrend versus the dollar has three potential impacts, according to Fed Govenor Edward Kelley. A softening dollar could increase demand for US exports, "requiring more productive capacity here at a time when our labor force is already fully utilized." Secondly, it could "continue to put upward pressure on commodity prices." And third, the US inflation picture, which benefited markedly from falling import costs, could deteriorate as higher-priced goods begin entering US shores.(Barrons 12-6) Starting today, visitors to AOL and other news-oriented sites will be able to query the White House about any subject. The "Ask the White House" feature will display the five most-requested weekly questions posted by Web sites visitors, as tabulated by the Web sites. The new feature represents "a special cyberpass to the most exclusive press conference in the world," says AOL's director of government programming, Kathleen Delaski. (USA Today 12-6) Based on the National Federation of Independent Business monthly survey of its members, Bill Dunkelberg (its chief economist) finds that the percentage of respondents reporting "at least one job opening that they can't fill" has been running at 30% in 1999. That is higher than at any year since 1973, when the survey first began. Similarly, a record 20% said that finding qualified labor "was the most important business problem they faced." But at the same time, only 7% said labor costs were any problem. As Dunkelberg notes, small business is holding the line on wages because they're forced to hold the line on prices. (Gene Epstein, Barrons 12-6) Many retail specialists believe that roughly 70% of all purchase decisions are made impulsively in the store. Shoppers typically spend less than five seconds thinking over each buy, according to the folks at I.Q. Design , a brand and package consultancy in New York that studies consumer behavior and has done work for Nabisco Brands, Johnson & Johnson, Himmel Nutrition and others. (Phat Chiem, Chicago Tribune, 12-5) From 1926 through 1997, according to Ibbotson Associates, a research firm in Chicago, the average small-cap stock has outperformed the average large-cap stock by 4.3 percentage points a year. Eliminate January returns and the large-cap stocks actually come out ahead since 1926. A similar theme is true for value stocks, as opposed to growth stocks, particularly among large-cap stocks. (Mark Hulbert, NYT 12-5) In structure, one tracking stock may be quite different from another. Some offer voting rights; some don't. Some entail ipo's and some don't. None are "spinoffs". Spinoffs are new companies carved out of old. Tracking stocks aren't new companies at all. The SEC filings for tracking-stock IPOs bluntly inform potential investors of the enormous potential for corporate conflicts of interest between the original stock and the tracking stock. Specifically, they warn that the company may wind up making decisions that favor the old stock at the expense of the tracking stock, as it sees fit. Since tracking-stock owners may have no vote, or a lesser vote, they have little or no say. (Fred Barbash, Wash Post 12-5) This year, according to Sanford Bernstein & Co., capital raised in initial offerings will total more than $75 billion. That is roughly equal to the amount raised in new stock issues during all of the 1980s. Monster moves in these stocks on their first day public are also breaking records. From 1986 to 1994, the average first-day move in an initial offering was about 10%. Today, the average stock rises 60% on its first day. (Gretchen Moregenson, NYT 12-5) Middle-class blacks are more inclined than whites to keep their money in banks and cash-value life insurance, according to a survey done for Schwab and the Ariel Mutual Funds. For capital gains, their preference has been real estate, which feels safer than stocks. The Ariel/Schwab survey questioned 1,629 people with average incomes of $50,000 or more, about evenly split between African-Americans and whites. 51% of white households had ira's, compared with just 34% of blacks. Slightly more whites than blacks have employer-sponsored retirement plans. Just 48% of black housholds said they own stock or bond mutual funds, compared with 61% of whites. Just 38% of blacks own individual stocks, compared with 54% of whites. (Jane Bryant Quinn, Atlanta JC 12-5) www.moneybulletin.com is a bare-bones Web site about income-oriented investing. The site is the invention of Mike Kavanagh, a financial planner and the host of a personal-finance talk show at WSB, a radio station in Atlanta. The site, which he calls a work in progress, has lists of income-bearing securities and weighs in on topics like bond funds and stock index-linked certificates of deposit. (NYT 12-5) With substantial sectors of fund investing--notably diversified small-company funds and value funds--being shunned, and with no relief in sight, fund companies come under great pressure to cast the losers overboard. So far this year, 306 equity mutual funds have been liquidated or merged into other funds, up from 289 funds for all of 1998, according to Morningstar. (Bill Barnhart, Chicago Tribune 12-5) To put things in historical terms, when employers and politicians decided years ago to hand off responsibility for the nation's retirement savings to workers, through 401(k) plans and the like, they created the risk that the stock market would tilt away from traditional investment practices. Generally, the individual investor is not concerned with valuation. They are concerned with growth stories and concepts. (Bill Barnhart, Chicago Tribune 12-5) A new report from Cyber Dialogue finds that the growth rate of adult Internet users declined from 58% during the first half of 1998 to 13% during the first half of this year, the report says. Only 3.9 million adults went online for the first time during the first six months vs. 12 million a year ago. And 27 million adults this year stopped using the Web after trying it, up from 9.4 million in 1997. The report predicts that roughly half of all U.S. adults will use the Internet by 2003. Adults with low or moderate levels of income are not making the jump to cyberspace in large enough numbers, a major cause for the slowdown, the report finds. The report also shows that roughly a third of those surveyed say they do not need the Internet. Further, 27 million adults gave up using the Internet this year, according to the report. (USA Today 12-3) A survey released by American Century Investments, gauging the online habits of mutual-fund investors, found that investors' use of the Internet has tripled since 1996. The study shows that 62% of investors, or about 35 million people, access the Web for research and information, news and financial services. That's an increase from 18% four years ago. However, investors appear reluctant to view cyberspace as a marketplace for mutual-fund transactions. The survey found that 60% of mutual-fund investors also own individual stocks, and, among those investors, nearly a quarter had traded securities online. For the study, American Century and Elrick & Lavidge, a marketing research firm, contacted 251 mutual-fund investors who currently access the Internet. (WSJ 12-2) As much as 12% of the goods consumers bring home from the supermarket aren't used and eventually get thrown out, says Brian Wansink, a professor at the University of Illinois, Urbana. Impulse buying and bulk purchases are the usual suspects, but the professor's research suggests that 63% of castaway items were bought for something that didn't happen -- such as a special dinner or a rug-cleaning. Impulse buying accounted for only 2% of discards. The research was based on interviews and surveys of more than 400 adult shoppers. It found that food and household goods people buy for themselves are kept for a long time -- an average of 2.7 years -- before being thrown out. (WSJ 12-2) 'Payment in full' written on a check could be binding even if the amount owed is more than the amount of the check, says a memo to clients from Timothy Hughes, an attorney in the Boston office of Pepe & Hazard. Cashing the check may be tantamount to accepting it as full payment, even if the recipient crosses out those words. (WSJ 12-2) With the Russell 2000 small-stock index up 11% in just over a month, some small-stock investors, and even executives at the companies themselves, are almost giddy at the prospect of a rally. But 94% of the Russell 2000's year-to-date gain has come from technology stocks, according to Steven DeSanctis, small-cap quantitative analyst with Prudential Securities. And the Russell can thank the tech sector for more than half of its gain in November. 'This isn't a small-cap rally. It's really a technology rally,' Mr. DeSanctis says.(WSJ 12-2) The top 5% of all individual U.S. taxpayers, based on income, paid about 52% of total federal individual income taxes in 1997. That was up from 43% a decade earlier, according to a report by the Tax Foundation, a nonprofit research group, based on preliminary IRS data. This top 5% accounted for 32% of 1997 adjusted gross income, up from 26% in 1987. To qualify for a spot in this elite group, taxpayers had to have adjusted gross income above $108,048 in 1997.The top 50% of taxpayers made 86% of 1997 income and paid about 96% of federal individual income taxes. In 1987, this group accounted for 84% of income and paid 94% of income taxes. (WSJ 12-1) Last week, Stockjungle.com opened a family of four self-proclaimed "naked mutual funds," a sexy but meaningless way of saying the funds take the wraps off portfolio moves by posting transactions and daily manager commentary. OpenFund, started doing the same thing in September. Another Web site, X.com, will soon unveil its fund family, and there are more to come. But why would an investor buy into an untested fund family for which the claim to fame is not investment prowess but reasonable skill at developing a Web site? (Charles Jaffe, Boston Globe 12-1) The average American household gave $1,075 to charity last year, roughly 2.1 percent of household income, according to Independent Sector, a firm that tracks charitable giving. Of that money, roughly 40% was given away in December. (Charles Jaffe, Boston Globe 11-29)
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