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"There is . . . little doubt in our mind that the consensus 'call' that once the war begins the economy and stock market will do just fine, will likely prove false." (Jeffrey Saut of Raymond James) Make no mistake, there is going to be a violent rally sometime over the next month as the Iraq conflict comes to a head. This will happen because traders expect it to happen. It is self-fulfilling. My bet is that the move higher is both extreme and short-lived. After that, yes, we can expect yet another move to new lows. (Terry Bedford, MSN Money 3-5) United States investors have bid up the S&P 500 by 2.5% since the war began on Wednesday night and 7.5% for all of last week. Though it is understandable that investors, fed up with a three-year-old bear market, would seize on positive war news as a reason to buy stocks, such a focus is exceedingly narrow. The fact is, the recent momentum in stocks must be backed by higher corporate earnings, which can come only if the economy improves. But corporate spending remains moribund, consumers are nervous, and layoffs keep coming. (Gretchen Morgenson, NY Times 3-23)
1. Beware of Crowds: In early 2000, stocks were loved and bonds were hated. In early 2003, bonds were beloved and stocks despised. As we now know, the early 2000 love affair with stocks ended badly. Will this year's passion for bonds prove equally ill-timed? With bond prices struggling in recent weeks, it's possible the crowd has got it wrong again. The lesson: Avoid being swayed by the mood of the mob. 2. Humility Rules: Instead of trying to figure out which investments will soar next, it's time to realize you will never figure it out. So what should you do? Decide what portion of your portfolio you want in stocks, in bonds and in cash investments like savings accounts and money-market funds. Thereafter, stick with these percentages through thick and thin. 3. Avoid Big Bets: As you settle on target percentages for stocks, bonds and cash, allocate at least a little money to all three categories. The past three years have proven that a 100% stock portfolio is a bad idea. But 100% in bonds is equally foolish. 4. No Safety in Numbers: Before the bear market, many investors took comfort in the notion that spreading their stock-market bets widely would limit their losses in a bear market. But the benefits of diversification proved far smaller than these folks hoped. The Nasdaq Composite Index lost 78% over the 2« years through October 2002. The S&P 500 lost 49%. Clearly, broad stock-market diversification won't save you in a bear market. Instead, if you want to limit losses, you need to include some bonds and cash. 5. This is Risky Business: What should determine your mix of stocks, bonds and cash? You need to gauge your tolerance for risk. But that isn't easy. No matter how aggressive or conservative your investment mix, you will have your queasy moments. In recent years, it's been tough to own stocks. But remember the late 1990s? Back then, many bond investors got antsy as they were left behind by a skyrocketing stock market. 6. History Is Bunk: In the late 1990s, many folks took comfort in data showing that stocks clocked 10% a year over long periods. But as investors soon learned, that long-run average doesn't tell you anything about returns over the next few years. Treat stock-market history not as an unerring road map to the future, but as a rough indication of what could happen. 7. Dividends Matter: As we discovered over the past three years, managers often squandered retained earnings on foolish attempts at growth and some even used corporate cash to line their own pockets. 8. Keep It Simple: In the late 1990s, investors got way too clever, buying initial public stock offerings, day trading, purchasing stocks with margin debt and betting on highflying technology funds. All four strategies proved disastrous. Over the past three years, many investors fell into the same trap all over again, pursuing overly clever strategies like market timing, investing in hedge funds and shorting stocks in a bet that they would fall in value. Sure, all these strategies have an aura of sophistication. But they can also cost you a truckload in investment costs and generate terrible investment results. Most investors would be far better off sticking with mundane mutual funds. 9. Indexing Triumphs: When you buy mutual funds, consider low-cost index funds. In the past, pundits have argued that actively managed stock funds would sparkle once the market turned rougher. No such luck. McGraw-Hill's Standard & Poor's division analyzed stock-fund performance over the past three years, looking at how stock-fund managers in nine categories fared compared with an appropriate benchmark index. Result? Actively managed funds, on average, outperformed in just two of the nine categories.
Suppose the pessimists are right. Suppose returns over the 16.5 years that started in March 2000 rival the 16.5 years that started in early 1966. Seem like a grim prospect? In fact, it would be remarkably good news. Remember, we have already suffered a pretty good licking, with share prices cut in half over the past three years. If we are in the midst of a 16.5-year stretch during which stocks clock 5.1% year, we need to do some serious catching up over the final 13.5 years. Indeed, for the 16.5-year period starting in March 2000 to match the 1966-'82 period, the S&P 500 would have to climb 10.5% a year over the next 13.5 years, according to Chicago researcher Ibbotson Associates.
That dark spot is being caused by worries about how the old-line, staid, big-business giants are going to cope with problems arising from their pension plans. Specifically, due to losses incurred over the last three years as well as changes in funding regulations, the fate of pension plans at many large companies has changed. Some of the pension plans, due to federal accounting rules, were profit centers for the employers just a few years ago, with the investment gains of the pension funds contributing directly to the bottom line; today, many of the pension plans are big, underfunded liabilities. Michael Hirsch, a senior portfolio manager at New York-based Advest Inc., created a list he calls ''The Pension 100,'' which includes the 50 corporations with the largest unfunded pension liabilities, as well as the 50 corporations with the highest expected rates of return in their pension funds. The list is a veritable who's who of large-cap companies, which is not surprising, considering that more than 70% of the S&P 500 companies have defined benefit plans. Through the first two months of the year, according to Hirsch's research, the S&P 500 was off 0.9%, while the Pension 100 fell roughly 6.8%. Just 22 of the 100 companies were positive during the period, while 28 had double-digit losses over the two months. Hirsch and other observers believe that the pension situation will prove to be a steady drain of capital from the company into its pension plan, with the results affecting cash flows, profits and more. 'Two months of data is not the kind of eternity we want to have when we draw conclusions about investments,' says Hirsch, 'but these pension problems are too huge to go away and it's altering the way these companies do business. . . . This is a bullet that these companies can not dodge, that much we do know.' Pension Acc't Rules Led To Overvalued Stock Jonathan Weil, WSJ 3-28 A study by two Federal Reserve Board staff members concludes that stocks of companies reporting substantial earnings from their pension plans were "systematically overvalued" in recent years, as a result of accounting rules that make it difficult for investors to distinguish those gains from the earnings generated by companies' core operations. The study's authors, Julia Lynn Coronado and Steven A. Sharpe of the Fed's division of research and statistics, recommend that the current system of pension accounting "be re-examined and revised." Coronado and Sharpe wrote that investors tend to apply the same price-to-earnings multiples to pension earnings that they do to earnings from core operations. In part, that is because fuzzy disclosures make it hard for investors to carve out pension earnings from corporate-income statements. In an efficient market, investors would value pension plans based on their net asset values, not on such earnings multiples. Rather than require corporate-income statements to reflect quarterly changes in the values of their pension-plan holdings, the FASB rules employ "smoothing" mechanisms. That way, any given period's pension-plan gains or losses don't hit a company's financial statements all at once. For companies in the S&P 500 index with defined-benefit plans, the result, on average, was "an unjustifiably high valuation of the underlying net pension assets." The study's authors wrote that "the evidence for this overpricing is particularly strong for 2001, when underlying pension-asset values had been decimated by a steep stock-market decline, while the accrual of pension earnings was still quite high." By the end of 2001, the aggregate value of net pension assets among companies in the S&P 500 had plunged to a $2 billion deficit. By contrast, pension earnings for those companies totaled $20.4 billion. "At this point in time, naively valuing pension earnings, rather than taking account of pension net-asset positions, could lead to nontrivial valuation errors," the study says. Related articles: Increased IBM Pension Contribution will Raise Profits - Cheryl Einhorn, Barrons, Pensions & Company Income, Jim Jubak, MSN, Move Pension Reporting Out of the Dark - G Morgenson, NY Times / Others
Small, medium and large stocks all suffered together. Among Morningstar Inc.'s nine style-box categories of small, mid-cap and large growth, blend and value funds, the worst one-year showing was a 29.8 percent loss by small-growth specialists. The best was a 20.7 percent drop by mid-cap value funds.
In their most basic form, the immediate annuity gives retirees lifetime checks in exchange for an upfront lump sum. These days, people can choose to add on a variety of different features, or "riders," that alter the basic format. You can choose a rider to leave money to heirs, or to limit the amount of time you're invested in the annuity. You can ask for inflation protection, or the ability to cash out. You can receive extra income in the case of a medical emergency, or invest slowly to take advantage of future interest-rate increases. And many more variations are expected to be released in the coming years as the marketplace grows. A rule of thumb suggests people invest about 25% of their retirement portfolio in this type of annuity so that they don't lock up all their funds to maintain some liquidity and growth. Beyond that, people need to think long and hard about whether they really need any added features. Critics caution retirees against jumping on every new feature that comes to market, especially because they tend to result in lower payouts or added costs. Plus, people might be wise to wait for the dust to settle and see what new kinds of plans work and what don't. Often, the desire for features can be linked to irrational fears. For example, one of the most popular riders, called "joint and last survivor," allow people to guarantee that the annuity will pay them or their spouses as long as either are alive. But it's not always the smartest choice for people who have only allocated a small portion of their funds to the annuity.
The new study, however, has found that assumption to be wrong. It was conducted by three finance professors - Joshua Coval of the Harvard Business School, David Hirshleifer of Ohio State University and Tyler Shumway of the University of Michigan - the academic working paper can be found at papers.ssrn.com/sol3/papers.cfm?abstract_id=364000. The study focused on nearly 17,000 accounts in which investors had bought at least 25 stocks - an amount large enough to give the researchers confidence that any outperformance was not a result of mere chance. The findings were also adjusted for risk, to ensure that investors had not beaten the market simply by taking on greater risk in a period when stocks generally were rising. After considering these factors, the professors found that about one-fifth of these frequent traders had genuine stock-picking ability. In that group, the average stock gained 44% a year, annualized, over this period, versus 14.5% for the Wilshire 5000. The professors saw little evidence of stock-picking ability among most of the other investors. Though their average stock slightly beat the market, the professors found that the margin of outperformance was not enough to pay commissions and bid-asked spreads. About 10 percent of the active traders stood out because their stock picks consistently underperformed the market Ù reflecting what the professors called "negative ability." How can the research help you know if you are part of the elite stock-picking group - that top 20% - and whether you should keep choosing your own stocks? That is difficult, because the study used complex statistical tests to determine genuine ability. But Professor Coval suggests this test, while not perfect, offers at least a tentative answer: First, compare each of your 25 most recent stock picks to its appropriate index, being careful to find a benchmark that matches its market capitalization and value or growth characteristics. If you find that at least 18 of those 25 stocks have outperformed their benchmarks over the time you have held them - and that the 25 stocks' average return beats that of their benchmarks - you probably have what it takes to beat the market. Beating the Market James Glassman, Washington Post 3-23 Some experts do beat the averages over long periods -- though they usually do it through risky strategies, such as concentrating their portfolios in only a few stocks. Over the past 10 years, for instance, one of the best-performing mutual funds has been Sequoia (SEQUX), managed by William Ruane and Robert Goldfarb. Sequoia has returned an annual average of 14.2 percent, compared with 7.2 percent for the average fund and 8.6 percent for the benchmark Standard & Poor's 500-stock index. But Sequoia's portfolio is highly focused. The top five holdings represent two-thirds of total assets, and the fund owns only 15 companies in all. Ruane subscribes to Buffett's philosophy on diversification: Forget it. Buffett likes to quote Mae West, who said, "Too much of a good thing can be wonderful." There aren't that many great stocks in the world, so buy lots of the few you find. My suggestion is to watch smart managers like Ruane and Goldfarb for stock-picking clues but to play it safe with more diversified portfolios. Don't own 15 individual stocks, own 30 - or, better, own an index fund and a few managed funds along with 15 individual stocks.
Diversification is a must for technology, so lean toward ETFs. QQQ is still about three-quarters technology (including biotech and telecom). iShares DJ U.S. Technology (IYW) mimics the Dow Jones technology index. SPDR Technology (XLK) owns the tech stocks that are part of the S&P 500. The only major difference between iShares and SPDR is that the latter includes traditional telecom companies, including the giant regional Bells like Verizon (VZ), which is among its top five holdings, and SBC Communications (SBC). As a result, iShares is a purer play and more concentrated.
Funds that change their names were found to attract 22% more new money than funds of similar size, investment style and other features that don't undergo a name makeover. And that is true even if the name changes are purely cosmetic, without significant change in the way the fund invests. "It's like saying by suddenly changing your name, you're a better fund," says P. Raghavendra Rau, a management professor at Purdue University in West Lafayette, Ind., who co-wrote the paper. That is obviously not a rational conclusion. "If I call myself Brad Pitt, for example, it shouldn't make me more attractive to women," Prof. Rau says. Prof. Rau and two other academics - Michael J. Cooper, also of Purdue, and Huseyin Gulen of Virginia Polytechnic Institute -- investors also will pump money into funds that simply sound like they belong in a hot category. Just adding "growth" to a fund's name when fast-expanding growth stocks are outperforming discounted value stocks often would do the trick, they found. Funds amending their names reaped an average of $67 million more than similar funds over the course of the next 12 months following the name change, with funds hewing to hot trends getting most of the gain, the study found. On average, the funds studied each had assets of $299 million, so the new money amounted to a significant increase in the funds' coffers. All told, during the seven years from 1994 through 2001, 296 funds raked in some $19.9 billion in additional money that could be attributed to name changes, the paper says. The study isn't the first to show that investors are attracted to funds that advertise more heavily or that are promoted by commission-paid brokers and financial advisers. But often, the true cause and effect is fuzzy, says Erik R. Sirri, an associate professor of finance at Babson College. For one thing, fund companies tend to advertise their most successful funds by touting glowing investment returns. That leaves open the question of whether investors flock to funds that are advertised heavily, or to funds that perform well, because they tend to be the same funds, according to Prof. Sirri. Not only can a hot fund attract piles of money from investors, but fund companies sponsoring top-performing portfolios also draw money to other offerings in their fund lineup that have mediocre performance, according to research co-written by researchers Vikram Nanada, Z. Jay Wang and Lu Zheng at the University of Michigan in Ann Arbor. In a working paper, "Fund Families and the Star Phenomenon," they looked at money flowing in to individual funds at families sponsored funds with top performance numbers. The researchers suspect that advertising is the link. Unfortunately, spreading your money among both a family's star fund and its less stellar siblings on balance delivers only average returns. "If we invest in star families, do we do better than average? The answer is no," Prof. Zheng says. As a group, the funds of families boasting star funds don't perform any better than the funds of other fund families.
But now the record industry is giving new priority to these feature-rich audio discs. Having lowered their prices to typical CD levels, the labels are ramping up re-releases of classic albums, and planning releases of new albums in those formats. Hardware makers, meanwhile, are lowering prices on players and home theater systems, and are planning to put the format into cars and portable players. Sony and Philips, co-inventors of the original CD, created SACD primarily as a platform for stereo and multichannel music, with a high-resolution technology geared at recreating the fluidity and frequency response of analog sound. Most SACD's on the market have a hybrid CD layer, meaning that they play CD-quality audio in regular CD players and high-res audio in SACD players. (While the SACD platform supports multimedia content, no current SACD's carry onscreen graphics or video.) DVD-Audio, introduced by Panasonic, Toshiba and the other patent holders in the DVD Forum, is a music-centered variation on the standard DVD, usually containing a high-resolution multichannel mix of the album and additional content like lyrics, photos, band interviews and music videos. You need a DVD-Audio-capable player to take advantage of its high-resolution tracks, but any DVD player can read the video content and play a low-resolution stereo mix of the music. Stuart Robinson, editor of HighFidelityReview.com, said he believed that both formats were of equally high quality, a leap beyond CD audio. Sales figures for both formats are still quite low: for every 2,000 CD's sold in the United States last year, only one DVD-Audio disc went out the door. Nielsen SoundScan reports that just over 300,000 DVD-Audio discs were sold last year, nearly triple the previous year's total but a far cry from the 650 million CD's sold. SoundScan lumps SACD's in with CD's because of the backward compatibility, so it is harder to estimate their sales figures. (This will change within six months.) However, it is safe to say that sales exceeded one million in 2002, owing largely to Abkco Records' release of 22 remastered Rolling Stones albums on hybrid stereo SACD last August. Though the market research firm NPDTechWorld estimates that only about 1% of DVD players shipped last year had high-resolution audio capability, many manufacturers are making it a priority in their spring and summer lineups. For example, about half of Sony's DVD component and home theater systems will also be SACD players; Panasonic will be offering DVD-Audio playback in 10 of its 12 home theater systems and 4 of its 6 stand-alone DVD players. Entry-level prices for such stand-alone players are well under $200. Although a format war is under way, it is different from the battle between VHS and Betamax because SACD and DVD-Audio are the same size. Not only do both kinds fit in the same tray as a CD, but some machines, called universal players, can read both SACD and DVD-Audio. Currently, universal players are offered by Denon, Marantz, Pioneer and Yamaha. From www.techtronics.com July 2002; Storage capacity of the formats: DVD-Aduio - (1) 4.7GB - Single layer (2) 8.5GB - Dual Layer (3) 17GB (est) Double Sided Dual Layer; SACD - 4.7GB - Single layer; CD - 650MB (1GB = 1024MB)
Skimming relying on such devices, which are often sold for anywhere from $250 to $1,200, poses a growing problem for law enforcement and is costing consumers millions of dollars a year. In most skimmer rings, the numbers are obtained by low-level operatives, often store clerks or waiters, whose jobs involve handling customers' cards. They can easily pass the cards through a small skimmer that they carry or have placed next to a cash register. "The waiter takes your card, the waiter leaves your table, reaches in his apron, swipes your card through the skimmer, and in two seconds - even less - compromises all of your numbers," said Gregg James, a special agent in the financial crimes division of the Secret Service. Some skimmers have been more audacious, taping one of the devices to an A.T.M. with a sign asking patrons to use the "card cleaner" before all transactions.
Mutual funds were designed to give individual investors of modest means cheap access to a broad portfolio of securities picked by a seasoned pro. The idea was that managers and their firms served as the professional experts for small investors' long-term financial betterment. During the tech froth, however, stewardship often gave way to salesmanship, to borrow a phrase from Vanguard founder Jack Bogle. Catering to investors' craving du jour, firms pumped out a geyser of a narrow, pricey tech funds. At the same time many so-called diversified growth managers tossed the majority of investors' money in the searing sector. Even fund marketing also helped inflate the tech bubble. Funds are sold [and advertised] on performance, so advertisements for tech and Net funds made them look irresistible.
A separate survey last year by the Profit Sharing/401k Council of America found that enrollment rates in 401(k) plans had dropped to 78% last year from a peak of 82% in 1999. Another problem: Those who still contribute to their retirement plans are investing less. The median savings rate for 401(k) participants declined to 6% in 2001 from 7% in 1999, according to Vanguard Group. Benefits consultants say the biggest drop appears to be coming from new employees. Buck says some of its clients report that nearly half of new hires aren't enrolling in the company's 401(k). The irony is that young workers actually benefit from a down market. By buying stock now at lower prices, they are likely to get higher returns in the future. In addition, most had relatively small nest eggs three years ago, and thus weren't greatly hurt by the stock market's nose-dive. Even new hires and job switchers who do enroll in their companies' 401(k) plans are putting less faith in the stock market. Workers who joined 401(k) plans last year allocated an average of 60% of their contributions to equities, according to Vanguard. Those who signed up in 1997 still have 73% of their new money going into stocks. Falling stock prices aren't the only reason participation rates are dropping. Employers are also kicking in less money to match workers' contributions. These employer matching contributions dropped to 2.5% of total pay in 2001 from a peak of 3.3% in 1999, according to the Profit Sharing Council. More 401(k) Stats Werner Renberg, Minn Star Tribune 3-16 The Investment Company Institute and the Employee Benefit Research Institute reported that, despite the first 1 3/4 years of the bear market and a 3.8% drop to $58,785 in the average account balance from year-end 2000, average allocations to equity funds had increased - from 44.0% to 47.7% - during the last five years. thier data is for year-ending 2001. It is based on records of 6.6 million participants in 27,762 401(k) plans. Equity fund allocations had gone up in various age brackets -- to 58.6% from 55.1% for those in their 20s, and to 36.2% from 33.9% for those in their 60s. Vanguard's Center for Retirement Research released their finding for 2002. Their data is based on a random sample of 50,000 of the 2.3 million participants in 401(k) plans for which the company is recordkeeper. Vanguard's findings: In 2002, the average participant lost 13.3% on his or her investments while the stock market fell 22.1%. In the three years from 2000 through 2002, the median participant's investments declined 6.3% annually vs. the market's 14.6% drop. Seven of 10 lost money. Seven of 10 saw their account balances remain steady or rise during the three years, in part because ongoing contributions. Total equity allocations - including equity funds, employer stock and the equity portion of balanced funds - declined from year-end 1999 to year-end 2002 by only 9 percentage points: from 73% to 64%. Slightly more than half of that was because of the market decline; less than half the decline was because of participants switching to fixed income investments. [From Tom Petruno, LA Times 3-16] A Hewitt Associates index that tracks how 1.5 million workers allocate their contributions to 401(k) retirement plans found that 61.3% of the money went into stocks in January, the lowest since Hewitt launched the index in 1997. The rest went into fixed-income investments such as bonds. Schwab, Delphi & Ford Drop 401 (k) Match Stacy Forster WSJ 3-14 Charles Schwab Corp. has joined a small but growing number of companies that will no longer match employee contributions to 401(k) plans, a development that could undermine people's ability to retire comfortably. The San Francisco discount-brokerage firm said the move is expected to save about $12 million a quarter in 2003. The decision isn't permanent and will be reconsidered as business conditions dictate, the company said. Schwab isn't alone. El Paso Corp., a Houston natural-gas producer, told its employees in January that it would stop matching contributions to its 401(k) plan on March 1, but would consider reinstating them if financial conditions improve. The move is expected to save the company about $33 million this year. Some companies have restored contributions. Delphi Corp., an auto supplier, reinstated its matching program in February after eliminating it in 2001, but said it will now offer just 30 cents for each dollar contributed by an employee, instead of 70 cents. But Ford Motor Co. suspended its 401(k) match in 2001, a decision the company called temporary at the time and hasn't reversed. Over time, losing even a small employer contribution hurts. Take two workers, each of whom earns $70,000 a year and gets a 3% annual raise. Each contributes 10% to their 401(k) plans annually, but Employee A's company offers to match 2% of that contribution - just $1,400 for that first year - while Employee B's company has no matching program. If the money is invested over the course of 25 years with an annual return of 8%, the additional money put up by Employee A's company will yield nearly $144,000 more in retirement savings. Profit-sharing plans are designed to link employees' fortunes with those of their employers - just as they are boosted when the company does well, they can be scaled back when times are tough, said Ed Ferrigno, vice president of Washington affairs for the Profit Sharing Council. Mr. Ferrigno said that eliminating retirement-plan contributions may also allow a company to cut costs without having to cut jobs. (Schwab said the cost-cutting measures it announced Thursday wouldn't include mass layoffs.) Related article: Companies to Offer Some 401k Education - Beth Healy, Boston Globe The 401(k) Trap - Pamela Yip, Dallas Morning News
Levels of cortisol, a stress hormone, are highest early in the morning, making you more likely to overreact. Remedy: Focus on quick solutions. And skip the coffee. A recent study at Duke University determined that people produce more stress hormones on days they consume caffeine -- and that caffeine's effects can last as long as 12 hours. Just sitting in front of a screen can invoke a fight-or-flight response, causing your muscles to tighten. About 95% of people raise their shoulders the moment they sit down in front of a computer, and 30% begin breathing more shallowly. To fight it, walk around for five minutes each hour. Eating carbohydrates leads to the production of serotonin, a neurotransmitter that has a calming effect on your mood. Traffic congestion causes stress. Remedy: Learn Spanish. Call your Mother. For many, the most stressful part of a long commute is the long stretch of wasted time. Relaxed commuters use the time productively. By measuring heart rhythms much the same way you take your temperature, Biofeedback can give people a window on exactly how their body is handling stress throughout the day. Shedding stress also involves cultivating a certain amount of pessimism, to avoid constant disappointments. Don't expect to find a parking place immediately, and acknowledge in advance that computers crash. If all else fails, try laughing. It opens up the blood flow.
To prove his point, he explored the laxities of mutual-fund boards, where 50% of directors must be independent today. In his letter Mr. Buffett boils fund boards' sundry responsibilities down to two main tasks: hiring the best investment manager available and negotiating for low fees on shareholders' behalf. "When you are seeking investment help yourself, those two goals are the only ones that count," Mr. Buffett wrote. "Yet when it comes to independent directors pursuing either goal, their record has been absolutely pathetic." To illustrate his point, Mr. Buffett highlights most fund boards' tendency to retain the same investment advisory firm, often an affiliate of the fund company, for years. "Year after year the directors of Fund A select manager A," he wrote, "in a zombie-like process that makes a mockery of stewardship." On the fee front, data indicate that stock-fund expense ratios have been rising in recent years, while most funds and their shareholders have lost money. "If you or I were empowered, I can assure you we could easily negotiate materially lower management fees with incumbent managers of most mutual funds," he writes. "Under the current system, though, [fee] reductions mean nothing to 'independent' directors while meaning everything to managers. So guess who wins?"
That may soon change, Mr. Hastings said, for two reasons. First, he believes that because prices are no longer dropping for raw materials - and are even rising for some, like oil and cotton - shoppers may start seeing higher prices on goods. Accustomed as they are to ever-bigger bargains, and given how many cars, computers, sweaters and electronics gear they have bought in recent years, consumers may well commence a buying strike. "As prices came down, that created a bargain effect," Mr. Hastings said, "and consumers kept spending even though so much wealth was destroyed in the bear market." A strong dollar made imports cheaper as well. Also worrisome is a shift in the source of the funds available to consumers. In the 1990's, Mr. Hastings said, consumer spending was fueled by growing wages, a secure job environment and gains in real estate and the stock market. But since mid-2000, consumer spending has been bolstered by mortgage refinancings, home equity loans and falling retail prices. None of those sources can be relied upon much longer. Some Optimism, Consumer Spending Has Room to Grow Steve Liesman paraphrasing a speech from Federal Reserve Governor Ben Bernanke, WSJ 3-6 Unlike previous recessions, real disposable income, which is adjusted for inflation, has kept rising throughout this downturn. It was up by 4.5% in 2002, compared with 1.8% in 2001. Debt service as a percentage of disposable income at 14% is bumping up against its historical high. But about 90% of the growth of debt has come from mortgages, and resulted in a windfall to homeowners who have cashed out equity from their dwellings. There is still a lot of mortgage debt out there carrying interest rates above current levels, so refinancings should continue at a brisk pace in the early part of this year.
Bernstein Investment Research and Management, in a report last year titled "Sleeping with Enemy" (the "enemy" being volatility), studied stock and bond portfolios over 40 years and concluded that a combination of 60 percent stocks and 40 percent bonds carries a "superb risk/return tradeoff."
Now add a second level of confusion - The best share class at one fund family may be their worst option at another -- even when the sums of money and expected time horizon for the investment are the same. And finally - a third level of confusion: commission break points will alter the outcome of which class is best for you. At most fund families, investors who plan on putting a total of more than $25,000 into one or more of the firm's funds -- over a period as long as a year -- are eligible for discounts on the upfront sales charge. Those discounts can substantially change the results of the calculation, especially for larger investments such as those with retirement-account rollovers. In the prospectus, mutual-fund companies are required to illustrate the impact of the different share-class fees on a $10,000 investment over various time spans. They also must list the break points on the upfront sales charge. However, the illustrations aren't required to show the impact of break points, so investors can't see the advantage of one share class over another at various levels of investment. To see how the most cost-efficient share class can differ by fund company, even when using the same assumptions, consider a $10,000 investment for six years in American Express Co.'s AXP New Dimensions Fund and the Morgan Stanley Information Fund. In this case, the B shares of New Dimensions provide a slim $17 return advantage over C shares, according to calculations by Morningstar.com. A shares are the least-attractive option, returning $185 less than B shares. On the Morgan Stanley Information Fund, the C shares are the best choice over the second-best option of B shares by a wider margin of $186, while A shares remain the least- attractive option, returning $286 less than the C shares. Throw a break point into the mix and the story changes significantly. With a $100,000 investment, A shares become the better choice on both funds. In the case of the AXP fund, B shares become the second-best option, while C shares are worst, returning $1,296 less than the A shares. However, on the Morgan Stanley Information Fund, C shares are the second-best choice, while B shares are the least-attractive option, returning $2,294 less than the A shares. Part of the reason is that differences in sales charges can have a big impact. AXP funds have a 5.75% sales charge on the purchase of $10,000 in A shares. It drops to 3.75% for the $100,000 purchase. Morgan Funds have a 5.25% load on A shares that drops to 3% after that same break point. "It's hard to make a general rule of thumb among fund companies," says Peter Di Teresa of Morningstar. More on Break-Points Judith Burns WSJ 3-11 Securities regulators have found widespread evidence that brokerage firms aren't providing mutual-fund discounts to eligible customers, according to individuals familiar with the matter. Problems were "pretty much across the board," said an individual familiar with a preliminary study by the Securities and Exchange Commission, the National Association of Securities Dealers and the New York Stock Exchange.
Fund expense ratios have been rising for a while, partly due to simple mathematics. As fund assets have declined with declining stock values, the expense ratio pulls in less money to pay for firms' fixed operational costs. To compensate, funds have been boosting the ratio. The median stock fund's expense ratio, 1.46%, which covers management and back-office costs, is up 9% since 1999, according to Lipper. Current industry changes could spell more fee spikes. For starters, the tolls funds pay brokerages and fund supermarkets for shelf space are quietly - and dramatically - rising. At the same time, high-net-worth baby boomers, whose big accounts have helped subsidize the costs driven by smaller fund investors, are being lured to separately managed accounts by the promise of more personalized service. Even if the stock market does go on a tear, however, it's highly unlikely that it could bring assets and fee income back to their peak levels for several years. Call it the law of small numbers. Funds' annual fees are asset-based. The Nasdaq Composite and S&P 500 are off more than 70% and 40%, respectively, from their 2000 peaks. So many stock funds' assets have shriveled and won't go back to 2000 levels for quite some time. It takes a 100% gain to recover a 50% loss. Fees at Big Stock Funds Rose Lucchetti & McDonald WSJ 3-12 Fees at the largest stock mutual funds rose 11% between 1999 and 2001, reversing a five-year trend of declining fund charges paid by investors, according to a draft of a General Accounting Office report expected to be released Wednesday. The study found the average annual expenses paid by stock-fund shareholders rose to 0.7% of assets in 2001 from 0.63% in 1999. The average was "asset weighted," meaning it was adjusted to give the largest funds more impact on the results. For a $100,000 fund account, the 11% increase represents a $70 difference in cost yearly. Fidelity Fees Rise Scott Burns, Dallas Morning News 4-01 Fidelity Magellan fund, the mother of all mutual funds, had as much in assets as many fund companies have in all of their funds. Peaking at more than $100 billion in 1999, the fund finished the year with an expense ratio of 0.62%, literally half the expenses of the average "large blend" fund. Three years of bear market later, Magellan's assets have been cut in half. Its expense ratio has risen to 0.78% a year, a whopping 26% increase. During the same period, its large-blend peer group has increased expenses from 1.2% to 1.26%, an increase of only 5%. As a practical matter, the Magellan expense increase amounts to a surcharge on the nation's retirement plans. Fidelity is the single largest provider of retirement plans. About 8.3 million 401(k) participants and 1.8 million 403(b) and 457 plan participants have their money in Fidelity retirement plans. Retirement plans, in turn, account for 78% of Magellan fund assets. Fidelity Contrafund, the second-largest equity fund at Fidelity and the third-largest equity fund in defined-contribution plans, also saw a major increase in its expense ratio. It went from 0.65 percent to 1.03 percent, an increase of 58%. Eight of Fidelity's 10 largest equity funds increased expenses over the last three years; 19 of its 25 largest equity funds increased expenses over the last three years.
A graph of the quarterly change in business fixed investment is a textbook example of a `V-bottom'. The change went from a 15% increase in Q3-00 to a 14.5% decrease in Q2-01. Since then, the changes have become increasingly less negative until turning positive last quarter. While investment in structures, which typically lag the business cycle, fell 9.8%, spending on equipment and software rose 6.6%. It was the third consecutive quarterly gain. Someone, somewhere is investing in something. Investment is off to a strong start in Q1-03 as well. Shipments of non-defense capital goods excluding aircraft, which economists use as a proxy for equipment spending, rose 4.1% in January. The series stands an annualized 11.6% above the Q4-02 average, according to Henry Willmore, U.S. economist at Barclays Capital Group. With capital goods prices falling, Willmore says the inflation-adjusted increase in equipment and software spending may be close to 15% in Q1-03. That's probably not enough to shake perceptions that companies aren't investing. The 18.1% year- over-year increase in shipments of computers and related products is a sign of a `clear rebound on the technology side' says Joe Carson, an economist at Alliance Capital Management. The February report from the Institute for Supply Management corroborated the technology rebound. Eleven of the 20 industries surveyed, including all three technology categories, reported that new orders rose at a faster pace than in the previous month. Related article: Cap Spending Update - Gene Epstein, Barrons Foundation for Expansion in Capital Spending - D Ratajczak, AJC / Barrons
Bankrate.com's site will give you a list of about 80 reward or cash-back cards. Cardratings.com has more than 11,000 staff-written credit-card reviews, which are very helpful in pointing out the pros and cons of a card. For most consumers, the cash-back cards make the most sense. However, cash-back reward cards offer the lowest percentage rebate on your purchases. Also, read the fine print. For example, almost all the cash-back cards have a tiered system, which means the percentage you'll get back is based on your annual spending. The typical tier can be something like one for the American Express Cash Rebate Card: 0.25 percent for the first $2,000, 0.5 percent for $2,001 to $5,000, and 1.5 percent for spending above $5,000. Just the Facts Identity Theft Stats A report by TowerGroup Inc. estimates that banks lost at least $1 billion to identity thieves last year, although actual losses from identity theft are difficult to determine. False identities are used to obtain credit cards, apply for home equity loans, buy cars, and take out mortgages. In 2002, about 68,000 victims had new credit cards issued in their names, and 10,000 had home loans worth around $300 million taken out in their names. The Federal Trade Commission received 161,000 identity theft complaints, but the FBI estimates the actual number of victims to be around 500,000. The problem, according to the report, is that banks can't positively identify new customers applying for loans or credit cards. Banks downplay their losses and haven't passed costs on to consumers, so to date there's little incentive to put stricter controls in place, which would limit competitiveness and inconvenience consumers. "Nobody has taken a huge hit yet," according to Senior Analyst Christine Pratt, the author of the report. (MSNBC, 3-26) Reasons for Pessimism In a study by NPD Group, a market research company, only 14% of consumers said they plan to spend more than usual this spring; 41% will spend less. Crushing consumer debt levels may be forcing these cutbacks. Another likely culprit is continued layoffs. In a survey released on Wednesday, the Conference Board said that 62% of consumers rated the investment environment as bad, and that 65% expected no change six months from now. Fourteen percent expected investment conditions to worsen, up from 11 percent in September, and 69 percent didn't plan to invest in stocks in the next six months. In a survey of 186 finance officers last week by Financial Executives International and Duke University, 45% said they felt less optimistic. Three months earlier, only 15% said that. All these factors, said Richard Bernstein, Merrill Lynch's senior United States strategist, mean that investors should sell into the rallies that euphoria over the war may produce. (Gretchen Morgenson, NY Times 3-23) Politics & Investing "We don't expect Congress to pass much if any new legislation regulating mutual funds," wrote Tom Gallagher and Andy Laperriere of ISI Group, the Washington, D.C. group that does political analysis for the securities industry, in a recent report. "However, if Congress highlights criticisms of the industry, it will encourage regulators to be more aggressive. What's more, after three years of negative returns, one would expect downward pressure on expenses. An active Congress and SEC could help serve as a catalyst that speeds up underlying market forces." The potential losers? The brokerage firms. If mutual funds are pushed to cut costs, payments to brokers could decline. (Andrew Bary, Barrons 3-17) Earnings Expectations Preannouncements are running more negative than they normally do. Normally, the ratio of negatives to positives is 1.7-1.8 to 1. So far this quarter, that ratio is at 2.6 to 1. In the first quarter of 2002 the ratio was 1.8 to 1. So right now, it looks like this will be worst preannouncement period since the second half of 2001. Back in October, earnings for the S&P 500 companies were expected to increase by 17.4% in Q1-03. That estimate fell to 11.7% in early January. Currently it is at 7.6%, a figure that has been fairly stable for the last several weeks. One reason these numbers have held up as well as they have in the last month is that energy company earnings estimates have been skyrocketing. (Chuck Hill, director of research at Thomson First Call, NY Times 3-16) Your Monthly Bond Warning It's March 2000 all over again. But this time, the frenzied buyers aren't focusing on stocks. Instead of buying stocks without any earnings, folks are purchasing bonds with hardly any yield. Bond investors have bid up the price of 10-year Treasury notes, so that they yield just 3.57% [tying a 44-year low reached last October]. According to Vanguard Group, if interest rates climb one percentage point over the next six months, Treasury notes will lose 5.7%, even after figuring in the interest. If rates rise two points, investors will be pounded for a 12.5% loss. (Jonathan Clements, WSJ 3-12) The 'Worth' of a Retirement Day-Job Today's cosmic question: What's the best investment a retired person can make these days? Answer: Getting a day job. The largest employer in the United States is Wal-Mart, with 1.3 million "associates". Most Wal-Mart employees work fewer than 30 hours a week, don't have health insurance and earn $8 to $9 an hour. If you worked one eight-hour shift at Wal-Mart every week and earned $8 an hour, you'd gross $3,328 for the year before employment taxes, or an after-tax wage of $3,073. According to Banxquote, the national average yield on a one-year CD was 1.11%. That means you'll need to buy a CD in the amount of $276,883 to earn $3,073 in a year. According to Bloomberg News, you'll need to commit $200,876 to the two-year U.S. Treasury to earn that amount, or for a 10-year Treasury (yielding about 3.79) you would need to have $81,092. According to the most recent Federal Reserve report on consumer finances, half of all American households have a net worth of $80,700 or less. (Scott Burns, Dallas Morning News 3-9) A Financial Illusion Investors see these huge gains and conclude it is easy to score handsome stock-market profits. After all, all you need to do is pick one or two of the winners and you are assured of great returns, right? But in fact, the market's big winners are a sign that the odds are stacked against performance-hungry investors. How so? Because a minority of stocks notch outrageously large gains each year, their performance skews the stock-market average upward, so that most stocks end up lagging behind the average. Similarly, in most years, a majority of funds trail behind the average for all stock funds, because that average is skewed upward by a few funds with eye-popping gains. The implication: It may seem easy to select winning investments. But in fact, it is a financial illusion. If you try to pick market-beating stocks and stock funds, the odds suggest you will end up with investments that lag behind the market. (Jonathan Clements, WSJ 3-2) Corporate Bond Risk "Corporate bonds are more risky than ever," said Carol Levenson, director of research at Gimme Credit, an independent research service that analyzes high-grade corporate bonds for institutional investors. "The general level of credit quality is going down, and there are land mines everywhere. But until the stock market starts to worry about it, companies aren't going to worry about it." Three companies that worry Levenson: (1) ALCOA has made ill-timed acquisitions using debt financing. (2) KROGER has been buying back stock with borrowed money. (3) Seeking new revenue growth, MBNA has increased its business of making riskier, unsecured loans to consumers. (Gretchen Moregenson, NY Times 3-2) Quick Facts, Stats & Opinions There are two different kinds of call signs. There are the ones pilots carry as nicknames for years -- personal call signs. And there are the ones that are generated every few hours and used as part of the code employed on a particular mission -- radio call signs. The constant changes make it difficult for enemy intelligence agencies to inventory aircraft and to figure out how many squadrons there are and where those squadrons are operating. (Nicholas Kulish, WSJ 3-27) In the year ending Feb. 28, savings account balances swelled by $450 billion, an 18% jump, according to the latest Federal Reserve data. (Ian McDonald, WSJ 3-25) We love stocks when they go up and hate them when they go down. We've got the buy-low and sell-high idea backwards. Emboldened by the 1990s' heady gains, a record $309 billion gushed into stock funds in 2000. Over the last two calendar years, bond funds netted more than $228 billion, compared with just $4.1 billion for equity funds according to ICI. "This all boils down to one question: Will the large mass of investors ever be able to invest competently?" says William Bernstein, a financial adviser based in Bend, Ore. "The answer has always been 'No' and probably always will be." (Ian McDonald, WSJ 2-25) "People look at investing in stocks as being an all-or-nothing proposition. In fact, it should be a matter of moving in relatively small increments" says Meir Statman, a finance professor at Santa Clara University in California. Got 60% of your portfolio earmarked for stocks? No matter how bullish or how bearish you get, I wouldn't let your stock percentage rise above 70% or fall below 50%. (Jonathan Clements, WSJ 3-22) Many market pros are betting that, once the war is over, Iraq's oil fields will be in good enough shape to guarantee that global crude supplies will soon be more than ample - leading to lower fuel prices and a boost for the world economy. That, in turn, could drive optimism about corporate earnings and give investors more confidence about buying stocks. That was how markets played out after the 1991 war. (Tom Petruno, LA Times 3-21) The Corporation for Public Broadcasting reported that children under 17 spend nearly as much time using computers as watching television, with Internet use among minority and low-income children surging over the past two years. More than two-thirds of low-income households have a computer at home, compared to fewer than half two years ago. Gaps persist, however, particularly with respect to high-speed Internet access at home. (Washington Post 3-19 ) In a December 1999 report, Moody's Investors Service said the popularity of hybrid ("hybrid" because they combine features of debt and equity) preferred securities was evident from their rapid growth. It said the global market in hybrid securities shot up to $49.6 billion in 1999, from $30.9 billion in 1995. According to Principal, the U.S. market alone grew from virtually nothing in the early 1990s to more than $100 billion in 1999 and about $195 billion at the end of 2002. (Fiona Fleck, WSJ 3-17) Though it's true that this bear market is the longest and deepest since the 1930s, major indexes including the Dow, the S&P 500 and the Nasdaq composite have so far given back five to six years of their bull-market gains. That is a modest destruction of wealth compared with the 12 years of gains wiped out by the 1973-74 bear market and the 18-year giveback of the 1930s bear market. (Tom Petruno, LA Times 3-16) Morningstar reports that some 454 managers of single funds - people running funds on their own and not in teams - got whacked in 1996. That number has grown each year since, to the point where 725 single managers lost their jobs in 2002. The numbers are much bigger when you include comanagers. And it's nearly impossible to track the firings taking place at team-managed funds. 'When you have a new manager of a poor-performing fund, things normally improve,' says Thurman Smith, who runs Equity Fund Research. 'But it's not a sure bet because at funds that have never been competitive - particularly if their structure or expenses have contributed to their poor performance - things tend to stay the same or actually get worse.' (Charles Jaffe, Boston Globe 3-16) I think there is going to be a benign ending to the Saddam crisis, that the Middle East is going to get better, and that the threat of terrorism is exaggerated. To me, the U.S. economy has surprising resilience in the face of fierce headwinds. If geopolitical events go reasonably well, the unexpected event could be how strong the U.S. economy becomes in the second half of the year. The triggers would be a decline in oil prices and an end to the malaise of uncertainty and fear. After three years of bear markets, people have forgotten that things can go right. (Barton Biggs, Global Strategy, Morgan Stanley via Washington Post 3-16) Give credit to Michael Lewis of Free Market Inc., for being the only economist I know (and believe me, I follow a few) to predict that February's East Coast Storms would cause a huge decline in payroll employment. The Bureau of Labor Statistics announced Friday that employment fell 308,000 in February, following a rise of 185,000 in January. The weather's impact was especially evident in construction (down 48,000) restaurants (down 85,000), and retailing (down 92,000). The unemployment rate also ticked up to 5.8% last month from 5.7%. Adds Lewis, "I expect a major rebound next month." (Gene Epstein, Barrons 3-10) More than 37% of the stocks in S&P's 500-stock index increased in value between March 24, 2000 --- the beginning of the current bear market --- and now. That's 187 stocks that made money for shareholders, which shows it can be done in an otherwise disastrous stock market. But investing in a bear market requires an approach different from when it's bullish, and winners can seemingly be picked at random. Two keys to Bear Market investing: (1) Buy companies, not stocks and (2) Diversify, diversify, diversify. (Tom Walker, AJC 3-9) A "secular market," bullish or bearish, is a long-term trend, lasting as long as 10 to 20 years. A secular bear would be a multiyear stretch of below-average returns, with stocks trading in a volatile price range and the trend line flat at best. A "cyclical" market is shorter, typically lasting from one to three years. Several cyclical markets can occur during a secular market. There were three cyclical bears during the raging 1990s bull market. (Tom Walker, AJC 3-9) The average room rate for all American hotels dropped to $84.50 a night in 2001 from $85.54 in 2000. That was the first year-to-year decline since 1929. In 2002, the average dropped again, to $83.16. (Harriet Edleson, NY Times 3-9) Michael Driscoll of Bear Stearns recently wrote: "People are awfully cavalier about the potential for war with Iraq and the commonly held view that stocks will rally and oil prices will plunge as soon as bombs start dropping. That scenario is too pat. The only thing I know for certain is the market will do its best to screw up the most people possible." (James Glassman, Washington Post 3-9) "When truth and faith are lost," says Robert W. Smith, manager of the T. Rowe Price Growth Stock Fund (PRGFX), "you get a compression of price-to-earnings multiples. In terms of valuations, investors stop differentiating between companies with great growth prospects and those with average growth prospects. . . . This creates opportunity because you can pay average prices for superior growth companies." (James Glassman, Washington Post 3-9) Most of the bears tell us that this market lacks leadership. I contend that, not only will the low-priced stocks not collapse during this short-term bear market, but [they] are already proving to be the new market leadership. This new strength is taking place when most people are not aware of it. Many of these stocks will be the big names of tomorrow; . . . they should be bought today. (Joseph Granville, The Granville Market Letter via The Washington Post 3-9) Emerging markets are an inefficient asset class with immense opportunities for active management. Furthermore, after a long secular bear market and a depression, they appear to be the cheapest equity class by far. Returns of 9% per annum can be achieved over the next five to ten years, but it's going to require courage and willingness to venture abroad and assume more volatility. (Barton Biggs, Global Strategy, Morgan Stanley via The Washington Post 3-9) More than 40% of all cars sold in Europe have diesel engines. In France, the number is above 60%, and in Austria, 70%. (Mark Landler, NY Times 3-5) What about those who say all will be well once the conflict with Iraq is resolved? Well, these people are delusional. While the current stock market is not being helped by the war uncertainty, the underlying weakness has little to do with Iraq. Stocks are declining because large professional investors are unwilling to "buy into" the idea that 1990s-style growth is forthcoming. Valuations are shrinking as a result. This will happen with or without Saddam Hussein. (Terry Bedford, MSN Money 3-5) The stock market is ignoring decent fundamentals. War fears are overwhelming good value in several sectors, including utilities. This raises the odds of a sharp rally whenever tensions ease. . . . Meanwhile, the economy and profits are arguably in better shape than during the previous two times the S&P 500 was testing 800, providing some valuation support. (U.S. Equity Sector Strategy, BCA Research via Wash Post 3-2) The average price of a generic prescription drug in 2002 rose 15%, to $14.70 from $12.79, from the corresponding period in 2001, according to IMS Health, a pharmaceutical information company. Prices of all brand-name drugs, including those with no generic competition, rose 8.8%, on average, to $77.02 from $70.79, IMS said. (NY Times via Chicago Tribune 1-5) Tech Tips & News Online Coupons Consumers downloaded about 242 million coupons last year, 111% more than in 2001, according to CMS, a coupon management company. Of those, 7.6 million were redeemed, which is more than a fourfold increase from 2001. But online coupons are still a tiny share of the coupon market. More than 335 billion paper coupons were distributed last year, with 3.7 billion being redeemed for a total of $3.1 billion. One company that has used online coupons extensively is Colgate-Palmolive unit Hill's Pet Nutrition, which makes the Science Diet line of pet foods. According to Alexis Nahama, Internet marketing manager for Hill's, the company has offered millions of coupons to consumers in the last year through e-mail messages as well as on the coupon site SmartSource.com and on the sites of the company's pet food brands. When the coupon is downloaded, users give Hill's their name, e-mail address and other information. The coupon's code is tied to each individual user, so when it is redeemed, the company knows who redeemed it and where. Hill's also knows when a user or retailer has copied and used the same coupon more than once, and can deny future access to coupons. SmartSource.com works similarly to many other online coupon sites. Users register with the site, including details about family members' ages, gender and pets, along with the names of stores where they shop. After that, users have free access to 30 to 35 coupons on a given day, worth about $14. Manufacturers pay SmartSource an undisclosed fee each time a consumer redeems a coupon. Other coupon providers include Coupons Inc, CoolSavings and E-centives. (Bob Tedeschi, NY Times 3-17) Computer Maintenance Plan Bill Husted, AJC 3-16 Dust and heat are computer killers, practically mass murderers. Dust hurts computers two ways. If it's thick enough, it can clog cooling vents and form an insulating blanket that causes your PC to run hot. In some cases, dust particles can conduct electricity and cause a short circuit on the circuit board. Since dust is heavier than air, it tends to settle on the floor. That's why it's a really bad idea to set your PC down there. My strong recommendation is that you keep your PC on the desk. It's better to save the PC than desktop space. But no matter where your PC sits, it eventually will get a coating of dust inside. To remove that dust, you're going to have to remove the cover. Once you open the case, you can use a can of compressed air to blow the dust off the circuit boards. Then check the exhaust fan at the rear of the machine to make sure it's not clogged with dust, dirt or cat hair. Before you put the top back on, push all accessory cards firmly into their slots - that would include the video card, sound card, network card - to make sure they are firmly seated. If any of these cards seem loose, then remove the single screw that holds them in place and reseat them. Since heat is such a killer, also make sure that there are at least four inches of space around your PC. That lets air flow. Also avoid piling stuff on top of the monitor. A dirty mouse can be another source of trouble. Unless you have an optical mouse, take your mouse apart and clean the rollers and the rubber ball itself. The best way is to take a cotton swab soaked in alcohol. Finally, squirt a little glass cleaner [Windex] on a soft cloth (not on the screen of the monitor) and clean the glass. That's my maintenance plan. As far as how often you need to do it, use common sense. If you find that your computer gets incredibly dusty, clean it more often. If things looked great inside, clean it less often. But most of us shouldn't need to clean the inside of the computer case more than a couple of times a year. As far as the monitor screen and the mouse, once a month or so is fine. I once included keyboards in my maintenance plan, but now that you can find a good keyboard for $30 or so, I think it's smarter to just use the thing until it gets balky and then replace it. Spelling & Grammer Checkers Add Errors Wired News, 3-14 In a study conducted at the University of Pittsburgh, computer spelling and grammar checkers actually increased the number of errors for most students. The study looked at the performance of two groups of students: one with relatively high SAT verbal scores and one with relatively lower scores. The group with lower SAT scores made an average of 12.3 mistakes without the spelling and grammar tools turned on and 17 mistakes with the tools. The students with higher SAT scores made an average of 5 mistakes without the tools and an average of 16 errors with the tools. According to Dennis Galletta, a professor of information systems at the Katz Business School, the problem is one of behavior rather than of technology. Some students, he said, trust the software too much. Richard Stern, a speech-recognition technology researcher at Carnegie Mellon University, said that when computers attempt to identify proper grammar, the computer has to make some guesses. It becomes "a percentage game," he said. If you'd like to know when you, or someone else who uses your computer, last visited a Favorite site, you can easily find out in Microsoft Internet Explorer 6. All you have to do is choose Favorites|Organize Favorites. When the Organize Favorites window opens, click the URL of interest. In the left side of the window, you'll see the date and time of the last visit. (Sue Whitehouse, Emazin 3-21) To switch to kiosk mode in IE6 (which hides the tool bars), simply press F11. Now, right-click the toolbar and choose Auto-Hide. Move the mouse cursor away from the top of the window and the toolbar will disappear. To use the toolbar, just move the mouse cursor to the top of the IE window. To return to standard view, press F11 again. You can also right-click the toolbar and select Auto-Hide again to recover the default toolbar action. (Sue Whitehouse, Emazing 3-18) WinBZip2 is a small freeware file compression utility. WinBZip2 isn't meant to replace full-featured file compression programs, but it does come in very handy when you need to only compress a single file - and get a good compression level in the process. You can get a copy of WinBZip2 at www.irnis.net. (Sue Whitehouse, Emazing 2-28) Home Page Previous Factoid Top Sites
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