Michael Jackson dies, 1958-2009: The Talent and the Tragedy

The tragedy of Michael Jackson's death at age 50, reportedly from cardiac arrest, pales in comparison to the tragedy of his life. To understand all that Jackson had and lost requires wiping away three decades of plastic surgeries that deformed him, erratic behavior that made his name synonymous with the warping powers of fame, and a 2005 trial for sexually abusing a child that, even though he was spared of any finding of wrongdoing, made him a pariah to all but the most brainwashed of fans. (See pictures and listen to: "(Sort of) Celebrating Michael Jackson's 50th Birthday")

But if you can forgive or forget all that, underneath was one of the most talented entertainers of the 20th century. Quincy Jones who produced Jackson's quintessential solo albums was devastated by the news of his passing. "I've lost my little brother today," Jones said in a statement, "part of my soul has gone with him." Said Jones: "Divinity brought our souls together... and allowed us to do what we were able to throughout the 80's. To this day, the music we created together on Off The Wall, Thriller and Bad is played in every corner of the world and the reason for that is because he had it all...." (TIME reports: Mourning Michael on Twitter)

Jackson was born in 1958, the seventh of nine Jackson children, and before he reached age six he had joined his brothers in the Jackson Five. By the age of eight he had taken over lead singing duties with brother Jermaine, but there was no question who was the star of the group. Little Michael was the best dancer and singer of the bunch, but he also had the mysterious thing that record bosses and studio chiefs crave: star power. Michael appeared to be his best and most interesting self when everyone in the world was watching. (See the All-TIME 100 Albums.)

As Michael aged into adolescence the Jackson Five, renamed The Jacksons after their departure from Motown Records, inevitably lost some of its charm. A solo career followed, and after a steady stream of middling hits that attempted to milk the last bit of innocence from Jackson's voice, Jackson had the good fortune to hook up with Quincy Jones while filming The Wiz. The two shared a vision for what Jackson's career as an adult might be and on 1979's Off The Wall they executed it beyond even Jackson's dreams. With songwriting help from Paul McCartney and Stevie Wonder, Off the Wall spun off four Top 10 hits and two number-ones - "Don't Stop 'Til You Get Enough" and "Rock with You." (Read TIME's 1984 cover story on Michael Jackson)

At 22, Jackson not only became one of the most admired pop musicians in the world, but one of the globe's most famous people. And his fame only increased with the 1981 release of Thriller, which was to become the best-selling album of all-time (until it was eclipsed in the late '90s by The Eagles Greatest Hits, 1971-1975.) Seven of the record's nine tracks made the Top 10, and the Quincy Jones-produced hooks remain awe-inspiring. In a cover story about Jackson and Thriller, TIME described him as "a one-man rescue team for the music business. A songwriter who sets the beat for a decade. A dancer with the fanciest feet on the street. A singer who cuts across all boundaries of taste and style and color too."

While Jackson had few ambitions at the time beyond global domination, it's worth noting that "The Girl is Mine" established interracial love as a pop music theme and "Beat It" (with Eddie Van Halen's guitar solo) bridged arena rock and soul four years before Run DMC met Aerosmith. On March 25, 1983, Jackson may have reached the very peak of his fame when he unveiled his signature dance move, the moonwalk, live on the "Motown 25: Yesterday, Today, Forever" television special.

The years after Thriller, however, were marked by a slow descent into what was first dismissible as eccentricity. Jackson attended the Grammys on a triple date with Emmanuel Lewis and Madonna, purchased a chimpanzee named Bubbles and was diagnosed with vitiligo, a condition that he said was responsible for the steady lightening of his skin. But his songwriting genius remained undeniable. With Lionel Richie Jackson, he co-wrote "We Are the World," a 1985 charity single that raised an estimated $50 million for famine relief in Africa and ushered in the era of celebrity philanthropy.

After the release of 1987's Bad, a disappointing follow-up to Thriller, Jackson purchased the 2,800-acre Neverland Ranch in California, and his public weirdness became almost aggressive. In his biography, Moonwalk, Jackson wrote of childhood abuse at the hands of his father and multiple plastic surgeries, subjects he returned to in a 1993 interview with Oprah Winfrey that was one of the most watched non-sports programs in American history.

Shortly after, Jackson was accused of child sexual abuse in a suit brought by Evan Chandler on behalf of his then 13-year-old son Jordan. Chandler told a psychiatrist and police that he and Jackson had engaged in sexual acts that included oral sex; the boy gave a detailed description of Jackson's genitals. The case was settled out of court for a reported $22 million, but the strain led Jackson to begin taking painkillers. Eventually he became addicted.

To counteract the stigma that came with the allegations of pedophilia, Jackson married Lisa Marie Presley in a relationship Elvis' only daughter later dismissed as a sham. Two years later they divorced.

Given the tumult in his personal life, it's no surprise that the 1990s were a barren period for Jackson creatively. In 2001 he managed to pull himself together enough to release Invincible and stage two concerts celebrating his 30th anniversary as a performer at New York's Madison Square Garden. The shows, held a few days before Sept. 11, were a capsule of all Jackson had become. There were bizarre cameos from friends Marlon Brando, Liza Minnelli and Eliabeth Taylor. Macaulay Culkin sat next to Jackson in a royal box. But several hours after the proceedings began, when Jackson finally took the stage, all the years of Wacko Jacko melted away. Then in his early 40s, he could still dance and sing better than almost anyone in the world, and he still had star power. The Jackson on display in those concerts was one the world admired and the one that will be missed.

Prototype Nokia phone recharges without wires

Pardon the cliche, but it's one of the holiest of Holy Grails of technology: Wireless power. And while early lab experiments have been able to "beam" electricity a few feet to power a light bulb, the day when our laptops and cell phones can charge without having to plug them in to a wall socket still seems decades in the future.

Nokia, however, has taken another baby step in that direction with the invention of a cell phone that recharges itself using a unique system: It harvests ambient radio waves from the air, and turns that energy into usable power. Enough, at least, to keep a cell phone from running out of juice.

While "traditional" (if there is such a thing) wireless power systems are specifically designed with a transmitter and receiver in mind, Nokia's system isn't finicky about where it gets its wireless waves. TV, radio, other mobile phone systems -- all of this stuff just bounces around the air and most of it is wasted, absorbed into the environment or scattered into the ether. Nokia picks up all the bits and pieces of these waves and uses the collected electromagnetic energy to create electrical current, then uses that to recharge the phone's battery. A huge range of frequencies can be utilized by the system (there's no other way, really, as the energy in any given wave is infinitesimal). It's the same idea that Tesla was exploring 100 years ago, just on a tiny scale.

Mind you, harvesting ambient electromagnetic energy is never going to offer enough electricity to power your whole house or office, but it just might be enough to keep a cell phone alive and kicking. Currently Nokia is able to harvest all of 5 milliwatts from the air; the goal is to increase that to 20 milliwatts in the short term and 50 milliwatts down the line. That wouldn't be enough to keep the phone alive during an active call, but would be enough to slowly recharge the cell phone battery while it's in standby mode, theoretically offering infinite power -- provided you're not stuck deep underground where radio waves can't penetrate.

Nokia says it hopes to commercialize the technology in three to five years.

Witnesses to testify in trial of former AIG CEO

NEW YORK – Witnesses begin testifying Tuesday in the civil trial of American International Group Inc.'s former top executive, accused of plundering an AIG retirement program of billions of dollars.

Attorney Theodore Wells told jurors Monday in Manhattan that former Chief Executive Officer Maurice "Hank" Greenberg improperly took $4.3 billion in stock from the company in 2005, after he was ousted by the company amid investigations of accounting irregularities.

"Hank Greenberg was mad. He was angry," Wells said in U.S. District Court of the emotional state of the man who, over a 35-year-career, built AIG from a small company into the world's largest insurance provider. He said the saga is a story of "anger, betrayal and cover-up."

Wells said that Greenberg, within weeks of being forced out in mid-2005, gave the go-ahead for tens of millions of shares to be sold from a trust fund. The fund was set up decades ago to provide incentive bonuses to a select group of AIG management and highly compensated employees that they would receive upon their retirement.

Wells showed the jury several clips of Greenberg speaking on videotape about the responsibilities of the trust fund. He called it Greenberg's "videotaped confession."

Wells asked the jury to award AIG $4.276 billion and 185 million AIG shares.

Greenberg, 84, has contended through his lawyers that he had the right to sell the shares because they were owned by Starr International, a privately held company he controlled.

Greenberg's lawyer, David Boies, told the jury in his opening statement that the shares sold by his client did not belong to AIG.

"I disagree with a great many things that Mr. Wells said," Boies told the jury. He said a study of the documents in the case would prove that the shares sold by Greenberg did not belong to AIG.

"Look in this case not to what people said after this lawsuit started," Boies said. "Look to what they said and did and wrote before the lawsuit started."

Starr International was named after Cornelius Vander Starr, who created a worldwide network of insurance companies in the early 1900s.

AIG maintains that Starr and Greenberg, his protege and successor, decided in the late 1960s to organize the various companies under one holding company, AIG.

Starr International remained a private company and its shareholders decided in 1970 that the amount that its shares of AIG were worth above book value of about $110 million should be used to compensate AIG employees, AIG has said.

The embattled insurer is trying to reclaim the money from Starr it says was wrongly pocketed through stock sales by Greenberg.

The trial relates to events that occurred long before AIG found itself under attack earlier this year over its bonus program.

The company was roundly criticized after it accepted $182 billion in federal aid and then paid out $165 million in bonuses to employees, including traders in the financial products unit that nearly caused the company to collapse.

Before the jury was chosen Monday, U.S. District Judge Jed S. Rakoff said evidence in the trial could not include information about the government bailout. He also said the entire trial will last no longer than a month. Greenberg is among one of several witnesses expected to take the stand this week.

The trial features two legal heavyweights.

Boies argued on behalf of Democratic presidential candidate Al Gore before the U.S. Supreme Court during the disputed presidential vote in 2000. Wells was on the team of defense lawyers in 2007 for former White House aide I. Lewis "Scooter" Libby, who was convicted of perjury, obstruction and lying to the FBI about his role in leaking the name of a CIA operative to a reporter.

Boeing shut out of orders race at Paris Air Show

LE BOURGET, France – Worries about passenger traffic, credit markets, the global economy and the unexplained crash of Air France Flight 447 have marred the atmosphere at the world's first and largest air show.

While defiant Boeing Co. executives said the overall prospects were robust, the Chicago-based aviation giant reported no new orders at the Paris Air Show on Monday. Airbus announced just one, from Qatar Airways, for 24 jets from the A320 family worth $1.9 billion.

At the opening day of the industry's last major show, in Farnborough, England, a year ago, airlines from oil-rich Middle Eastern countries booked orders for about 150 planes worth more than $25 billion.

Gulf-based carriers were among the few pulling out their checkbooks this year.

Qatar Airways' head, Akbar al-Baker, announced firm orders for 20 single-aisle A320s and confirmed a commitment for four A321 jets announced last year at the Farnborough Air Show.

He said the deal announced Monday is worth $1.9 billion, which is about the same as the list price. Airlines, however, usually negotiate steep discounts to catalog prices, particularly during grim economic times.

Meanwhile, Rolls-Royce PLC signed a $1.5 billion order with Gulf Air to supply engines for the Bahrain-based airline's new Airbus A330 long-haul aircraft. The British aircraft engine manufacturer will supply Trent 700EP engines to power 20 Airbus A330 aircraft, with deliveries beginning in 2012.

Russian planemaker Sukhoi, peddling its SuperJet 100 at the air show, netted promised orders from Hungary's Malev for 30 jets worth up to $1 billion. But it was a commercial sleight of hand, since Malev was bought by Russian state-owned bank Vnesheconombank in a high-profile deal earlier this year.

The SuperJet 100, seen as key to Russia's attempts to revitalize its civilian aircraft industry, is designed to fly both regional and medium-haul routes. SuperJet International is a joint venture between Italy's Alenia Aeronautica and Russia's Sukhoi Civil Aircraft.

Canada's Bombardier announced it had won, confirmed or converted a total of 35 firm orders for its CRJ1000 NextGen jets by Spanish regional carrier Air Nostrum, in deals worth a total of $1.75 billion.

Boeing warned last week not to expect a flurry of orders. Its defense business is hoping to make up for lagging commercial sales — and weakening U.S. military sales — through rising international exports.

Boeing Integrated Defense Systems (IDS) announced on Monday the launch of a new Unmanned Airborne Systems division, which will group all the company's drone projects to better compete for military contracts.

The formation of the new division reflects the growing interest by various air forces in unmanned aerial vehicles for everything from high-altitude surveillance and coastal patrols to tracking natural disasters.

Boeing's commercial aircraft chief sought Monday to strike a positive tone.

"At this point it appears to us that the economic conditions have bottomed," Scott Carson, president and chief executive of Boeing's commercial aircraft division, said Monday. "If they have bottomed and a recovery comes next year, I think we have a shot at getting through."

Boeing recently cut its outlook for the commercial aircraft market for the first time in at least a decade, which Carson said was mainly driven by the drop in freight traffic due to the global recession.

Carson said long-term prospects for the industry "are as robust as they have ever been."

However, he disappointed hopeful attendees who thought Boeing might spring a surprise first flight of the delayed 787 jetliner during the show. "The airplane will fly when it is completely ready," he said.

So far this year, Boeing — which is cutting 10,000 jobs — has taken orders for 73 planes, but with cancellations of 66, the net order intake is only 7 jets.

Airbus' order tally advanced to 56 on Monday after the Qatar Airways order. After cancellations, net orders to date total 35.

Both planemakers are cushioned by order backlogs of around 3,500 planes.

Already reeling from the global recession, the industry gathering near where Air France Flight 447 should have landed only two weeks ago has been shaken by the still-unexplained crash. Investigators have only two more weeks to find the flight data and cockpit voice recorders from the Airbus A330 jet before the signals emitted by small beacons on the so-called black boxes start to fade. Without them, the cause of the May 31 accident may never be fully known.

"We are supporting the investigation as much as we can and we very much hope that the recorders will be found soon, so that we find out what really happened," Airbus CEO Tom Enders said Monday.

He defended the A330's record as "very, very impressive." He said they have "more than 16 million flight hours, more than 3 million flights and this is so far one of the safest commercial aircraft built."

The Paris Air Show is marking its 100th anniversary. It opened to industry on Monday, and then to the public Friday to Sunday.

Asian markets tumble on knock to recovery hopes

BANGKOK – Asian stock markets tumbled Tuesday, with Japan and Hong Kong benchmarks down about 3 percent, after weak U.S. manufacturing figures knocked confidence in a quick recovery from global recession.

Oil retreating from eight-month highs dragged commodity stocks lower in Asia while top manufacturers like Japanese automaker Toyota fell on the weak data. The dollar weakened after Russian President Dmitry Medvedev told a regional summit that the world needs new reserve currencies.

Indexes in big Asian markets such as Japan and Hong Kong have gained 40 percent or more since early March, powered by ample liquidity and signs the economic slump has leveled out.

But as the rally gathered pace, it became increasingly vulnerable to any evidence that a recovery wasn't unfolding as quickly as investors hoped.

Wall Street faltered overnight on one such sign, with the Dow Jones industrials posting its biggest drop in nearly a month.

A monthly index of manufacturing conditions around the New York region fell to minus 9.4 in June from minus 4.6 the previous month, underscoring that any recovery in the world's largest economy — a critical market for Asian exporters — will be tepid and slow.

"All the global stock markets have been overbought so the manufacturing data was a trigger, an excuse to sell and take some profit," said Peter Lai, investment manager at DBS Vickers in Hong Kong.

"I don't believe the economy will recover so fast," he said. "China and Asia will be the pioneers of the recovery but I don't see it happening until the first or second quarter of 2010."

Japan's Nikkei 225 stock average shed 286.79 points, or 2.9 percent, to 9,752.88 even as the central bank said the country's economic conditions "have begun to stop worsening" — an improvement from its previous assessment that the economy had been "deteriorating." The Bank of Japan also left its key lending rate unchanged at 0.1 percent as expected.

Hong Kong's Hang Seng, meanwhile, slid 545.62, or 3 percent, to 17,953.34 and South Korea's Kospi dropped 0.9 percent to 1,399.15. Elsewhere, Australia's index lost 1.7 percent, Singapore retreated 1.9 percent and the Philippine market dived 3.8 percent.

Oil's decline hit commodity stocks with Chinese offshore oil producer CNOOC plunging 5.5 percent in Hong Kong and BHP Billiton, the world's biggest mining company, off 1.5 percent in Sydney trade.

Benchmark crude for July delivery fell 11 cents to $70.51 a barrel in Asia trade, taking a breather from a three-month rally that has doubled the price of oil. Last week, it rose above $73.

Automakers were hit by the U.S. evidence that manufacturing continues to wilt amid anemic consumer demand. Toyota Motor Corp., the world's biggest automaker, fell 3.4 percent, and Honda Motor Co. retreated 4.1 percent.

In the U.S. on Monday, the Dow Jones industrial average tumbled 187.13, or 2.1 percent, to 8,612.13, returning to a loss for the year. The broader Standard & Poor's 500 index dropped 2.4 percent to 923.72, and the Nasdaq composite index sank 2.3 percent, to 1,816.38.

U.S. stock index futures pointed to modest declines Tuesday on Wall Street. Dow futures were down 13 points, or 0.2 percent, to 8,606, while S&P 500 futures slipped 2.4, or 0.3 percent, at 917.

In currencies, the dollar's recent strength faded, falling to 96.27 yen from 97.63 yen. The euro rose to $1.3835 from 1.3776.

Sri Lanka won't beg for aid: central bank chief

COLOMBO (AFP) – War ravaged Sri Lanka will not beg for foreign aid even as a 1.9 billion dollar bailout from the IMF has been delayed, the island's central bank chief said on Friday.

"We will never go after donors or lending agencies with a begging bowl. We are capable of standing on our own and raise funds through capital markets," Central Bank of Sri Lanka Governor, Nivard Cabraal, told AFP.

Sri Lanka tapped the International Monetary Fund in March in a bid to stave off its first balance of payment deficit in four years after the island's foreign currency reserves fell to around six weeks worth of imports.

The loan has been put off due to political pressure from the US, Britain and other Western nations over Colombo's handling of the final stages of the battle against Tamil separatists and charges that thousands of civilians were killed.

The United States is the main shareholder in the IMF and its approval is key to the release of the money. But the US has supported calls for a probe into alleged war crimes committed by Sri Lankan government troops.

Despite pressure from the West, Cabraal said he was confident the rescue package would be approved.

The island's 37-billion-dollar economy was caught up in the global economic crisis last year, with exports of garments and tea affected and foreign remittances slowed.

"We have dignity and our own identity in the international community. Sri Lanka does not want to go after anyone for aid with bended knees," Cabraal said.

He added that foreign reserves have picked up in the past several weeks, with money coming from aid flows -- to meet the humanitarian needs of nearly 300,000 displaced people in the north -- remittances and foreign investments.

The central bank was also negotiating a 500 million dollar loan from Libya and another 500 million dollars from an unnamed "friendly country" to help with post-war reconstruction, he said.

"Little by little, the urgency of the IMF loan is easing. I am not saying that we don't need it. The threat of a downturn is receding and Sri Lanka is getting some inflows after the end of the war," Cabraal said.

"The future scenario is very comforting to our foreign exchange situation," he said.

The central bank plans to revise upwards the island's economic forecast for 2009 to between four to five percent, from 2.5 percent to 3.0 percent announced earlier this year.

Sri Lanka's economy posted 6.0 percent growth in 2008, down from 6.8 percent in 2007.

"For a very long time, every time someone spoke about Sri Lanka's economy, they responded saying if not for this war things would be better. Now the war is over and we have a tremendous scope for economic development," Cabraal said.

BlackRock to buy BGI, becomes top asset manager

BOSTON (Reuters) – BlackRock Inc. (BLK.N) said on Thursday it will buy British bank Barclays Plc's (BARC.L) investment arm BGI for $13.5 billion in a blockbuster deal that will create the world's biggest asset manager.

For BlackRock, a 21-year old company which relied heavily on acquisitions to grow from a one-room bond investment firm into the largest publicly traded U.S. money manager, the deal will more than double assets to roughly $2.7 trillion.

It will also give New York-based BlackRock, well-known for working with governments and institutional clients, access to retail investors and the hugely popular exchange traded funds San Francisco-based Barclays Global Investors offers.

BGI, which has operations in 15 countries and ranks as Europe's largest hedge fund manager, will help expand BlackRock's reach around the world and into new products spanning actively and passively managed portfolios.

"This gives BlackRock a global footprint which is a substantial thing to have in these markets," said Geoff Bobroff, who advises mutual fund companies as president of Bobroff Consulting Inc.

For Barclays the deal will strengthen its balance sheet after the bank refused aid from the British government that some of its rivals accepted as the global financial crisis engulfed the industry.

BlackRock will pay $6.6 billion in cash and the rest in stock to acquire BGI and Barclays' iShares unit, which had been promised to private equity firm CVC Capital Partners for $4.4 billion in April.

Barclays was allowed to keep shopping for a better deal until the middle of June and will owe CVC a $175 million break-up fee if it sells iShares to another bidder. CVC has until next week to come up with a counter offer.

TRANSFORMATIONAL DEAL

"This is a transformational transaction" for the investment management industry Laurence Fink, BlackRock's chief executive officer, said on a hastily arranged conference call late on Thursday.

Fink said BlackRock has received commitments from a global network of institutional investors and clients to purchase 19.9 million shares at the closing of the transaction for a total of $2.8 billion. He would not disclose the investors.

The combined companies' market capitalization will be roughly $34 billion, Fink said.

BlackRock's share price, which has climbed 36 percent since January, shot up 11.5 percent this week to close at $182.60 on Thursday as speculation about a possible deal heated up. Bank of New York Mellon (BK.N) was also said to have been interested in buying BGI, but several people briefed on the deal said the company's more tepid stock price rise hurt its chances.

Together BlackRock and BGI -- or BlackRock Global Investors as the new company will be called -- will be the industry's single biggest player, zooming past rivals State Street Corp (STT.N), which manages $1.4 trillion, and Fidelity Investments, which oversees $1.25 trillion. The company will also outpace PIMCO, its chief fixed-income rival, which is building up a presence in exchange traded funds.

The deal also further shakes up an already battered money management industry where firms lost billions in assets and thousands of jobs during the financial crisis by eliminating a possible bidder for other firms that are up for sale.

BlackRock had expressed interest in Columbia Management, the investment management arm at Bank of America (BAC.N), which holds a stake in BlackRock, analysts have said.

Barclays will own a roughly 20 percent stake in BlackRock and expects a net gain on sale of $8.8 billion, which it will use to shore up its capital.

FINK SIGNATURE

To outsiders, this mega-deal carries the signature of Fink, who co-founded BlackRock and has grown the company through a series of acquisitions including an $8.6 billion deal to buy Merrill Lynch's asset management operations in 2006.

Known for sticking to routines like arriving at the office by 6 a.m. and having lunch at a local Italian restaurant, Fink had interviewed to head Merrill Lynch in 2007. Instead he stayed put and his company survived the financial crisis largely unscathed while others suffered.

Now he will have to marry the two distinctly different cultures of BlackRock and BGI. "You'll have bookends on the east and the west coasts," Bobroff said, adding "It has been Fink's style to put everything under one roof but that won't make sense anymore."

Barclays president Robert Diamond will receive a about $36 million for his shares and options in BGI and will sit on the new company's board of directors.

Barclays Capital and Lazard were the British lender's financial advisers, while JPMorgan Cazenove acted as broker and sponsor. Clifford Chance LLP and Sullivan & Cromwell LLP provided legal advise.

BlackRock was advised by Citigroup and Credit Suisse, while Bank of America Merrill Lynch, Morgan Stanley and Perella Weinberg Partners provided additional financial advisory support. Skadden, Arps, Slate, Meagher & Flom served as legal counsel.

Asian shares advance; momentum seen waning

HONG KONG (Reuters) – Asian shares marched toward new highs for the year on Friday as stronger-than-expected Chinese industrial output data and a rise in U.S. retail sales fueled hopes that the worst was over for the global economy.

The safe-haven dollar was largely unchanged after Thursday's falls, but oil prices slipped below $73 following a three-day rally that brought levels to their highest since mid-October.

The strong shift toward riskier assets over the past few months has been anchored by the improving global economic prospects, especially in the United States and China.

The momentum of that shift is slowing though, and wary investors will need more evidence of an actual recovery in the global economy, analysts said.

"The market probably ran a bit too hard over the past two weeks. Consumer sentiment has improved but some of the economic challenges still remain," said Lucinda Chan, division director with Macquarie Equities in Australia.

The MSCI index of Asia-Pacific stocks outside Japan (.MIAPJ0000PUS) rose 0.6 percent as of 0240 GMT, just under a 2009 high hit last week that was its best level since late September.

The index has surged some 66 percent from its March bear market low, but struggled over the last two weeks as investors worried demand was still too weak and feared higher borrowing costs for consumers and businesses may hold back a U.S. recovery.

Japan's Nikkei average (.N225) rose 1 percent after powering to its highest level since Oct 7, taking its gains to more than 40 percent since early March.

The levels indicate in part a return to normalcy nine months after the collapse of Lehman Brothers in mid-September sent global financial markets into a nosedive.

Data on Friday showed China's annual industrial output growth rebounded by a stronger-than-expected 8.9 percent in May, in line with Chinese media articles on Wednesday that had reported the data ahead of the official release.

The improving prospects for China comes as reports on Thursday showed U.S. retail sales rose in May for the first time in three months, while the number of workers filing new claims for jobless benefits last week fell to the lowest level since January.

A fall in benchmark U.S. Treasury yields following a well-received auction of 30-year notes also helped support broader sentiment, easing concerns about rising borrowing costs. Interest rates on many loans and mortgages are benchmarked to government bond yields.

Hong Kong's main index (.HSI) advanced more than 1 percent, but gains were smaller in Shanghai (.SSEC), as well as in South Korea (.KS11) and Australia (.AXJO).

Among individual gainers, OZ Minerals (OZL.AX) surged 13.5 percent in its resumption of trade after shareholders of the debt-laden miner on Thursday approved a sale of most of the company's assets to China's state-owned MinMetals for about $1.4 billion.

But some of the gains in resources shares over the past couple of sessions that had fueled gains in Asian shares faltered along with the decline in oil prices.

RECOVERY PROSPECTS KEY

With investors increasingly confident that the global economy is at or near a bottom, the debate has shifted toward how any recovery would take shape amid contradictory signals and conflicting forecasts.

The International Monetary Fund has raised its global growth estimates for 2010 to 2.4 percent from a forecast of 1.9 percent made in April, a G8 source who has seen the latest figures told Reuters.

The organization also confirmed its forecast for a 1.3 percent contraction this year, making it more optimistic than World Bank President Robert Zoellick, who on Thursday said the world economy would shrink by nearly 3 percent this year, worse than its previous estimate.

In yet another view, the International Energy Agency said on Thursday, world oil demand will contract by less than previously expected in 2009.

The oil forecast helped send U.S. crude to an intraday high of $73.23 on Thursday that marked the highest since October 21, though oil prices had fallen 28 cents to $72.41 by Asian trade on Friday as some investors locked in profits.

Markets are divided over what to make of the recent spurt in oil prices. Some traders believe it reflects stronger business activity, reinforcing the recovery theme, while others worry that a spike in fuel prices could slow or derail a rebound from the worst global economic crisis since the Great Depression.

The dollar remained largely flat after its falls on Thursday with the dollar index (.DXY), a gauge of the greenback's performance against six other major currencies, unchanged at 79.531.

World airlines seen losing $9 billion this year

KUALA LUMPUR, Malaysia – The world's airlines will collectively lose $9 billion this year — nearly double the previous projections — and face a slow recovery as the economic crisis saps air travel and cargo demand, an industry body warned Monday.

The International Air Transport Association, which represents 230 airlines worldwide, increased its loss estimate from the $4.7 billion it forecast in March, reflecting a "rapidly deteriorating revenue environment."

Although there has been growing signs of a bottoming out of the recession, IATA said the industry was severely hit in the first quarter with 50 major airlines reporting losses of more than $3 billion. Weak consumer confidence, high business inventories and rising oil prices pose headwinds for future recovery, the association said during a two-day global aviation conference in Kuala Lumpur.

Revenues are expected to decline by $80 billion — an unprecedented 15 percent from a year ago — to $448 billion this year, and the weakness will persist into 2010, it said.

"There is no modern precedent for today's economic meltdown. The ground has shifted. Our industry has been shaken. This is the most difficult situation that the industry has faced," said IATA Chief Executive Giovanni Bisignani. The Geneva-based association also revised its estimated loss for last year to $10.4 billion from $8.5 billion previously.

It said passenger traffic for 2009 is expected to contract by 8 percent from a year ago to 2.06 billion travelers. Cargo demand will decline by 17 percent and some 100,000 jobs worldwide are at risk, it said.

The association expects the industry fuel bill to shrink by $59 billion, or 36 percent, to $106 billion this year, accounting for 23 percent of operating costs with an average oil price of $56 a barrel. But crude oil prices have rallied in recent weeks, breaching the $70 a barrel level on Friday on hopes of economic recovery.

Bisignani urged governments to avoid protectionist policies and reiterated his call for more liberalization such as the lifting of restrictions on routes and cooperation between airlines to bolster the global airline industry.

"It would be a cheap and effective stimulus...liberalizing key routes today would create 24 million jobs and $490 billion in economic activity," he said.

Over the next three years, he said about 4,000 aircraft are scheduled to be delivered. This year alone, airlines are expected to spend about $25 billion to take delivery of more than 800 Western-built jets, draining cash for a second straight year.

"Aircraft ordered in good times are being delivered in recession," Bisignani said. "Finding customers to fill them profitably will be a challenge."

IATA said carriers in all regions were expected to report losses, with Asia-Pacific to be the hardest hit amid a sharp slowdown in its three key markets — Japan, China and India. The region's carriers are expected to post losses of $3.3 billion, worse than the previous forecast of $1.7 billion but better than the $3.9 billion losses last year.

North American carriers are expected to lose $1 billion, far better than its $5.1 billion losses in 2008, thanks to early capacity cuts and limited hedging by U.S. airlines.

Despite strong traffic, Middle East carriers will see losses deepen to $1.5 billion as the region's intercontinental hubs are vulnerable to recessionary impacts in Europe and Asia.

A collapse for demand in premium services in all major markets will see European airlines lose $1.8 billion. Latin American carriers are expected to lose $900 million and African airlines $500 million.

World Bank sees 3.0% global contraction

WASHINGTON (AFP) - – The World Bank said Thursday the global economy is set to contract some 3.0 percent this year, sharper than previously estimated, urging more aid for developing countries amid the spreading crisis.

The latest growth estimate marked a significant revision to the bank's prior estimate of a 1.75 percent contraction in late March and came ahead of a two-day meeting of Group of Eight (G8) finance chiefs that opens Friday in Lecce, Italy.

"Financial markets seem to have broken the fall over past months but there are clear fragilities, and risks remain," World Bank president Robert Zoellick said in a conference call with reporters.

"The developed economies seem to be contracting at a slower pace but the effects of the global economic downturn are rippling through the world and still very much hurting developing countries," he said.

The World Bank will be revising its gross domestic product (GDP) growth estimates in the next few weeks, he added.

Zoellick said the Washington-based development lender expected to see continuing "wave effects" from the steep downturn that will pound the most vulnerable countries and populations the hardest.

"Unemployment is still rising in both the developed and developing world," he noted, adding that the rise signals "there's the danger of destablization and even the return of risk of conflict."

The global financial crisis that began in the United States home mortgage market in August 2007 and accelerated with the collapse of Wall Street investment bank Lehman Brothers in September has now infiltrated the developing world, he said.

"We're starting to see factors like the increase of the nonperforming loans in the African economy as the downturn in financial markets in the developed world hit the real economy and then it moves to the real economy in the developing world and now it's hitting the financial sector in the developing world," Zoellick said.

"What I hope to do in this coming G8 meeting is give an update on where we see the challenges for the developing countries over the next 12 months or so," he said.

He said funding was "particularly critical" for the bank's International Development Association (IDA), the arm that focuses on the 78 poorest countries.

Demand for IDA grants and interest-free loans is on track to total more than 13 billion dollars, a record high, for fiscal year 2009 that ends on June 30, compared with 11.2 billion last year.

In response to a question whether he would lobby for IDA funds at the G8 meeting, Zoellick said the United States and Italy "have to take some additional steps."

Countries need to continue to provide financial support for developing countries, "even" Mexico and Indonesia, and "for a longer period than people had expected, he said.

Zoellick warned that the downturn was severely straining post-conflict countries, citing Haiti, Liberia and Afghanistan.

"These are the countries that are often very dependent on commodity exports, remittances, development assistance to deal with emergency or security issues -- and all of these are under stress," he said.

The 185-nation bank estimates it will provide between 50 to 60 billion dollars in lending over fiscal 2009.

Zoellick in a statement urged G8 meetings this month and in July to "follow up on the promises made at the Group of 20 meeting in London in April to restore domestic lending and the international flow of capital."

Miss California Carrie Prejean Fired Playboy Photos

The celebrity model Miss California Carrie Perjean has been fired today for posing playboy and this time Donald Trump couldn’t have anything to do for her. And Carrie Prejean can’t hold the crown not any more. Yesterday it was announced that the beauty queen who survived a scandal over semi-naked photos and her controversial stand on same-sex marriage, will be fired.

According to TMZ, Prejean claims pageant honcho Keith Lewis actually asked her last month if she would take two gigs — appearing on “I’m a Celebrity … Get Me Out of Here!” and Playboy. Prejean says Lewis told her Playboy offered $140,000 for her to pose semi-nude. She rejected both offers.

Carrie Prejean said:

They wanted me out and they got what they wanted

A few minutes ago we talked to Lewis who said he was not pushing her to take either gig — but merely passing the offers along. Lewis said Prejean had insisted they not turn anything down without running it by her.

Prejean — who told us she was “shocked” at the news she was fired and learned about it only after we broke the story — tells us she has been more than cooperative with pageant officials.

Prejean says, “What’s behind this I think is a political debate. They don’t agree with the stance that I took [on Prop 8]. Shanna [Moakler] is trying to bash me. They don’t like me. From day one they wanted me out and they got what they wanted.”

Prejean also told us she couldn’t believe Donald Trump would say she treated people in the pageant “like s**t.” For the record, Trump did tell Harvey Levin that on the phone earlier today. Prejean said if Trump really feels that way she’s sorry, adding: “I’ve shown respect for every party involved, even when they haven’t shown it back.”

Prejean went on: “I was very respectful of people even when they slandered me and humiliated me. I have not once stooped down to their level.”

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Fiat closes Chrysler deal; new management team named

DETROIT/MILAN (Reuters) – Fiat SpA closed its acquisition of Chrysler's strongest assets on Wednesday, a key step in the Italian carmaker's ambitious plan to create a global player to ride out the worldwide auto sales downturn.

The Fiat and Chrysler announced deal revives the 84-year old U.S. automaker that had been down to its last dollars before government intervention in late 2008 and completes an Obama administration-directed fast-track reorganization for Chrysler.

Other parts of Chrysler will remain in bankruptcy to be sold or closed.

Fiat Chief Executive Sergio Marchionne became CEO of the new Chrysler Group LLC on Wednesday. The automaker's former CEO, Bob Nardelli, will return to Cerberus Capital, the former majority owner of Chrysler, as an adviser.

Chrysler's former vice chairman and president, Jim Press, has been named Marchionne's deputy chief executive, and Fiat's chief financial officer, Richard Palmer, has been named CFO of the new company.

In a memo to employees, Marchionne voiced optimism about the new company's outlook.

"There is no doubt in my mind that we will get the job done," he said. He called the alliance a "bold first step to implement" lessons learned.

Marchionne added that Fiat will begin the process of transferring Fiat's technology, platforms and powertrains to Chrysler plants in the next few months.

In addition to Fiat, Chrysler Group LLC is owned by a union-aligned trust and the U.S. and Canadian governments in taking over the best parts of Chrysler.

The White House welcomed the completion of the deal and said the new alliance was "poised to emerge as a competitive, viable automaker."

The Canadian government said a restructured Chrysler is good for the Canadian auto parts supply chain and for Canadian consumers.

The completion of the Chrysler sale in roughly the time frame planned has been seen by analysts as a good omen for the prospects of completing a similar process for General Motors Corp, which filed for bankruptcy on June 1.

The GM sale is expected to take longer due to the size and complexity of the No. 1 U.S. based automaker. GM will be majority owned by the U.S. government when its sale is completed.

SUPPLIER TALKS

Chrysler filed for bankruptcy on April 30 and halted production to work through the sale to Fiat, heightening pressure on auto parts suppliers that already had sustained losses due to production cuts at automakers in North America.

Chrysler said it would resume production soon, but did not give a time frame. GM also halted significant production starting in mid May for several weeks.

U.S. and Canadian auto suppliers are under heightened pressure as U.S. auto sales remain at their lowest level in 27 years. U.S. sales are down 36.5 percent in the first five months of 2009.

The Obama administration's autos task force was meeting with parts suppliers on Wednesday as part of its effort to monitor the auto supply base, a Treasury spokesperson said.

"Today's meeting is part of our ongoing commitment to work with the companies and monitor the auto supply base going forward," the spokesperson said.

U.S. suppliers had submitted a formal request to the U.S. Treasury for $18.5 billion in emergency funding, saying they have been shut off from credit at a time when payments from automakers are declining rapidly.

Shares of several large U.S. auto parts makers rose sharply on Wednesday after the Chrysler deal completion erased fears that it could face liquidation if the deal did not go through and eased concerns over whether some auto suppliers could survive the current downturn.

Separately, a senior member of the Treasury task force responsible for overhauling the auto industry, Ron Bloom, was asked to explain to Congress its rationale for decisions that lead to bankruptcies at both GM and Chrysler.

The Obama administration must provide a clear explanation of how it plans to extricate the government from ownership stakes in GM and Chrysler, Senate Banking Committee Chairman Christopher Dodd said on Wednesday.

U.S. Senator Richard Shelby, a persistent critic of the auto bailouts and the top Republican on the Senate Banking Committee, said he was not sure government could remain a silent partner in GM and Chrysler and protect taxpayers.

Shelby also said that Treasury needed to be thinking about an exit strategy from its GM and Chrysler ownership stakes.

Meanwhile, Several lenders that provided bankruptcy funding to auto parts supplier Delphi Corp are seeking to make their own competing offer for the company, their lawyers told a U.S. bankruptcy court on Wednesday.

Delphi, which was spun off from GM in 1999 and filed for bankruptcy in 2005, said last week it reached a deal to sell most of its global operations to private equity firm Platinum Equity, allowing the car parts supplier to emerge from Chapter 11 bankruptcy protection.

(Additional reporting by Giancarlo Navach, David Bailey and Soyoung Kim; Editing by David Cowell, Patrick Fitzgibbons, Matthew Lewis and Carol Bishopric)

Chinese exports plunge 26.4 percent in May

BEIJING (AP) -- China's exports plunged in May for a seventh month as the global downturn battered trade, while imports also dropped sharply, the government reported Thursday.

May exports fell 26.4 percent from a year earlier, the customs agency reported. That was sharper than April's 22.6 decline and far below March's 17.2 percent contraction.

Chinese trade collapsed in late 2008 as the global economic crisis cut into demand for Chinese exports. The slump forced thousands of factories to close and threw millions of migrants out of work.

The government is trying to shield China from the downturn by pumping up domestic consuption with a 4 trillion yuan ($586 billion) to pump money into the economy through higher spending on public works construction and other initiatives.

May imports dropped by 25.2 percent, the agency said. That was worse than April's 23 percent fall and matched March's decline.

The decline suggested Chinese demand for iron ore, industrial components and other foreign products is still weak.

General Administration of Customs of China (in Chinese): http://www.customs.gov.cn

Top Industry Sectors to Grow Your Money

SAN DIEGO (ETFguide.com) - We've already reached the half-way point of the year and the top performing U.S. industry sectors are rising much higher than many people, even Wall Street's leading economists and analysts previously thought. Even though the economic recession is far from over, astute investors are profiting. Are you?

Boosted by a rising market, the money invested in ETFs finished the month of May on a very strong note, up by $53 billion. Much of the greatest interest in ETF investing is in funds that narrowly invest in specific industry sectors. Energy and technology stocks are just two examples of sectors that have performed well so far this year. Today, there are 205 industry sector ETFs and that doesn't even include the 90 or so leveraged and short ETFs focused on specific sectors.

So far for the year, five of the nine S&P 500 industry sectors are in positive territory. This is a dramatic reversal from last year when all nine S&P sectors posted double digit market losses.

Let's analyze three of this year's top performing industry sectors.

Materials Select Sector SPDR (NYSEArca: XLB)

The basic materials sector is one of the S&P 500's smallest. XLB represents just 3.66% within the S&P. Nevertheless, this tiny sector has given investors the best pop for their money this year, gaining 21.81%. This sector includes industries such as chemicals, construction materials, containers and packaging, metals and mining, and paper along with forest products. Among its largest components are Monsanto, E.I. DuPont de Nemours & Co., and Dow Chemical Co.

Year-to-date, XLB has soared 21.81%. In 2008, XLB declined 43.99% and the fund's annual expense ratio is 0.21%.

Technology Select Sector SPDR (NYSEArca: XLK - News)

With a 21.51% weighting, technology stocks are the largest industry sector represented within the S&P 500. XLK owns 80 leading technology stocks like Apple, IBM, Oracle, Microsoft, Yahoo and others. Technology is a diverse sector which covers IT consulting services, Internet companies, semiconductor equipment, software developers, computers and peripherals, telecommunication services and wireless products.

So far this year, XLK has gained 19.59% compared to a 41.39% loss in 2008. XLK's annual expense ratio is 0.21%.

Consumer Discretionary Select Sector SPDR (NYSEArca: XLY - News)

Unlike the defensive consumer staples sector (NYSEArca: XLP - News), consumer discretionary stocks are more prone to wild swings and downturns because of their heavy reliance on consumer spending. Despite a severe reduction in consumer's spending habits, XLY is surprisingly one of this year's best performing industry sectors. XLY includes industries such as automobiles and components, consumer durables, apparel, hotels, restaurants, leisure, media, and retailers. Stocks among XLY's portfolio are McDonald's, Walt Disney Co., and Comcast.

XLY has jumped 11.88% on the year compared to a 33.43% loss in 2008. XLY's annual expense ratio is 0.21%.

Making the Right Sector Choices

Investors need to be very selective about which industry sectors they decide to own. During the dotcom bust from 2000 to 2002 finding areas of sector strength were easier to identify because avoiding technology stocks was all you had to do. In today's environment it's more difficult because the global economic recession is affecting all industries.

Recently, a traditional sector rotation strategy of overweighting strong performing sectors and underweighting weaker ones has had limited success. Last year, for example, all nine S&P 500 industry sectors were down between 30% to 60%.

Conclusion

How can you know which sector ETFs are represent the best opportunity for capital growth? Which of the 300 industry focused ETFs are poised for the next leg up? Consider just one series of recent moves we made inside our Sector Savvy ETF Portfolio.

Just as stocks were bottoming, on March 2nd we got rid of short ETFs like ProShares UltraShort Real Estate (NYSEArca: SRS - News) and ProShares UltraShort Financial (NYSEArca: SKF - News). A few days later, on March 6th, the Dow Jones Industrial Average and S&P 500 bottomed.

And here's what we stated to our subscribers on March 2nd: 'In a contrarian move, we are establishing a long position in the ProShares Ultra Financials (NYSEArca: UYG - News). For the first time ever, UYG is trading below $2 per share compared to $72 in June 2007.' We subsequently bought UYG at $1.96 on March 2nd and sold half the position at $4.63 on May 8th. That works out to a 134% gain! Since the beginning of the year, the Sector Savvy ETF Portfolio is ahead 14.08% compared to a 4.08% rise in the S&P 500.

Getting the right mix of ETFs inside your portfolio doesn't happen by accident. Despite the unpredictable nature of stocks, with just a little guidance and research from the right sources you can achieve investment results that exceed your expectations. Four of our six subscription based ETF portfolios are outperforming the S&P 500 this year. This is ample proof that profitable results are possible even during difficult times.

*Performance through 6/5/09 market close

Problems of old Chrysler linger at new Chrysler

DETROIT (AP) -- Chrysler was reborn Wednesday under a new Italian parent, but it can't shake the shadows of its past: It's not selling enough cars, its fleet is tilted to trucks and SUVs, and help is more than a year away.

A 42-day stay in bankruptcy court cleansed the company of much of its debt and labor costs, but many analysts say Chrysler's immediate future is bleak. It lost $8 billion in 2008, and sales are down by almost half for the first five months of this year.

Cars designed by its new owner, Italy's Fiat Group SpA, won't make it to the U.S. until late 2010. And even then there are no guarantees American drivers will want the tiny cars Fiat specializes in.

In the meantime, Chrysler is left with few new vehicles headed to its drastically reduced network of dealers. Its aging model lineup is still heavy with bigger vehicles. And its offerings in the growing small and midsize markets haven't caught on.

"The showroom is not going to look terribly different over the next 18 months," said Aaron Bragman, an analyst for the consulting firm IHS Global Insight. "They're going to try and maintain market share in a down market with products, many of which haven't been redesigned in several years."

Bragman said Chrysler faces tremendous competition, especially from new cars in the works at General Motors Corp. and Ford Motor Co.

Even if the new Chrysler Group LLC can survive, the super-small Fiat cars that were popular in Europe, like the 500 and Grand Punto, could be out of step with Americans who like bigger cars and are used to lower gas prices.

During Fiat's last run at the U.S. market, in the 1970s and '80s, reliability problems led people to suggest the name stood for "fix it again, Tony."

"Fiat is really not a known commodity in the U.S. market," said David Koehler, a clinical marketing professor at the University of Illinois at Chicago. "It doesn't resonate with the target market."

The new Chrysler began operations Wednesday morning after the U.S. Supreme Court refused to hear an appeal of lower court decisions that allowed the transfer of most of the old Chrysler's assets to Fiat.

Fiat CEO Sergio Marchionne was named chief executive of the new company, and Chrysler CEO Bob Nardelli said farewell to employees and ended his tumultuous 20-month reign.

Marchionne quickly shook up the management, replacing Chrysler's chiefs of marketing, finance and product development and cutting layers to make the company more focused on individual brands, such as Jeep, Chrysler and Dodge.

Jim Press, who was Toyota Motor Corp.'s top U.S. executive until he joined Chrysler in 2007, was named deputy CEO and will probably run the company when Marchionne is in Italy.

In an e-mail to Chrysler's 54,000 workers, Marchionne acknowledged the company's problems and said he was determined to repair them. Five years ago, he wrote, he stepped into a similar situation at Fiat, perceived at the time as a failing bureaucracy that made poor cars.

"Through hard work and tough choices, we have remade Fiat into a profitable company that produces some of the most popular, reliable and environmentally friendly cars in the world," he wrote. "We can and will accomplish the same results here."

Marchionne's more immediate problem is weak offerings in the market for small and midsize cars. Its smallest vehicles, the Dodge Caliber and Jeep Compass and Patriot, sell far less than the Toyota Corolla, the nation's top-selling small car.

Work is already under way to convert Chrysler factories to produce small Italian-designed cars. Neither Chrysler nor Fiat would say which models would come first or how many would be imported to the U.S.

"The need is now, but unfortunately, it'll be at least a two- to three-year process," said Michael Robinet, vice president of CSM Worldwide, a Detroit-area auto industry consulting firm.

Chrysler plans to roll out new versions of its popular Jeep Grand Cherokee SUV and Chrysler 300 large sedan by the end of next year, along with a rechargeable electric vehicle. But Bragman said those were probably delayed in the bankruptcy process, making the next 18 months look iffy.

The good news for Chrysler is that it has cut its expenses enough that it can break even with lower sales, said Gary Dilts, senior vice president of global automotive operations for J.D. Power and Associates.

He said much of the drop in sales this year for Chrysler came from cuts in its sales to rental car companies. Chrysler actually made small gains in market share in sales to individuals in the first five months of 2009.

The struggling company has offered the heftiest rebates and other incentives to buyers recently. But it remains to be seen whether Chrysler can produce amazing cars, not just amazing deals.

The U.S. government has committed roughly $8 billion more to help Chrysler as it leaves Chapter 11 bankruptcy protection, and the Obama administration acknowledges Chrysler will probably lose money until Fiat rides to the rescue. But the government believes the company will be viable in the long term because of Fiat's management expertise.

Aside from the electric vehicle, Chrysler's upcoming new models are not particularly fuel-efficient, and they could suffer if gas prices keep climbing. Those same gas prices could help Chrysler benefit from Fiat's small-car technology.

Marchionne has said Fiat could start selling a successful, North America-made remake of the 500 minicar as soon as next year. Fiat also plans to relaunch the sporty Alfa Romeo brand in North America.

The new Alfa 149 midsize five-door hatchback, to be unveiled next year, would be built in North America as a successor to the larger Alfa 159, Marchionne has said.

But Toyota and Honda remain the champs of midsize cars, and Fiat still has to prove itself to American drivers.

"A lot of us have residual memories of Fiat that are less than stellar," Dilts said. "But I think the product looks good. They've got some great small engine capabilities. With a little bit of pressure on gasoline, I think they're going to give Fiat a look."

The Top 10 Housing Markets for the Next 10 Years

With home prices at the national level down a painful 32 percent from their 2006 peaks, it's easy to overlook real estate's benefits as a long-term investment. But the truth is, despite the ongoing housing bust, the overwhelming majority of America's real estate markets will appreciate over the next 10 years--although some more handsomely than others. "In the long run--subtracting from the ups and downs of the business cycle--house prices should grow at the rate of household income," says Mark Zandi, chief economist at Moody's Economy.com. "If people's incomes are rising, then they will buy more housing and house prices will rise." Income growth, in turn, is linked to the strength of the area's economy. Moody's Economy.com sifted through employment and population data and analyzed geographic and industry trends to generate 10-year home price projections for each of the nation's 384 distinct metropolitan statistical areas--everywhere from Abilene, Texas, to Yuma, Ariz. Using these data, U.S. News compiled a list of the top 10 housing markets for the next 10 years.

[See photos of the 10 Best Affordable Places to Retire.]

The neighboring cities of Bremerton and Silverdale, Wash., are located on the Kitsap Peninsula, a slip of land surrounded by more than 300 miles of coastline in lovely Puget Sound. Although the Pacific Northwest greenery is enticing, it's the cities' stable economies that should drive home price gains in the coming years. A large military presence--of the U.S. Navy in particular--helps insulate the local economies from volatility. Meanwhile, the nearby cities of Tacoma, Wash., and Seattle provide additional employment to the area's roughly 240,000 residents. "About a third of the community works [in either Tacoma or Seattle]," says Silvia Klatman, executive director of the Bremerton Area Chamber of Commerce. "And a little bit more than that actually work...for the military." Silverdale's 2008 median home sale price was $266,500. Moody's Economy.com expects home prices in the Bremerton/Silverdale area to increase by an average of 5.2 percent annually from the fourth quarter of 2008 through the same period of 2018.

At the foot of the Adirondack Mountains of New York you'll find Glens Falls. With attractions like beautiful Lake George just a short drive away, tourism has long played a key role in the local economy. But the area, which has about 130,000 residents, is also considered "the catheter valley" on account of its thriving medical device manufacturing industry. Companies like Covidien, AngioDynamics, and C. R. Bard have outposts in the area, which has also become a popular lower-cost alternative to nearby Saratoga County, N.Y., and a bedroom community for the state capital of Albany. In recent years, downtown Glens Falls has attracted an impressive amount of private-sector investment, says Todd Shimkus, president and chief executive of the Adirondack Regional Chamber of Commerce. "It is staggering to see $65 million for a new wing of a hospital, $17 million for new library, $25 million for a downtown townhouse project, $4 million for a corporate headquarters for Barton Mines, $3.5 million for a theater downtown, [and] $500,000 for a downtown park," he says. The 2008 median home sale price was $185,000 for Warren County, where Glens Falls is located. Home prices in the area will increase an average of 4.7 percent a year over the next 10 years, Moody's Economy.com projects.

Not far from Colorado's breathtaking Rocky Mountain National Park are the neighboring cities of Fort Collins and Loveland. Thanks to university research, local support, and private investment, this area of roughly 300,000 residents is evolving into a leading center for traditional and renewable energy, says Brian Willms, the president and CEO of the Loveland Chamber of Commerce. "We have this fantastic wind corridor to produce wind energy, over 300 days of sunshine a year--so it's a great place for solar energy--and we have some of the most productive natural gas reserves in the country," he says. "And with all of the research and development taking place here, it's a perfect culmination for a new energy economy." Fort Collins's 2008 median home sale price was $212,000. Home prices in the Fort Collins/Loveland area should rise an average of 4.1 percent annually over the next 10 years, Moody's Economy.com projects.

[Check out The $8,000 First-Time Home Buyer Tax Credit Program Expands: 5 Things to Know.]

With about 48,000 residents, Corvallis is nestled in the natural splendor of Oregon. Since it is home to Oregon State University as well as numerous public agencies, about a third of the area's workers are employed by the government, says Mysty Rusk, the president of the Corvallis-Benton Chamber Coalition. At the same time, this intellectually curious university town has long possessed a creative, entrepreneurial spark. "We have the highest [number of] patents per capita in the United States," Rusk says. And although large companies like Hewlett Packard and Samaritan Health Services are among the area's leading private employers, the community doesn't forget about the little guy. The local chamber of commerce plays an active role in helping entrepreneurs turn their ideas into payrolls. "We have hundreds of little startups," Rusk says. Corvallis's 2008 median home sale price was $245,000. Area home prices should increase an average of 4 percent annually over the next 10 years, Moody's Economy.com projects.

If moose sightings are more your style, check out Anchorage, Alaska, where Moody's Economy.com projects that home prices will appreciate by an average of 3.8 percent a year over the next 10 years. The real estate market in the Duluth, Minn., area is expected to post similar gains of about 3.7 percent annually. Home prices near Sandusky, Ohio, are also expected to increase an average of 3.7 percent a year over the next 10 years. That's only slightly ahead of the Santa Fe, N.M., area's projected 3.6 percent annual gains. The revitalization of Pittsfield, Mass.'s, downtown district could help area home prices rise an average of 3.5 percent a year over the next 10 years. Meanwhile, Decatur, Ill.'s, development into a green energy hub should help its housing market post roughly 3.4 percent annual gains, according to Moody's Economy.com.

Here's the projected average annual percent change in home prices from the fourth quarter of 2008 to the fourth quarter of 2018:

1. Bremerton-Silverdale, Wash.: 5.22 percent

2. Glens Falls, N.Y: 4.71 percent

3. Fort Collins-Loveland, Colo.: 4.06 percent

4. Corvallis, Ore.: 3.95 percent

5. Anchorage, Alaska: 3.8 percent

6. Duluth, Minn.: 3.74 percent

7. Sandusky, Ohio: 3.66 percent

8. Santa Fe, N.M: 3.57 percent

9. Pittsfield, Mass.: 3.51 percent

10. Decatur, Ill.: 3.44 percent

The Human Capital Bubble

Charles Wheelan, Ph.D. The Naked Economis

I recently had dinner with some of my students who will be graduating in the coming weeks. To make conversation, I asked what they will all be doing next year. An uncomfortable silence settled over the table. No one ever did answer the question.

I suspect there are many such conversations going on around the country, as students pick up diplomas, take stock of their student debt, and wonder what the heck comes next.

This isn't just a bad job market - it's the popping of a "human capital bubble." Wall Street and its assorted reckless offshoots didn't just squander much of our capital; the financial industry also sucked up human talent for the better part of a decade that should have gone somewhere else. It's the human equivalent of those empty subdivisions in foreclosure that never should have been built.

That's what happens with bubbles. Resources -- including people -- are allocated poorly because the market sends faulty signals.

Too Many Investment Bankers

Several years ago I looked at the list of jobs for the graduating seniors in my old fraternity. These are really bright kids at an Ivy League school. At least half were going to consulting and investment banks. I remember thinking: "That's too many," which is an odd thought for someone who believes in labor markets.

But I had a similar thought around the same time when I saw new golf courses and developments springing up like weeds across southwestern Florida. The units were priced at $700,000 or $800,000, even though the land had no inherent scarcity value. The developments weren't on the ocean, or even near the ocean in some cases, meaning that there was nearly unlimited space to build more and more identical developments across Southwest Florida.

"Those prices don't make sense," I remember thinking. The land doesn't have much value, and the construction costs for stucco condominiums around a golf course are only a fraction of what's being charged.

Believe me, I didn't predict the crash; I'd be a much richer man if I had. If anything, I talked myself out of believing that there were problems afoot because I'm such a firm believer that the most beautiful thing about markets is their ability to allocate resources efficiently.

After all, the whole point of a market, whether it is real estate or labor, is that prices send meaningful signals. Graduates take jobs with high salaries because that is where their skills will be most productive. Developers build new units where prices are high because that is where there is the most demand relative to supply.

Signals Were Wrong

Here's our problem now, particularly for the new graduates: Those signals were wrong.

In fact, if you want a snapshot of the impact of what happens when a bubble sends inaccurate market signals, ask yourself this question: How many people do you know who became real estate agents over the past five years? In hindsight, does that make much sense?

In the case of the financial industry, salaries had become rock-star huge, both for new graduates and for Wall Street veterans. (In fact, I would venture that the "stars" in finance were making a lot more than most successful rock musicians.) When we were in the midst of it, people like me assumed that those salaries reflected real value for the economy -- that we'd found more efficient ways to allocate capital and reduce risk and that the people who'd come up with those innovations were being compensated for their innovation.

Now it turns out that Wall Street hadn't really built a better mouse trap. Much of what was going on was just reckless speculation with borrowed money -- more like tearing up the old mouse trap and selling it for scrap. At best, these complex financial products offered minimal improvements over what we already had; at worst, they squandered enormous sums of capital and devastated the financial system.

When smart young graduates were lured to Wall Street (and related jobs) by staggering starting salaries, they were making the same mistake as the Florida condominium developers. The problem was NOT greed; self-interest is and always will be at the heart of market behavior. The problem was that self-interest is a disaster when the market signals are wrong. It's like giving someone a bad map and then criticizing their driving when they show up in the wrong place.

Smart People, Bad Choices

With real estate, that means we now have empty subdivisions and millions of homes in foreclosure. In the labor market, the effects were more subtle but arguably more damaging: Smart people could have and should have been doing something else. The clever men and women who made a lot of money designing and trading credit default swaps could have been conducting research on alternative energy, teaching math, practicing medicine, or doing any number of other jobs that strengthen society, rather than making bad bets with borrowed money.

The human capital bubble will take time to unwind, just like all other aspects of the larger financial crisis. People followed the money into jobs for which there is now less demand. In my world, college students flocked into economics, not necessarily because they were scintillated by its ability to predict human behavior and make the world a better place but because it was perceived as the best route to Wall Street.

But in the long run there is good news, too, though it may not be much immediate solace to the college graduates who are now moving in with their parents.

First, a tough job market will lead to a healthier job search for young people. Nothing focuses the mind like struggling to find a job rather than having one handed to you. I watch students participate in "corporate recruiting," which is the process in which firms come to campus and make it enticingly easy to take a lucrative job. It's a stunning opportunity for smart young people who know what they want to do; it can be a sad trap for those swept along by what everyone else is doing.

Twenty years ago I opted not to participate in corporate recruiting. After graduation, my friends had jobs; I was broke, unemployed, and unhappy. It was an awful stretch, but it also forced me to think hard about what I really wanted to do and then go out and find it. (I wanted to be a writer.)

Second, the post-Wall Street collapse job market will be healthier in the long run for the economy, as smart people do other things. It's the human equivalent of NOT building unneeded condominium developments.

The economic tragedy is that some of our smartest graduates took the big salaries on Wall Street (and in law firms doing Wall Street work and so on). Those folks could have made significant contributions somewhere else. That problem is now fixing itself.