Stocks surge on upbeat earnings and forecasts

Stocks rally after strong earnings reports and encouraging signs of growth in Europe

NEW YORK (AP) -- Stocks surged Thursday after another strong batch of earnings reports revived optimism about the economic recovery. Encouraging signs of growth in Europe added to the upbeat mood.

Traders largely wrote off a jump in the number of people seeking unemployment benefits for the first time. The increase was likely skewed by seasonal factors. Instead, investors focused on earnings from a broad range of companies that showed businesses aren't seeing a slowdown in the recovery. News of corporate deals also lifted shares.

The Dow Jones industrial average rose more than 200 points in afternoon trading. Broader indexes also rose more than 2 percent. Interest rates surged in the Treasury market as investors felt less need to put their money into the safety of government securities.

Caterpillar Inc., 3M Co., UPS Inc. and AT&T Inc. all topped earnings forecasts and raised their outlooks for future profit. Only Travelers reported a dip in earnings, but that came as bad weather led to more claims payments.

Investors who have been selling stocks on disappointing earnings and revenue figures over the past week got some reassurance from companies' outlooks on Thursday. Caterpillar said its orders are growing and production will pick up in the second half of the year. UPS raised its outlook because of spending by businesses. Caterpillar's stock rose 1.5 percent, while UPS gained 5.8 percent.

Chris Hobart, founder of Hobart Financial Group in Charlotte, N.C. said the outlooks are especially important because if companies expect to grow, that might get them to ramp up hiring.

If improved outlooks lead to jobs growth, "then this can be better than a good quarter or good second half, (it can mean) we've got a good economy," Hobart said.

More earnings are due out later in the day, including from American Express Co., Microsoft Corp. and Amazon.com Inc.

In afternoon trading, the Dow Jones industrial average rose 206.91, or 2 percent, to 10,327.44. The Standard & Poor's 500 index rose 23.60, or 2.2 percent, to 1,093.19, while the Nasdaq composite index rose 51.64, or 2.4 percent, to 2,238.97.

Nearly seven stocks rose for every one that fell on the New York Stock Exchange, where volume came to 491.7 million shares.

European markets rose after a report showed unexpected growth in the 16-nation group that uses the euro. In recent months, investors worldwide have been concerned that rising government debt in Europe would stall a global recovery. A jump in Europe's purchasing managers index reported Thursday was a welcome relief after forecasts of a possible recession on the continent.

The economic reports out of Europe were "a big surprise because everyone expects that to be the Achilles heel of the global economy," said Anthony Chan, chief economist at J.P. Morgan Private Wealth Management in New York.

The market's gains Thursday came a day after investors sold stocks because Federal Reserve Chairman Ben Bernanke warned Congress that the economy remains fragile. Bernanke confirmed investors' fears that the best scenario for the economy is only slow growth and relatively high unemployment. Bernanke was testifying again before Congress on Thursday.

Stock trading has been erratic for weeks as investors were quick to sell at any signs of bad news and just as eager to buy on signs of optimism. The Dow has moved by at least 100 points in just over half the trading days since it hit its 2010 high of high for the year on April 26.

Guy LeBas, chief fixed income strategist of Janney Montgomery Scott in Philadelphia said there are two groups fighting back and forth, which has led to the volatility. One believes the economy is going to fall back into recession, while the other thinks this is just a pause in a strong rebound.

"There's no middle ground," LeBas said. As a result, he said, each group will pounce on news that backs up their claims and send the market sharply higher or lower. "We are absolutely hypersensitive to what we're seeing."

Overseas, Britain's FTSE 100 rose 1.9 percent, Germany's DAX index gained 2.5 percent and France's CAC-40 rose 3.1 percent. In Japan, where trading ends before it begins in the U.S., the Nikkei stock average fell 0.6 percent.

UPS jumped $3.49, or 5.8 percent, to $63.50. AT&T rose 78 cents, or 3.1 percent, to $25.70. Caterpillar rose 98 cents to $67.85.

Shares of 3M rose $2.26, or 2.8 percent, to $84.56. Travelers fell 67 cents to $49.20.

General Motors agreed to buy auto financier Americredit Corp. for $3.5 billion. The deal lets GM expand loans to customers with poor credit and offer more leases, two areas that GM needs to expand to boost car sales.

Americredit shares surged $4.30, or 21.8 percent, to $24.00.

The upbeat corporate profits, outlooks and acquisitions come against a backdrop of still mixed economic data. The Labor Department said weekly claims for jobless benefits jumped by 37,000 to 464,000. Economists polled by Thomson Reuters expected claims to rise to 445,000 last week.

The big jump comes after a big drop a couple of weeks ago when companies like GM reported fewer temporary layoffs than usual for the time of year. Even with the distorted numbers, high unemployment remains of the biggest obstacles to a strong, sustained recovery.

Bond prices dipped as investors jumped back into stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.93 percent from 2.88 percent late Wednesday.

Fed chief to Congress: Don't end stimulus spending

Bernanke urges Congress not to slash spending or raise taxes during the economic recovery

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke told Congress Thursday that the fragile economy still needs government stimulus spending to strengthen the recovery and help reduce unemployment.

Testifying before the House Financial Services Committee, Bernanke did urge lawmakers to come up with a credible plan to reduce the government's record-high budget deficits in the long run. But he said they shouldn't move now to slash spending or boost taxes in the near future.

"I believe we should maintain our stimulus in the short term," Bernanke said as he spoke about the economy's challenges for the second straight day on Capitol Hill.

Bernanke again said the Fed is prepared to take new steps to bolster the recovery if needed.

"We are ready, and we will act" if the economy doesn't continue to improve, Bernanke told the House panel.

But he refrained from repeating comments made earlier in the week, that he didn't anticipate the Fed taking new action in the near term. Those comments to the Senate Banking Committee sent stocks tumbling Wednesday. The market on Thursday recovered those losses after another strong batch of earnings revived optimism on Wall Street.

Bernanke is under growing pressure to keep the recovery going because there's little appetite in Congress to provide a major new stimulus package.

The Fed chief made his comments as the panel's highest-ranking Republican, Rep. Spencer Bachus of Alabama, and other Republican members, complained about the effectiveness of President Barack Obama's $862 billion stimulus package. That has increased government spending and cut taxes at a time when most Republicans and some Democrats are worried about the government's exploding red ink.

"The economic recovery is anemic at best," Bachus said, arguing that the stimulus package hasn't delivered.

Bernanke's remarks also come as tax cuts by President George W. Bush are set to expire at the end of this year.

The economy is slowing as consumers cut back spending under the strains of 9.5 percent unemployment, lackluster wage gains, sagging home values and chipped nest eggs.

Businesses are wary of hiring and expanding because they are uncertain about the strength of their sales and the strength of the rebound. Some private economists fear the recovery could fizzle.

If the recovery were to flash serious signs of backsliding, the Fed could revive programs to buy mortgage securities or government debt. It could cut to zero the interest rate paid to banks on money left at the Fed, although there are some technical difficulties raised by such a move, Bernanke said. The Fed also could create a new program to spark more lending to businesses and consumers in a bid to lure them to ratchet up spending and grow the economy.

Rep. David Scott, D-Ga., complained about a lack of "aggressiveness" on the part of the Fed to tackle high unemployment. And, Rep. Gary Peters, D-Mich., wondered why the Fed wasn't taking new steps to stimulate the economy now.

Despite growing threats to the recovery, Bernanke said the Fed continues to believe the economy will grow modestly this year and avoid sliding back into recession. Some disappointing economic data hasn't been bad enough for Fed policymakers to "radically change our outlook," he said.

Congress to extend jobless benefits, but employment crisis continues

Although Congress is on the verge of passing another emergency extension of jobless benefits this week, concern continues to grow over how long it could take to dig the country out of its current unemployment crisis.

The U.S. has weathered recessions before, but none in decades have included this many Americans joining the ranks of the "long-term unemployed" (individuals out of work for more than six months). That number is at its highest level "since the government began keeping the statistic in 1948," according to government statistics. The New York Times reports that the latest figures indicate that 46 percent of the 14.6 million Americans who are unemployed have been out of work for more than six months.

If those statistics weren't enough to illustrate the enormity of the long-term unemployment crisis, check out this chart below from the Department of Labor:

So why aren't people able to return to the workforce? Economists and analysts say there are currently "five job seekers for every job." There simply aren't jobs out there to be filled. Since the current recession began in December 2007, it's estimated that nearly 8 million jobs have been lost. As long as the economy is suffering, employers aren't increasing their staffs and are leaving empty positions vacant.

[Most secure jobs for 2010]

So how do we get more jobs? Politicians and economists are busy debating the question, but most agree that until employers have incentives to hire, the jobless problem can't be solved quickly.

[Best cities to build a business]

Many Democrats say more stimulus is required to provide those incentives. They've pushed for the jobless benefit extension because they think it will stimulate the economy and in turn, stimulate employment. "There is no better stimulus than unemployment benefits, as this money quickly flows from those who need help into local economies," Labor Secretary Hilda Solis wrote in a post this month for AOLNews.

[Slideshow: U.S. unemployment in pictures]

But that suggestion irks many, including most Republicans in Congress and some economists: "Not only will increased unemployment benefits not stimulate the economy, they will at the same time lower the incentives for people to work by reducing the amount people are paid for working and increasing the amount people are paid for not working," economist Arthur B. Laffer wrote for the Wall Street Journal.

But statistics show that many unemployed people, including those not receiving benefits, are simply giving up their job searches. One requirement for receiving unemployment benefits is that an individual actively search for work, yet people are continuing to forgo benefits to drop out of the labor market.

The unemployed who stop looking for work become classified as "discouraged," and the number of discouraged workers continues to grow. And these discouraged workers are an added twist to the nation's unemployment problem: Discouraged workers are no longer considered unemployed, which is part of why the 9.5 percent rate of unemployment understates our current crisis. It's also one of the reasons the unemployment rate dropped in June from 9.7 to 9.5 percent. If you add the 1.2 million "discouraged" workers to the 14.6 million unemployed, you have 15.8 million out-of-work Americans.

So when will it end? Estimates vary, but the Federal Reserve says that unless job growth rates improve, it will take five years for the unemployment rate to return to pre-crisis levels.

(Graph via The Atlantic)

Other popular Yahoo! stories:
• Job training is futile for many unemployed
• Nation's strongest job markets
• Touring the (almost) largest home in U.S.

Giant predatory whale named for 'Moby Dick' author

LONDON – Scientists have discovered an ancient whale whose bite ripped huge chunks of flesh out of other whales about 12 million years ago — and they've named it after the author of "Moby Dick."

The prehistoric sperm whale grew to between 13 and 18 meters (up to 60 feet) long, not unusual by today's standards. But unlike modern sperm whales, Leviathan melvillei, named for Herman Melville, sported vicious, tusk-like teeth some 36 centimeters (14 inches) long.

The ancient beast evidently dined on other whales, researchers said in Thursday's issue of the journal Nature. They report finding a skull of the beast in a Peruvian desert.

The researchers named it in tribute to the 19th-century author and his classic tale of the great white whale, which includes frequent digressions on natural history that punctuate the action.

"There is a chapter about fossils," one of the paper's authors, Olivier Lambert of the Natural History Museum in Paris, said. "Melville even mentions some of the fossils that I studied for my PhD thesis."

Anthony Friscia, a paleontologist at the University of California, Los Angeles, who wasn't involved in the discovery, said scattered finds of huge fossilized teeth had long hinted at the ancient whale's existence. But without a skull to fit them in, the creature's shape, size and feeding habits remained a mystery.

"The fact that they have found the entire jaw — well, almost the entire skull — is what's pretty unprecedented," he said.

The ancient beasts "were the killer whales of their time, although on a much grander scale," Friscia said. "They were close to the biggest things around."

Friscia said he thought the choice of a name was fantastic.

"You gotta love any time you get a nod to literature in taxonomy," he said. "It was a big whale, so why not?"

http://news.yahoo.com/s/ap/20100630/ap_on_sc/eu_whale_fossil

ADP Jobs Report Supports Double-Dip Case

ADP's private employment report for June showed no signs of life Wednesday. It's a troubling read heading into Friday's Bureau of Labor Statistics data, and only seems to further strengthen our argument for a Double-Dip Recession.

Automatic Data Processing (ADP) reported Wednesday on the labor market for June. In summary, nonfarm private payrolls were reported increased by 13,000, which while representing the fifth consecutive monthly gain, also fell short of the average growth of 34K over that span. In fact, ADP's chart of monthly labor activity seems to imply a job market double-dip ahead. Job growth, as depicted by ADP, has decelerated over the last two months, and looks to be heading back into contraction mode, in my view. ADP's data differs significantly with the Bureau of Labor Statistics (BLS) data in that it excludes the public sector. The BLS report has shown strong job growth over recent months on the temporary hiring of census workers, but that's not evident in ADP's data. Neither will it be evident in the BLS report in short time, when the census concludes.

The Details

The details of ADP's report for June show large and small businesses alike inactive in hiring activity. Small businesses (less than 50 employees) shed 1,000 jobs on net, while large businesses (500 or more employees) added only 3,000 jobs in June. It was the group in between, medium-sized firms of between 50 and 499 employees, who picked up the slack in hiring 11,000 folks through June.

Goods-producing industries shed 17K jobs through the month, though the manufacturing sector continued to expand, adding 16K employees. It was instead ongoing weakness in construction that weighed on goods makers, as construction shed 35K jobs through the month. Any gains made through the First-Time Homebuyers Tax Credit, while effective, proved temporary. Natural growth is not yet prepared to take the baton from government stimulated growth, and homebuilders seem to be facing up to that reality in their labor adjustments. (Interests: F, TM, HMC, TOL, HOV, BZH, DHI, FNM, FRE, PNC, GS, MS, JPM, BAC, C, WFC)

The service sector, the key driver of American economic activity, added 30K jobs in June. While this report is seasonally adjusted, I have to wonder how much of this growth was due to hiring along America's coastline resort towns and amusement parks. Given the weakness of last year's consumer spending, it seems likely to me that the pick up this year toward normal consumer spending might have allowed for more hiring on the nation's boardwalks than the seasonal adjustment could make up for. Therefore, I'm not at all impressed by the still otherwise soft growth in services. (Interests: FUN, DIS, CUK, CUL, PCLN, EXPE, RCL, SIX, OWW, WWON)

Looking Ahead

When reported Friday, economists surveyed by Bloomberg are looking for unemployment to post an increase for June, to 9.8%, from the 9.7% rate reported in May. I agree that it is unlikely the rate will moderate further, as it did in May from 9.9% in April. I concur also that it is more likely the unemployment rate will increase, as economic activity previously supported by government crutch must now make its own way. This premature wish of policy makers now consumed by budget crisis could leave our economy flailing in the harsh dry wind of renewed recession

Treasury gets $10.5B from Citigroup share sales

Treasury has raised a total of $10.5B from selling Citi shares it got in bank's bailout

WASHINGTON (AP) -- The Treasury Department said Thursday it has raised $10.5 billion from the sale of a total of 2.6 billion shares of Citigroup stock it received as part of the government's rescue of the bank.

The government sold the shares at a profit as it seeks to recoup the costs of the $700 billion financial bailout in 2008.

Treasury says the latest sale of 1.1 billion shares, which figures into the total, completes its second phase of selling operations.

In the latest Citigroup sale, the stock sold for an average price per sale of around $4.03, Treasury said. That would represent a profit form the $3.25 price Treasury paid to obtain the shares.

Citigroup's shares slipped 8 cents to $3.68 in morning trading Thursday.

The government still owns 5.1 billion shares of Citigroup stock and expects to continue selling shares at a future date.

Citigroup, hard hit by the financial crisis, received $45 billion in taxpayer-funded bailout money. That was one of the largest bank rescues by the government. Of the $45 billion, $25 billion was converted to a government ownership stake. The bank repaid the other $20 billion in December.

"We are pleased that Treasury has profitably sold a third of its common shares in Citi, adding to the substantial return for taxpayers realized last year," said Jon Diat, a spokesman for Citigroup.

The government's bailouts of banks and insurance giant American International Group Inc. has touched a nerve with the American public -- and by extension -- lawmakers on Capitol Hill. Ordinary people have been incensed that taxpayer money has helped banks, while so many Americans are struggling under near double-digit unemployment, soaring home foreclosures and lackluster wage gains.

Treasury Secretary Timothy Geithner told a watchdog panel last week that that banks have repaid about 75 percent of the bailout money they received. The government's investments in aided banks have brought taxpayers $21 billion, he said.

At the same time, Geithner acknowledged there likely will be a partial loss from the rescue of giant insurer American International Group Inc., into which the government plowed $182 billion.

Geithner also said the auto industry has made significant structural changes, and the prospects that General Motors and Chrysler will repay the nearly $60 billion in bailout money have improved.

New jobless claims rise in sign of weak job market

New unemployment claims rise unexpectedly; more than a million have lost federal benefits

WASHINGTON (AP) -- Initial claims for unemployment benefits rose last week for the second time in three weeks. At the same time, more than a million people have lost benefits and more could be cut off now that Congress has failed to extend federal jobless aid.

New claims for benefits jumped by 13,000 to a seasonally adjusted 472,000, the Labor Department said Thursday The four-week average, which smooths fluctuations, rose to 466,500, its highest level since March.

Claims have remained stuck above 450,000 since the beginning of the year. That has heightened concerns among economists that jobs remain scarce even as the economy has begun to recover from the worst recession since the 1930s.

"We find the level and direction in jobless claims somewhat troubling and the increase is likely to feed double-dip fears," said John Ryding, an economist at RDQ Economics in a note to clients.

The economy received more bad news on Thursday when two reports showed the housing industry is struggling now that government tax credits for homebuyers have expired.

Still, the biggest problem for the recovery remains the number of people who are unemployed. Adding to that is the growing number of people who stand to lose government support while they search for work.

More than 1.3 million laid-off workers won't get their unemployment benefits reinstated before lawmakers go on a weeklong vacation for Independence Day. The numbers could reach 3.3 million by the end of this month if they don't pass the extension, the Labor Department said.

For the third time in as many weeks, Senate Republicans blocked a bill Wednesday night that would have continued unemployment checks to people who have been laid off for long stretches. The House is slated to vote on a similar measure Thursday, though the Senate's action renders the vote a futile gesture as Congress prepares to depart Washington for its holiday recess.

During the recession, Congress added up to 73 weeks of extra benefits on top of the 26 weeks typically provided by states. Democrats in the House and Senate want them extended through November. Republicans want the $34 billion cost of the bill to be paid for with money remaining from last year's stimulus package. Democrats argue that it is emergency spending and should be added to the deficit.

Some economists say they may revise their forecasts for growth in the third quarter if the benefits are not extended.

"People whose benefits are going to run out will simply not have the spending power necessary to help drive growth," said Dan Greenhaus, chief economic strategist at Miller Tabak.

The housing market is also weighing on the economy. The number of buyers who signed contracts to purchase homes tumbled 30 percent in May, the National Association of Realtors said. And construction spending declined 0.2 percent in May as residential building fell, the Commerce Department said.

Both were affected by the expiration of government incentives to buy homes. Buyers had until April 30 to sign sales contracts and qualify for tax credits.

The tax credit's impact also showed up in the jobless claims report. Greater layoffs by construction firms fueled the increase, a Labor Department analyst said.

Separately, the Institute for Supply Management, an industry trade group, said its manufacturing index slipped in June. But it was still at a level that suggests growth in the industrial sector, which has helped drive the economic recovery.

Requests for unemployment benefits dropped steadily last year after reaching a peak of 651,000 in March 2009. Economists say they will feel more confident the economy about sustained job growth when initial claims fall below 425,000

The figures come a day before the Labor Department is scheduled to release the June jobs report. That is expected to show a modest rebound in private-sector hiring. Overall, employers are expected to cut a net total of 110,000 positions, but that includes the loss of about 240,000 temporary census jobs. Private employers are projected to add 112,000 jobs, according to a survey of economists by Thomson Reuters.

That would be an improvement from May, when businesses added only 41,000 workers. But the economy needs to generate at least 100,000 net new jobs per month to keep up with population growth, and probably twice that number to bring down the jobless rate.

The unemployment rate is expected to edge up to 9.8 percent from 9.7 percent in May.

Layoffs are rising in the public sector, as states and local governments struggle to close persistent budget gaps. New York City approved a budget Tuesday that cuts about $1 billion in spending and would eliminate 5,300 jobs from the city's 300,000-person work force.

The total number of people continuing to claim benefits rose by 43,000 to 4.6 million, the department said. But the number of people collecting extended benefits fell by 376,000, as Republican lawmakers have refused to continue the extra aid. About 4.9 million people continue to collect emergency aid.

Associated Press Writer Stephen Ohlemacher contributed to this report.

http://finance.yahoo.com/news/New-jobless-claims-rise-in-apf-2896779054.html?x=0

Job worries hurt stocks at start of 3rd quarter

ob worries hurt stocks at start of 3rd quarter

Stocks drop after weaker reports on jobs, manufacturing; Pending home sales fall to record low

NEW YORK (AP) -- Stocks have begun the third quarter with more selling after disappointing reports on jobs, housing and manufacturing deepened concerns about the economy.

The weaker reports Thursday follow a bad second quarter for investors and come a day ahead of the government's June jobs report.

The government says initial claims for jobless benefits rose by 13,000 last week to 472,000. Economists had forecast claims would fall.

Trade groups report that the number of buyers who signed contracts to purchase homes fell to a new low in May and that manufacturing slipped in June.

At midday, The Dow Jones industrials are down 94 at 9,680. The Standard & Poor's 500 index is down 11 at 1,020, while the Nasdaq composite index is down 22 at 2,088.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

NEW YORK (AP) -- Stocks began the third quarter with more selling after disappointing reports on jobs, housing and manufacturing deepened concerns about the economy.

The Dow Jones industrial average fell about 120 points in morning trading Thursday. The Dow and other major indexes lost more than 1 percent. Interest rates fell in the bond market as demand for Treasurys grew.

The weaker reports followed a bad second quarter for investors and came a day ahead of the government's June jobs report. That's an important date on investors' calendars because a rebound in jobs is needed for the economy to recover.

The government said initial claims for jobless benefits rose by 13,000 last week to 472,000. Economists had forecast claims would fall. That comes a day after payroll company ADP said private employers didn't ramp up hiring as much as expected last month.

Initial claims have remained well above the levels economists believe would indicate strong jobs growth. Many employers remain reluctant to hire because of worries about the pace of the economic recovery.

The market extended its early drop after the National Association of Realtors said the number of buyers who signed contracts to purchase homes fell to a new low in May following a rush of purchases to meet an April 30 tax credit deadline.

The Institute for Supply Management, an industry trade group, said its manufacturing index fell in June but that the sector still appears to be growing. The drop from May was steeper than analysts had expected.

John Canally, economist at LPL Financial in Boston, said traders were so scarred by the market's crash in 2008-09 that they see a slowdown as a sign that the economy is going to falter again rather than just slow as the recovery continues.

"You see this almost every time 12-15 months after the end of a recession. You hit sort of a soft spot," Cannaly said.

In late morning trading, the Dow fell 119.48, or 1.2 percent, to 9,654.54. The broader Standard & Poor's 500 index fell 15.92, or 1.5 percent, to 1,014.79, and the Nasdaq composite index fell 34.52, or 1.6 percent, to 2,074.72.

The Dow fell 10 percent for the April-June quarter, while the S&P 500 index fell 11.9 percent.

With the market so unsettled, investors are giving up potential big gains in stocks and opting for the smaller but safer gains that can be made in bonds.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.89 percent from 2.94 percent late Wednesday. Its yield fell below 3 percent this week for the first time in more than a year, a sign bond investors are concerned the economy could slip back into recession.

About five stocks fell for every one that rose on the New York Stock Exchange, where volume came to 477 million shares compared with 338 million traded at the same point Wednesday.

The Russell 2000 index of smaller companies fell 15.93, or 2.6 percent, to 593.56.

Overseas, Britain's FTSE 100 dropped 2.4 percent, Germany's DAX index fell 2 percent, and France's CAC-40 lost 3.4 percent. Japan's Nikkei stock average fell 2 percent.

http://finance.yahoo.com/news/Job-worries-hurt-stocks-at-apf-90609780.html?x=0

New rules for Wall Street must clear final hurdles

In final push on Wall Street rules, Congress tackles sticking points that could gum up reform

WASHINGTON (AP) -- They are the sticking points that would gum up the Wall Street overhaul. From big banks' exotic trades to the plastic in people's wallets, it only take a few of the most contentious issues to upend a careful political equilibrium as lawmakers try to blend House and Senate bills into a single rewrite of banking regulations.

The final measure, which President Barack Obama wants by July 4, is intended to prevent another financial crisis like the 2008 meltdown, which triggered a deep recession.

Rep. Barney Frank, chairman of a panel resolving differences in the two bills, and Sen. Christopher Dodd, who shepherded the Senate's measure, must fend off industry efforts to dilute the final legislation. And they will need to hold together a fragile Senate coalition that included only four Republicans.

Typically, legislation gets watered down in the Senate. This time, the Senate version emerged tougher than the House bill. Frank, D-Mass., agreed to make the Senate bill the base, with some minor House modifications.

There's momentum behind the Senate version.

"Throughout this process you have seen a desire by members not wanting to be seen voting with the banks," said Edward Mills, a financial policy analyst at FBR Capital markets.

The financial industry is no stranger to the lawmakers working on the legislation.

At least 56 industry lobbyists have served on the personal staffs of the 43 Senate and House members who will have a hand in shaping the bill over the next two weeks, according to an analysis by Public Citizen and the Center for Responsive Politics, two government watchdogs.

What's more, the center found that lawmakers on the committee settling differences between the competing House and Senate versions have received more than $112 million over two decades from political action committees or employees of industries affected by the legislation.

"It's going to be very difficult to stop special interests, working through some members of the conference, from inserting weakening provisions," said Travis Plunkett, legislative director of the Consumer Federation of America.

A look at the main issues to be settled:

Derivatives:

These are the complex, unregulated securities that many corporations typically use as a hedge against market fluctuations. For instance, an airline may try to soften the cost of a potential rise in fuel prices by betting in the derivatives market that fuel prices will rise. But derivatives have become instruments for risky speculation. The legislation would require that they be traded in regulated exchanges.

The toughest Senate provision would force banks to shed most of their lucrative derivatives business -- the trades they conduct for themselves and the markets they create for clients would have to be spun off into separate subsidiaries.

The proposal's chief advocate is Sen. Blanche Lincoln, D-Ark., who survived liberal and labor attacks during a hard-fought primary runoff largely by spotlighting her anti-Wall Street stance.

The Obama administration and bank regulators, including Federal Reserve Chairman Ben Bernanke, have said her proposal goes too far. Advocates say it would limit the type of risky bank behavior that led to the financial crisis.

Large banks are simply apoplectic, watching as it gains strength over time.

Lincoln's political success had two effects: It boosted her strength as a member of the House-Senate conference committee working on a compromise and it showed other Democrats that her Wall Street criticism worked in a tough political year for incumbents.

With seven Senate Democrats and five Senate Republicans on the conference committee, Frank and Dodd, D-Conn., can't afford to lose her vote.

Volcker Rule:

After the Great Depression, depository banks and investment banks had to be separate and independent enterprises. Congress and the Clinton administration changed that in 1999. Now, huge financial institutions such as Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America combine commercial and investment banking operations.

A Senate plan known as the Volcker rule, after former Fed Chairman Paul Volcker, would prohibit banks from betting on the markets with their own money. It would give regulators the authority to determine the best way to put into place that prohibition, which would apply to all securities trades, not just derivatives.

Unlike Lincoln's plan, it would not stop banks from creating trading markets for their clients.

Volcker is the proposal's leading champion. But he and several Democratic lawmakers want to strengthen the Senate bill by giving regulators less latitude to modify the prohibition. The idea has been pushed by Democratic Sens. Carl Levin of Michigan and Jeff Merkley of Oregon.

Prompted by a Securities and Exchange commission case against Goldman Sachs, their plan also would prevent financial firms from betting against securities they assemble for their clients.

Large banks see billions of dollars in trades slipping away. They prefer a House plan that merely says regulators could ban such trades. But Frank last week dashed those hopes.

"The general direction that Sens. Merkley and Levin were moving in is a direction that a lot of people are supportive of," he said. "The final version, we'll see. But it will be tougher than the House."

Debit card fees:

People in the U.S. use debit cards more frequently than credit cards. But their use costs merchants money: For every swipe, merchants pay 1 percent to 2 percent to banks and credit card networks such as Visa and MasterCard.

A proposal that passed the Senate 64-33 requires the Federal Reserve to limit those fees, and it has created a lobbying donnybrook between banks and retailers.

Most of the fees go to banking giants such as Bank of America and JPMorgan Chase. But the face of the lobbying effort has been small community banks and credit unions that say they will be disproportionately hurt if they lose such fees.

The proposal specifically excludes banks with assets under $10 billion. Officials at small banks say their banks still would have to lower fees to compete with bigger banks or drop their debit card programs.

Though the House did not take up the measure, the Senate vote sent a strong signal.

"When you have 64 senators voting for something like that after a lot of controversy it's unrealistic to think it's going to go away," Frank said.

Analysts say the measure could be amended, perhaps by expanding the conditions that the Fed would have to consider in setting the fees.

Consumer protections:

The final legislation will create a government consumer financial protection entity. This development was once considered the most contentious element sought by the administration.

The House bill exempted accountants, tax preparers, real estate agents and auto dealers from bureau oversight. The Senate bill has no such exceptions.

Auto dealers have lobbied fiercely to be excluded from the law's reach, arguing that they assemble loans but don't administer them. Obama has fought back, elevating the issue to a test of White House strength.

The Senate passed a resolution instructing negotiators to carve car dealers out of the bill, but that guidance isn't binding.

Consumer groups also want to strike a provision added by Sen. Olympia Snowe, R-Maine, that would require the bureau to consult with small businesses before proposing rules that could affect them. That would give businesses such as payday lenders a chance to affect rules before they are even proposed, according to thre groups.

That is a difficult area for Frank and Dodd because Snowe was one of just four Republicans who voted for the bill. Dropping her provision could give her cause to oppose it.

Online:

House Financial Services Committee: http://tinyurl.com/y4uercn

Senate Banking, Housing and Urban Affairs Committee: http://banking.senate.gov

Consumer Federation of America: http://www.consumerfed.org

Public Citizen: http://tinyurl.com/2a5zyn9

Center for Responsive Politics: http://tinyurl.com/23qbmwo

Brazil to your bank: How derivatives circle globe

How a derivative, little-understood but key to financial system, circles the world

NEW YORK (AP) -- Jonis Assmann, who grows soybeans on a farm in Brazil, is not sure exactly how financial derivatives work. But he's counting on them to help bring in next year's harvest.

Assmann is perpetually worried he will run short of cash if prices for his crops fall. So he tries to pay for some of his supplies at the start of the growing season with a fixed amount of soybeans that will be collected at the end.

His suppliers don't want to take on the risk of falling prices, either. But last month Philadelphia chemical maker FMC Corp. agreed to send Assmann all the insecticides and herbicides he needs in exchange for a third of his expected harvest.

Making the barter possible: A separate derivative that FMC, without Assmann's knowledge, got a bank to design. That side bet is designed to make sure FMC won't lose a penny if soybean prices fall.

"They seem very complicated," Assmann, 39, said when told about the derivative. "A poultry company here lost a lot of money in derivatives. I don't fully understand them."

Neither do most people, even though trade in many things we buy every day would slow or even stop without them.

Derivatives are private bets between two parties on how the value of assets like crops or measures like interest rates will change in the future. Most aren't traded on exchanges, and they're hard to value.

There's a derivative for nearly everything. You can bet that the Standard & Poor's 500 index will be higher in a year or the dollar will fall in value. You can bet that people of a certain age will die off faster than expected. A few creative financiers once devised a derivative that allowed you to bet on the value of future royalties from old David Bowie songs. Others came up with one to bet on how many basketball games the Utah Jazz would win in a year. And, yes, you can bet on soybeans in all their varieties -- crushed or ground, solid or oil, normal-sized or miniature.

For all the positives that investors see in derivatives, the investments can also be dangerous. Dubbed "financial weapons of mass destruction" by billionaire Warren Buffett, derivatives have been behind nearly every recent financial blowup from the bankruptcy of Orange County, Calif., in 1994 to the collapse of the housing market.

Two years after panic on Wall Street brought the economy to near-collapse, Congress is finalizing a sweeping overhaul of laws governing the financial services industry. Legislation is pending that would regulate derivatives for the first time -- and could make derivatives like FMC's difficult to execute. House and Senate negotiators will begin crafting the final bill this week. President Barack Obama hopes to sign it into law by July 4. Both the House and Senate versions would require users or middlemen to set aside money in case their derivatives generate big losses.

Supporters of the legislation say regulation is needed to prevent another meltdown. But opponents say regulation will make it too expensive for companies such as FMC to hedge their risk and will throw sand into the gears of commerce. That's because derivatives affect the price of nearly everything we buy -- a steak at a restaurant, bread at the supermarket, gas for our cars.

"There isn't a thing you use that isn't somewhere hedged by derivatives," said Lee Prisament, a doctor who ditched medicine 20 years ago to design derivatives at banks like JPMorgan Chase & Co. "The average Joe benefits from them without even knowing it."

Derivative contracts worldwide have a value of $700 trillion, or 10 times the worth of all the goods and services produced in the world in a year. Speculators are behind much of this market. But derivatives' popularity also reflects fear at companies that they could get walloped by unexpected changes in the prices of things they buy or sell.

In the case of the Brazilian soybeans, the fear showed up in a most unlikely person.

Scion of a proud farming family of German descent, Assmann greets visitors with a firm handshake and exudes confidence when talking about business. He boasts that he's "usually 80 percent right" guessing where soybean prices are heading. But that other 20 percent can sock him with big losses.

Five years ago, Assmann was caught by surprise when prices for soybeans dropped on world markets. He lost $1 million, had to lay off a dozen workers and found himself scrambling for cash to pay suppliers, including makers of herbicide and insecticide. This year, because of the crops-for-chemicals deal, Assmann hopes his scrambling days are over.

On a sunny day in April, Marina Fusco, an FMC analyst in Brazil, grabbed her laptop and jumped in a pickup for a four-hour drive to Assmann's farm in the big agricultural state of Mato Grosso do Sul, west of Sao Paulo. She was ushered into his office to answer a seemingly simple question: If FMC's chemicals cost $660,000, just how many bushels should he eventually hand over?

The answer isn't easy because Assmann will start planting in November and won't harvest until May next year. It's anyone's guess what the price of soybeans will be then. The soybean futures market at the Chicago Board of Trade provides one clue. But futures fluctuate every second, and those changes over tens of thousands of bushels can translate into big money.

So Fusco and Assmann haggled, stealing glances at their computers to check prices for Chicago futures due in May 2011. Fusco threw out a few numbers and fired off a half-dozen e-mails to staffers at her Brazilian office and in Philadelphia to double-check her math. After an hour, the two agreed to value the soybeans at roughly $10 a bushel regardless of what the market price is next year. Translation: Assmann would have to hand over 66,000 bushels in exchange for FMC's chemicals.

The two signed a single-page contract stipulating terms like the warehouse to which Assmann must send the soybeans when they're harvested. Now it was up to one of Fusco's colleagues in Philadelphia, Julian Treves, to prevent FMC from losing money if soybeans are worth less than $10 a bushel when the company receives Assmann's crop. Here is where derivatives come into the story.

Treves called Citigroup Inc. in Houston. Within 10 minutes, he agreed to pay Citi $3,000 to design a derivative to protect FMC. If the price of soybeans is below $10 in a year, Citi must pay the difference to FMC. If the price is above $10, FMC must give the difference to Citi.

Banks like Citi, in turn, typically transfer their risk by finding a company that regularly buys soybeans and wants to lock in prices a year ahead of time at $10. In Wall Street parlance, FMC and Citi are hedged -- protected against the hard-to-predict price fluctuations.

Even the harshest critics of derivatives are fans of such hedging. Locking in a stable price for a key raw material allows a manufacturer or a retailer to avoid raising prices on a host of products, from coffee at Starbucks Corp. to clothes at a department store.

"You shouldn't tar all derivatives with the same brush," said Frank Partnoy, a former derivatives trader who lashed out at them in his book "Infectious Greed." "It's hard to think of the world without them."

The problem is, derivatives can also be used to gamble. That's because you don't have to own the asset that a particular derivative tracks. Say that FMC just had a hunch that soybean prices would fall. It could have entered into soybean futures contracts in hopes of making a little money on the side.

American International Group Inc. nearly collapsed in 2008 thanks to such side bets. Though largely an insurer, AIG gambled hundreds of billions via derivatives that homeowners with bad credit would continue making payments on their mortgages. What's more, it didn't set aside much money in case it was wrong and had to pay parties that took the other side of the bet that these homeowners would stop paying.

When homeowners did stop paying during the housing crash, AIG suffered huge losses. Taxpayers had to fork over $182 billion to keep the company afloat.

The financial overhaul bills passed by the Senate and the House won't outlaw the kind of speculation AIG did. But they will force AIG and many other derivative users to put money aside. The goal is to prevent another financial meltdown.

The Senate version would require banks that take people's deposits or borrow from the Federal Reserve to put their derivatives-trading units into separately funded subsidiaries walled off from their other businesses. The House version would not. In addition, both bills would replace many private deals like FMC's with one-size-fits-all contracts that trade on public exchanges where everyone could see prices. The two versions would allow some companies that are hedging, not gambling, to continue with their customized deals.

If FMC were forced to use an exchange, it would be able to hedge soybeans only in standardized units of 5,000 bushels. Thus it could have hedged only 65,000 bushels, not the 66,000 it will own after Assmann's harvest. That would have left FMC exposed to losses on a 1,000 bushels if prices fell under $10 in a year. Since FMC has struck similar deals with dozens of other Brazilian farmers, the losses could add up.

Also, many standardized contracts only allow hedging on prices for certain months in the future. In the case of soybeans, FMC can enter into contracts that expire in May 2011 when Assmann harvests his crops but not in four other months of the year. Some of the farmers bartering with FMC harvest their crops later in the long Brazilian growing season during months for which standardized contracts don't exist.

Finally, the two bills would force bank middlemen, like Citi in FMC's case, to set aside money in case either party to a derivative can't pay up.

"If Citi has to hold higher reserves, Economics 101 says they'll pass those costs on to us," said FMC treasurer Tom Deas.

Despite the likely change in rules, derivatives will remain popular. The fear of something going wrong, and the desire to hedge against it, is just too powerful.

Since his barter with FMC, Assmann's fear of falling prices has started to come true. Investors on the Chicago Board of Trade now predict soybeans in May 2011 will fetch closer to $9 than $10. Says the otherwise confident farmer, "You can never be 100 percent sure."

Chrysler recalls almost 700,000 Jeeps, minivans

DETROIT (AP) -- Chrysler is recalling almost 600,000 minivans and Jeep Wranglers in the United States and another 100,000 elsewhere because of brake or wiring problems that could create safety issues, the company and federal regulators said Monday.

Chrysler said it is recalling 288,968 Jeep Wranglers from the 2006 through 2010 model years due to a potential brake fluid leak.

It also is recalling 284,831 Dodge Grand Caravan and Chrysler Town & Country minivans from the 2008 and 2009 model years because a wiring problem can cause a fire inside the sliding doors.

Another 76,430 Wranglers and 34,143 minivans are being recalled in Canada, Mexico and other international markets, Chrysler said.

Neither problem has caused any crashes or injuries, Chrysler Group LLC said.

It was the second notable recall in the past week for Chrysler. The company recalled nearly 35,000 Dodge Calibers and a limited number of Jeep Compasses last week to fix a potential problem with sticky gas pedals, the same issue that has afflicted millions of Toyotas.

In the latest recall, the front inner fender liners on the Jeeps can rub against the brake fluid tubes and cause a leak. The National Highway Traffic Safety Administration said the leak could lead to a partial brake loss.

The minivans can have improperly placed wires that can come into contact with sliding door hinges that could cut through the insulation, Chrysler and NHTSA said.

Chrysler spokesman Nick Cappa said the defect could lead to a fire inside the minivan door "in rare instances."

Chrysler will notify owners and dealers about the repairs, which will be made free of charge. The recall is expected to start later this month.

The Wranglers affected by the recall were made from May 15, 2006 through Aug. 9, 2010, according to NHTSA. The minivans were made from February 2007 through September 2007.

Associated Press Writer Ken Thomas in the Washington, D.C., bureau contributed to this report.

Ted Koppel's Son Found Dead

Ted Koppel's son Andrew has died -- reportedly after a drinking binge in NYC.

The 40-year-old was found unconscious and not breathing in an apartment in Washington Heights early Tuesday morning -- and he was pronounced dead on the scene.

According to the Post, Koppel had been drinking all day with Russell Wimberly, a 32-year old waiter he'd just met.

The two ended up at the apartment of one of Wimberly's friends, where he says he told Koppel to sleep it off.

Wimberly and friend Belinda Caban later discovered Andrew wasn't breathing and called 911.

Andrew was Ted's only son.

Dumbest Things You Do With Your Money

Brad Klontz knows all about the dumb things that smart people do with their money: He's a smart guy (with a doctorate in psychology) who lost half of his assets in the technology stock bubble.

A financial psychologist, Klontz says that when it comes to money smarts, size matters: The logical part of your brain is so much smaller than the emotional side that it's like "a circus performer riding an elephant." To make smart decisions about your finances, you need the logical side to dominate. But once you get tweaked by greed or fear, that elephantine emotional brain is likely to run amok.

More from MoneyWatch.com: • Deal or No Deal? 8 Lousy 'Bargains' • 5 Things You Should Buy at Wal-Mart • Dumbest 401(k) Mistakes to Avoid

That's why otherwise intelligent people chase get-rich fantasies. Or cling to stocks that are long past their expiration dates. Or find other ways to let fear and superstition keep them from smarter financial moves. Here are nine of these common, emotionally driven money mistakes — plus some tricks from experts for getting that elephant in line.

1. Falling in Love ... With Your Investments

It can be great to fall in love with a person, but stocks can get you into deep trouble. Newport Beach, Calif., financial planner Laura Tarbox says she sees this all the time: Some clients keep concentrated stock holdings because they inherited them and "Mom just loved IBM," or because they work for the company and feel that selling would be disloyal.

Then there's the couple who came to her asking for help investing $12 million. "That sounded really great until we found out that this couple used to have more than $1 billion," Tarbox says. "All their money had been invested in a company that the husband helped launch — and he couldn't convince himself to diversify when he walked away."

Sorry, but that relationship just won't work, says Tarbox. No one should have more than 10 percent of his or her wealth locked in one stock. Just ask the former employees of Enron, who lost both their jobs and their retirement savings when the company filed for bankruptcy 10 years ago.

Popular Stories on Yahoo!: • 7 Cities With Great Real Estate Deals • Little-Known Island Paradises • How Pinching Pennies Can Backfire More from Yahoo! Finance

2. Chasing a Fantasy

You've read it 100 times: "Past performance is not an indication of future returns." But no one appears to believe it. Purveyors of investment data can trot out tons of statistics showing that when a mutual fund or asset class (such as gold, emerging markets stocks, or junk bonds) gets singled out for great quarterly or annual returns, investors start to pour money into that investment like it was going out of style.

And, of course, it is. One extensive study that looked at 19 years of market data found that investors consistently poured money into "hot" investments just as they were about to turn cold. That left the average investor with returns that fell way below the market as a whole and didn't even keep up with inflation. (For more on this, see our recent story "The Biggest Mistake Investors Make.")

Klontz admits that this is why he lost his shirt in technology stocks. It's a natural inclination to "run with the herd," he says with a shrug. Maybe so, but if you don't want to get trampled, you have to devise an investment strategy that suits your goals and then stick to it, even as your neighbor gets (temporarily) rich on the investment du jour.

3. Equating "On Sale" With "Good Deal"

Consider two television sets: Both are $500, but one is marked down from $800. Which one do you buy? If you're being reasonable, you buy the one that got the better rating in Consumer Reports. But most people buy the one that's on sale, says Matt Wallaert, a consultant for LendingTree, which owns the money management Web site Thrive. In fact, even people who would never have spent $500 on a television often will when it's discounted — simply because it's so cheap!

In reality, $500 is $500. If you wouldn't normally spend that much on a television (or any product, for that matter), you shouldn't do it now. We've been fooled by "anchoring": the illogical, but nearly inescapable, tendency to base our estimates of value on the nearest number we see, rather than an independent assessment. Just because the tag has $800 crossed out and replaced by $500, that doesn't mean $800 was a meaningful price. Indeed, an MIT experiment revealed that students who wrote down the last two digits of their Social Security numbers based their estimates of a wine bottle's worth on those two random numbers. The higher their numbers, the more the students were willing to bid for the wine.

Before you pull out your checkbook to splurge at a sale, evaluate whether the product, be it a television or a bread machine, is worth that price in enjoyment. Consider how often you'll use it, for instance, and whether you can get something of similar quality for less.

4. Retaliatory Spending

You don't need it. You don't want it. But, dang it, no one is going to tell you that you can't have it. New York psychologist Bonnie Eaker Weil calls it "POP" spending — for "pissed-off purchases." She did a survey before publishing her latest book, Financial Infidelity, and estimated from the results that POP spending accounts for about $424 billion in purchases each year.

One of Weil's Brooklyn-based clients, for example, went on a retaliatory $500 shopping spree when her husband gave one of her beat-up old jackets to charity without asking her first. When she got home, she informed him that since he didn't like her old jacket, she had gotten a new one from Saks Fifth Avenue. Such purchases can also result from a fight with your boss, mother, or best friend, according to Weil.

But as good as retaliatory spending may feel, it can do real damage to your financial health. Tarbox says a better approach is to talk out the anger, hurt, or disappointment — or just your bad day — with a friend, or even a professional counselor. If you have to spend money on a psychologist, it's probably still cheaper than the golf clubs or designer shoes you put on your credit card after that last argument with the boss.

5. Hanging On to Debt

The number of people who have money in savings accounts, earning less than 2 percent, while carrying debt on credit cards that charge more than 14 percent is "shocking," Wallaert says. Of Thrive's customers who have more than $500 in credit card debt, almost 40 percent have more than enough in savings to pay it off, he says.

Wallaert connects this mistake to "mental accounting" that separates our money into different stacks that we think ought to stay separate. But illogical separations can create mathematical mayhem.

Consider a person with $5,000 in credit card debt and $10,000 in savings. The debt costs him 14 percent per year, or $700, but the $10,000 in savings earns just 2 percent annually, or $200. He could pay off the debt, saving the $700, and still earn $100 annually on the remaining $5,000 in savings. Net result: He's immediately $600 richer and can start saving faster.

You might argue that you need those savings for emergencies. And you do need some emergency savings, allows Frank C. Presson III, a financial planner in Tucson, Ariz. But if you've got considerably more savings than debt, there's no excuse. Keep one month's worth of living expenses in the bank, even at those sorry returns, Presson advises. Use the rest to pay off the high-cost debt. Then rebuild the emergency savings, not the debt. Worst-case scenario: You still have the credit cards (now with zero balances), and you can tap them in an emergency.

6. Parental Martyrdom

An emerging problem involves parents who spend themselves to the edge of insolvency bailing out their children. "It starts from a good place, basically from wanting to be a good parent," Klontz says. "They'll say that Johnny is going through a rough patch and needs some help. But it becomes financial enabling."

Worse, it often causes the parents to suffer money woes that keep them from retiring or living comfortably because they're constantly paying Johnny's bills.

Any time you help an adult child, you should have a clear idea of how much help is necessary, how long it will be required, how it will help the child get back on his or her feet, and when (or whether) the child will have to pay you back. When there's no plan — just an open checkbook or couch — you turn the child into a dependent who becomes increasingly incapable of taking care of himself, Klontz says.

"I talk to the parents about how their attempts to help are like giving a drink to an alcoholic because his hand is shaking. This kind of helping is hurting," he says. "Then we talk about what kind of help would really help." (Hint: That kind generally doesn't involve cash.)

7. Cyber Insecurity

Roughly half the world has signed on for free online banking, which makes money management easier and saves the typical consumer about $50 annually in postage stamps. Among the people who don't use online banking, 41 percent say they've held back because of security concerns, according to a recent survey by Gartner Research.

What do banks typically do to secure online customer accounts? They put up multiple firewalls, which are the equivalent of brick enclosures around your house, and they have techno-security teams attempting to find the weak spots and shore them up. They also patrol the firewalls 24/7, looking for climbers.

Now, let's look at your mailbox. It's probably unlocked and unguarded — just what a thief needs to steal your credit cards. In reality, the chance of becoming a victim of identity theft or financial fraud as the result of low-tech crime — whether it's somebody stealing cards or "spoofing" you into providing private information via e-mail — is a lot greater than the chance that somebody will breach your bank's online vault.

So sign up already and save the stamps. And if you're worried about security, check your account regularly to make sure there's no suspicious activity.

8. State of Denial

Remember when you were 2 years old and you thought you could hide by closing your eyes? When the stock market plunged last winter and spring, that's just what investors did, leaving their quarterly statements sitting unopened on the counter.

If watching too closely would make you abandon a reasoned investment strategy, go ahead and ignore a statement or two. But losses don't go away just because you don't look at them, Tarbox points out. At some point, particularly if you're nearing retirement or need the dough for some other reason, you need to take a look, assess where you are, and figure out what to do about it.

9. Hoarding Money

Children of the Depression did a lot of this — stuffing $20 bills in their bibles or balling up tinfoil and rubber bands so they wouldn't have to buy more. But planners say that this is often a problem with wealthy and responsible older folks today: They're so afraid of running out of money that they don't enjoy the money that they have.

"When people deny themselves things that they could clearly afford, you have to ask them what they're saving that money for," Tarbox says. "We have to tell them that they're not spending enough."

If you're worried about running out of money, sit down with a financial planner and work out the math. Make sure you consider worst-case investment scenarios, not just the averages. That will make you more comfortable about weathering a bad patch like the one we just muddled through. Then, if you still have more than enough, make a plan that will allow you to enjoy your wealth by either spending the excess or giving it away.

Money, after all, is a means to an end — not the end itself. You save it to make you, and the people you love, calm and comfortable. And it's a lot more fun to take the kids and grandkids on vacation — or provide them with college money or other gifts while you're around to get the hugs and kisses — than to know that they'll inherit a fortune after you die.

Pamela Anderson on 'Dancing with the Stars'

India unexpectedly hikes rates a quarter point

India's central bank unexpectedly hikes key interest rates a quarter point on inflation fears

MUMBAI, India (AP) -- India's central bank has unexpectedly hiked key interest rates a quarter of a percentage point, as the bank tries to cool high inflation amid a faster-than-expected economic rebound.

The bank raised the benchmark repo rate -- at which the central bank makes short-term loans to commercial banks -- to 5 percent and raised the reverse repurchase rate -- the rate at which it borrows from commercial banks -- to 3.5 percent, with immediate effect.

"These measures should anchor inflationary expectations and contain inflation going forward," the Reserve Bank of India said in a statement after trading hours Friday. "As liquidity in the banking system will remain adequate, credit expansion for sustaining the recovery will not be affected."

Most economists had expected a rate hike, but not until the bank's scheduled policy meeting on April 20.

The bank said robust growth in manufacturing, a revival of investment, expanding exports and increasing bank credit gave it confidence that economic growth is consolidating.

Inflation, however, has become a growing concern. Headline Wholesale Price Index inflation for February was 9.9 percent, higher than the bank expected, and inflation is spreading from drought-induced high food prices into other sectors of the economy, like manufactured goods.

"With rising demand side pressures, there is risk that WPI inflation may cross double digits in March 2010," the bank said.

This is the bank's first rate hike since it began implementing aggressive monetary stimulus measures in the wake of the global financial crisis.

Beginning in September 2008, the Reserve Bank cut the benchmark repo rate from 9 percent to 4.75 percent, and slashed the reverse repurchase rate from 6 percent to 3.25 percent. It also cut the cash reserve ratio -- the amount of cash banks must keep on hand -- by 4 percentage points.

The bank began to unwind that stimulus in January, by raising cash reserve requirements three-quarters of a percentage point, to 5.75 percent.

Gas the next fuel to fire Australia's boom

KARRATHA, Australia (AP) -- First gold, then coal and iron ore. Now, a new bonanza is about to be unleashed from beneath Down Under: Australia's got gas.

Projects being ramped up to tap huge undersea fields off the country's northwest could quadruple Australia's exports of liquefied natural gas in the next few years and turn it into what the country's resources minister has called an "energy superpower."

It will be the next stage of a long boom that has enriched Australia and made it a key supplier of the raw materials underpinning Asia's development -- from the girders in city skyscrapers to the fuel burned to light them.

"We have what the world, and particularly the rapidly growing economies of Asia, want -- iron ore, energy and minerals," said Colin Barnett, the premier of Western Australia state, which is at the heart of the new boom.

The mostly desert state has become known for a frontier atmosphere not unlike that of Australia's 19th century gold rush, the country's first mining boom that drew enough migrants to almost triple Australia's population within a decade.

As a major source of the materials driving Asia's economic surge, Australia has increasingly been drawn into the orbit of emerging giants China and India, spawning tensions and discord. There are also nagging worries over economic overheating and long-lasting environmental damage caused by its thriving resource industry.

Gas was discovered off Australia's remote northwest coast in the 1970s. But its exploitation has lagged behind iron ore and coal that have been easier to get and more in demand.

Now, gas is gaining popularity as a cleaner-burning alternative to coal in power generation, with a fraction of the greenhouse gas emissions.

The biggest boost in the sector came last September, when Chevron and joint venture partners ExxonMobil and Royal Dutch Shell announced they would go ahead with the massive Gorgon project.

The venture will drill fields about 80 miles (130 kilometers) offshore to tap into an estimated 40 trillion cubic feet of gas, build pipelines and a liquefaction plant and port for about AU$43 billion ($41 billion) -- roughly the size of Guatemala's gross national product.

If that sounds big, the numbers stack up. The decision to proceed came on the heels of news that ExxonMobil Corp. had signed a 20-year deal worth about AU$50 billion to supply PetroChina Co. with LNG from its share of Gorgon. Similar deals for Gorgon gas worth another AU$70 billion were struck with power companies in Japan, South Korea and India.

The Australian government says Gorgon could generate exports worth AU$300 billion during the next 20 years. And that's just one project. There are at least a half dozen other large gas plans in the works, including Australian company Woodside's $12 billion plan to tap the Browse fields holding an estimated 20 trillion cubic feet of gas.

Yet even as the projects pile up, Australia is trying to tamp down strains with China that have taken some of the gloss of its mineral and energy endowments.

On Monday an Australian executive of mining giant Rio Tinto will face court in China charged with stealing commercial secrets in a trial Australian lawmakers are concerned is linked to Beijing's unsuccessful campaign to get lower iron ore prices. The case has added to unease about close China relations after a string of deals for state-owned Chinese firms to buy into Australian resource projects.

Other problems are local but no less intractable.

Gorgon, Browse and some of the other big deposits lie off the Pilbara, a remote Outback region of Western Australia that is buffeted by a half-dozen cyclones a year and where temperatures can soar to 118 degrees (48 C).

Western Australia's few urban areas are already bursting at the seams because of the mining boom. A five-hour flight across nearly unbroken desert from Sydney, the state capital of Perth can't build hotels fast enough to keep up with demand, and cranes building office towers dot the skyline.

A severe worker shortage means companies compete for just about everyone from mine site managers to truck drivers -- who can earn more than AU$120,000 a year in salary and a rest and recuperation flight to Perth every month.

One of the main supply towns is Karratha, a sweltering collection of houses and a few shops and pubs nestled between hills covered in spinifex and boulders of a deep-maroon color that belies the iron content within.

It's more than 1,000 miles (1,800 kilometers) from the nearest city, surrounded by some of Australia's harshest territory, and there's almost no one here but miners. A bungalow with a pool can set you back AU$2,000 a week in rent.

"It's gone bloomin' overboard," said Jim Holland, a driver and 40-year-veteran of mining in the region. "The house down the road from me sold the other week for $900,000, three bedrooms."

Holland is one of the lucky ones. Rio Tinto in the 1980s offered to sell some company-owned houses to longtime workers for around AU$45,000, and he took it up. Before too long he plans to sell up and retire in comfort to Thailand.

The federal government has appointed a task force to find ways to fill an expected shortfall of 70,000 construction workers in the resource sector in the next decade, with fast tracking of visas for skilled migrant workers -- likely from Asia and the Middle East -- a key consideration.

Gorgon alone is expected to create 10,000 jobs -- including several thousand workers during construction on currently uninhabited Barrow Island.

Conservationists say the government should never have approved Barrow Island as a site for the liquefaction plant. The nature reserve is home to species such as the flatback turtle and the burrowing bettong, a rat-like kangaroo that no longer survives on the mainland.

"I don't see how you can have a safe operating environment for an industrial facility and also create the natural dark conditions that turtles need in order to not be disturbed from their natural nesting," said Gilly Llewellyn, the World Wildlife Fund's conservation manager.

Chevron says the plans for Gorgon avoid conservation sites and the project is environmentally friendly because it includes plans to inject polluting carbon dioxide gases into an underground trap. Chevron did not respond to requests for an interview.

Environmental concerns about the industry deepened last year after fire erupted on an oil and gas rig at a different field off the northwest coast and burned unchecked for more than two months, spilling thousands of barrels of oil into the sea.

On Barrow Island, the first signs of Gorgon are starting to show. Shipping containers -- entirely shrink-wrapped to prevent mainland pests such as rats or cockroaches being introduced -- are being unloaded and scrub cleared for an accommodation camp, said Anne Nolan, a state government official who visited this month.

Before long, it will be a bustling scene of more than 3,000 people working around the clock.

Obama on the brink of a health care reinvention

WASHINGTON – Rarely does the government, that big, clumsy, poorly regarded oaf, pull off anything short of war that touches all lives with one act, one stroke of a president's pen. Such a moment now seems near.

After a year of riotous argument, decades of failure and a century of spoiled hopes, the United States is reaching for a system of medical care that extends coverage nearly to all citizens. The change that's coming, if Sunday's tussle in the House goes President Barack Obama's way, would reshape a sixth of the economy and shatter the status quo.

To the ardent liberal, Obama's health care plan is a shadow of what should have been, sapped by dispiriting downsizing and trade-offs.

To the loud foe on the right, it is a dreadful expansion of the nanny state.

To history, it is likely to be judged alongside the boldest acts of presidents and Congress in the pantheon of domestic affairs. Think of the guaranteed federal pensions of Social Security, socialized medicine for the old and poor, the civil rights remedies to inequality.

Change is coming, it now appears, but in steps, not overnight. The major expansion of coverage to 30 million people — powered by subsidies, employer obligations, a mandate for most Americans to carry insurance, new places to buy it and rules barring insurance companies from turning sick people away — is four years out.

In contrast, on June 30, 1966, after a titanic struggle capped by the bill signing a year earlier, President Lyndon Johnson launched government health insurance for the elderly with three simple words, as if flicking a switch: "Medicare begins tomorrow."

Obama practically needs a spreadsheet to tell people what's going on and when.

Yet if the overhaul goes through, he and LBJ will share a distinction: the only two presidents to succeed with a transcendent health care law.

You can be sure Obama, a student of history, is aware of how LBJ captured the moment when Medicare became law with his pen. That happened in Independence, Mo., in the presence of the very first American to sign up for the program: Harry Truman. The ex-president had ended a world war but could not achieve national health insurance in his time.

"Care for the sick, serenity for the fearful," Johnson promised that day. "In this town, and a thousand other towns like it, there are men and women in pain who will now find ease."

Said Truman: "I am glad to have lived this long."

Ted Kennedy lived long enough to see a goal of his lifetime take shape but not long enough for it to happen. His death last summer was almost the death of the whole plan because a Republican won his Senate seat, changed the voting balance and left despondent Democrats in search of a second wind, which they found.

Why is this so hard? In part, because self-reliance and suspicion of a strong central government intruding into people's lives are rooted in the founding of the republic, and still strong.

The colonial insurgents who dumped British tea into Boston harbor inspired the name and agitating spirit of today's tea party protesters, who rolled a taped-together health care bill up the Capitol steps like toilet paper to show their disdain. "Grandma's not Shovel-Ready," said one of their signs last week, playing off a fear the aged will see their care rationed away.

In 1854, President Franklin Pierce vetoed a national mental health bill on the basis that it would be unconstitutional to treat health as anything but a private matter that is none of the government's business.

Seventy-five years later, the American Medical Association denounced proposals for organized medical services as an "incitement to revolution" at the hands of "Medical Soviets."

And that wasn't even about government-run health care. The AMA's fierce opposition to collectivism included objections to private health insurance, the norm today, and the pooling of doctors into what became health maintenance organizations decades later.

No wonder would-be health reformers were thwarted one generation after another even as they made deep imprints on the nation in other ways.

Teddy Roosevelt couldn't do it — and he's carved into Mount Rushmore.

Franklin D. Roosevelt rewrote the social compact with his job and retirement security and regulatory expansion, all in the jagged teeth of the Depression, then took the nation to war. He made national health insurance a second-tier priority and it eluded him.

Even so, social responsibility for medicine grew.

In 1930, citizens paid nearly 80 percent of the nation's medical costs from their own pocket. Government at all levels covered a mere 14 percent, with industry and philanthropy picking up the few remaining crumbs. Insurance was barely in the picture.

Federal and state programs now cover half the cost of health care purchased in the country and are expected to go over 50 percent in the next year or two, even absent Obama's plan. By that measure, the government takeover of health care that opponents warn about is happening regardless of what's about to happen next.

Why the creep of government in health care? In part, because individualism isn't the entire American story. The idea of watching out for each other is also in the nation's fabric.

Besides, as much as Americans hate overbearing government and higher taxes, give them a federal benefit and then just try to take it away. Today's hot potato becomes tomorrow's cherished check.

That's one reason government programs grow — and why Democrats dared to push for a less than popular package mere months from congressional elections, when people were telling their leaders to create jobs instead.

Johnson, full of beans after his Medicare victory, realized all of this.

"The doubters predicted a scandal; we gave them a success story," he crowed a month after the law took effect, as hundreds of thousands of patients entered hospitals for treatment covered by the government and some 6 million children and needy adults began getting benefits.

"Where are the doubters tonight?" he asked. "Where are the prophets of crisis and catastrophe? Well, some of them are signing their applications; some of them are mailing in their Medicare cards because they now want to share in the success of this program."

Obama can only hope for such a first-blush reception. He took on the cause of universal coverage after a campaign in which he did not promise it, intending only to secure insurance for all children and shrink the pool of uninsured adults. His health care ambition grew in office, quickly.

More than a quarter century before, Ted Kennedy came close to the prize with none other than the Republican president, Richard Nixon, who embraced ideas that mainstream Republicans today cannot tolerate. Nixon was ready to force businesses to provide health insurance to their workers or pay heavy penalties.

Sound familiar? It will.

At its core, Nixon's proposal is a pillar of Obama's plan today. Nixon's willingness to subsidize coverage for the working poor is also seen in the plan, though writ larger.

Back then, Kennedy's union and liberal allies gambled that by spurning Nixon, they'd get something better later. They didn't. In similar fashion years after that, President Bill Clinton aimed high and crashed hard.

Clinton no doubt drew on his own failure when, in December, he advised Democrats to pass what they could manage and not make it an all-or-nothing fight. "America," he said, "can't afford to let the perfect be the enemy of the good."

Obama absorbed these lessons.

For him, a system with government as the sole or principal payer of everyone's medical bills was a nonstarter, nice for the ideologues and other countries but not the American way. He would have liked the option of a government-run plan competing in the marketplace, but didn't need it.

For months he stood so far back from the legislative nitty-gritty that it was hard to tell what he stood for.

In the end, he stood for more than the incremental steps that succeeded in the past, and for less than the towering ideas that failed.