Friday, June 6, 2008
Peak Oil: Gas Prices, Oil Supply Depletion & The New Energy Crisis: SU... DetailsCommentsMore from userPeak Oil: Gas Prices, Oil Supply Depletion & T
Stocks fall sharply on surge in oil, jobs data
By TIM PARADIS, AP Business Writer
NEW YORK - Wall Street tumbled Friday, taking the Dow Jones industrials down nearly 400 points, on a pair of alarming economic developments: oil prices that shot up by more than $11 a barrel and approached $140 for the first time, and the biggest gain in the government's unemployment reading in more than 20 years.
The jump in oil to a price that might have seemed unfathomable only a few months ago appeared to wipe out investors' recent optimism over the prospects for a strengthening of the economy. Oil jumped following a Morgan Stanley analyst's forecast of $150 oil by July 4, and in response to a drop in the dollar and fresh tensions in the Middle East.
The surge in oil seemed the guarantee that gasoline prices that are on the verge of a national average of $4 a gallon will only continue to climb, putting additional pressure on consumers who have been forced to forgo discretionary purchases in order to pay for gas and other basics. Moreover, consumers who can't find work or who are worried about losing a job will be even more hesitant to spend on extras.
Wall Street has been worried of late that a pullback in consumer spending will deal a blow to the economy, as Americans' expenditures account for more than two-thirds of U.S. economic activity. So Friday's surge in oil convinced many investors to pull money out of stocks that suddenly seemed too risky.
Crude oil saw a huge rebound during the week after falling amid a drop in demand for gasoline. The biggest gains came Friday, with light, sweet crude setting a high of $139.12 in after-hours trading on the New York Mercantile Exchange. Oil settled at $138.54, a gain of $10.75 for the regular session; that was the biggest one-day advance for oil in the history of the Nymex.
The spike in energy prices came as the Labor Department said the nation's unemployment rate jumped to 5.5 percent in May from 5.0 percent in April. It was the biggest monthly increase since February 1986 and the rise leaves unemployment at it highest level since October 2004. Wall Street had predicted an uptick to 5.1 percent.
The number of U.S. jobs shrank by a smaller-than-expected 49,000, but that development offered Wall Street little solace as May marked the fifth straight month of jobs losses.
But the sudden spurt in oil appeared to weigh most heavily on Wall Street. The increase, fueled in part by a weak dollar, also came after an Israeli Cabinet minister hoping to replace Prime Minister Ehud Olmert was quoted as saying Israel would attack Iran if it doesn't abandon its nuclear program.
"I think the biggest concern right now is oil and it's potential for a stagflationary environment," said Bill Knapp, investment strategist for MainStay Investments, a division of New York Life Investment Management. Stagflation occurs when stalling growth accompanies rising prices.
The headwinds facing the economy sent the Dow Jones industrial average down 394.64, or 3.13 percent, to 12,209.81; it was down by as much as 412 points at its low of the session. The decline was the worst percentage and point drop since Feb. 27, 2007, when the blue chips dropped 416.02 points, or 3.29 percent, amid concerns about souring debt and an economic slowdown.
Broader stock indicators also fell sharply Friday. The Standard & Poor's 500 index lost 43.37, or 3.09 percent, to 1,360.68, and the Nasdaq composite index fell 75.38, or 2.96 percent, to 2,474.56. The day's declines were the steepest percentage losses for the S&P 500 and the Nasdaq since Feb. 5 this year.
The Dow Jones Wilshire 5000 Composite Index, an index that measures a wide swath of the U.S market, fell 2.9 percent Friday, a paper loss for the day of about $500 billion.
Investors' nervousness was clear. The Chicago Board Options Exchange's volatility index, known as the VIX, and often referred to as the "fear index," jumped 26.5 percent Friday.
Friday's pullback came a day after the Dow jumped nearly 214 points, its largest daily point gain since April 18 and a reaction to better-than-expected sales from retailers and a dip in weekly jobless claims. The welcome economic news helped investors shrug off a more than $5-a-barrel jump in oil prices. But the advance in oil Friday made it clear to Wall Street that ascendent energy prices posed a serious threat to consumer spending and the economy.
Friday's session capped an erratic week for the markets. Stocks fell Monday and Tuesday before moving sideways Wednesday and surging Thursday. The back-and-forth moves left the Dow down 3.39 percent for the week, the S&P 500 off 2.83 percent and the Nasdaq with a loss of 1.91 percent.
Bond prices jumped Friday after the weak jobs data sent investors scurrying for safety. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.91 percent in late trading from 4.04 percent late Wednesday.
The dollar declined against other major currencies — a move that makes each barrel of oil more expensive. Gold prices jumped.
Knapp remains skeptical of the reasons behind the run-up in oil.
"The supply demand dynamics just don't warrant where we are today. It's becoming incredibly hackneyed to say it's all coming from demand in China," he said. "I think the consensus is that something is going to come along to deflate this commodity bubble and put the stock market back on track."
And the worries about employment and oil may be intertwined.
Ethan Harris, Lehman Brothers' chief U.S. economist, contends that the jobs report helped drive oil prices higher. He said traders are worried that the increase in unemployment would leave the Federal Reserve unwilling to raise interest rates. A notion of a Fed with few options combined with comments from the European Central Bank this week on the possibility of rate hikes have hurt the dollar.
"The weaker dollar is pushing up oil prices because oil is denominated in dollars and oil sellers want to be compensated for the weaker dollar," Harris said, adding that he thinks the market's moves have been overdone.
"While I'm skeptical of the whole thing in terms of whether it makes sense logically, this is the way the market behaves. It's like a Pavlovian response. If the Fed looks soft, oil prices go up," he said.
Declining issues outnumbered advancers by more than 4 to 1 on the New York Stock Exchange, where consolidated volume came 4.69 billion shares, compared with 4.18 billion traded Thursday.
The Russell 2000 index of smaller companies fell 22.90, or 3.00 percent, to 740.37.
Wall Street's pullback weighed on Europe. Britain's FTSE 100 ended down 1.48 percent, Germany's DAX index fell 1.99 percent, and France's CAC-40 lost 2.28 percent on the day. Japan's Nikkei stock average closed up 1.03 percent; trading there ended before the release of the U.S. jobs report.
The Dow Jones industrial average ended the week down 428.51, or 3.39 percent, at 12,209.81. The Standard & Poor's 500 index finished down 39.70, or 2.83 percent, at 1,360.68. The Nasdaq composite index ended the week down 48.10, or 1.91 percent, at 2,474.56.
The Russell 2000 index finished the week down 7.91, or 1.06 percent, at 740.37.
The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended Friday at 13,924.63, down 336.13 points, or 2.36 percent, for the week. A year ago, the index was at 15,343.15.
Tuesday, June 3, 2008
Kids and Money
No matter what age your children (or grandchildren, or...) are, NOW is always the time to work on building financial skills. Like any skill, financial management develops with PRACTICE. And a child who begins learning a skill early in life will usually be more skilled. (Think of the best wrestlers or gymnasts - usually they started at an early age!)
When it comes to personal finance there are some key skills all young adults need: living within limits (i.e. spending less than they earn); comparison shopping; stretching resources; planning ahead; managing a checking account (including debit cards and on-line banking); wise use of credit; prioritizing goals, needs, & wants. Nearly every child of school age can start practicing some of these skills. Obviously, a 6-year-old can't manage a checking account (although she may be able to observe her parents using one and discussing it), but a 6-year-old can start doing some comparison shopping, and making choices to live within limits.
The critical element here is practice. Everyone learns by doing. Just being told what to do or how to do it is not enough to really learn a skill. Some learners will self-teach by trying things out, asking questions, and practicing on their own. If you leave your children to self-teach their financial skills after they become adults, they may eventually learn most of the skills needed, but it may take a very long time, AND it may involve some very costly mistakes which could haunt them for decades.
That is why it is so important to create opportunities for young people to practice financial skills before they are out on their own. Younger children can help make some family shopping decisions, and when they have money of their own to spend they can learn about limits and deciding which option is most valuable. By early-mid grade school children are ready to manage a steady income, which parents can provide in the form of an allowance. Checkbook management skill-building can begin in the teen years.
Think about your own children, and the children you care about. What financial skills are they already practicing? What other skills do they still need a chance to practice? What can you do to help create opportunities for practicing those skills?
As summer vacation begins, with a break from formal education for most children, look for opportunities for informal education. If the kids are at home for the summer, involve them in planning food shopping; summer snacks and easy-to-fix lunches can be costly, and involving the kids in planning (within a budget) for that spending will help them learn a key skill -- and will also help keep your food spending within reasonable limits. Other ways to involve the children are plentiful - haave them help manage the checkbook (writing checks, recording transactions in the register, adding and subtracting - and older kids can reconcile the bank statement when it arrives). Vacation and special-event planning create more opportunities. Just keep your eyes open and you will find numerous ways in which your children can practice financial skills this summer and throughout the year!
by : Barb Wollan
ISU Extension Family Resource Management Specialist
The Billionaire Universities
by Andrew Farrell Friday, May 30, 2008
provided by FORBES
For every one opening at Harvard's undergraduate college, there were 14 hopeful high school applicants. Despite the daunting odds, there's good reason to try to win one of those coveted acceptance letters.Harvard is consistently ranked as one of the top schools in the country. Its $35 billion endowment makes it the best-funded college in the United States.Oh, and there's this: Harvard students are more likely to become billionaires than graduates of any other college.
Of the 469 Americans on Forbes' most recent list of the world's billionaires, 50 received at least one degree from Harvard. The school has produced 20 more current American billionaires than No. 2 on our list, Stanford University.
Harvard's billionaire alumni are an accomplished group. They include Microsoft Chief Executive Steve Ballmer, New York City Mayor Michael Bloomberg and media tycoon Sumner Redstone.Stanford University trails Harvard, but still boasts 30 billionaire alumni. These include Nike co-founder Philip Knight and discount brokerage mogul Charles Schwab.
Fittingly, the California university, which has produced so many ultra-wealthy businesspeople, was founded by one. The grieving railroad tycoon Leland Stanford decided to found a university after his only son died of typhoid fever. With considerable land and money donations from the Californian, the school opened its doors in 1891.
Following Stanford is the University of Pennsylvania, with 27 graduates. Notable members of the group include real estate king Donald Trump and SAC Capital founder Steven Cohen.
Rounding out the top five are Yale, with 19 billionaire graduates, and Columbia University, with 15. The top school from the Midwest is the University of Chicago, ranked seventh, with 10 grads. No. 1 from the south is Duke, with eight.
A dubious distinction goes to New York University. The school has five dropouts who have gone on to become billionaires, including Carl Icahn. After receiving a degree in philosophy from Princeton, Icahn enrolled in NYU's medical school. Bored by all the memorization required, he jumped ship to be a stockbroker.It proved a profitable career change. The Queens, N.Y., native is now the 46th wealthiest person in the world with a fortune of $14 billion. He could rack up another $300 million in profits if he can push Yahoo! to reconsider a sale to Microsoft.
A small group of schools account for a disproportionate amount of billionaire education. Just 20 universities and colleges account for 52% of the billionaire graduates while 182 schools count for the remainder.What makes certain schools billionaire factories? For one thing, they offer excellent educations. But they also offer networking, which in many cases amounts to a ticket to the old-boys network, still very much in existence these days.
Some programs, like business schools, are more likely to produce super-high earners. Of Penn's 27 billionaire graduates, 20 attended its prestigious Wharton business school.Strong research programs in developing areas of tech are important too. Sergey Brin and Larry Page met at Stanford's storied computer science program. The Google co-founders are now worth nearly $19 billion each.
Selectivity also helps. The best schools are overwhelmed by applicants each fall. Acceptance rates for nearly all of the top billionaire-producing schools are below 30%.The low acceptance rates ensure that incoming classes are exceptionally smart. They're full of people whose resumes already point to great successes ahead.
Future billionaire Patrick McGovern caught MIT's attention as a teenager after building a computer that was unbeatable at tic-tac-toe, a remarkable feat in the 1950s. After attending MIT on a scholarship, McGovern began publishing magazines covering the growing computing world. Today, his tech media empire now puts his net worth at $4.7 billion.
