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Show a DAILY HERALD Sunday, December 9, 2007 THE WALL STREET JOURNAL . The Weekly Guide to Managing Your Money urn 2007 Dow Jones WSJ.comSunday 6 Company, Inc. All Rights Reserved. Involve Kids The Fed Gets Ready to Cut Rates Again In Charity By Gregory Ip the Federal cuts interest it's normally good news for the bond market. But though the Federal Reserve is likely to trim its target for short-terinterest rates from 4.5 on Tuesday, the opportunities for additional profits might be slim-a- nd risks of a loss high. That means if you were hoping to make additional money on your bond investments from further drops in rates, the opportunity may have passed: estment-grade corporate bonds might be a better bet. The Fed already trimmed rates a point in September and a quarter-poiin October. At that last meeting, Fed officials thought they had done enough to see the economy through its curhousing-induce- d rent air pocket, and back on the road to recovery by the middle of next year. But since then, financial markets have become increasingly strained. .Last week, the Dow Jones Industrial Average rose 1.9 after a midweek surge countered earlier declines. The benchmark Treasury fell 1 732 points for the week, lifting its yield to 4.119. When the source of today's crisis. That could make the central bank reluctant to go so low again. "You'd be giving the drugs back to the addict," says Course Change After holding interest rates steady for a year, the Federal Reserve is taking them down a notch or two. But it's not clear how far the Fed is planning to go. 7 m nt Lack of Demand Investors are shunning anything that they fear holds tainted securities linked to subprime mortgages. The lack of demand for such securities is rippling back to consumers and iusinesses in the form of costlier mortgages and corporate loans. And banks are more reluctant to lend, even to each '01 2000 inv- '03 '02 other. The Fed is thus likely to cut the target on the federal-fund- s rate, charged on overnight loans between banks, to 4.25, and possibly as low as 4 this week. Just a month ago, economists surveyed by The Wall Street Journal thought the funds rate would hit bottom at 4.25 next June. But the worsening picture has led futures markets to price in a funds rate of between 3.5 and 3.75 by June and a quarter point lower than that a year from now. Ordinarily, lower short-terinterest rates cause longer-terbond yields to fall and bond prices, which move in the opposite direction, to rise. That could still happen, but the upside for Treasurys is limited by the fact their prices already reflect so much bad news. Ten-yeyields have already fallen to 4.1 from 5.25 in June. Two-yeyields have fallen even more sharply, to 3.1 from Martin Barnes, editor of the Bank Credit Analyst, a financial forecasting service, figures 5. INVESTOR'S CALENDAR THIS WEEK THE RIDE CONTINUES: The Dow Jones Industrial Average started off December trading with two days of declines before turning back upward with strong gains V.M regularly contribute to the Journals personal-financ- Listen e VI . . 12500 ; I 1 i, NOV. OCT. DEC '07 Source: WSJ Market Data Group Takeover News: Shareholders vote Thursday on News for $18.9 billion, joining the firms behind hits Guitar Hero and World of Warcraft Corp.'s $5.6 billion acquisition of Dow Jones & Co. News Corp. executive Leslie Hinton and Times of London Editor Robert Thomson will take over as CEO of Dow Jones and publisher of The Wall Street Journal, respectively. daq Composite Index 1.7. For the year to date, they are up 9.3 and 12, respectively. Video Fusion: Vivendi plans to acquire control of Activision 1. agents pulous insurance also view it as open season for preying on older adults. The wrongdoing, among other activities, involves violating federal regulations selling against of coverage and the forging of signatures. "It's the wild, wild West By Tom out there," says Mary Jo Hudson, director of the Ohio De- partment of Insurance. In particular, the sheer Drug Rebuff: An FDA advisory panel narrowly rejected Genentech's Avastin drug as a treatment for advanced breast cancer. complexity Gem-star-T- V Olympic Overhaul: Acer Computer announced plans to replace Lenovo Group as the Olympic Games' equipment sponsor in 2009. Lawrence Rout, Senior Editor Larry.Routwqj.com David Crook, Editor David.Crookwqj.com. Director, The Journal Report Karen Damalo, Neu Editor Karen.Dunatowijj.coni d Special Project (212)597-586- Buying Guide: Macrovision agreed to acquire TV Guide magazine publisher Guide International for $2.8 billion. 2 Mark Pope 8 Mark Tyner, Art Director MarlLryiHrwqj.com Mark.Ipedowjoneii.coni of Medicare-combi- ned with the vulnerability of many seniors to high-pressu- tics sales tac"is very bad news," The prescription drug program known as Part D was launched two years ago to insure against the growing cost of brand name and generic medicines. An eligible person can choose either to sign up for a standalone policy or privately run Medicare Advantage programs that provide broader health benefits as well as drug coverage. Making a decision can mean sorting through scores of insurance plans. Adding to the challenge, winthere is only a k dow to sign up. The current enrollment period ends Dec 3L drug-insuran- Medicare Steven A. Towiwlcy Director of Sola (212)597-573- 3 Stevennwnleydow)ore.com CoRFORATI 0 Tiuphons: (609) email: wmut03wv.oum 4300 Rounl North Smrm Brunswick, NJ. 08852 HKADQUARTKRS For a Sprcial Journal Sukotptiun Offer, Call; 200 Liberty Street New York, N.Y. 10281 ' All Of THIS WIT" S EDITION ar 45-ye- Juice drinks at grocery stores. WALL STREET JOURNAL Piul.Bclldowjonni.com fixed-incom- 4. Jamba in Store: Nestle Stocks Rise: The Dow Jones Industrial Average rose L9 last week and the Nas- (212)859-121- 2.5. 2. Ms. Hudson says. Biaineua to Yet even in two-yea- USA said it will sell Jamba LAST WEEK Vice Preiident, Partner 2 a recession, the upside for Treasurys may be lime ited. David Ader, strategist at RBS Greenwich Cap'Flight to Safety' ital, thinks that in a recession Yields are also being held the Fed funds rate will fall to 3 r artificially low by a "flight to and the Treasury yield But he sees safety." That means investors to yields are willing to accept far lower a bit higher than they are today, at around returns than the economic outlook ought to dictate because Treasury yields hit a they are so averse to losing low of 3.1 in 2003, but circumany money on riskier bonds. A stances are different today. resumption of normal risk ap- Then, the Fed worried that de- -. petites could cause an exodus flation, or generally falling out of Treasurys. prices, could take hold, and cut Of course, with economic the funds rate to Many economists and some growth likely close to zero and Fed officials now think the Fed possibly negative in the curand those low rent quarter, the odds of a reoverreacted, cession are rising. If the Fed rates helped create the housconcludes one is likely, it is ing bubble, whose bursting is Lauricella November Numbers: The consumer price index, a key inflation gauge, is out Friday. PaulD.Bcll 2, higher-returnin- Am-itab- Inflation Risk Increases B AVAILABLE ON OUR FREE WSXcornSunday WEB SHI : THE WEEK The tradition of giving began in her house many years ago when she allowed her children to each pick a clothing donation for a local domestic violence shelter. Ann Boyce, president of the T. Rowe Price Program for Charitable Giving, says one of the most important things families can do is to talk with their children and grandchildren about giving. "It trains them," Ms. Boyce says. "They think about giving, and they see their parents as role models." Kim inflation risks are higher than in 2001. Soaring energy prices could drive overall inflation temporarily over If people begin to act like that's here to stay, underlying inflation could ratchet higher as well. And the boost to productivity from the maturing technology boom is also fading. With slower labor force growth, the Fed thinks that the economy can now grow only as much as 2.5 a year without fueling inflation, compared with the last decade's average growth of Finally, 4. 3. Email: forum.sunday03(3wsj.com presi- Wright-Violic- dent of Schwab Charitable, a;,' d fund, gets her three children involved by volunteering as a family at a soup kitchen and by allowing them to select a charity that the family donates to. Some families require that the children contribute some of their own money to the donation. One way to encourage youngsters of all ages to give is to match their contributions, says Ms. Wright-ViolicShe recommends that parents consider contributing three or four dollars for every dollar the child gives. By Jilian Mincer donor-advise- Swindlers Drug-Insuran- ce fraud. To start, older adults should have a trusted family member or adviser with them whenever meeting with any insurance agent. During the meeting, insist on seeing a written list of doctors, hospitals and prescription drugs that each plan covers and be sure the plan covers any needed special care, such as dialysis. Demand Full Disclosure door-to-do- podcast at WSJxomPodcasts THE likely to cut rates more aggressively. Mr. Barnes says in a recession, the federal funds rate adjusted for inflation- -a better measure of the cost of borrowing than the nominal rate typically falls to zero. Since underlying inflation is now a little over that implies the Fed funds rate would fall as low as period f V 13000 weekday "Your Money Matters' rate would s for Medicare prescription drug coverage, and regulators are warning that an increasing number of unscru- 14000 VV-...- 13500 federal-fund- have to drop to 2.75 to justify such yields: "To be bullish on bond yields coming down more, you'd need to be expecting a recession." Economists put the odds of recession at only one in three. If they're right, and the economy proves more resilient than Wall Street's current gloom implies, yields could shoot higher, saddling 'bond holders with subpar returns. season with Holiday the open 14500 Wan Street Journal Sunday writers the Open Season for s midweek and in positive territory on Friday. JetBlue Airways Tuesday becomes the first U.S. airline to offer free inflight wireless services. Wi-Fl-y: '07 - ENCORE IN THE MARKET New Prince: Citigroup's board is expected to name a new CEO this week to succeed chief executive Charles Prince, who resigned last month. '06 '05 '04 Source: WSJ Market Data Group Thomas Joseph Marta, fixed income strategist at RBC Capital Markets. Second, that drop in yields was fueled in part by buying related to hedging of portfolios of fixed-rat- e mortgages by mortgage agencies Fannie Mae and Freddie Mac, more Today, mortgages carry adjustable rates so the is less prophenomenon nounced, Mr. Ader says. In addition, one major source of demand for Treasurys, foreign central banks, is slackening a bit as they divert some of their massive currency g alreserves to ternatives like stocks and mortgageh -backed securities, says Arora, global head of interest rate strategy at Lehman Brothers. He sees yields climbing to between 4.25 and 4.5 by the end of next year. holidays are here a for friends, family all too often the "gimmes." But you don't need to be the Grinch to teach chuV dren the tradition of giving. The key is getting them involved in the process, says Linda Leitz, a parent, financial adviser and author of The Ultimate Parenting Map TIP OF The Problems .commonly arise when beneficiaries are pitched the Medicare Advantage programs. While these plans can offer benefits not included in the original Medicare, they typically 11 ,w.m.. coverage to certain health-car- e providers. Enrolling in such a plan can affect eligibility for other types of coverage, such as the health-carTricare, plan for current and retired military members. The result can mean having to switch doctors or pay more money for health benefits than would have been neceslimit e sary. "Seniors think they are signing up for a prescription-drug program and what they are really being sold is Medicare Advantage," says Laura Dillon, an examiner with the New York State Insurance Department. The federal provision sales against of Medicare insurance is frequently violated, regulators note, and oversight is especially difficult in rural areas. In some instances, insurance agents will arrange for a legitimate appointment in s a complex, and then once inside will either persuade the potential customer to introduce them to neighbors a violation of the rules or just start knocking on doors. "We found one agent who offered to carry groceries to get in the door," says Janet Davignon, an examiner with the New York insurance department Other instances of fraud include luncheons where participants are asked to fill out informational cards that door-to-do- senior-citizen- IJJ are actually insurance applications, or agents who represent themselves as being from with Medicare complete official-lookin- but misleading red, white and blue business cards. Critics say that driving the unscrupulous sales practices are commission structures that favor promoting one plan over another no matter what the needs of an applicant. Insurance companies also hold contests to plan?'" An agent also should be willing to show how the plan being recommended stacks up against other offerings, when it comes to costs and coverage. " If they won't do a comparison for you, you shouldn't sign up," says Ms. Hudson. Consumers should make sure, that an agent is licensed; according to federal d law, only are agents permitted to sell Medicare insurance. Don't provide any personal data especially a Social Secu- push their products that promise salespeople prizes like trips to Las Vegas. Tough to Change For individuals who end up in an inappropriate Medicare insurance program, it can be a difficult and lengthy process to fix the situation. "Once you're in a plan you generally can't get out until the next period and that's a real problem for somebody whose doctor doesn't accept the plan they're now in," says Ms. Davignon in New York. Getting permission to switch plans from the Centers for Medicare and Medicaid Services, which administers the program, typically puts the burden of proof on beneficiaries that they were, in fact, victims of fraud, says Ms. Hudson in Ohio. "It's a lot of red tape." There are some basic steps individuals can take to avoid Medicare insurance "Don't sign unless you have full disclosure and that may not happen in just one meeting," says Norma Almanza, of the Texas State Health Insurance Assistance Program. "And call your doctors before you sign and ask, 'Do you work with this state-license- rity . number-un- til a pur- chase is certain. Another basic step-col- lect a business card. "So many times we get complaints where the clients tell us, 'She was a nice lady, but I only know her first name " says Ms. Almanza in Texas. Need additional help? State officials offer insurance assistance programs often referred to by the acronym "SHIP." Information on these programs is typiavailable online cally through a state's insurance department Local agencies on aging also can often provide guidance. Email: encoreewsJ.com |