Dubai: what the immediate future holds
Until last Wednesday, most investors saw Dubai as an attractive tourist destination, a regional financial centre and an example of what bold and visionary leadership can achieve.
By Mohamed A El-Erian
Published: 12:23AM GMT 29 Nov 2009
Some worried that Dubai's impressive achievements came with a debt burden that would prove difficult to sustain after last year's financial crisis.
This weekend, investors around the world are united in wondering "what does Dubai mean for me?"
At the local level, the standstill is an explicit recognition that the Emirate's debt and leverage levels cannot be sustained in what, at PIMCO, we have called the "new normal". The question for Dubai is now two-fold: can an orderly extension of debt payments be achieved; and how will this impact the risk premium that is attached to other economic and financial activities in the Emirate?
The key issue at the national level is how Abu Dhabi, the largest and richest of the seven UAE Emirates, will react. Here, it is a question of willingness. The leaders of Abu Dhabi must strike that delicate balance between using enormous wealth to support Dubai and ensuring appropriate burden sharing among those that repeatedly failed to heed Abu Dhabi's past warnings about the excesses in Dubai.
The regional dimension is captured by a word familiar to investors in emerging markets: "contagion". The immediate reaction of almost all markets (and too many commentators) is to lump together countries in the region that have very different characteristics. Witness how market measures of risk have surged for all the oil exporters in the region even though they share none of Dubai's debt and leverage characteristics.
At the global level, the Dubai announcement serves as a catalyst to take the froth off expensive financial markets. For the last few months, massive injections of liquidity (primarily by the US), aimed at limiting the adverse impact of the financial crisis on employment, have turbo-charged financial market valuations rather than make their way to the real economy. While many have worried about the generalised over-extension of equity markets, most have hesitated to take money off the table as there did not appear to be a catalyst to break the general "trend is your friend" mentality. Dubai is that catalyst.
So, what next?
First, it will take time to sort out the Dubai situation. Inevitably, this is an uncertain and protracted process that involves both on- and off-balance sheet exposures. It will cast a cloud not only on companies in the Emirate itself but also on institutions that have large exposures there, especially in the banking and real estate sectors.
Second, the immediate indiscriminate sell-off in regional (and emerging market) names will, over time, give way to greater differentiation based on economic and financial realities. Those with strong fundamentals will recover (including Abu Dhabi, Brazil, Kuwait, Qatar and Saudi Arabia) while others, including countries with large deficits and debt burdens in eastern/central/southern Europe, may come under more pressure.
Finally, and most importantly, Dubai serves as a warning to those that were quick to find comfort in the sharp market rally of the last few months. Since the summer, the appreciation of risk assets has been driven predominantly by artificial liquidity injections rather than fundamentals. The Dubai announcement is a reminder that a flood of government-induced liquidity cannot mask all excesses, all the time.
Investors should treat last Wednesday's announcement as an illustration of the lagged financial effects of the global financial crisis. The Dubai situation is no different than that facing commercial real estate in the US and UK.
Let Dubai be a reminder to all: last year's financial crisis was a consequential phenomenon whose lagged impact is yet to play out fully in the economic, financial, institutional and political arenas.
Mohamed A El-Erian is CEO and co-CIO of PIMCO, the investment management firm
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Things to Do Before End of the Year: Tax Tips (WSJ)
Smart year-end tax moves
BY Laura Saunders,
The Wall Street Journal — 11/13/2009
Time to review your taxes — before it's too late.
Year-end tax planning always makes sense, but this year it's especially vital.
Convulsions in the markets and the economy have shifted the ground beneath many taxpayers, and next year may bring major tax changes as lawmakers confront the record deficit.
Bottom line: review your taxes before it's too late. "Too often, I can't do anything for people who come to me in February," says Douglas Stives, an accountant with Curchin Group in Red Bank, N.J.
Here are areas especially relevant now. (For more details, go to www.irs.gov.)
First-time home-buyer tax credit
Congress has just extended and altered this benefit, making it more generous for many. The new rules took effect on Nov. 6. The provision is a true dollar-for-dollar tax credit of up to $8,000 for 10% of the cost of a home. The credit is also refundable, meaning that even if a buyer doesn't owe $8,000 of tax, she can claim the full benefit and receive a refund check.
The new law has more generous phase-outs. The credit now begins to disappear for single taxpayers with modified adjusted gross incomes of $125,000 and married couples with incomes of $225,000. It is available for purchases through July 1, 2010 if the buyer has a contract in place before May 1, 2010. Unlike the prior law, however, this credit is capped: those buying homes for more than $800,000 get no credit at all, as of Nov. 6.
The new law also authorizes a similar $6,500 credit for buyers who already own a home. It too is a refundable credit for 10% of the purchase price of a house costing no more than $800,000. To qualify the buyer has to have owned and lived in the same home for five of the eight years preceding the new home purchase, and the new home must become the buyer's principal residence.
There are interesting twists. Two or more unmarried people buying a house together may be able to allocate the credit as they wish, say to the lowest earner. Taxpayers who buy this year may also claim the credit on either a 2008 or 2009 return, and those who buy in 2010 can claim the credit either in 2009 or 2010. Some people claim the credit in one year rather than another to avoid phase-outs.
Unemployment benefits
Alas, these are subject to income tax. But this year there is an exemption of $2,400 per individual. Still, many unemployed taxpayers receiving benefits may need to estimate and pay quarterly taxes or risk penalties when they can least afford them. IRS spokesmanEric Smith points out that all recipients can choose to have 10% of benefits withheld by the payer. "That should protect many," he says.
American opportunity credit
In the roster of fiendishly complex and highly limited education incentives, this one is more useful than most. It is a tax credit for as much as $2,500, generated by spending on tuition and other education expenses (books, possibly a computer) up to $4,000. Currently this credit is available for 2009 and 2010 to single taxpayers with less than $80,000 of modified adjusted gross income and married couples earning less than $160,000. Amounts paid in 2009 for the spring of 2010 are eligible for a 2009 credit.
New car purchases
Taxpayers who buy a new car before Jan. 1, 2010, may deduct sales and excise taxes and other fees on as much as $49,500 of the purchase price. This provision has generous phase-outs: It disappears between $250,000 and $260,000 of modified adjusted gross income for married couples and $125,000 and $135,000 for singles.
Retirement savings
Have you just started a job? Remember that you can still put in an entire year's 401(k) contribution, which is $16,500 ($22,000 if you're over 50). "Some workers who begin a job in the last quarter arrange to have an entire paycheck or two go into the plan," says Melissa Labant, an attorney with the American Institute of CPAs.
Charitable gifts
Unless Congress acts, this will also be the last year for taxpayers over 70 1/2 to make a charitable contribution directly from an IRA. This provision is useful: without it, the donation would have to be withdrawn from the IRA, claimed as income and then deducted as a donation. That, in turn, can trigger deduction limits or jack up Medicare premiums in the future.
Investments
Take losses! Even after the run-up following the lows of last March, many investors still have long-term capital losses on investments held longer than one year. Taxpayers may deduct up to $3,000 of these losses per year against ordinary income, with the excess carried forward for use in future years. The assets must be held in cash accounts, as opposed to IRAs and other tax-sheltered retirement plans.
Capital losses also may be matched dollar-for-dollar against long-term capital gains — so if you have $20,000 of long-term losses on some investments and $15,000 of gains on others, after the $3,000 deduction, you'd only have a net loss of $2,000 to carry forward. What's more, if you are bullish on an investment with gains and you sell it to soak up losses, you may buy the winner back right away. The tax code's "wash sale" rules only apply to losers, which can't be purchased for 30 days either before or after a sale. Note: The IRS also prohibits selling a loser from a regular account and then repurchasing it within an IRA inside of 30 days.
The current top capital-gains tax rate of 15% is the lowest in decades, and it is almost certain to rise at some point as the government scrambles to pay down the deficit. "If you have a buyer and a decent price, think about selling," suggests Mr. Stives of the Curchin Group.
Medical expenses
This has long been one of the least useful deductions in the tax code, unless a taxpayer is seriously ill or in a nursing home, because the taxpayer must spend more than 7.5% of adjusted gross income to claim any deduction. But rising insurance costs and diminishing coverage plus this year's economic tumult may qualify more people for this deduction.
In general, taxpayers may deduct all un-reimbursed medical expenses recognized by the IRS. This category includes after-tax dollars spent on insurance premiums, Medicare Part B and D premiums, and co-payments for drugs and treatments. It also extends to costs that insurance almost never covers- such as weight-loss plans (if prescribed for a medical condition), lead abatement, bandages, wigs after chemotherapy, acupuncture, and medical travel (24 cents per mile). But it typically does not cover expenses for over-the-counter drugs such as aspirin or antihistamines, which some Flexible Spending Plans reimburse.
--------------------------------------------------------------------------------
Copyright © 2009 Dow Jones & Company, Inc. All Rights Reserved.
BY Laura Saunders,
The Wall Street Journal — 11/13/2009
Time to review your taxes — before it's too late.
Year-end tax planning always makes sense, but this year it's especially vital.
Convulsions in the markets and the economy have shifted the ground beneath many taxpayers, and next year may bring major tax changes as lawmakers confront the record deficit.
Bottom line: review your taxes before it's too late. "Too often, I can't do anything for people who come to me in February," says Douglas Stives, an accountant with Curchin Group in Red Bank, N.J.
Here are areas especially relevant now. (For more details, go to www.irs.gov.)
First-time home-buyer tax credit
Congress has just extended and altered this benefit, making it more generous for many. The new rules took effect on Nov. 6. The provision is a true dollar-for-dollar tax credit of up to $8,000 for 10% of the cost of a home. The credit is also refundable, meaning that even if a buyer doesn't owe $8,000 of tax, she can claim the full benefit and receive a refund check.
The new law has more generous phase-outs. The credit now begins to disappear for single taxpayers with modified adjusted gross incomes of $125,000 and married couples with incomes of $225,000. It is available for purchases through July 1, 2010 if the buyer has a contract in place before May 1, 2010. Unlike the prior law, however, this credit is capped: those buying homes for more than $800,000 get no credit at all, as of Nov. 6.
The new law also authorizes a similar $6,500 credit for buyers who already own a home. It too is a refundable credit for 10% of the purchase price of a house costing no more than $800,000. To qualify the buyer has to have owned and lived in the same home for five of the eight years preceding the new home purchase, and the new home must become the buyer's principal residence.
There are interesting twists. Two or more unmarried people buying a house together may be able to allocate the credit as they wish, say to the lowest earner. Taxpayers who buy this year may also claim the credit on either a 2008 or 2009 return, and those who buy in 2010 can claim the credit either in 2009 or 2010. Some people claim the credit in one year rather than another to avoid phase-outs.
Unemployment benefits
Alas, these are subject to income tax. But this year there is an exemption of $2,400 per individual. Still, many unemployed taxpayers receiving benefits may need to estimate and pay quarterly taxes or risk penalties when they can least afford them. IRS spokesmanEric Smith points out that all recipients can choose to have 10% of benefits withheld by the payer. "That should protect many," he says.
American opportunity credit
In the roster of fiendishly complex and highly limited education incentives, this one is more useful than most. It is a tax credit for as much as $2,500, generated by spending on tuition and other education expenses (books, possibly a computer) up to $4,000. Currently this credit is available for 2009 and 2010 to single taxpayers with less than $80,000 of modified adjusted gross income and married couples earning less than $160,000. Amounts paid in 2009 for the spring of 2010 are eligible for a 2009 credit.
New car purchases
Taxpayers who buy a new car before Jan. 1, 2010, may deduct sales and excise taxes and other fees on as much as $49,500 of the purchase price. This provision has generous phase-outs: It disappears between $250,000 and $260,000 of modified adjusted gross income for married couples and $125,000 and $135,000 for singles.
Retirement savings
Have you just started a job? Remember that you can still put in an entire year's 401(k) contribution, which is $16,500 ($22,000 if you're over 50). "Some workers who begin a job in the last quarter arrange to have an entire paycheck or two go into the plan," says Melissa Labant, an attorney with the American Institute of CPAs.
Charitable gifts
Unless Congress acts, this will also be the last year for taxpayers over 70 1/2 to make a charitable contribution directly from an IRA. This provision is useful: without it, the donation would have to be withdrawn from the IRA, claimed as income and then deducted as a donation. That, in turn, can trigger deduction limits or jack up Medicare premiums in the future.
Investments
Take losses! Even after the run-up following the lows of last March, many investors still have long-term capital losses on investments held longer than one year. Taxpayers may deduct up to $3,000 of these losses per year against ordinary income, with the excess carried forward for use in future years. The assets must be held in cash accounts, as opposed to IRAs and other tax-sheltered retirement plans.
Capital losses also may be matched dollar-for-dollar against long-term capital gains — so if you have $20,000 of long-term losses on some investments and $15,000 of gains on others, after the $3,000 deduction, you'd only have a net loss of $2,000 to carry forward. What's more, if you are bullish on an investment with gains and you sell it to soak up losses, you may buy the winner back right away. The tax code's "wash sale" rules only apply to losers, which can't be purchased for 30 days either before or after a sale. Note: The IRS also prohibits selling a loser from a regular account and then repurchasing it within an IRA inside of 30 days.
The current top capital-gains tax rate of 15% is the lowest in decades, and it is almost certain to rise at some point as the government scrambles to pay down the deficit. "If you have a buyer and a decent price, think about selling," suggests Mr. Stives of the Curchin Group.
Medical expenses
This has long been one of the least useful deductions in the tax code, unless a taxpayer is seriously ill or in a nursing home, because the taxpayer must spend more than 7.5% of adjusted gross income to claim any deduction. But rising insurance costs and diminishing coverage plus this year's economic tumult may qualify more people for this deduction.
In general, taxpayers may deduct all un-reimbursed medical expenses recognized by the IRS. This category includes after-tax dollars spent on insurance premiums, Medicare Part B and D premiums, and co-payments for drugs and treatments. It also extends to costs that insurance almost never covers- such as weight-loss plans (if prescribed for a medical condition), lead abatement, bandages, wigs after chemotherapy, acupuncture, and medical travel (24 cents per mile). But it typically does not cover expenses for over-the-counter drugs such as aspirin or antihistamines, which some Flexible Spending Plans reimburse.
--------------------------------------------------------------------------------
Copyright © 2009 Dow Jones & Company, Inc. All Rights Reserved.
Using Facebook to Get More Business (NY Times)
November 12, 2009
Small-Business Guide
How to Market Your Business With Facebook
By KERMIT PATTISON
Quick Tips:
Identify a short list of goals before you begin.
Show some personality in your page.
Don't shill. Use your page to engage-and trust that sales will follow.
Use Facebook data to analyze your customer demographics.
Suggested Resources:
A Facebook guide for advertisers.
http://www.facebook.com/advertising/
Advice on getting started from Mashable.
http://mashable.com/2009/09/22/facebook-pages-guide/
Strategies and a tutorial from All Facebook - "the unofficial Facebook resource."
http://www.allfacebook.com/2009/03/facebook-page-strategy/
Business owner, you might want to friend Facebook.
A growing number of businesses are making Facebook an indispensible part of hanging out their shingles. Small businesses are using it to find new customers, build online communities of fans and dig into gold mines of demographic information.
“You need to be where your customers are and your prospective customers are,” said Clara Shih, author of “The Facebook Era” (Pearson Education, 2009). “And with 300 million people on Facebook, and still growing, that’s increasingly where your audience is for a lot of products and services.”
Start Small
For most businesses, Facebook Pages (distinct from individual profiles and Facebook groups) are the best place to start. Pages allow businesses to collect “fans” the way celebrities, sports teams, musicians and politicians do. There are now 1.4 million Facebook Pages and they collect more than 10 million fans every day, according to the site.
Businesses can easily create a Web presence with Facebook, even if they don’t have their own Web site (most companies still should maintain a Web site to reach people who don’t use Facebook or whose employers block access to the site). Businesses can claim a vanity address so that their Facebook address reflects the business name, like www.facebook.com/Starbucks. Facebook pages can link to the company’s Web site or direct sales to e-commerce sites like Ticketmaster or Amazon.
Facebook offers an array of tools and networks, and it’s easy to wander down too many paths. Ms. Shih recommends that newcomers start by asking themselves a simple question: What is your basic objective? Is it getting more customers in the door? Building brand awareness? Creating a venue for customer support? Once you have set your goal, you can strategize accordingly.
“You can waste a lot of time on Facebook,” said Ms. Shih, founder of Hearsay Labs, a Facebook marketing software company. “But if you’re a business, you don’t have any time to waste. Figure out your objectives first, start small and do things that help you accomplish your objectives.”
Ms. Shih suggests that businesses ask friends and family to become fans of their pages so that they display a respectable crowd of supporters when they debut. Pages can grow organically by word of mouth — the average Facebook user has 130 friends on the site — or by advertising or promotion.
You can enliven your page with photos, comments and useful information. As you grow more comfortable, you can add videos or business applications. Flaunt your personality. The page of an ice cream parlor should feel different than that of a funeral parlor. “The pages that are most successful,” said Tim Kendall, the director of monetization at Facebook, “are the ones that really replicate the personality of the business.”
It’s Not All About Selling
Art Meets Commerce, a New York marketing firm, has struck up a never-ending conversation with fans. The company uses Facebook as a crucial part of its publicity campaigns for theatrical productions. Its Facebook page for the show “Rock of Ages,” for example, has more than 13,000 fans.
Staff members constantly update the page with new photos, videos and quotes from the cast. They’ve also learned what not to do: Once they posted a video of Paris Hilton plugging the show and got negative feedback from fans who professed to be sick of her.
But it’s not just about marketing — or, at least, it’s not just about selling. “You end up moving away from being an Internet marketer and go into almost customer service,” said Jim Glaub, creative director at the agency. “A lot of times people use Facebook to ask questions: What’s the student rush? How long is the show? Where’s parking? You have to answer.”
Some basic rules: Buy-buy-buy messages won’t fly. The best practitioners make Facebook less about selling and more about interacting. Engage with fans and critics. Listen to what people are saying, good and bad. You may even pick up ideas for how to improve your business. Keep content fresh. Use status updates and newsfeeds to tell fans about specials, events, contests or anything of interest.
These interactions can take a vast amount of time — the “Rock of Ages” page has 300 to 600 interactions every week — but they can also provide a big payoff. Facebook is one of the show’s top sources of new ticket sales.
Last year, Art Meets Commerce introduced a Facebook ad campaign to promote an Off Broadway run of the musical “Fela!” The campaign aimed at Facebook users with interests like theatrical shows or Afro beat. According to the company, it generated 18 million impressions, more than 5,700 clicks and $40,000 in ticket sales — all for $4,400 spent on advertising.
“We can advertise all day, but if we don’t give them what they want they will not be a fan anymore,” said Mark Seeley, a marketing associate at Art Meets Commerce. “Even though we represent the shows as marketers, we don’t want to constantly tell people to buy tickets. You talk to them like you talk to your friends on Facebook.”
Aim at Potential Customers Only
Some guys use Facebook to find single women. Chris Meyer used it to find women who are already engaged.
Mr. Meyer, a wedding photographer in Woodbury, Minn., had had little luck with traditional advertising. A full-page ad in a bridal magazine generated zero leads and a trade show yielded only four bookings, barely covering the cost of his booth. But Facebook proved a digital bonanza.
Mr. Meyer aimed at women ages 22 to 28 who listed their martial status as engaged in the Minneapolis-St. Paul metropolitan area. He estimates that he has spent about $300 on Facebook ads in the last two years and has generated more than $60,000 in business. He says about three-quarters of his clients now come to him through Facebook, either from ads or recommendations from friends.
“I’d be out of business if I didn’t have Facebook,” Mr. Meyer said. “Especially with this economy, I need to stretch each marketing dollar as much as I possibly can.”
Facebook enables small businesses to engage in targeted marketing that they only could have dreamed about a few years ago. Facebook users fill out profiles with information like hometown, employer, religious beliefs, interests, education and favorite books, movies and TV shows — all of which can help advertisers deliver messages to specific demographic slices.
As you create an ad, you can add demographic criteria and keywords and see how many Facebook users fall into your target audience and modify it accordingly to get the most bang for your buck. Advertisers can elect to pay per impression or per click, set maximum budgets and schedule the ad to run on specific dates.
Thus a coffee shop in San Francisco can display advertisements only to local people whose profiles or group affiliations suggest they like coffee. According to Mr. Kendall, Facebook’s director of monetization, ads can also aim at people based on social exchanges, like a person who sends a message to a friend, “let’s get together for coffee” or who posts a status update about just having awakened and needing some java.
“We can help you find customers before they even think about searching for you,” Mr. Kendall said. “We’re very, very well-positioned to generate demand, based on the fact that we know a tremendous amount about a user.”
The Facebook ad system provides instant feedback with metrics like the number of impressions and clicks-through. This reporting allows Mr. Meyer to improve his advertising; if one ad doesn’t generate enough hits within 24 hours, he pulls it and tries something new.
Give Away Cupcakes!
Charles Nelson has an M.B.A. and is a former investment banker who owns a growing national chain of stores. Yet this 40-year-old entrepreneur checks Facebook with the frequency of a college student. Up to 30 times a day, he logs onto the social networking site via his laptop or Blackberry.
For Mr. Nelson, this is serious business. He and his wife, Candace, own Sprinkles, a cupcake bakery that relies on social media in lieu of traditional advertising. Mr. Nelson considers Facebook marketing essential. “People are out there talking about your business everyday, whether you’re looking or not,” he said. “This gives people a place to come and speak directly to us.”
Sprinkles uses Facebook to give customers a whiff of what’s cooking. Every day it posts a password on Facebook that can be redeemed for a free cupcake. Since April, its fan base has risen tenfold to 70,000.
Mr. Nelson and his wife previously worked as investment bankers in the technology sector and were keenly aware that, even for a traditional business like a bakery, social media is a crucial ingredient. His advice: make it relevant to the customer, keep it fresh and remember that the return on investment may come slowly.
“Be patient with it,” Mr. Nelson advised. “People are not going to flock to your social media site overnight. Technology is about the network effect. It takes time for those connections to build.”
http://www.nytimes.com/2009/11/12/business/smallbusiness/12guide.html?em
Small-Business Guide
How to Market Your Business With Facebook
By KERMIT PATTISON
Quick Tips:
Identify a short list of goals before you begin.
Show some personality in your page.
Don't shill. Use your page to engage-and trust that sales will follow.
Use Facebook data to analyze your customer demographics.
Suggested Resources:
A Facebook guide for advertisers.
http://www.facebook.com/advertising/
Advice on getting started from Mashable.
http://mashable.com/2009/09/22/facebook-pages-guide/
Strategies and a tutorial from All Facebook - "the unofficial Facebook resource."
http://www.allfacebook.com/2009/03/facebook-page-strategy/
Business owner, you might want to friend Facebook.
A growing number of businesses are making Facebook an indispensible part of hanging out their shingles. Small businesses are using it to find new customers, build online communities of fans and dig into gold mines of demographic information.
“You need to be where your customers are and your prospective customers are,” said Clara Shih, author of “The Facebook Era” (Pearson Education, 2009). “And with 300 million people on Facebook, and still growing, that’s increasingly where your audience is for a lot of products and services.”
Start Small
For most businesses, Facebook Pages (distinct from individual profiles and Facebook groups) are the best place to start. Pages allow businesses to collect “fans” the way celebrities, sports teams, musicians and politicians do. There are now 1.4 million Facebook Pages and they collect more than 10 million fans every day, according to the site.
Businesses can easily create a Web presence with Facebook, even if they don’t have their own Web site (most companies still should maintain a Web site to reach people who don’t use Facebook or whose employers block access to the site). Businesses can claim a vanity address so that their Facebook address reflects the business name, like www.facebook.com/Starbucks. Facebook pages can link to the company’s Web site or direct sales to e-commerce sites like Ticketmaster or Amazon.
Facebook offers an array of tools and networks, and it’s easy to wander down too many paths. Ms. Shih recommends that newcomers start by asking themselves a simple question: What is your basic objective? Is it getting more customers in the door? Building brand awareness? Creating a venue for customer support? Once you have set your goal, you can strategize accordingly.
“You can waste a lot of time on Facebook,” said Ms. Shih, founder of Hearsay Labs, a Facebook marketing software company. “But if you’re a business, you don’t have any time to waste. Figure out your objectives first, start small and do things that help you accomplish your objectives.”
Ms. Shih suggests that businesses ask friends and family to become fans of their pages so that they display a respectable crowd of supporters when they debut. Pages can grow organically by word of mouth — the average Facebook user has 130 friends on the site — or by advertising or promotion.
You can enliven your page with photos, comments and useful information. As you grow more comfortable, you can add videos or business applications. Flaunt your personality. The page of an ice cream parlor should feel different than that of a funeral parlor. “The pages that are most successful,” said Tim Kendall, the director of monetization at Facebook, “are the ones that really replicate the personality of the business.”
It’s Not All About Selling
Art Meets Commerce, a New York marketing firm, has struck up a never-ending conversation with fans. The company uses Facebook as a crucial part of its publicity campaigns for theatrical productions. Its Facebook page for the show “Rock of Ages,” for example, has more than 13,000 fans.
Staff members constantly update the page with new photos, videos and quotes from the cast. They’ve also learned what not to do: Once they posted a video of Paris Hilton plugging the show and got negative feedback from fans who professed to be sick of her.
But it’s not just about marketing — or, at least, it’s not just about selling. “You end up moving away from being an Internet marketer and go into almost customer service,” said Jim Glaub, creative director at the agency. “A lot of times people use Facebook to ask questions: What’s the student rush? How long is the show? Where’s parking? You have to answer.”
Some basic rules: Buy-buy-buy messages won’t fly. The best practitioners make Facebook less about selling and more about interacting. Engage with fans and critics. Listen to what people are saying, good and bad. You may even pick up ideas for how to improve your business. Keep content fresh. Use status updates and newsfeeds to tell fans about specials, events, contests or anything of interest.
These interactions can take a vast amount of time — the “Rock of Ages” page has 300 to 600 interactions every week — but they can also provide a big payoff. Facebook is one of the show’s top sources of new ticket sales.
Last year, Art Meets Commerce introduced a Facebook ad campaign to promote an Off Broadway run of the musical “Fela!” The campaign aimed at Facebook users with interests like theatrical shows or Afro beat. According to the company, it generated 18 million impressions, more than 5,700 clicks and $40,000 in ticket sales — all for $4,400 spent on advertising.
“We can advertise all day, but if we don’t give them what they want they will not be a fan anymore,” said Mark Seeley, a marketing associate at Art Meets Commerce. “Even though we represent the shows as marketers, we don’t want to constantly tell people to buy tickets. You talk to them like you talk to your friends on Facebook.”
Aim at Potential Customers Only
Some guys use Facebook to find single women. Chris Meyer used it to find women who are already engaged.
Mr. Meyer, a wedding photographer in Woodbury, Minn., had had little luck with traditional advertising. A full-page ad in a bridal magazine generated zero leads and a trade show yielded only four bookings, barely covering the cost of his booth. But Facebook proved a digital bonanza.
Mr. Meyer aimed at women ages 22 to 28 who listed their martial status as engaged in the Minneapolis-St. Paul metropolitan area. He estimates that he has spent about $300 on Facebook ads in the last two years and has generated more than $60,000 in business. He says about three-quarters of his clients now come to him through Facebook, either from ads or recommendations from friends.
“I’d be out of business if I didn’t have Facebook,” Mr. Meyer said. “Especially with this economy, I need to stretch each marketing dollar as much as I possibly can.”
Facebook enables small businesses to engage in targeted marketing that they only could have dreamed about a few years ago. Facebook users fill out profiles with information like hometown, employer, religious beliefs, interests, education and favorite books, movies and TV shows — all of which can help advertisers deliver messages to specific demographic slices.
As you create an ad, you can add demographic criteria and keywords and see how many Facebook users fall into your target audience and modify it accordingly to get the most bang for your buck. Advertisers can elect to pay per impression or per click, set maximum budgets and schedule the ad to run on specific dates.
Thus a coffee shop in San Francisco can display advertisements only to local people whose profiles or group affiliations suggest they like coffee. According to Mr. Kendall, Facebook’s director of monetization, ads can also aim at people based on social exchanges, like a person who sends a message to a friend, “let’s get together for coffee” or who posts a status update about just having awakened and needing some java.
“We can help you find customers before they even think about searching for you,” Mr. Kendall said. “We’re very, very well-positioned to generate demand, based on the fact that we know a tremendous amount about a user.”
The Facebook ad system provides instant feedback with metrics like the number of impressions and clicks-through. This reporting allows Mr. Meyer to improve his advertising; if one ad doesn’t generate enough hits within 24 hours, he pulls it and tries something new.
Give Away Cupcakes!
Charles Nelson has an M.B.A. and is a former investment banker who owns a growing national chain of stores. Yet this 40-year-old entrepreneur checks Facebook with the frequency of a college student. Up to 30 times a day, he logs onto the social networking site via his laptop or Blackberry.
For Mr. Nelson, this is serious business. He and his wife, Candace, own Sprinkles, a cupcake bakery that relies on social media in lieu of traditional advertising. Mr. Nelson considers Facebook marketing essential. “People are out there talking about your business everyday, whether you’re looking or not,” he said. “This gives people a place to come and speak directly to us.”
Sprinkles uses Facebook to give customers a whiff of what’s cooking. Every day it posts a password on Facebook that can be redeemed for a free cupcake. Since April, its fan base has risen tenfold to 70,000.
Mr. Nelson and his wife previously worked as investment bankers in the technology sector and were keenly aware that, even for a traditional business like a bakery, social media is a crucial ingredient. His advice: make it relevant to the customer, keep it fresh and remember that the return on investment may come slowly.
“Be patient with it,” Mr. Nelson advised. “People are not going to flock to your social media site overnight. Technology is about the network effect. It takes time for those connections to build.”
http://www.nytimes.com/2009/11/12/business/smallbusiness/12guide.html?em
Dividend Stocks (Fortune Magazine)
Go the distance - Dividends for the long run
BY Scott Cendrowski,
Fortune — 11/09/09
Yield stocks always make sense. And even in tough times you can find companies with solid payouts.
(Fortune Magazine) -- This is shaping up as the worst year for dividend cuts in three generations. Striving to conserve cash amid the most severe slump since the Depression, companies are reducing or eliminating their payouts to shareholders.
Banks, of course, have led the way, but also cutting payouts are such stalwarts as Dow Chemical (DOW) (which hadn't cut its dividend since it began paying one in 1912!), General Electric (GE), and Pfizer (PFE ).
In all, 74 companies in the S&P 500 index have cut $48 billion in dividends in 2009 -- the highest amount ever -- and Standard & Poor's senior index analyst Howard Silverblatt forecasts average payouts to fall by 36% from last year. That would be the worst annual percentage decline since 1938.
But dividends are not dead. Some companies maintained or raised them in the past year, indicating that their payouts can survive even the worst markets. And dividend investing remains a sound course amid market turmoil. Ned Davis Research shows that since 1972, companies that increase or begin paying dividends have returned 9.5% a year, soundly beating the 6.8% return of the S&P 500.
So how do you find income stocks you can count on? Ideally you want established companies that have a long history of dividend increases.
You also want to look at the coverage ratio -- earnings per share divided by the dividend per share. A figure of two or higher tells you the company has plenty of money to pay its dividend. (Companies with lower coverage ratios can also be steady payers if they have stable cash flows.)
To help you identify reliable choices, we asked three top-rated fund managers who specialize in dividend stocks for their best ideas -- and did a little screening of our own.
We started with Rick Helm, manager of Cohen & Steers' Dividend Value fund (DVFAX ), which has outperformed its average competitor by 2.5 percentage points annually since its 2005 launch. Helm recommends Abbott Laboratories (ABT ), now yielding 3.1%. The $30 billion pharmaceutical giant, known for its rheumatoid arthritis drug Humira, has hiked its annual payouts for more than three decades.
Helm believes that no matter what happens with health-care reform, Abbott will thrive thanks to its diversified businesses in drugs, diagnostics, and nutritional drinks. He expects the stock, which trades at 14 times next year's estimated earnings, to appreciate smartly.
Roger Sit, chief investment officer of Sit Investment Associates, whose Dividend Growth fund (SDVSX ) has beaten the S&P by 4.9 percentage points a year since 2004, looks for companies with sustainable business models that dominate their industries.
For example, Verizon Communications (VZ), yielding 6.3%, is his top telecom holding. Sit notes that Verizon boasts the widest margins in wireless of any carrier and has almost completed building its FiOS high-speed Internet network, a massive project that cost $15 billion over five years.
Verizon's dividend coverage ratio is below one right now, but Sit analyst Joseph Eshoo considers Verizon's dividend to be safe and expects the coverage ratio to improve as spending on the FiOS network winds down. Eshoo prefers Verizon to rival AT&T (T ), which offers a similar yield, because of Verizon's superior mobile network.
Thomas Cameron, chairman of money-management firm Dividend Growth Advisors, has been preaching the value of dividends for 40 years. His Rising Dividend fund's (ICRDX) 3.7% annual return since 2004 has beaten the S&P 500 by nearly 3% a year.
Cameron likes Magellan Midstream Partners (MMP ), a $1.2 billion master limited partnership, or MLP, that runs more than 9,400 miles of oil pipeline in the U.S. He suggests buying MLPs such as Magellan, which offers a high yield and operates in the generally stable industry of energy infrastructure.
"They are never moving pipelines to China," he says. MLPs are set up to avoid corporate taxes. They must receive 90% of income from commodities, natural resources, interest, or dividends, and are required to pay out 100% of profits. Magellan pays $2.84 a share annually, for a 7.4% yield, which Cameron expects to grow in coming years as U.S. energy infrastructure is modernized.
Along with talking to fund managers, we examined S&P's list of stocks that have increased annual payouts for at least 10 years and have estimated coverage ratios of at least two for 2009 and 2010.
Of 69 companies making the cut, the top-yielder, at 4.3%, is Universal (UVV ), a Richmond-based tobacco grower with customers like giants Phillip Morris International and Japan Tobacco. With its largest customers selling cigarettes overseas, Universal is sheltered from U.S. legislation and declining smoking rates.
Also making the list was Johnson & Johnson (JNJ ), which we recommended last year as one of the best stocks to own in 2009. The pharmaceutical giant JNJ's 3.3% yield and 47 consecutive years of increasing dividends make the diverse manufacturer of everything from Band-Aids to Tylenol a strong pick in any environment.
BY Scott Cendrowski,
Fortune — 11/09/09
Yield stocks always make sense. And even in tough times you can find companies with solid payouts.
(Fortune Magazine) -- This is shaping up as the worst year for dividend cuts in three generations. Striving to conserve cash amid the most severe slump since the Depression, companies are reducing or eliminating their payouts to shareholders.
Banks, of course, have led the way, but also cutting payouts are such stalwarts as Dow Chemical (DOW) (which hadn't cut its dividend since it began paying one in 1912!), General Electric (GE), and Pfizer (PFE ).
In all, 74 companies in the S&P 500 index have cut $48 billion in dividends in 2009 -- the highest amount ever -- and Standard & Poor's senior index analyst Howard Silverblatt forecasts average payouts to fall by 36% from last year. That would be the worst annual percentage decline since 1938.
But dividends are not dead. Some companies maintained or raised them in the past year, indicating that their payouts can survive even the worst markets. And dividend investing remains a sound course amid market turmoil. Ned Davis Research shows that since 1972, companies that increase or begin paying dividends have returned 9.5% a year, soundly beating the 6.8% return of the S&P 500.
So how do you find income stocks you can count on? Ideally you want established companies that have a long history of dividend increases.
You also want to look at the coverage ratio -- earnings per share divided by the dividend per share. A figure of two or higher tells you the company has plenty of money to pay its dividend. (Companies with lower coverage ratios can also be steady payers if they have stable cash flows.)
To help you identify reliable choices, we asked three top-rated fund managers who specialize in dividend stocks for their best ideas -- and did a little screening of our own.
We started with Rick Helm, manager of Cohen & Steers' Dividend Value fund (DVFAX ), which has outperformed its average competitor by 2.5 percentage points annually since its 2005 launch. Helm recommends Abbott Laboratories (ABT ), now yielding 3.1%. The $30 billion pharmaceutical giant, known for its rheumatoid arthritis drug Humira, has hiked its annual payouts for more than three decades.
Helm believes that no matter what happens with health-care reform, Abbott will thrive thanks to its diversified businesses in drugs, diagnostics, and nutritional drinks. He expects the stock, which trades at 14 times next year's estimated earnings, to appreciate smartly.
Roger Sit, chief investment officer of Sit Investment Associates, whose Dividend Growth fund (SDVSX ) has beaten the S&P by 4.9 percentage points a year since 2004, looks for companies with sustainable business models that dominate their industries.
For example, Verizon Communications (VZ), yielding 6.3%, is his top telecom holding. Sit notes that Verizon boasts the widest margins in wireless of any carrier and has almost completed building its FiOS high-speed Internet network, a massive project that cost $15 billion over five years.
Verizon's dividend coverage ratio is below one right now, but Sit analyst Joseph Eshoo considers Verizon's dividend to be safe and expects the coverage ratio to improve as spending on the FiOS network winds down. Eshoo prefers Verizon to rival AT&T (T ), which offers a similar yield, because of Verizon's superior mobile network.
Thomas Cameron, chairman of money-management firm Dividend Growth Advisors, has been preaching the value of dividends for 40 years. His Rising Dividend fund's (ICRDX) 3.7% annual return since 2004 has beaten the S&P 500 by nearly 3% a year.
Cameron likes Magellan Midstream Partners (MMP ), a $1.2 billion master limited partnership, or MLP, that runs more than 9,400 miles of oil pipeline in the U.S. He suggests buying MLPs such as Magellan, which offers a high yield and operates in the generally stable industry of energy infrastructure.
"They are never moving pipelines to China," he says. MLPs are set up to avoid corporate taxes. They must receive 90% of income from commodities, natural resources, interest, or dividends, and are required to pay out 100% of profits. Magellan pays $2.84 a share annually, for a 7.4% yield, which Cameron expects to grow in coming years as U.S. energy infrastructure is modernized.
Along with talking to fund managers, we examined S&P's list of stocks that have increased annual payouts for at least 10 years and have estimated coverage ratios of at least two for 2009 and 2010.
Of 69 companies making the cut, the top-yielder, at 4.3%, is Universal (UVV ), a Richmond-based tobacco grower with customers like giants Phillip Morris International and Japan Tobacco. With its largest customers selling cigarettes overseas, Universal is sheltered from U.S. legislation and declining smoking rates.
Also making the list was Johnson & Johnson (JNJ ), which we recommended last year as one of the best stocks to own in 2009. The pharmaceutical giant JNJ's 3.3% yield and 47 consecutive years of increasing dividends make the diverse manufacturer of everything from Band-Aids to Tylenol a strong pick in any environment.
Which States are in the Most Financial Trouble (CNN)
10 states face financial peril
Dropping tax revenue, rising unemployment and yawning budget gaps are wreaking havoc in states from Arizona to Wisconsin, a new report shows.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: November 11, 2009: 3:42 PM ET
NEW YORK (CNNMoney.com) -- The same economic pressures that pushed California to the brink of insolvency are wreaking havoc on other states, a new report has found.
And how state officials deal with their fiscal problems could reverberate across the United States, according to the Pew Center on the States' analysis released Wednesday.
The 10 most troubled states are: Arizona, California, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin.
Other states -- including Colorado, Georgia, Kentucky, New York and Hawaii -- were not far behind.
The list is based on several factors, including the loss of state revenue, size of budget gaps, unemployment and foreclosure rates, poor money management practices, and state laws governing the passage of budgets.
These troubles have forced these states -- as well as many others -- to raise taxes, lay off or furlough state workers and slash services. These actions can slow down the nation's recovery, especially since these 10 states account for one-third of the country's population and economic output.
"Decisions these states make as they try to navigate the recession will play a role in how quickly the entire nation recovers," said Susan Urahn, managing director of Pew Center on the States.
In a separate study released Wednesday, the Center on Budget and Policy Priorities found that states will likely have to make steep cuts in their fiscal 2011 budgets, which start next July 1 in most states. That's because the critical federal stimulus dollars will run out by the end of 2010.
These cuts could take nearly a percentage point off the national gross domestic product and cost the nation 900,000 jobs, the study found.
10 troubled states
Here's a summary of what Pew found is plaguing each of the states:
California: The Golden State's housing collapse -- and resulting unemployment surge -- has plagued the state's economy. The weakening economy prompted revenue to fall by nearly a sixth between the first quarters of 2008 and 2009. State lawmakers have limited ability to deal with California's massive budget gap due to several voter-imposed restrictions, including requirements that all budgets and tax increases pass the legislature by a two-thirds majority.
Arizona: The state depends heavily on a growing economy to bring in tax revenue, and lawmakers don't have a lot of leeway to address budget deficits thanks to voter-imposed spending constraints. Lawmakers relied on one-time fixes to balance its budget instead of making long-term changes.
Rhode Island: The Ocean State has among the highest unemployment rates in the nation and among the highest foreclosure rates in New England. High tax rates, big budget deficits and a lack of high tech jobs are hurting its chances to pull out of the doldrums. State government has a poor record of managing its finances
Michigan: The state never climbed out of the recession that started in 2001, and matters only became worse during the Great Recession. Two of the Big Three Detroit-based automakers went bankrupt in 2009, sending shockwaves through a state on track to lose a quarter of its jobs this decade. The recession accelerated drops in state revenue, and has left Michigan's government trying to deal with today's problems on a 1960s-sized budget.
Nevada: Nevada is one of the recession's big losers as its gaming-based economy suffered. Year-over-year revenue has fallen for two consecutive years, a record. But changing tax laws is tough because some are written into the state constitution.
Oregon: Oregon's leading industries, such as timber and computer-chip manufacturing, have been hit hard in the recession. Lawmakers have approved more than $1 billion in new taxes to keep it afloat. But voters in January will have the final say on another $733 million in new income taxes.
Florida: For the first time since World War II, Florida's population is shrinking -- bad news for an budget built on new residents flocking to the Sunshine State. Lawmakers raised $2 billion in new revenue this year, but could face a similar shortfall next year.
New Jersey: The Garden State, which has been plagued by years of fiscal mismanagement, spends more than it collects in revenue. The collapse of Wall Street, which supports about one-third of New Jersey's economy, has only made matters worse.
Illinois: Since the last recession earlier this decade, the state piled up huge backlogs of Medicaid bills and borrowed money to pay its pension obligations. The state's current budget still relies heavily on borrowing and paying bills late.
Wisconsin: Wisconsin has a long history of budget shortfalls. It also borrows frequently to cover operating expenses, among other measures. Unemployment is climbing as manufacturing, the state's largest sector, sputters.
More stimulus needed
The Center on Budget and Policy Priorities, a liberal research group, says the states need additional federal fiscal relief to avoid budget cuts that will hurt both the economy and people. State and local spending accounts for about one-eighth of the GDP.
Already, less than five months into fiscal 2010, several states are looking at additional budget cuts. Rhode Island announced Tuesday it is facing a revenue shortfall for the current fiscal year of $130.5 million. Gov. Donald Carcieri said the state must examine its aid to local governments, since it has already cut personnel and social service programs.
And in California, Gov. Arnold Schwarzenegger said Tuesday that his state is facing a budget gap of up to $7 billion. The state will likely announce across-the-board spending cuts in January.
"So we just have to hang in there, tighten our belts and live within our means," he said.
The center would like to see the federal government allocate another $50 billion, while economist Mark Zandi said about half of that would be needed. Congress should pass the additional aid now since states are currently crafting their fiscal 2011 budgets.
States received billions of dollars in funding from the Obama administration's $787 billion stimulus package, including $87 billion for Medicaid and $48.3 billion for maintaining education and other key services.
The stimulus funds plugged about 30% to 40% of the budget gaps states were facing, and created or saved more than 300,000 jobs, said Iris Lav, the center's senior adviser.
But the economic downturn is greater than administration officials expected when the Recovery Act was passed in February, Lav said. That's why more assistance is needed now.
Budget projections show that states could face deficits as large as $260 billion in 2011 and 2012 after stimulus funding is exhausted. State economies usually take up to two years longer to recover after the nation's fiscal health begins to improve.
New budget cuts and tax increases "will be a serious drag on the economy at just the wrong time," said Mark Zandi, chief economist at Moody's Economy.com.Without assistance, the economy could slide back into a recession, he said.
First Published: November 11, 2009: 1:00 PM ET
Find this article at:
http://money.cnn.com/2009/11/11/news/economy/states_economies
Dropping tax revenue, rising unemployment and yawning budget gaps are wreaking havoc in states from Arizona to Wisconsin, a new report shows.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: November 11, 2009: 3:42 PM ET
NEW YORK (CNNMoney.com) -- The same economic pressures that pushed California to the brink of insolvency are wreaking havoc on other states, a new report has found.
And how state officials deal with their fiscal problems could reverberate across the United States, according to the Pew Center on the States' analysis released Wednesday.
The 10 most troubled states are: Arizona, California, Florida, Illinois, Michigan, Nevada, New Jersey, Oregon, Rhode Island and Wisconsin.
Other states -- including Colorado, Georgia, Kentucky, New York and Hawaii -- were not far behind.
The list is based on several factors, including the loss of state revenue, size of budget gaps, unemployment and foreclosure rates, poor money management practices, and state laws governing the passage of budgets.
These troubles have forced these states -- as well as many others -- to raise taxes, lay off or furlough state workers and slash services. These actions can slow down the nation's recovery, especially since these 10 states account for one-third of the country's population and economic output.
"Decisions these states make as they try to navigate the recession will play a role in how quickly the entire nation recovers," said Susan Urahn, managing director of Pew Center on the States.
In a separate study released Wednesday, the Center on Budget and Policy Priorities found that states will likely have to make steep cuts in their fiscal 2011 budgets, which start next July 1 in most states. That's because the critical federal stimulus dollars will run out by the end of 2010.
These cuts could take nearly a percentage point off the national gross domestic product and cost the nation 900,000 jobs, the study found.
10 troubled states
Here's a summary of what Pew found is plaguing each of the states:
California: The Golden State's housing collapse -- and resulting unemployment surge -- has plagued the state's economy. The weakening economy prompted revenue to fall by nearly a sixth between the first quarters of 2008 and 2009. State lawmakers have limited ability to deal with California's massive budget gap due to several voter-imposed restrictions, including requirements that all budgets and tax increases pass the legislature by a two-thirds majority.
Arizona: The state depends heavily on a growing economy to bring in tax revenue, and lawmakers don't have a lot of leeway to address budget deficits thanks to voter-imposed spending constraints. Lawmakers relied on one-time fixes to balance its budget instead of making long-term changes.
Rhode Island: The Ocean State has among the highest unemployment rates in the nation and among the highest foreclosure rates in New England. High tax rates, big budget deficits and a lack of high tech jobs are hurting its chances to pull out of the doldrums. State government has a poor record of managing its finances
Michigan: The state never climbed out of the recession that started in 2001, and matters only became worse during the Great Recession. Two of the Big Three Detroit-based automakers went bankrupt in 2009, sending shockwaves through a state on track to lose a quarter of its jobs this decade. The recession accelerated drops in state revenue, and has left Michigan's government trying to deal with today's problems on a 1960s-sized budget.
Nevada: Nevada is one of the recession's big losers as its gaming-based economy suffered. Year-over-year revenue has fallen for two consecutive years, a record. But changing tax laws is tough because some are written into the state constitution.
Oregon: Oregon's leading industries, such as timber and computer-chip manufacturing, have been hit hard in the recession. Lawmakers have approved more than $1 billion in new taxes to keep it afloat. But voters in January will have the final say on another $733 million in new income taxes.
Florida: For the first time since World War II, Florida's population is shrinking -- bad news for an budget built on new residents flocking to the Sunshine State. Lawmakers raised $2 billion in new revenue this year, but could face a similar shortfall next year.
New Jersey: The Garden State, which has been plagued by years of fiscal mismanagement, spends more than it collects in revenue. The collapse of Wall Street, which supports about one-third of New Jersey's economy, has only made matters worse.
Illinois: Since the last recession earlier this decade, the state piled up huge backlogs of Medicaid bills and borrowed money to pay its pension obligations. The state's current budget still relies heavily on borrowing and paying bills late.
Wisconsin: Wisconsin has a long history of budget shortfalls. It also borrows frequently to cover operating expenses, among other measures. Unemployment is climbing as manufacturing, the state's largest sector, sputters.
More stimulus needed
The Center on Budget and Policy Priorities, a liberal research group, says the states need additional federal fiscal relief to avoid budget cuts that will hurt both the economy and people. State and local spending accounts for about one-eighth of the GDP.
Already, less than five months into fiscal 2010, several states are looking at additional budget cuts. Rhode Island announced Tuesday it is facing a revenue shortfall for the current fiscal year of $130.5 million. Gov. Donald Carcieri said the state must examine its aid to local governments, since it has already cut personnel and social service programs.
And in California, Gov. Arnold Schwarzenegger said Tuesday that his state is facing a budget gap of up to $7 billion. The state will likely announce across-the-board spending cuts in January.
"So we just have to hang in there, tighten our belts and live within our means," he said.
The center would like to see the federal government allocate another $50 billion, while economist Mark Zandi said about half of that would be needed. Congress should pass the additional aid now since states are currently crafting their fiscal 2011 budgets.
States received billions of dollars in funding from the Obama administration's $787 billion stimulus package, including $87 billion for Medicaid and $48.3 billion for maintaining education and other key services.
The stimulus funds plugged about 30% to 40% of the budget gaps states were facing, and created or saved more than 300,000 jobs, said Iris Lav, the center's senior adviser.
But the economic downturn is greater than administration officials expected when the Recovery Act was passed in February, Lav said. That's why more assistance is needed now.
Budget projections show that states could face deficits as large as $260 billion in 2011 and 2012 after stimulus funding is exhausted. State economies usually take up to two years longer to recover after the nation's fiscal health begins to improve.
New budget cuts and tax increases "will be a serious drag on the economy at just the wrong time," said Mark Zandi, chief economist at Moody's Economy.com.Without assistance, the economy could slide back into a recession, he said.
First Published: November 11, 2009: 1:00 PM ET
Find this article at:
http://money.cnn.com/2009/11/11/news/economy/states_economies
Demand for Build America Bonds (WSJ)
Investors Push to Extend BABs By ANDREW EDWARDS
The Build America Bond program isn't set to expire until the end of 2010, but portfolio managers and other investors in this new class of taxable municipal securities already are arguing to extend it. The reason: The bonds, known as BABs, have done their job. They have helped states, cities and other local government entities tap new capital markets and lower financing costs.
The credit crisis obliterated much of the demand for municipal debt. Money-market funds lost their appetite for variable-rate bonds, and funds that had borrowed heavily to invest in munis disappeared almost entirely.
Municipalities were forced to delay issuing new debt, or to offer unheard-of rates to attract enough individual investors to fund projects. BABs were meant to change that, and they did: New investors have come to the table and tens of billions of dollars in BABs have been issued.
"BABs are a much better foundation for the muni market," said Peter Coffin, president of Breckinridge Capital Advisors, which has $11 billion in municipal bonds under management. "It's a deeper source of demand."
The question is whether they are worth the long-term cost.
The most popular form of BABs pay higher interest rates than tax-exempt muni bonds and recoup 35% of the interest charge from the federal government. So, if a public university sells BABs with an interest rate of 5%, the university ends up paying only 3.25%, with Uncle Sam's subsidy effectively picking up the difference.
This makes BABs attractive to municipalities, which end up with an actual cost of capital even lower than on traditional tax-free muni bonds. The triple-A rated Virginia College Building Authority recently issued tax-free bonds due in 2027 at a par yield of 4.25%, said Ben Landers, head of taxable municipal-bond sales and trading at investment bank Morgan Keegan in Memphis, Tenn. Similar Virginia transportation BABs yield 5.72%, he said, but the actual cost to the state is 3.71%.
"If you're building something it makes sense to go BABs," Mr. Landers said.
However, that subsidy adds up. Assume that BABs yield an average of 5.95%, the average yield on Wells Fargo & Co.'s BAB index at the beginning of November, and that $48.3 billion of BABs have been issued this year. That means, year to date, the federal government has been put on the hook for $1 billion in yearly interest payments, a number that is only going to increase.
Advocates of BABs said that much of that figure is likely to come back in the form of federal taxes. They said these bonds potentially could end up costing the government less than the tax-free alternative if, and it is a big if, the taxable securities don't end up largely overseas or in the hands of nonprofit groups, pension funds and other institutions that aren't taxable to begin with.
Right now, those institutions shun lower-yielding munis because they don't benefit from the tax exemption on interest. They also are the major source of new demand for BABs.
"We really don't have a group of investor that can't buy BABs," Mr. Landers said. "For tax-free bonds, it's a very finite group of people."
BAB supporters argue that it is a more-efficient subsidy. The increased demand eventually will drive down yields, and the savings will be passed on to taxpayers. This is in contrast to the tax-free bonds, where the full benefits, they said, were never priced in.
Public advocates worry that the increased ease in raising capital could be an invitation to spend the easy money less wisely.
"It's an awful lot of money that's being put into the market without more transparency," said Michael Lakosky, at New York University's Institute for Public Knowledge.
Write to Andrew Edwards at andrew.edwards@dowjones.com
The Build America Bond program isn't set to expire until the end of 2010, but portfolio managers and other investors in this new class of taxable municipal securities already are arguing to extend it. The reason: The bonds, known as BABs, have done their job. They have helped states, cities and other local government entities tap new capital markets and lower financing costs.
The credit crisis obliterated much of the demand for municipal debt. Money-market funds lost their appetite for variable-rate bonds, and funds that had borrowed heavily to invest in munis disappeared almost entirely.
Municipalities were forced to delay issuing new debt, or to offer unheard-of rates to attract enough individual investors to fund projects. BABs were meant to change that, and they did: New investors have come to the table and tens of billions of dollars in BABs have been issued.
"BABs are a much better foundation for the muni market," said Peter Coffin, president of Breckinridge Capital Advisors, which has $11 billion in municipal bonds under management. "It's a deeper source of demand."
The question is whether they are worth the long-term cost.
The most popular form of BABs pay higher interest rates than tax-exempt muni bonds and recoup 35% of the interest charge from the federal government. So, if a public university sells BABs with an interest rate of 5%, the university ends up paying only 3.25%, with Uncle Sam's subsidy effectively picking up the difference.
This makes BABs attractive to municipalities, which end up with an actual cost of capital even lower than on traditional tax-free muni bonds. The triple-A rated Virginia College Building Authority recently issued tax-free bonds due in 2027 at a par yield of 4.25%, said Ben Landers, head of taxable municipal-bond sales and trading at investment bank Morgan Keegan in Memphis, Tenn. Similar Virginia transportation BABs yield 5.72%, he said, but the actual cost to the state is 3.71%.
"If you're building something it makes sense to go BABs," Mr. Landers said.
However, that subsidy adds up. Assume that BABs yield an average of 5.95%, the average yield on Wells Fargo & Co.'s BAB index at the beginning of November, and that $48.3 billion of BABs have been issued this year. That means, year to date, the federal government has been put on the hook for $1 billion in yearly interest payments, a number that is only going to increase.
Advocates of BABs said that much of that figure is likely to come back in the form of federal taxes. They said these bonds potentially could end up costing the government less than the tax-free alternative if, and it is a big if, the taxable securities don't end up largely overseas or in the hands of nonprofit groups, pension funds and other institutions that aren't taxable to begin with.
Right now, those institutions shun lower-yielding munis because they don't benefit from the tax exemption on interest. They also are the major source of new demand for BABs.
"We really don't have a group of investor that can't buy BABs," Mr. Landers said. "For tax-free bonds, it's a very finite group of people."
BAB supporters argue that it is a more-efficient subsidy. The increased demand eventually will drive down yields, and the savings will be passed on to taxpayers. This is in contrast to the tax-free bonds, where the full benefits, they said, were never priced in.
Public advocates worry that the increased ease in raising capital could be an invitation to spend the easy money less wisely.
"It's an awful lot of money that's being put into the market without more transparency," said Michael Lakosky, at New York University's Institute for Public Knowledge.
Write to Andrew Edwards at andrew.edwards@dowjones.com
401k: when it makes sense to opt out (Forbes.com)
The 401(k) Rethink
from Forbes.com
David K. Randall, 09.07.09, 12:00 AM ET
Millions of company employees are being automatically enrolled in 401(k) plans. That's great news for fund firms but not necessarily for workers.
Aware that Americans weren't putting away nearly enough to support themselves comfortably in old age, Congress enacted legislation three years ago that permits employers to automatically enroll workers in 401(k) savings plans. Workers would have to opt out rather than opt in. Inertia would work in favor of savings.
At companies adopting the forced-march approach, employees have 3% to 6% of pretax wages diverted from their paychecks unless they go to the trouble of explicitly informing their employers that they do not want to participate. Of employers with at least 1,500 employees, half now have automatic enrollment plans.
In one sense the legislation is working like a charm. In 2005, just before Congress began encouraging automatic enrollment, seven in ten eligible workers participated in 401(k) plans. Now nine in ten do among companies with automatic enrollment. What's more, over half of those automatically enrolled are either younger than 34 or making less than $40,000 a year, Fidelity Investments says.
What's not to like? Not a thing, if the goal is merely to boost 401(k) assets. Plenty, if the objective is to help workers save for retirement in the most effective way possible. That's because in the current environment 401(k) plans are a crummy deal for millions of workers. That goes doubly for young and low-wage earners. Following are some guidelines to consider before enrolling yourself, or your workers, in a 401(k) plan.
The Big Chill
Conventional wisdom has long had it that only a fool would fail to contribute to a 401(k), at least up to the point that his employer stops matching his contributions. Passing this up, the adage goes, is tantamount to leaving free money on the table.
That logic still holds if your employer offers a match. Unfortunately 5% of employers have frozen 401(k) contributions in the past year. In the absence of matches, and in light of the points below, a 401(k) might not make sense at all.
Better Alternatives
For workers in low tax brackets it may make more sense to put aftertax dollars in now and take them out tax free later in life via a Roth 401(k). That's assuming your employer offers this relatively new type of retirement account and attractive investment options inside it. For both types of 401(k)s, the contribution limit is $16,500 this year, or $22,000 for those age 50 and above.
And what if your employer has a no-match 401(k) but no Roth option? If you are in a low tax bracket, you might do well to opt out of the 401(k) and put the money instead into your own Roth Individual Retirement Account up to the $5,000 maximum for 2009 ($6,000 for those 50 and over). An IRA enables you to call the shots on where your money is invested. That means you can select an index fund or ETF with rock-bottom fees or go farther afield than most 401(k) plans allow and into things like real estate investment trusts or commodity futures. Single filers with modified adjusted gross incomes of less than $105,000, or married couples filing jointly and together earning $166,000 or less, can contribute to a 401(k) and make a full contribution to a Roth IRA. After that a Roth is limited or not allowed.
Younger workers in particular can benefit from funding a Roth IRA. As with a Roth 401(k), with the Roth IRA dollars go in after taxes are paid but come out tax free in retirement, when income, and income tax rates, are likely to be substantially higher.
"You have to factor in that you may have a lower tax bracket now than when you retire," says Mickey Cargile, head of WNB Private Client Services in Midland, Tex.
The Roth IRA also enables you to take out contributions at any time without paying a penalty, which can be useful for buying a house, sending a child to school or covering expenses between jobs. Withdraw money from a 401(k) before you turn 591/2 and you'll pay a 10% penalty, plus ordinary taxes.
Risky Investments
After Congress passed automatic 401(k) enrollment, the Department of Labor drafted guidelines stipulating that employers can exempt themselves from legal claims of negligence by designating target date funds as their default investment vehicles. These funds wrap together other funds that invest in stocks, bonds and money markets with the aim of buying risky assets early in participants' careers and becoming more conservative as they near retirement.
Target date funds have proved a disaster in the recent financial crisis. Some that were sold to those planning to retire in 2010, and marketed as geared toward capital preservation, were heavily invested in stocks and lost 40% of their value last year. The Senate is investigating.
Under the law, employers have a fiduciary duty to offer employees prudent investment options. The problem is that as long as they go along with what other employers are doing it will be hard to argue that they were imprudent--even if everyone's 401(k) loses a significant portion of its value.
"No matter what Wall Street has persuaded Congress to do, the only safe investment that people should be defaulted into are Treasury Inflation-Protected Securities," argues Laurence Kotlikoff, an economics professor at Boston University. "People shouldn't have Big Brother taking risks for them."
Academics warn that a false sense of security is another risk in making it too easy for employees to save for retirement. Workers who invest in a 401(k) without lifting a finger are unlikely to spend much time looking into whether they're saving enough, frets Punam Anand Keller, a professor of management at Dartmouth's Tuck School of Business.
"People assume it's like Social Security, and that once they're enrolled, nothing happens to that money," says Keller. "It's a false assumption."
--------------------------------------------------------------------------------
Fee Fiascos
Whether you're enrolled automatically or not, once you're in a 401(k) there's no cap on how much the plan might skim off the top in fees. As FORBES pointed out recently ("Group Stink"), many plans, especially those sold to small companies, can eat up roughly half of real investment returns. (That's not hard to do. Your assets might return 4% after inflation and an expensive asset manager can take 2% of assets annually.) Many small company plans offer dubious investment options, like deferred annuities that charge insurance premiums but offer little in the way of benefits.
Companies that automatically enroll workers have a fiduciary obligation to ensure that fees are reasonable, says Jeffrey Martin, a tax expert at Grant Thornton. "But 'reasonable' is a subjective determination," he adds.
Among 26 target date funds aimed at workers who plan to retire in 2045, expense ratios range from a modest 18 cents per $100 invested at Vanguard to $1.53 at BlackRock.
"I don't know how many people look at fees in their accounts now. That's what the mutual fund industry is relying on," says Glenn Sulzer, a tax attorney with CCH in Chicago.
In the end, automatic enrollment is a greater boon to the mutual fund companies who stand to receive billions of dollars in automatic contributions than it is likely to prove to individual savers, says Boston University's Kotlikoff.
"The money is locked in and big mutual fund companies earn fees on it year after year without having to do any work," he says. "This whole structure doesn't guarantee financial security or retirement security."
Decisions, Decisions
It's usually a good idea to invest in a 401(k), as long as your employer is matching your contributions. If it's not, other alternatives may be preferable and offer more flexibility to invest or to make penalty-free withdrawals before you retire.
Source // Contribution limit // Highlights
401(k) // Employer $15,500/$20,500 if older than 50 //Contributions pretax; employer may match contributions
Roth 401(k) // Employer $15,500/$20,500 if older than 50 //Employee contributions taxed now; employer match taxed at withdrawal
IRA / Self-directed $5,000/$6,000 if 50 or older // Withdrawals taxed in retirement
Roth IRA / Self-directed $5,000/$6,000 if 50 or older // Contributions taxed now; some taxpayers with higher incomes can't contribute
Income refers to adjusted gross income. Source: CCH.
from Forbes.com
David K. Randall, 09.07.09, 12:00 AM ET
Millions of company employees are being automatically enrolled in 401(k) plans. That's great news for fund firms but not necessarily for workers.
Aware that Americans weren't putting away nearly enough to support themselves comfortably in old age, Congress enacted legislation three years ago that permits employers to automatically enroll workers in 401(k) savings plans. Workers would have to opt out rather than opt in. Inertia would work in favor of savings.
At companies adopting the forced-march approach, employees have 3% to 6% of pretax wages diverted from their paychecks unless they go to the trouble of explicitly informing their employers that they do not want to participate. Of employers with at least 1,500 employees, half now have automatic enrollment plans.
In one sense the legislation is working like a charm. In 2005, just before Congress began encouraging automatic enrollment, seven in ten eligible workers participated in 401(k) plans. Now nine in ten do among companies with automatic enrollment. What's more, over half of those automatically enrolled are either younger than 34 or making less than $40,000 a year, Fidelity Investments says.
What's not to like? Not a thing, if the goal is merely to boost 401(k) assets. Plenty, if the objective is to help workers save for retirement in the most effective way possible. That's because in the current environment 401(k) plans are a crummy deal for millions of workers. That goes doubly for young and low-wage earners. Following are some guidelines to consider before enrolling yourself, or your workers, in a 401(k) plan.
The Big Chill
Conventional wisdom has long had it that only a fool would fail to contribute to a 401(k), at least up to the point that his employer stops matching his contributions. Passing this up, the adage goes, is tantamount to leaving free money on the table.
That logic still holds if your employer offers a match. Unfortunately 5% of employers have frozen 401(k) contributions in the past year. In the absence of matches, and in light of the points below, a 401(k) might not make sense at all.
Better Alternatives
For workers in low tax brackets it may make more sense to put aftertax dollars in now and take them out tax free later in life via a Roth 401(k). That's assuming your employer offers this relatively new type of retirement account and attractive investment options inside it. For both types of 401(k)s, the contribution limit is $16,500 this year, or $22,000 for those age 50 and above.
And what if your employer has a no-match 401(k) but no Roth option? If you are in a low tax bracket, you might do well to opt out of the 401(k) and put the money instead into your own Roth Individual Retirement Account up to the $5,000 maximum for 2009 ($6,000 for those 50 and over). An IRA enables you to call the shots on where your money is invested. That means you can select an index fund or ETF with rock-bottom fees or go farther afield than most 401(k) plans allow and into things like real estate investment trusts or commodity futures. Single filers with modified adjusted gross incomes of less than $105,000, or married couples filing jointly and together earning $166,000 or less, can contribute to a 401(k) and make a full contribution to a Roth IRA. After that a Roth is limited or not allowed.
Younger workers in particular can benefit from funding a Roth IRA. As with a Roth 401(k), with the Roth IRA dollars go in after taxes are paid but come out tax free in retirement, when income, and income tax rates, are likely to be substantially higher.
"You have to factor in that you may have a lower tax bracket now than when you retire," says Mickey Cargile, head of WNB Private Client Services in Midland, Tex.
The Roth IRA also enables you to take out contributions at any time without paying a penalty, which can be useful for buying a house, sending a child to school or covering expenses between jobs. Withdraw money from a 401(k) before you turn 591/2 and you'll pay a 10% penalty, plus ordinary taxes.
Risky Investments
After Congress passed automatic 401(k) enrollment, the Department of Labor drafted guidelines stipulating that employers can exempt themselves from legal claims of negligence by designating target date funds as their default investment vehicles. These funds wrap together other funds that invest in stocks, bonds and money markets with the aim of buying risky assets early in participants' careers and becoming more conservative as they near retirement.
Target date funds have proved a disaster in the recent financial crisis. Some that were sold to those planning to retire in 2010, and marketed as geared toward capital preservation, were heavily invested in stocks and lost 40% of their value last year. The Senate is investigating.
Under the law, employers have a fiduciary duty to offer employees prudent investment options. The problem is that as long as they go along with what other employers are doing it will be hard to argue that they were imprudent--even if everyone's 401(k) loses a significant portion of its value.
"No matter what Wall Street has persuaded Congress to do, the only safe investment that people should be defaulted into are Treasury Inflation-Protected Securities," argues Laurence Kotlikoff, an economics professor at Boston University. "People shouldn't have Big Brother taking risks for them."
Academics warn that a false sense of security is another risk in making it too easy for employees to save for retirement. Workers who invest in a 401(k) without lifting a finger are unlikely to spend much time looking into whether they're saving enough, frets Punam Anand Keller, a professor of management at Dartmouth's Tuck School of Business.
"People assume it's like Social Security, and that once they're enrolled, nothing happens to that money," says Keller. "It's a false assumption."
--------------------------------------------------------------------------------
Fee Fiascos
Whether you're enrolled automatically or not, once you're in a 401(k) there's no cap on how much the plan might skim off the top in fees. As FORBES pointed out recently ("Group Stink"), many plans, especially those sold to small companies, can eat up roughly half of real investment returns. (That's not hard to do. Your assets might return 4% after inflation and an expensive asset manager can take 2% of assets annually.) Many small company plans offer dubious investment options, like deferred annuities that charge insurance premiums but offer little in the way of benefits.
Companies that automatically enroll workers have a fiduciary obligation to ensure that fees are reasonable, says Jeffrey Martin, a tax expert at Grant Thornton. "But 'reasonable' is a subjective determination," he adds.
Among 26 target date funds aimed at workers who plan to retire in 2045, expense ratios range from a modest 18 cents per $100 invested at Vanguard to $1.53 at BlackRock.
"I don't know how many people look at fees in their accounts now. That's what the mutual fund industry is relying on," says Glenn Sulzer, a tax attorney with CCH in Chicago.
In the end, automatic enrollment is a greater boon to the mutual fund companies who stand to receive billions of dollars in automatic contributions than it is likely to prove to individual savers, says Boston University's Kotlikoff.
"The money is locked in and big mutual fund companies earn fees on it year after year without having to do any work," he says. "This whole structure doesn't guarantee financial security or retirement security."
Decisions, Decisions
It's usually a good idea to invest in a 401(k), as long as your employer is matching your contributions. If it's not, other alternatives may be preferable and offer more flexibility to invest or to make penalty-free withdrawals before you retire.
Source // Contribution limit // Highlights
401(k) // Employer $15,500/$20,500 if older than 50 //Contributions pretax; employer may match contributions
Roth 401(k) // Employer $15,500/$20,500 if older than 50 //Employee contributions taxed now; employer match taxed at withdrawal
IRA / Self-directed $5,000/$6,000 if 50 or older // Withdrawals taxed in retirement
Roth IRA / Self-directed $5,000/$6,000 if 50 or older // Contributions taxed now; some taxpayers with higher incomes can't contribute
Income refers to adjusted gross income. Source: CCH.
Growing Market for LEDs (WSJ, Japan Times)
NOVEMBER 5, 2009, 4:12 P.M. ET
Cree To Light Up 650 Wal-Mart Stores' Aisles With LEDs
By Sari Krieger
Of DOW JONES CLEAN TECHNOLOGY INSIGHT
NEW YORK (Dow Jones)--Attention Wal-Mart shoppers: Cree Inc. light-emitting diodes will soon be lighting up the retail giant's stores in various aisles.
Durham, N.C.-based Cree said Wednesday that Wal-Mart Stores Inc. (WMT) signed a deal with the company to buy two kinds of its LED lights, which the retailer will install in 650 of its stores in the first year. Although the companies wouldn't disclose the value of this deal for Cree, or exactly how many lights Wal-Mart bought, this move has larger implications for the LED lighting industry and Cree.
"I think it's an important milestone in what we've been calling the LED lighting revolution," said Cree Chief Executive Chuck Swoboda in an interview with Clean Technology Insight. "It demonstrates that LED lighting really works in commercial lighting applications."
Swoboda called this deal an "initial roll out," but he wouldn't say whether Wal-Mart has expressed interest in buying more LED lights, otherwise known as solid-state lighting.
Wal-Mart didn't return a call requesting comment.
The adoption of LED technology, and Cree's products specifically, by the retail giant could soon bring other retailers knocking at their door. Swoboda said that once some municipalities started using outdoor LED lighting, others soon followed suit. The retail arena should be similar, Swoboda said he hopes, because he thinks that once some companies try LED lights and can show some positive results, others will be less gun-shy about switching to the technology.
Wal-Mart bought Cree's LRP-38s, a spot light, to illuminate some of its products. This light lasts 50,000 hours, consumes 82% less energy than the 70-watt ceramic metal-halide bulbs it replaces and can last more than five years when kept on all the time. These lights also make products displayed under them look more vivid and they don't radiate heat down, helping delay product spoilage, as the company demonstrated at the Lightfair International Convention in May, held in New York. Cree rolled out the LRP-38 at the convention.
The deal also includes use of Cree's LR6 recessed can lights in some Wal-Mart new construction, but the companies wouldn't give further details on how many or where they will be used. The LR6 has similar specifications to the LRP-38, but it is a more general-purpose light, rather than a spot light.
Theo O'Neill, an analyst with Kaufman Bros. LP, said in an interview that this initial roll out brings Cree about $4 million to $8 million in revenue.
"It's obviously a plus for Cree," O'Neill said. "Plus it will help with industrial expansion of this business. There are five billion light bulbs in the U.S. and they are all going to convert to solid-state lights eventually. Big, big business."
O'Neill has a "hold" rating on the stock and a $36, 12-month price target. He doesn't own shares of the company and Kaufman Bros. makes a market in shares of Cree.
Jed Dorsheimer, an analyst with Canaccord Adams Inc., who has been consistently bearish on Cree's stock, acknowledged the significance of the deal. He doesn't own shares of Cree and Canaccord Adams conducts no business for Cree. He has a $45 price target and a "hold" rating on shares of Cree.
"It's also great to see Wal-Mart transition to solid-state lighting, as they did with refrigeration," Dorsheimer said. "Typically, they lead the market by one to two years."
Bentonville, Ark.-based Wal-Mart has already installed LED lights in its refrigerator and freezer cases and is considering using LED parking lot lights, it said recently.
Shares of Cree climbed Wednesday $1.92, or 4.5%, to $44.70 on Nasdaq. Shares of Wal-Mart increased 89 cents, or 1%, to $51.27 on the New York Stock Exchange.
(Dow Jones Clean Technology Insight covers news about public and private clean-technology and alternative-energy companies.)
-By Sari Krieger, Dow Jones Clean Technology Insight; 212-416-2016; sari.krieger@dowjones.com
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BUSINESS SEPTEMBER 30, 2009
Lighting Firm to Unveil LED Bulb
By SARI KRIEGER
Lemnis Lighting Inc. plans to announce this week the full-scale release in the U.S. market of a light-emitting diode bulb, its entry in the race to replace 60-watt incandescent lights.
As consumers look to cut down on energy use and the federal government's 2012 ban on incandescent bulbs approaches, sales of compact fluorescent lights have increased. These spiral-shaped lights use much less energy than traditional incandescent lights, which waste most of the energy they draw. CFLs also last seven to 10 times longer than incandescents.
But light-emitting diodes, or LEDs, promise a next generation of lights that are even more efficient, last longer, are more easily dimmable and, unlike CFLs, don't contain mercury.
Lemnis Lighting says its Pharox light looks like a traditional incandescent light, with a metal piece wrapped around the midsection of the light that acts as a heat-sink, keeping the LEDs cool and ensuring a long life of 35,000 hours, or about 20 years of normal household use. The bulbs are pricey, though, costing about $40 each.
Its light output looks like what consumers expect from a soft white incandescent light, as opposed to the harsher, blue-hue from a cool white often seen from fluorescents in offices and hospitals.
The LED light draws 6 watts and puts out the same amount of light as a 40-watt bulb if used right-side-up, such as in a desk lamp, or the equivalent of a 60-watt bulb if used in an upside-down application, due to the nature of LEDs.
Lemnis Lighting is owned by Tendris Holding, a business incubator and operator in sustainable technology and services based in Naarden, Netherlands. Both Lemnis and Tendris are run by Warner Philips, the grandson of Royal Philips NV co-founder Anton Philips. Tendris was formed in 2002 with investments from its insiders and friends and family. Philips is a 10% shareholder in Tendris.
Mr. Philips said in an interview that Lemnis is in talks with major U.S. retailers to sell the Pharox product.
Coming up with a quality, affordable 60-watt replacement light has been a challenge for the LED industry, partially for the reason that LEDs are by nature directional sources of light, as opposed to traditional incandescents that shine in 360 degrees. Top LED companies have been concentrating mostly on directional light sources for commercial and industrial purposes, which make up the bulk of the lighting market.
But the Department of Energy recently established the Bright Tomorrow Lighting Prize, known as the L-prize, which is a competition for companies to come up with the best 60-watt replacement light. The DOE said last week that more than 425 million 60-watt incandescent light bulbs are sold each year in the U.S. alone, representing approximately 50% of the incandescent light bulb market.
So far Amsterdam, Netherlands-based Philips is the only company to submit a product.
The DOE said an LED replacement for this purpose could save 34 terawatt-hours of electricity in one year, enough to power the lights of 17.4 million U.S. households and avoid 5.6 million metric tons of carbon emissions annually.
New York-based Lighting Science Group Corp. has a 40-watt incandescent LED replacement that the company says draws about 7 watts, lasts 40,000 hours and is dimmable.
Thomas Griffiths, an LED industry expert, said in an interview that he sees these three companies as the main competitors at the moment on the LED replacement light scene. Griffiths said the Pharox light looks like a good product, but only time will tell for sure, and he thinks the $39 sticker price is still too high.
Lemnis offers a three-year warranty on the product and the company estimates that an average utility rate of 15 cents per kilowatt-hour, a consumer will achieve a payback within three years.
"I think they're representing where the state of the technology affordably has us right now, but there's still a ways to go before there's a real replacement, and right now Philips is the one to watch because of this announcement," Mr. Griffiths said.
Philips said in a statement that it is confident its product meets the criteria of the L-prize, which calls for a higher level of efficiency, better quality light and more light output than the Lemnis and Lighting Science products.
Although Philips and Lemnis are competitors in this context, Philips acquired an equity stake in Tendris in January.
Mr. Philips said that if Lemnis, with the help of Los Angeles-based partner Digital Light LLC, can reach its goal of selling 10 million lights world-wide within the next 24 months, the price could drop to $30 per bulb.
Griffiths said LED replacement lights need to reach the $15 to $20 range before they'll really be viable.
Tendris' first investment was Oxxio, a supplier of renewable energy, which was sold to Centrica PLC in 2005. That exit gave Tendris at least $39 million more to play around with. The same year, the Dutch National Postcode Lottery also bought a 10% stake in Tendris, giving the company more capital to push its innovations out into the market.
Lemnis, based in Hertogenbosch, Netherlands, was founded in 2005 and is on the verge of profitability, Mr. Philips said in an earlier interview.
Mr. Philips said he isn't looking for an exit with Lemnis, but he said long-term partnerships are always a possibility.
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<
LED light bulbs fly off shelves as price war starts
By YOSUKE FUKUOKA
Kyodo News
Light-emitting diode lights are selling like hot cakes since prices dropped by half this year.
The surge in demand for the new generation of light bulbs has quickly emptied store shelves, prompting more manufacturers to jump into the market.
LED lights first appeared about a decade ago, but their poor brightness limited them to emergency use. Recent advances in longevity and brightness, however, have turned their fortunes around completely.
Today's LED bulbs cost as little as ¥4,000 but boast a longevity of 40,000 hours, which is about 40 times the life span of incandescent bulbs. They also consume nearly 90 percent less electricity than incandescent bulbs.Compared with fluorescent light bulbs, LED lamps are six times more durable and use at least 40 percent less energy.
Rising public awareness of environmental issues is also boosting LED sales. Countries embarking on "green" initiatives are letting incandescent bulbs fall by the wayside as they move to save energy.
Under the previous government led by the Liberal Democratic Party, then Economy, Trade and Industry Minister Akira Amari announced a plan last year to cease production and sales of incandescent bulbs by 2012.
As a result, demand for LED bulbs is outpacing supply.
"We are swamped by orders and just can't keep pace with demand," said Takahisa Uzumaki, senior manager at Toshiba Lighting & Technology Corp., a unit of Toshiba Corp., which developed LED bulbs in 2007.
Sales of LED lights spiked this summer as prices began to come down. At one large store in Tokyo's Akihabara electronics shopping district, "Sold Out" signs were seen at the LED light section.
"Many customers buy LED bulbs just to try them out," said a shop clerk.
In June, Sharp Corp. unveiled a plan to sell LED bulbs for about ¥4,000, less than half the price of products made by other companies. Then more manufacturers, including Panasonic Corp. and NEC Corp., entered the fray.
Competition is heating up because startups founded only five or six years ago have entered the market, since it doesn't take large facilities to mass-produce LED bulbs. That's one of biggest differences of LEDs over incandescent and fluorescent lamps.
As new companies crowd into the LED business, Toshiba Lighting is taking on the challenge by halving its prices. Their bulbs now retail for under ¥5,000.
The Toshiba group is fostering the business and betting it will turn into a hot sector.
"We intend to boost annual LED lighting sales to ¥350 billion by March 2016 from the current ¥20 billion," said Masashi Muromachi, a senior executive at the parent firm.
Sharp aspires to raise annual sales to ¥50 billion in the near future.
With energy conservation a matter of global concern, manufacturers also anticipate brisk demand abroad. Toshiba aims to get overseas sales to account for 30 percent or more of its total LED sales by the year ending in March 2016.
Panasonic is also setting its eyes on foreign markets.
While they are experiencing a sudden burst of popularity, LED bulbs still leave something to be desired technologically. They are more expensive and less bright than their fluorescent counterparts.
The new type of light bulb can become standard in every household only when manufacturers address and overcome these weaknesses.
The Japan Times: Friday, Oct. 23, 2009
(C) All rights reserved
Cree To Light Up 650 Wal-Mart Stores' Aisles With LEDs
By Sari Krieger
Of DOW JONES CLEAN TECHNOLOGY INSIGHT
NEW YORK (Dow Jones)--Attention Wal-Mart shoppers: Cree Inc. light-emitting diodes will soon be lighting up the retail giant's stores in various aisles.
Durham, N.C.-based Cree said Wednesday that Wal-Mart Stores Inc. (WMT) signed a deal with the company to buy two kinds of its LED lights, which the retailer will install in 650 of its stores in the first year. Although the companies wouldn't disclose the value of this deal for Cree, or exactly how many lights Wal-Mart bought, this move has larger implications for the LED lighting industry and Cree.
"I think it's an important milestone in what we've been calling the LED lighting revolution," said Cree Chief Executive Chuck Swoboda in an interview with Clean Technology Insight. "It demonstrates that LED lighting really works in commercial lighting applications."
Swoboda called this deal an "initial roll out," but he wouldn't say whether Wal-Mart has expressed interest in buying more LED lights, otherwise known as solid-state lighting.
Wal-Mart didn't return a call requesting comment.
The adoption of LED technology, and Cree's products specifically, by the retail giant could soon bring other retailers knocking at their door. Swoboda said that once some municipalities started using outdoor LED lighting, others soon followed suit. The retail arena should be similar, Swoboda said he hopes, because he thinks that once some companies try LED lights and can show some positive results, others will be less gun-shy about switching to the technology.
Wal-Mart bought Cree's LRP-38s, a spot light, to illuminate some of its products. This light lasts 50,000 hours, consumes 82% less energy than the 70-watt ceramic metal-halide bulbs it replaces and can last more than five years when kept on all the time. These lights also make products displayed under them look more vivid and they don't radiate heat down, helping delay product spoilage, as the company demonstrated at the Lightfair International Convention in May, held in New York. Cree rolled out the LRP-38 at the convention.
The deal also includes use of Cree's LR6 recessed can lights in some Wal-Mart new construction, but the companies wouldn't give further details on how many or where they will be used. The LR6 has similar specifications to the LRP-38, but it is a more general-purpose light, rather than a spot light.
Theo O'Neill, an analyst with Kaufman Bros. LP, said in an interview that this initial roll out brings Cree about $4 million to $8 million in revenue.
"It's obviously a plus for Cree," O'Neill said. "Plus it will help with industrial expansion of this business. There are five billion light bulbs in the U.S. and they are all going to convert to solid-state lights eventually. Big, big business."
O'Neill has a "hold" rating on the stock and a $36, 12-month price target. He doesn't own shares of the company and Kaufman Bros. makes a market in shares of Cree.
Jed Dorsheimer, an analyst with Canaccord Adams Inc., who has been consistently bearish on Cree's stock, acknowledged the significance of the deal. He doesn't own shares of Cree and Canaccord Adams conducts no business for Cree. He has a $45 price target and a "hold" rating on shares of Cree.
"It's also great to see Wal-Mart transition to solid-state lighting, as they did with refrigeration," Dorsheimer said. "Typically, they lead the market by one to two years."
Bentonville, Ark.-based Wal-Mart has already installed LED lights in its refrigerator and freezer cases and is considering using LED parking lot lights, it said recently.
Shares of Cree climbed Wednesday $1.92, or 4.5%, to $44.70 on Nasdaq. Shares of Wal-Mart increased 89 cents, or 1%, to $51.27 on the New York Stock Exchange.
(Dow Jones Clean Technology Insight covers news about public and private clean-technology and alternative-energy companies.)
-By Sari Krieger, Dow Jones Clean Technology Insight; 212-416-2016; sari.krieger@dowjones.com
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BUSINESS SEPTEMBER 30, 2009
Lighting Firm to Unveil LED Bulb
By SARI KRIEGER
Lemnis Lighting Inc. plans to announce this week the full-scale release in the U.S. market of a light-emitting diode bulb, its entry in the race to replace 60-watt incandescent lights.
As consumers look to cut down on energy use and the federal government's 2012 ban on incandescent bulbs approaches, sales of compact fluorescent lights have increased. These spiral-shaped lights use much less energy than traditional incandescent lights, which waste most of the energy they draw. CFLs also last seven to 10 times longer than incandescents.
But light-emitting diodes, or LEDs, promise a next generation of lights that are even more efficient, last longer, are more easily dimmable and, unlike CFLs, don't contain mercury.
Lemnis Lighting says its Pharox light looks like a traditional incandescent light, with a metal piece wrapped around the midsection of the light that acts as a heat-sink, keeping the LEDs cool and ensuring a long life of 35,000 hours, or about 20 years of normal household use. The bulbs are pricey, though, costing about $40 each.
Its light output looks like what consumers expect from a soft white incandescent light, as opposed to the harsher, blue-hue from a cool white often seen from fluorescents in offices and hospitals.
The LED light draws 6 watts and puts out the same amount of light as a 40-watt bulb if used right-side-up, such as in a desk lamp, or the equivalent of a 60-watt bulb if used in an upside-down application, due to the nature of LEDs.
Lemnis Lighting is owned by Tendris Holding, a business incubator and operator in sustainable technology and services based in Naarden, Netherlands. Both Lemnis and Tendris are run by Warner Philips, the grandson of Royal Philips NV co-founder Anton Philips. Tendris was formed in 2002 with investments from its insiders and friends and family. Philips is a 10% shareholder in Tendris.
Mr. Philips said in an interview that Lemnis is in talks with major U.S. retailers to sell the Pharox product.
Coming up with a quality, affordable 60-watt replacement light has been a challenge for the LED industry, partially for the reason that LEDs are by nature directional sources of light, as opposed to traditional incandescents that shine in 360 degrees. Top LED companies have been concentrating mostly on directional light sources for commercial and industrial purposes, which make up the bulk of the lighting market.
But the Department of Energy recently established the Bright Tomorrow Lighting Prize, known as the L-prize, which is a competition for companies to come up with the best 60-watt replacement light. The DOE said last week that more than 425 million 60-watt incandescent light bulbs are sold each year in the U.S. alone, representing approximately 50% of the incandescent light bulb market.
So far Amsterdam, Netherlands-based Philips is the only company to submit a product.
The DOE said an LED replacement for this purpose could save 34 terawatt-hours of electricity in one year, enough to power the lights of 17.4 million U.S. households and avoid 5.6 million metric tons of carbon emissions annually.
New York-based Lighting Science Group Corp. has a 40-watt incandescent LED replacement that the company says draws about 7 watts, lasts 40,000 hours and is dimmable.
Thomas Griffiths, an LED industry expert, said in an interview that he sees these three companies as the main competitors at the moment on the LED replacement light scene. Griffiths said the Pharox light looks like a good product, but only time will tell for sure, and he thinks the $39 sticker price is still too high.
Lemnis offers a three-year warranty on the product and the company estimates that an average utility rate of 15 cents per kilowatt-hour, a consumer will achieve a payback within three years.
"I think they're representing where the state of the technology affordably has us right now, but there's still a ways to go before there's a real replacement, and right now Philips is the one to watch because of this announcement," Mr. Griffiths said.
Philips said in a statement that it is confident its product meets the criteria of the L-prize, which calls for a higher level of efficiency, better quality light and more light output than the Lemnis and Lighting Science products.
Although Philips and Lemnis are competitors in this context, Philips acquired an equity stake in Tendris in January.
Mr. Philips said that if Lemnis, with the help of Los Angeles-based partner Digital Light LLC, can reach its goal of selling 10 million lights world-wide within the next 24 months, the price could drop to $30 per bulb.
Griffiths said LED replacement lights need to reach the $15 to $20 range before they'll really be viable.
Tendris' first investment was Oxxio, a supplier of renewable energy, which was sold to Centrica PLC in 2005. That exit gave Tendris at least $39 million more to play around with. The same year, the Dutch National Postcode Lottery also bought a 10% stake in Tendris, giving the company more capital to push its innovations out into the market.
Lemnis, based in Hertogenbosch, Netherlands, was founded in 2005 and is on the verge of profitability, Mr. Philips said in an earlier interview.
Mr. Philips said he isn't looking for an exit with Lemnis, but he said long-term partnerships are always a possibility.
Copyright 2009 Dow Jones & Company, Inc. All Rights Reserved
<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<<
LED light bulbs fly off shelves as price war starts
By YOSUKE FUKUOKA
Kyodo News
Light-emitting diode lights are selling like hot cakes since prices dropped by half this year.
The surge in demand for the new generation of light bulbs has quickly emptied store shelves, prompting more manufacturers to jump into the market.
LED lights first appeared about a decade ago, but their poor brightness limited them to emergency use. Recent advances in longevity and brightness, however, have turned their fortunes around completely.
Today's LED bulbs cost as little as ¥4,000 but boast a longevity of 40,000 hours, which is about 40 times the life span of incandescent bulbs. They also consume nearly 90 percent less electricity than incandescent bulbs.Compared with fluorescent light bulbs, LED lamps are six times more durable and use at least 40 percent less energy.
Rising public awareness of environmental issues is also boosting LED sales. Countries embarking on "green" initiatives are letting incandescent bulbs fall by the wayside as they move to save energy.
Under the previous government led by the Liberal Democratic Party, then Economy, Trade and Industry Minister Akira Amari announced a plan last year to cease production and sales of incandescent bulbs by 2012.
As a result, demand for LED bulbs is outpacing supply.
"We are swamped by orders and just can't keep pace with demand," said Takahisa Uzumaki, senior manager at Toshiba Lighting & Technology Corp., a unit of Toshiba Corp., which developed LED bulbs in 2007.
Sales of LED lights spiked this summer as prices began to come down. At one large store in Tokyo's Akihabara electronics shopping district, "Sold Out" signs were seen at the LED light section.
"Many customers buy LED bulbs just to try them out," said a shop clerk.
In June, Sharp Corp. unveiled a plan to sell LED bulbs for about ¥4,000, less than half the price of products made by other companies. Then more manufacturers, including Panasonic Corp. and NEC Corp., entered the fray.
Competition is heating up because startups founded only five or six years ago have entered the market, since it doesn't take large facilities to mass-produce LED bulbs. That's one of biggest differences of LEDs over incandescent and fluorescent lamps.
As new companies crowd into the LED business, Toshiba Lighting is taking on the challenge by halving its prices. Their bulbs now retail for under ¥5,000.
The Toshiba group is fostering the business and betting it will turn into a hot sector.
"We intend to boost annual LED lighting sales to ¥350 billion by March 2016 from the current ¥20 billion," said Masashi Muromachi, a senior executive at the parent firm.
Sharp aspires to raise annual sales to ¥50 billion in the near future.
With energy conservation a matter of global concern, manufacturers also anticipate brisk demand abroad. Toshiba aims to get overseas sales to account for 30 percent or more of its total LED sales by the year ending in March 2016.
Panasonic is also setting its eyes on foreign markets.
While they are experiencing a sudden burst of popularity, LED bulbs still leave something to be desired technologically. They are more expensive and less bright than their fluorescent counterparts.
The new type of light bulb can become standard in every household only when manufacturers address and overcome these weaknesses.
The Japan Times: Friday, Oct. 23, 2009
(C) All rights reserved
Great Rates on Insurance for Veterans ( Business Wire)
USAA Opens Membership to All Veterans Who Honorably Served
Thu Nov 5, 2009 1:00pm EST
Financial Services Provider Focused on Military Community Expands Potential
Customer Base by an Estimated 35 Million
SAN ANTONIO--(Business Wire)--
More than 18 million U.S. military veterans and their 17 million family members
who are looking for competitive alternatives to their current insurance, banking
and investment providers now can take advantage of USAA and its 87-year record
of strength, stability and performance in service to the military community.
Citing steady growth in financial strength and operational capacity, USAA
announced that effective immediately, membership now is open to all veterans of
the U.S. Armed Forces who served honorably, regardless of years of service.
The change expands USAA`s potential customer by an estimated 35 million,
including 18 million veterans, and 17 million spouses and children who also
would be able to access USAA services after their veteran relative becomes a
member.
"We believe everyone who served honorably in the armed forces should be able to
manage their financial well-being with USAA, a company committed to caring more
about the unique needs of the military community than any other," said retired
Army Maj. Gen. Joe Robles, USAA`s President and CEO. "Today, USAA is stronger
than at any time in our 87-year history, and we are thrilled to open our doors
wider to offer the benefits of USAA membership to more military families than
ever before."
USAA began as an officer-only association in 1922, opened to enlisted personnel
in 1996, and today serves 7.3 million current and former military members and
their families. Throughout its history, USAA has played an important role in
helping military families with their financial security, providing them with
insurance, investments and banking products as well as financial planning and
advice.
Operating without commissioned sales agents, the company has earned numerous
customer service accolades, including winning BusinessWeek`s #1 Customer Service
Champs award in 2008 and 2007.USAA is the only company to be ranked in the top
two each year since the list`s inception in 2007.
More recently, through innovations such as the banking industry`s first mobile
check deposit service, USAA Deposit@Mobile, USAA is leveraging technology to
enable its eligible customers to manage their finances anytime and from anywhere
a mobile signal is available.
"Having served as an Army private and many ranks along the way to major general,
it gives me great personal satisfaction to know that another 35 million former
service members, their spouses and children now have access to all that USAA
offers," said Robles.
Who is eligible for USAA P&C Group membership?
Military personnel
* All current members of the U.S. Armed Forces, active duty, Guard and reserve,
as well as those who retired or honorably separated in the past, regardless of
dates or branch of service (Army, Air Force, Navy, Marine Corps and Coast
Guard).
* Cadets, midshipmen, and officer or warrant officer candidates in
government-sponsored programs leading to a commission.
Family members
* Adult children, widow(er)s, and un-remarried former spouses of USAA members.
* Widow(er)s of officer and enlisted personnel who were killed in action while
eligible.
Additionally, USAA life insurance, investment, retirement and deposit products
are also available to members` extended families and others who are not eligible
for USAA membership.
Today, with heightened concerns about the economy and the solvency of financial
institutions, USAA is recognized for its conservative approach to financial
management. In 2008, the company`s net worth increased to $14.6 billion, and
USAA earned $423 million in net income. In addition, USAA`s Property & Casualty
Insurance Group maintains the highest ratings for financial strength from
Standard & Poor`s, A.M. Best and Moody`s rating agencies, making USAA one of a
small, elite group of companies to retain the highest possible ratings. More
current mid-year 2009 results are available on usaa.com.
About USAA
USAA, a diversified financial services group of companies, is among the leading
providers of financial planning, insurance, investments, and banking products to
members of the U.S. military and their families. For the past three years,
BusinessWeek magazine ranked USAA among the top two "Customer Service Champs,"
highlighting its legendary commitment of providing highly competitive financial
products for 7.3 million members. For more information about USAA, or to learn
more about membership, visit usaa.com.
Copyright Business Wire 2009
© Thomson Reuters 2009. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.
Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.
Thu Nov 5, 2009 1:00pm EST
Financial Services Provider Focused on Military Community Expands Potential
Customer Base by an Estimated 35 Million
SAN ANTONIO--(Business Wire)--
More than 18 million U.S. military veterans and their 17 million family members
who are looking for competitive alternatives to their current insurance, banking
and investment providers now can take advantage of USAA and its 87-year record
of strength, stability and performance in service to the military community.
Citing steady growth in financial strength and operational capacity, USAA
announced that effective immediately, membership now is open to all veterans of
the U.S. Armed Forces who served honorably, regardless of years of service.
The change expands USAA`s potential customer by an estimated 35 million,
including 18 million veterans, and 17 million spouses and children who also
would be able to access USAA services after their veteran relative becomes a
member.
"We believe everyone who served honorably in the armed forces should be able to
manage their financial well-being with USAA, a company committed to caring more
about the unique needs of the military community than any other," said retired
Army Maj. Gen. Joe Robles, USAA`s President and CEO. "Today, USAA is stronger
than at any time in our 87-year history, and we are thrilled to open our doors
wider to offer the benefits of USAA membership to more military families than
ever before."
USAA began as an officer-only association in 1922, opened to enlisted personnel
in 1996, and today serves 7.3 million current and former military members and
their families. Throughout its history, USAA has played an important role in
helping military families with their financial security, providing them with
insurance, investments and banking products as well as financial planning and
advice.
Operating without commissioned sales agents, the company has earned numerous
customer service accolades, including winning BusinessWeek`s #1 Customer Service
Champs award in 2008 and 2007.USAA is the only company to be ranked in the top
two each year since the list`s inception in 2007.
More recently, through innovations such as the banking industry`s first mobile
check deposit service, USAA Deposit@Mobile, USAA is leveraging technology to
enable its eligible customers to manage their finances anytime and from anywhere
a mobile signal is available.
"Having served as an Army private and many ranks along the way to major general,
it gives me great personal satisfaction to know that another 35 million former
service members, their spouses and children now have access to all that USAA
offers," said Robles.
Who is eligible for USAA P&C Group membership?
Military personnel
* All current members of the U.S. Armed Forces, active duty, Guard and reserve,
as well as those who retired or honorably separated in the past, regardless of
dates or branch of service (Army, Air Force, Navy, Marine Corps and Coast
Guard).
* Cadets, midshipmen, and officer or warrant officer candidates in
government-sponsored programs leading to a commission.
Family members
* Adult children, widow(er)s, and un-remarried former spouses of USAA members.
* Widow(er)s of officer and enlisted personnel who were killed in action while
eligible.
Additionally, USAA life insurance, investment, retirement and deposit products
are also available to members` extended families and others who are not eligible
for USAA membership.
Today, with heightened concerns about the economy and the solvency of financial
institutions, USAA is recognized for its conservative approach to financial
management. In 2008, the company`s net worth increased to $14.6 billion, and
USAA earned $423 million in net income. In addition, USAA`s Property & Casualty
Insurance Group maintains the highest ratings for financial strength from
Standard & Poor`s, A.M. Best and Moody`s rating agencies, making USAA one of a
small, elite group of companies to retain the highest possible ratings. More
current mid-year 2009 results are available on usaa.com.
About USAA
USAA, a diversified financial services group of companies, is among the leading
providers of financial planning, insurance, investments, and banking products to
members of the U.S. military and their families. For the past three years,
BusinessWeek magazine ranked USAA among the top two "Customer Service Champs,"
highlighting its legendary commitment of providing highly competitive financial
products for 7.3 million members. For more information about USAA, or to learn
more about membership, visit usaa.com.
Copyright Business Wire 2009
© Thomson Reuters 2009. All rights reserved. Users may download and print extracts of content from this website for their own personal and non-commercial use only. Republication or redistribution of Thomson Reuters content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters. Thomson Reuters and its logo are registered trademarks or trademarks of the Thomson Reuters group of companies around the world.
Thomson Reuters journalists are subject to an Editorial Handbook which requires fair presentation and disclosure of relevant interests.
Things to Do Before End of the Year: Medicare Options (NY Times)
October 31, 2009
Patient Money
Now Is the Time to Weigh Medicare Options
By WALECIA KONRAD
MEDICARE recipients, it’s your turn.
For the last few weeks, my Patient Money colleague Lesley Alderman and I have been giving advice on how to navigate the open enrollment season for employee health benefits. But Medicare enrollees must also do this annual drill, and in some ways their task can be more complicated.
While employees now typically face a dwindling number of options, Medicare recipients may have the opposite problem — a potentially overwhelming welter of choices. They may need to sort through dozens, even hundreds, of choices during the annual enrollment period, which runs Nov. 15 through Dec. 31.
Those already enrolled in Medicare, of course, might not need to do anything. Assuming the coverage they have now is not changing, and it’s working for them, they can probably stand pat. That might be particularly true for the 35 million people whose main coverage comes directly through the government. In that case all they may need to worry about is their Medicare D prescription drug plans provided by private insurers, if they have such coverage; about 17.5 million of these people in traditional Medicare have the separate drug coverage.
But as I explain below, there are various reasons that staying put might not be a good idea. And making a change means coming to grips with an array of Medicare options that has been expanding at a bewildering rate in the past decade.
There is the traditional Medicare A, which covers hospitalizations and is provided at no charge to enrollees, and Medicare B, which covers fees from doctors and other health care providers and requires a monthly premium. (Because there will be no Social Security cost-of-living increase in 2010, premiums for most current B enrollees will stay the same as for 2009, at $96.40 a month. However, most new enrollees will pay 15 percent more than that, $110.50 a month.
Seniors can also choose from a vast number of specialized plans from private insurers. There’s the Medicare D drug coverage, for example. But there are also fuller private-carrier packages called Medicare Advantage, which often bundle Medicare A and B with a drug plan, along with extra benefits like dental, vision and wellness coverage.
Each annual enrollment season you can change from traditional Medicare to a Medicare Advantage plan or vice versa. You can also add, change or drop a Medicare D plan. Keep in mind if you don’t sign up for Medicare D when you are eligible and you don’t have other creditable prescription drug coverage, you will be assessed a 1 percent penalty per month if and when you do sign up. This year’s annual Medicare enrollment period may be particularly tricky for some people. Because there are so many Medicare Advantage options available, the Center for Medicare and Medicaid Services — the agency that runs Medicare — eliminated about 18 percent of the Advantage plans, either because they were similar to other plans offered by the same company or they had very few members. (Even with those cuts, thousands of other Advantage plans still exist.)
As a result, an estimated 600,000 Medicare recipients must change plans this year because their former Advantage plans will no longer exist, according to data from Allsup, a provider of Social Security and Medicare consultation services based in Belleville, Ill.
If you’re new to Medicare this year you can find advice for first-time enrollees in an article I wrote recently for this newspaper: “Nearly 65? Time for the Medicare Maze.” ***see below
If you are already enrolled in Medicare, you’ll be receiving your copy of the 2010 “Medicare and You” handbook any day now. This government booklet will explain changes in this year’s enrollment period and provide information on different Medicare alternatives. Start your research by taking a close look at that publication, but do consider the following, too:
IS STANDING PAT AN OPTION? Determine if your existing plan is still available — and still right for you.
If you are a member of one of the private Medicare Advantage plans that has been eliminated, you should have received a notice from your insurer by now. If you have any doubts, call your insurer.
If you do nothing and your plan is eliminated, you will automatically be enrolled in traditional, government-provided Medicare A and B plans. But you will not be enrolled in a prescription drug plan and will have to do that separately through a private insurer during the Nov. 15-Dec. 31 enrollment period.
But even if your current plan will continue, you may also be ready to make a switch. If you’ve experienced any changes in your health or financial situation in the past year, it’s a good idea to sit down and take a close look at your existing plan. You may find your Medicare choice has out-of-pocket costs you can no longer afford.
Traditional Medicare can get expensive, with the monthly premiums, as well as a $1,000 deductible for hospitalizations and 20 percent co-payments for most doctor visits. With some Medicare Advantage plans you can lower those costs, says Paul Gada, Allsup’s personal financial planning director. (Some people also choose to buy a Medigap or supplemental policy to fill in what traditional Medicare doesn’t cover. See the recent Times article “Choosing a Policy to Cover What Medicare Doesn’t.”
On the other hand, if you’ve become sick, you may find you need more reliable and flexible coverage than your current plan provides. Most Medicare Advantage plans work on an H.M.O. or P.P.O. network system, so going to a doctor out of network can be difficult or more expensive. But almost all health care providers take plain old Medicare, says Judith Stein, founder of the Center for Medicare Advocacy, a nonprofit patients advisory group. That makes “traditional Medicare the most flexible option out there,” Ms. Stein said.
PICKING A NEW PLAN You’ll need to compare your options. That usually entails weighing prices and coverage for the Medicare Advantage plans offered in your area — to one another and to traditional Medicare.
In most cases, you’ll want to compare competing Medicare D drug plans as well. With these, you’ll want to look at price as well as which drugs are covered. Always make sure that the drugs you use will be covered by the plan you choose. Medicare D plans change the list of covered drugs from year to year, so it pays to call the insurer directly to check.
By now you’ve probably gotten an onslaught of mail from insurers that offer Medicare Advantage and Medicare D plans in your area.
“Companies are allowed to start marketing for the annual enrollment period on Oct. 1,” says Seemin Pasha, director of policy and communication at Health Assistance Partnership, a privately financed project of the Families USA consumer advocacy group. “But sifting through all these materials can be confusing.”
For help, log onto Medicare .gov. Along with lots of clear information, the site offers tools that will help you find private insurer plans in your area and help you compare prices and coverage.
You can also call or visit your State Health Insurance Assistance Program, known as SHIP, which is run by the government. Counselors provide information and help you compare plans without charge. To find the SHIP office in your state, go to www.hapnetwork.org/ship-locator. That office will refer you to the location in your county. Or call your local agency on aging and ask for a SHIP location near you.
For-profit companies like Allsup, for a fee, will help clients navigate the system and enroll in the plan of their choice. At Allsup, a range of services is available for about $200.
DON’T DELAY Try to sign up for your new coverage by early December, especially if you are choosing a plan with a private insurer.
Because the annual enrollment period ends Dec. 31 and coverage starts Jan. 1, late enrollees could experience some snags in the paperwork. Sign up early and you’re more likely to get on the books and get your insurance cards well before the new year starts.
Keep in mind if you do make a mistake or change your mind, the government allows some limited changes during what it calls open enrollment, from Jan. 1 through March 31. During this period you can switch from one Advantage plan to another or switch from an Advantage plan to traditional Medicare and vice versa.
What you can’t do, however, is join or switch a Medicare D plan, unless you already have a plan with prescription drug coverage, according to Medicare.gov. You also may not drop Medicare D coverage during this time.
***
October 15, 2009
Patient Money
Nearly 65? Time for the Medicare Maze
By WALECIA KONRAD
NOW that you’re about to retire, there’s good news and bad news about your health insurance. The good news: When you turn 65, you’re eligible for Medicare — all in all, a pretty affordable way to get coverage for doctor bills, hospitalizations and, more recently, prescription drugs. The bad news: You’ve got a big job ahead of you, sorting through the Medicare bureaucracy.
For someone new to the system, the hundreds of options Medicare provides can be daunting. “We’ve seen C.P.A.’s get stymied,” said Paul Gada, personal financial planning director at Allsup, a provider of Social Security and Medicare consultation services that is based in Belleville, Ill. “The process can be difficult for even the most savvy individuals.”
More important, the choices you make now as a new retiree may have consequences down the line when your health care and financial needs change. Confusing as Medicare may be, it is better to learn the ins and outs of the system early than to try to figure it out 20 years from now. The newly eligible have a seven-month period to enroll, starting three months before their 65th birthday. And numerous resources are available to help both newcomers and veteran Medicare users.
Not long ago, retirees simply went to their local Social Security office and signed up for Medicare A, which covers hospitalization, skilled nursing facilities, hospice and some home health care. Then they signed up for Medicare B, which provides coverage for doctor’s fees for a premium ($96.40 a month in 2009). That was the end of it.
Big changes in the way Medicare is distributed have made signing up a lot more complicated. In addition to A and B, enrollees can now buy prescription drug coverage under Medicare D. Dozens of private insurance plans offer Medicare D coverage, and the plans can differ widely in both premium costs and the drugs they cover.
The government also allowed private insurers to offer Medicare Advantage plans, which combine A, B and D benefits, often under a network like an H.M.O. or P.P.O. Many offer extras like dental, vision and wellness coverage. Hundreds of different Medicare Advantage plans are sold today, and depending on where you live, you could have dozens of choices.
Options may decrease slightly in 2010, said Marc Steinberg , deputy director for health policy at the health care advocacy group Families USA, because the Center for Medicare and Medicaid Services, the federal agency that administers Medicare, has vowed to consolidate similar plans from the same insurers to help reduce confusion.
In addition, many insurers may decide not to offer Advantage plans if the government subsidies given to these plans are cut, as many of the current health care bills have proposed. Finally, because Medicare deductibles and co-pays are high — a $1,000 deductible for hospitalizations, 20 percent co-pays for most doctor visits — many people elect to buy a Medigap, or supplemental, policy to fill in what Medicare does not cover.
With traditional Medicare and Medicare Advantage, it’s sometimes hard to get a handle on exactly what is covered. Physical therapy, for instance, is covered under traditional Medicare only if your doctor prescribes it and then only for a limited time. Traditional Medicare with a Part D and Medigap plan offers the most flexibility, said Judith Stein, founder of the Center for Medicare Advocacy. Because most health care providers throughout the country accept Medicare, there’s usually no need to change doctors when you join the system. “In addition, you have access to whatever specialists you’ll need, and you’re covered no matter where you are in the country,” she said.
Most Medicare Advantage plans, however, work on a network system, so going to a doctor out of network can be difficult or more expensive. And, because of the extra coverage, Medicare Advantage premiums are often higher than those for traditional Medicare, or coverage is restricted in other ways, like low limits on lifetime coverage, Ms. Stein said.
On the other hand, Mr. Gada said that a good Medicare Advantage plan could make the process of enrolling much easier. “It’s one-stop shopping for Medicare’s alphabet soup of plans,” he said. And for some people, the extra dental and vision benefits are extremely important, he added.
For help finding and comparing Medicare Advantage and Medicare D plans offered by private insurers, go to the government-run Web site www.medicare.gov. The site has clear and useful information and offers a tool that will help you compare costs and coverage among the various plans offered in your region.
But the tool is far from comprehensive, so you’ll probably still have questions, both about the system and what’s best for your needs. To get free answers, try your State Health Insurance Assistance Program, known as SHIP. Counselors provide information about traditional Medicare, help you find D and Advantage plans that fit your needs, and help you compare plan costs. To find the SHIP office in your state, go to www.hapnetwork.org/ship-locator. That office will refer you to the location in your county. Or call your local agency on aging and ask for a SHIP location near you.
For-profit companies like Allsup will, for a fee, help clients navigate the system, help them enroll and often offer customized advice on related health and financial matters like long-term care insurance. A range of services is available for about $200.
Medicare recipients can change plans each year during the open enrollment period, Nov. 15 through Dec. 31. So if you end up with a Part D or Medicare Advantage plan you do not like, or if your health or financial picture changes, you can take action at that time.
BUT there are some moves you may make now that will have financial consequences later. If you opt for traditional Medicare, for example, but do not sign up for Medicare B (perhaps to avoid paying the premiums) and you do not have qualified alternative insurance like retirement benefits from your employer, you will pay a financial penalty if you enroll down the line — 10 percent for each year you do not have coverage. Many Medigap plans also charge higher premiums or exclude pre-existing conditions if applicants do not sign up when they first become eligible for Medicare enrollment.
All Medicare D prescription drug plans include the dreaded doughnut hole. You fall into it when your total annual drug costs hit a certain amount — $2,830 for 2010 — and you then must pay the next $3,610 out of your own pocket. After you have paid that amount, the insurer will pick up all but 5 percent of the prescriptions it covers; you pay the balance.
To make sure you are not hit with any further surprises, always check to see if the plan you choose covers the drugs you currently need. You can check on Medicare.gov, but it’s also worth calling the insurer directly. “Insurance companies change their list of approved drugs all the time, so it pays to make sure you’re covered, especially if you take certain medicines regularly,” said Seemin Pasha, director of policy and communication at Health Assistance Partnership, the privately financed project of Families USA.
And always check the list of approved pharmacies, Mr. Steinberg advises. “This isn’t such a problem in big cities, but in some rural areas, we’ve seen cases where the only pharmacy is 20 minutes away and it’s not on the approved list.”
This article has been revised to reflect the following correction:
Correction: October 17, 2009
An article on Thursday about sorting through Medicare options described incorrectly the Health Assistance Partnership, an advisory service for the public. It is a privately financed project of Families USA; it is not government-run. The article also referred incorrectly to a fee that Allsup Medicare Advisor charges to help clients navigate the Medicare system. The $200 charge covers a range of services, not a single session. And an accompanying picture caption misstated Paul Gada’s role with Allsup. He is the company’s personal financial planning director, not a financial consultant.
Patient Money
Now Is the Time to Weigh Medicare Options
By WALECIA KONRAD
MEDICARE recipients, it’s your turn.
For the last few weeks, my Patient Money colleague Lesley Alderman and I have been giving advice on how to navigate the open enrollment season for employee health benefits. But Medicare enrollees must also do this annual drill, and in some ways their task can be more complicated.
While employees now typically face a dwindling number of options, Medicare recipients may have the opposite problem — a potentially overwhelming welter of choices. They may need to sort through dozens, even hundreds, of choices during the annual enrollment period, which runs Nov. 15 through Dec. 31.
Those already enrolled in Medicare, of course, might not need to do anything. Assuming the coverage they have now is not changing, and it’s working for them, they can probably stand pat. That might be particularly true for the 35 million people whose main coverage comes directly through the government. In that case all they may need to worry about is their Medicare D prescription drug plans provided by private insurers, if they have such coverage; about 17.5 million of these people in traditional Medicare have the separate drug coverage.
But as I explain below, there are various reasons that staying put might not be a good idea. And making a change means coming to grips with an array of Medicare options that has been expanding at a bewildering rate in the past decade.
There is the traditional Medicare A, which covers hospitalizations and is provided at no charge to enrollees, and Medicare B, which covers fees from doctors and other health care providers and requires a monthly premium. (Because there will be no Social Security cost-of-living increase in 2010, premiums for most current B enrollees will stay the same as for 2009, at $96.40 a month. However, most new enrollees will pay 15 percent more than that, $110.50 a month.
Seniors can also choose from a vast number of specialized plans from private insurers. There’s the Medicare D drug coverage, for example. But there are also fuller private-carrier packages called Medicare Advantage, which often bundle Medicare A and B with a drug plan, along with extra benefits like dental, vision and wellness coverage.
Each annual enrollment season you can change from traditional Medicare to a Medicare Advantage plan or vice versa. You can also add, change or drop a Medicare D plan. Keep in mind if you don’t sign up for Medicare D when you are eligible and you don’t have other creditable prescription drug coverage, you will be assessed a 1 percent penalty per month if and when you do sign up. This year’s annual Medicare enrollment period may be particularly tricky for some people. Because there are so many Medicare Advantage options available, the Center for Medicare and Medicaid Services — the agency that runs Medicare — eliminated about 18 percent of the Advantage plans, either because they were similar to other plans offered by the same company or they had very few members. (Even with those cuts, thousands of other Advantage plans still exist.)
As a result, an estimated 600,000 Medicare recipients must change plans this year because their former Advantage plans will no longer exist, according to data from Allsup, a provider of Social Security and Medicare consultation services based in Belleville, Ill.
If you’re new to Medicare this year you can find advice for first-time enrollees in an article I wrote recently for this newspaper: “Nearly 65? Time for the Medicare Maze.” ***see below
If you are already enrolled in Medicare, you’ll be receiving your copy of the 2010 “Medicare and You” handbook any day now. This government booklet will explain changes in this year’s enrollment period and provide information on different Medicare alternatives. Start your research by taking a close look at that publication, but do consider the following, too:
IS STANDING PAT AN OPTION? Determine if your existing plan is still available — and still right for you.
If you are a member of one of the private Medicare Advantage plans that has been eliminated, you should have received a notice from your insurer by now. If you have any doubts, call your insurer.
If you do nothing and your plan is eliminated, you will automatically be enrolled in traditional, government-provided Medicare A and B plans. But you will not be enrolled in a prescription drug plan and will have to do that separately through a private insurer during the Nov. 15-Dec. 31 enrollment period.
But even if your current plan will continue, you may also be ready to make a switch. If you’ve experienced any changes in your health or financial situation in the past year, it’s a good idea to sit down and take a close look at your existing plan. You may find your Medicare choice has out-of-pocket costs you can no longer afford.
Traditional Medicare can get expensive, with the monthly premiums, as well as a $1,000 deductible for hospitalizations and 20 percent co-payments for most doctor visits. With some Medicare Advantage plans you can lower those costs, says Paul Gada, Allsup’s personal financial planning director. (Some people also choose to buy a Medigap or supplemental policy to fill in what traditional Medicare doesn’t cover. See the recent Times article “Choosing a Policy to Cover What Medicare Doesn’t.”
On the other hand, if you’ve become sick, you may find you need more reliable and flexible coverage than your current plan provides. Most Medicare Advantage plans work on an H.M.O. or P.P.O. network system, so going to a doctor out of network can be difficult or more expensive. But almost all health care providers take plain old Medicare, says Judith Stein, founder of the Center for Medicare Advocacy, a nonprofit patients advisory group. That makes “traditional Medicare the most flexible option out there,” Ms. Stein said.
PICKING A NEW PLAN You’ll need to compare your options. That usually entails weighing prices and coverage for the Medicare Advantage plans offered in your area — to one another and to traditional Medicare.
In most cases, you’ll want to compare competing Medicare D drug plans as well. With these, you’ll want to look at price as well as which drugs are covered. Always make sure that the drugs you use will be covered by the plan you choose. Medicare D plans change the list of covered drugs from year to year, so it pays to call the insurer directly to check.
By now you’ve probably gotten an onslaught of mail from insurers that offer Medicare Advantage and Medicare D plans in your area.
“Companies are allowed to start marketing for the annual enrollment period on Oct. 1,” says Seemin Pasha, director of policy and communication at Health Assistance Partnership, a privately financed project of the Families USA consumer advocacy group. “But sifting through all these materials can be confusing.”
For help, log onto Medicare .gov. Along with lots of clear information, the site offers tools that will help you find private insurer plans in your area and help you compare prices and coverage.
You can also call or visit your State Health Insurance Assistance Program, known as SHIP, which is run by the government. Counselors provide information and help you compare plans without charge. To find the SHIP office in your state, go to www.hapnetwork.org/ship-locator. That office will refer you to the location in your county. Or call your local agency on aging and ask for a SHIP location near you.
For-profit companies like Allsup, for a fee, will help clients navigate the system and enroll in the plan of their choice. At Allsup, a range of services is available for about $200.
DON’T DELAY Try to sign up for your new coverage by early December, especially if you are choosing a plan with a private insurer.
Because the annual enrollment period ends Dec. 31 and coverage starts Jan. 1, late enrollees could experience some snags in the paperwork. Sign up early and you’re more likely to get on the books and get your insurance cards well before the new year starts.
Keep in mind if you do make a mistake or change your mind, the government allows some limited changes during what it calls open enrollment, from Jan. 1 through March 31. During this period you can switch from one Advantage plan to another or switch from an Advantage plan to traditional Medicare and vice versa.
What you can’t do, however, is join or switch a Medicare D plan, unless you already have a plan with prescription drug coverage, according to Medicare.gov. You also may not drop Medicare D coverage during this time.
***
October 15, 2009
Patient Money
Nearly 65? Time for the Medicare Maze
By WALECIA KONRAD
NOW that you’re about to retire, there’s good news and bad news about your health insurance. The good news: When you turn 65, you’re eligible for Medicare — all in all, a pretty affordable way to get coverage for doctor bills, hospitalizations and, more recently, prescription drugs. The bad news: You’ve got a big job ahead of you, sorting through the Medicare bureaucracy.
For someone new to the system, the hundreds of options Medicare provides can be daunting. “We’ve seen C.P.A.’s get stymied,” said Paul Gada, personal financial planning director at Allsup, a provider of Social Security and Medicare consultation services that is based in Belleville, Ill. “The process can be difficult for even the most savvy individuals.”
More important, the choices you make now as a new retiree may have consequences down the line when your health care and financial needs change. Confusing as Medicare may be, it is better to learn the ins and outs of the system early than to try to figure it out 20 years from now. The newly eligible have a seven-month period to enroll, starting three months before their 65th birthday. And numerous resources are available to help both newcomers and veteran Medicare users.
Not long ago, retirees simply went to their local Social Security office and signed up for Medicare A, which covers hospitalization, skilled nursing facilities, hospice and some home health care. Then they signed up for Medicare B, which provides coverage for doctor’s fees for a premium ($96.40 a month in 2009). That was the end of it.
Big changes in the way Medicare is distributed have made signing up a lot more complicated. In addition to A and B, enrollees can now buy prescription drug coverage under Medicare D. Dozens of private insurance plans offer Medicare D coverage, and the plans can differ widely in both premium costs and the drugs they cover.
The government also allowed private insurers to offer Medicare Advantage plans, which combine A, B and D benefits, often under a network like an H.M.O. or P.P.O. Many offer extras like dental, vision and wellness coverage. Hundreds of different Medicare Advantage plans are sold today, and depending on where you live, you could have dozens of choices.
Options may decrease slightly in 2010, said Marc Steinberg , deputy director for health policy at the health care advocacy group Families USA, because the Center for Medicare and Medicaid Services, the federal agency that administers Medicare, has vowed to consolidate similar plans from the same insurers to help reduce confusion.
In addition, many insurers may decide not to offer Advantage plans if the government subsidies given to these plans are cut, as many of the current health care bills have proposed. Finally, because Medicare deductibles and co-pays are high — a $1,000 deductible for hospitalizations, 20 percent co-pays for most doctor visits — many people elect to buy a Medigap, or supplemental, policy to fill in what Medicare does not cover.
With traditional Medicare and Medicare Advantage, it’s sometimes hard to get a handle on exactly what is covered. Physical therapy, for instance, is covered under traditional Medicare only if your doctor prescribes it and then only for a limited time. Traditional Medicare with a Part D and Medigap plan offers the most flexibility, said Judith Stein, founder of the Center for Medicare Advocacy. Because most health care providers throughout the country accept Medicare, there’s usually no need to change doctors when you join the system. “In addition, you have access to whatever specialists you’ll need, and you’re covered no matter where you are in the country,” she said.
Most Medicare Advantage plans, however, work on a network system, so going to a doctor out of network can be difficult or more expensive. And, because of the extra coverage, Medicare Advantage premiums are often higher than those for traditional Medicare, or coverage is restricted in other ways, like low limits on lifetime coverage, Ms. Stein said.
On the other hand, Mr. Gada said that a good Medicare Advantage plan could make the process of enrolling much easier. “It’s one-stop shopping for Medicare’s alphabet soup of plans,” he said. And for some people, the extra dental and vision benefits are extremely important, he added.
For help finding and comparing Medicare Advantage and Medicare D plans offered by private insurers, go to the government-run Web site www.medicare.gov. The site has clear and useful information and offers a tool that will help you compare costs and coverage among the various plans offered in your region.
But the tool is far from comprehensive, so you’ll probably still have questions, both about the system and what’s best for your needs. To get free answers, try your State Health Insurance Assistance Program, known as SHIP. Counselors provide information about traditional Medicare, help you find D and Advantage plans that fit your needs, and help you compare plan costs. To find the SHIP office in your state, go to www.hapnetwork.org/ship-locator. That office will refer you to the location in your county. Or call your local agency on aging and ask for a SHIP location near you.
For-profit companies like Allsup will, for a fee, help clients navigate the system, help them enroll and often offer customized advice on related health and financial matters like long-term care insurance. A range of services is available for about $200.
Medicare recipients can change plans each year during the open enrollment period, Nov. 15 through Dec. 31. So if you end up with a Part D or Medicare Advantage plan you do not like, or if your health or financial picture changes, you can take action at that time.
BUT there are some moves you may make now that will have financial consequences later. If you opt for traditional Medicare, for example, but do not sign up for Medicare B (perhaps to avoid paying the premiums) and you do not have qualified alternative insurance like retirement benefits from your employer, you will pay a financial penalty if you enroll down the line — 10 percent for each year you do not have coverage. Many Medigap plans also charge higher premiums or exclude pre-existing conditions if applicants do not sign up when they first become eligible for Medicare enrollment.
All Medicare D prescription drug plans include the dreaded doughnut hole. You fall into it when your total annual drug costs hit a certain amount — $2,830 for 2010 — and you then must pay the next $3,610 out of your own pocket. After you have paid that amount, the insurer will pick up all but 5 percent of the prescriptions it covers; you pay the balance.
To make sure you are not hit with any further surprises, always check to see if the plan you choose covers the drugs you currently need. You can check on Medicare.gov, but it’s also worth calling the insurer directly. “Insurance companies change their list of approved drugs all the time, so it pays to make sure you’re covered, especially if you take certain medicines regularly,” said Seemin Pasha, director of policy and communication at Health Assistance Partnership, the privately financed project of Families USA.
And always check the list of approved pharmacies, Mr. Steinberg advises. “This isn’t such a problem in big cities, but in some rural areas, we’ve seen cases where the only pharmacy is 20 minutes away and it’s not on the approved list.”
This article has been revised to reflect the following correction:
Correction: October 17, 2009
An article on Thursday about sorting through Medicare options described incorrectly the Health Assistance Partnership, an advisory service for the public. It is a privately financed project of Families USA; it is not government-run. The article also referred incorrectly to a fee that Allsup Medicare Advisor charges to help clients navigate the Medicare system. The $200 charge covers a range of services, not a single session. And an accompanying picture caption misstated Paul Gada’s role with Allsup. He is the company’s personal financial planning director, not a financial consultant.
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