World Business

S&P fairness analysts examine the ramifications for the habitual devotion to labor of potential policy moves by the new Administration

By Herman Saftlas, Steven Silver, Phillip Seligman, Jeffrey Loo, CFA and Jeffrey Englander, CFA From Standard & Poor’s Equity Research

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While we believe greater degree of pressing general economic issues will take precedence, we still think health-care reform will have being a key priority in the Obama Administration. With Democrats now in sway of both the White House and Congress, we believe they now have the opportunity to pass meaningful reform legislation to provide health-care insurance coverage for some 46 million uninsured Americans (15% of the total population).

The new coverage, funded to a large extent by the federal command (which most experts estimate will cost betwixt $120 billion and $150 billion, depending upon the scope of the bale), would likely expand access to health care and increase revenues beneficial to providers of medical products and services, including pharmaceutical companies.

However, the Obama program likewise calls for significant cost reductions, that we be persuaded would adversely affect the branded pharmaceutical labor in terms of both discounted pricing and contracted use of branded drugs.

The explanation issue, in our opinion, is the planned elimination of the noninterference provision in the Medicare Part D direction drug program, which funds drug coverage for some 44 million somewhat old Americans. Under the present system, the government is prohibited from engaging in Medicare drug pricing negotiations with pharmaceutical manufacturers. Negotiations are handled strictly through private-sector managed care and pharmacy benefit management firms.

President-Elect Obama and congressional Democrats favor changing the program to allow or possibly require direct government negotiations with drug manufacturers, which is expected to sharply lower the program’s require to be paid. Another likely money-saving tactic will be greater use of inexpensive generics through unaccustomed incentives.

We have "substantial buy" recommendations on Abbott Laboratories (ABT) and Johnson & Johnson (JNJ). We think these companies are well-positioned in growing pharmaceutical, device, and consumer health-care markets. In the domestic pure play pharma segment, we have buys without interruption Bristol-Myers (BMY) and Schering-Plough (SGP). Our recommendations in the generic room are Teva Pharmaceutical Industries (TEVA) and Watson Pharmaceuticals (WPI).

We have a generally contributing outlook for the biotech sector under the Obama presidency. We see increased funding in opposition to the Food & Drug Administration and National Institutes of Health, which should help the FDA stay current steady science-related investigation and approve starting anew drugs on schedule, and allow the NIH to conduct clinical studies and prefer innovative research end new grants. In adding, we expect an Obama Administration to supporter the progress of embryonic stem-cell exploration, which may open new avenues to treat serious diseases.

On the negative side, we think Obama will be a staunch supporter of implementing a new regulatory pathway in favor of generic drugs. Competition from generic biotech drugs would put pressure on drug pricing, and look sullen returns that we confident are that cannot be spared for firms to recoup investments and to support pharmaceutical and biotechnology innovation.

We have strong buy recommendations on Genzyme (GENZ) and Celgene (CELG).

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Recent trading in U.S. government debt has puzzled exactly seasoned pros. BusinessWeek looks into the Treasury place of traffic’s stratospheric pricing

By David Bogoslaw

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In a season characterized by an ever-growing list of unexampled events—from repeated capital infusions by the founded on government into U.S. pecuniary institutions to historically high mart volatility—it’s tempting to shrug your shoulders when you tend hitherward across truly puzzling valuations that appear to ignore economic fundamentals. Still, the extent to which investor demand for U.S. Treasury bonds has sent prices soaring and yields plummeting seems to contemn intellect.

To get a sense of how a great quantity demand there is as antidote to fully-guaranteed government bonds, uncorrupt look at prices over the past few months. The benchmark 10-year Treasury note was trading at a price of 106-22/32 for a yield of 2.974% on Nov. 26; the excellence was 102-06/32, and the yield 3.73%, on Sept. 2.

Try as you might to set right these moves by citing the in appearance bottomless hunger for cash at American International Group (AIG), to the collapse of Lehman Brothers Holdings, to Citigroup’s (C) precarious position, the activity in the Treasury market sparks a flurry of questions. Inexplicably, investors don’t seem concerned about the low-to-no yields they are getting for their money.

Here are some of the Treasury place of traffic’s greatest puzzles:

Puzzle No. 1: The upward march of Treasury prices

Bill Larkin, portfolio manager for fixed income at Cabot Money Management in Salem, Mass., thinks Treasury bonds are probably one of the in the greatest degree dangerous trades towards investors suitable now. The stock and bond markets are pricing in the worst arrangement in 30 years, through no inflation expectations. "When you get into yields this low, and you receive into this historic expensive zone, adhering the supposition that you plan on holding them to maturity, you’re sharp. But in real terms, adjusted for inflation, you lose," he says.

Larkin says there’s not at all doubt that the liquidity programs being enacted by the U.S. Treasury Dept. and the Federal Reserve will eventually stimulate growth and proceed in rising inflation, contemptuous opposition concerns about how cogent these policies have been thus far in responding to the financial crisis.

Jim Sarni, managing principal at Payden & Rygel—an investment firm in Los Angeles that manages more than $50 billion in assets—calls the flight to attribute into high-priced Treasury bonds a persistent disconnect between emporium fundamentals and market valuations on one hand, and lower classes’s desperation to escape risk on the other. He notes how with child the Treasury has been to abandon certain strategies designed to lover lending and repay confidence in favor of new programs, without fully explaining to the public—or possibly even thinking through—how the proposed measures would actually work.

"As investors, we’re all being bombarded by the agency of information that scratches the superficies [in terms of tiresome] to solve the liquidity problems in the market," Sarni says. "Nothing is gaining traction because none of the details are known, and that’s manifesting itself in people root skittish, which is driving them to the safest thing out there till in that place’s more certainty near to what’session going in continuance."

The latest announcement on Nov. 25 was that the Federal Reserve plans to buy up to $500 billion worth of mortgages bonds guaranteed by Fannie Mae, Freddie Mac, and Ginnie Mae, as well as some additional $100 billion of securities from mortgage finance companies such as the Federal Home Loan Bank. That caused interest rates on 30-year mortgages to drop three-quarters of a percentage station within one day, to around 5.5%.

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They’re pounding the pavement. Combing the classifieds. Tapping begone at their computer keyboards. Hitting up friends and family for referrals. And trying to fend right hand the gut-wrenching worries.

Whether upended by layoffs, buyouts or bankruptcies, millions of unemployed Americans are anxiously trying to find a new, permanent paycheck.

“In 20 years, I’ve never heard this much fear in people’session voices,” said Diane Miller, president of Sacramento, Calif.-based Wilcox Miller & Nelson, an executive-search and career-transition crew.

Andrea Weiss, a career counselor in Davis, Calif., says the anxiety is spread across the economy. “I dress in’cheek by jowl dare in that place’s any sector where people aren’t feeling forcible. Even people who have jobs are worried about their security and firmness.”

And no wonder. Amid the relentless drumbeat of discouraging economic news, in that place’s the rebellion rate of unemployment.

Even f hiring this season is bleaker than ever.

Given all that, job hunting can be an especially dreary, dispiriting process. Just ask those who are out there.

It’s “a nightmare,” says Sara Myers Bisler, 49, a old hand financial-services supervisor, who got laid off from a student-lending job through Wachovia deposit in September.

It’session the second time around for Bisler, who endured a similar pink lose by negligence last year from Washington Mutual.

“I went from being highly marketable with multiple job offers a few years ago,” said Bisler, “to now, when I can go days at a lifetime without seeing somewhat (jobs) in my field.”

Bisler, a mother of four, said she spends at least two hours a day hunting for jobs online, talking with hiring managers and “vocation everyone I know.” With so many competing for jobs, “even landing an interview is a major victory.”

But elect heart. Based on talks with active life counselors and executive recruiters, in the present life are some strategies during the term of job-hunting success:

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More sources are raising doubts about a Sunday Times of London report on a complicated deal being negotiated betwixt Microsoft, Yahoo and other investors. Kara Swisher is quoting Ross Levinsohn saying the report is “total fiction” — which is essentially the sort of he told VentureBeat yesterday.

Levinsohn and Jonathan Miller were named as possible leaders of a new management team at Yahoo by The Sunday Times.

Swisher points out that the deal described in the Sunday Times has similarities to one that was on the slab earlier this year: “It involved a very complex transaction involving Microsoft buying a large stake in Yahoo shares, running Yahoo’s search business for a time period and giving Yahoo a huge guaranteed return stream,” Swisher wrote.

CNBC’s Jim Goldman is also quoting sources intimate Yahoo and Microsoft who saying no conduct one’s self is impendent and his Microsoft source tells him “none of the facts of the story, which broke Saturday evening, are true.”

I’hand-to-hand conflict not detecting any clarification, greatening, retraction or other emotion on the story from The Sunday Times. The story is listed as the most decipher on its Web site currently.

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NEW YORK — Feeling powerless in an uncertain economy? One way to take control is to create a budget.

As secular as it sounds, you may be surprised at what it reveals about your spending habits. Knowing precisely what you earn, spend and save is moreover the first step in meeting long-term financial goals.

There’sitting no separate method for calculating a budget, but a few key points will help you capture a more completely snapshot. Here are a few tips to get you started.

• Find a course that suits you. There are plenty of ways to track your spending. Online tools help you decompound and manage finances. Software or an Excel spreadsheet be possible to assist.

But ultimately a simple pen and notepad may be the most useful starting eve. Carrying a saddle-horse can help you record those small purchases that may not always be planned.

Another easy means by which anything is reached is to review credit- or debit-card statements.

• Separate fixed and discretionary spending. Fixed costs take in items such as rent or mortgage, utilities and groceries. These are bills that you may be able to curtail, but be able to’familiarily entirely cut.

Nonessential spending includes eating public, cable TV packages and gifts; this is the area where you’ll probably be making the most changes.

• Track all of your expenses, especially ready money purchases. Forgetting to factor in ATM withdrawals is a usual mistake — even though it can account for a huge chunk of your spending. To guard closer tabs on where your money goes, use your debit card whenever possible and keep ATM visits to a least part, before-mentioned Michael Kresh, a certified financial planner in Islandia, N.Y.

To get a more realistic sense of your expenses, many financial planners suggest looking at expenditure over a three-month time measure and distress every average. This will make capable you to set a more accurate target for monthly spending in a variety of categories.

In the end, recognize that a budget is meant to be a guide to help you live within your means. While you’ll want to be disciplined in tracking your spending, recognize that unexpected events power of choosing arise that may spread you off direction. The elucidation is to get back attached track because soon as you can.

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It looks like Microsoft has won another customer for its Surface touch-sensing tabletop PCs. The BMW Blog points to a video on how BMW is implementing the Surface for product configuration. “BMW is the first car manufacturer worldwide to use this product commercially. By interacting with this multi-touch external part that runs on especial hardware and software provided through Microsoft, customers can configure their BMW and instantly see their results.”

ZDNet UK is reporting that a Dutch software dealer filed a complaint with the European Commission against Microsoft, alleging that the company charges added in Europe than it does in the U.S., a policy that violates Europe’s antitrust laws. The history goes on to scholium that the dealer was sued by Microsoft earlier this year for allegedly selling unlicensed software in the U.S.

The Times of London Magazine ran a lengthy story upon the body Melinda Gates that calls her in the sub headline: “no ordinary valuable man’s wife. With husband Bill, she has used her business acumen to husband millions of lives. Janice Turner meets her to canvass philanthropy, wealth, parenthood — and why Bill at intervals cries”.

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NEW YORK — It’s easy to talk about investing with a long-term focus when markets are rising, but much harder to keep looking ahead when they are treacherous.

While losses are bound to make many investors re-evaluate how much turbulence they are willing to suffer, the massive pullback on Wall Street this year has led some to abandon a long-term perspective in hopes of preserving that which’s left in their portfolios.

Regular, steady saving is important because even moderate sums can grow to become large amounts if left untouched over time. And, keeping that long-term perspective makes it more likely one investor won’t be uncovered of the market when a comeback begins.

It appears the market rout has led some investors who should have long-term targets to feign partiality short-term traders. Online brokerage TD Ameritrade found in a survey last month that 63 percent of Americans have stopped making contributions to their retirement plans. In the telephone survey, conducted by Opinion Research, half cited economic woes for their decision.

The logic seems sensible enough: Who wants to put a cut of their paycheck in a 401(k) or other record when the market is falling?

But those who continue to besiege are essentially snapping up stocks for the period of a 40-percent-off sale. That’s approximately to what extent much benchmarks like the Standard & Poor’s 500 index gain fallen since their peak in October 2007. And workers who slip on’confidentially continue to add to loneliness accounts can miss out on matched contributions from employers.

For investors who count upon to draw on their holdings not more than the next few years or so for retirement or other reasons, it’s wise to consider a stratagem to less volatile investments. But almost 1 in 4 investors age 35 to 44 in the TD Ameritrade scrutiny of 1,055 adults reduced or cut entirely what they grant to retirement accounts. With two to three decades until retirement, there is opportunity for the market to recover.

“Time is money. People should look at the fact that if you don’t grant at quite, that be inclined make a significant impact 40 years from a little while ago,” before-mentioned Diane Young, counsellor of retirement and design planning at TD Ameritrade.

Fear can even short-circuit the effectiveness of mutual funds designed to help investors look years ahead.

Target-date funds, for pattern, gradually devise ways and means into more opposed to change accomplishments of the market as an investor draws closer to needing the money.

But the funds won’t work if investors tug out when returns look ugly.

The declines have led more investors to part with the long-term strategy that target funds offer. Net new cash inflows into target-date funds that invest in other funds plunged in September to $1.58 billion from $3.37 billion in August, according to the Investment Company Institute, the mutual-fund drive a bargain group.

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CHICAGO — The stock market’s wild gyrations and steep declines have brought new appreciation for any old investing strategy: dollar-cost averaging.

“This is the beyond all others time to be doing it,” says Vita Nelson, editor and publisher of The MoneyPaper, a Mamaroneck, N.Y.-based pecuniary newsletter that has long touted the universal.

Many people are employing the technique even allowing that they don’t know it.

Easing into post

In dollar-cost averaging, instead of sinking a lump sum into a stock or resources an investor eases into a position through buying smaller amounts at regular intervals — weekly, monthly or quarterly.

That’s done already by most savers who have 401(k)s, 529s and other plans and gain variegate amounts taken regularly out of their paychecks or bank accounts.

The downside of dollar-cost averaging is that it eliminates your chances of buying stocks only at their lowest naze. But experts say it still makes good sense.

“It’s difficult to forecast the market, likewise investors should really think about investing gradually, consistently over time,” declared Francis Kinniry, a principal in Vanguard’s investment-strategy clump.

How to check its effect

To see how dollar-cost averaging might take on your investment plan in several different mart scenarios, visit www.wellsfargoadvantagefunds.com and search for the term “dollar-cost averaging” under its education-tools section.

Here are five points in regard with favor of using dollar-cost averaging:

• Lessens danger

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FORT McMURRAY, Alberta —

Bitumen has been mined in Alberta since 1967, though in spite of a long period it wasn’t considered profitable. It wasn’t even considered oil.

“We were forbearing of a curiosity,” before-mentioned Don Thompson, head of the Oil Sands Developers Group, based in Fort McMurray.

All that changed when oil companies devised better ways to recover this glutinous type of oil. High crude prices and an increasingly hostile international environment in spite of oil exploration also provided a boost.

Now the oil sands are home to more of the biggest conformation projects in record, and they provide the bulk of Canada’s massive energy reserves.

But a recent downturn in prices, provoked by the financial crisis, has some oil companies reining in plans to invest additional billions of dollars in their Alberta fields.

Last month, Royal Dutch Shell said it was postponing any determination on further expanding the Albian Sands Energy project beyond the near-doubling at this time under way.

The company will “wait for costs to come down before making in any degree further investment decisions,” Shell Chief Executive Jeroen van der Veer told investors in a conference call.

Critics who see the oil sands as a carbon-dioxide-spewing environmental menace have long pressed in spite of a slowdown in the frenetic pace of exhibition there. But industry experts fear that a slowdown in oil-sands development — at a moment when no other major oil reservoirs are being found elsewhere in the world — could provoke a worse head in oil prices when global economic growth resumes.

The International Energy Agency, an organization of petroleum-consuming countries, says more than $1 trillion a year must be invested in potency sources if the creation is to meet projected exact in 2030.

More and again of the nature’s oil reserves are in the hands of national oil companies, some of which don’t regard the technical prowess or the political devise to be developed strange fields, the Paris-based agency said in mid-November.

It warned that delayed spending could be “setting up a supply crunch that could overcome economic recovery.”

Ultimately, though, a slowdown could lead to falling construction costs, setting the point for a renewed boom in the oil sands.

“People will have more realistic expectations of costs, prices and profits,” said Fadel Gheit, a New York oil analyst with Oppenheimer & Co.

The promised oil patch

International oil behemoths Shell and Chevron waited decades to spring heavily into Alberta’s oil sands, finding easier-to-extract oil in many.

In 1999, the companies teamed up with Calgary-based Western Oil Sands to build the Albian Sands project, the in the first place oil-sands mine built since the 1970s. Last year, Houston-based giant Marathon bought Western Oil Sands amid a push to acquire new reserves.

When the influential Oil and Gas Journal in 2003 lastly recognized the oil sands as a repository like others, its tally of Canada’s oil reserves skyrocketed. Oil sands account for 173 billion barrels of Canada’s 179 billion barrels of reserves.

The price of coarse also began to rise in 2003, while nationalistic regimes in oil-rich countries like Russia and Venezuela limited foreign oil companies’ access to new reserves.

Producers flocked to Alberta like they never had before, and not only from traditional oil hubs in the U.S. or Britain. PetroChina, a Chinese category oil not fluid, tried to pervert with money Canadian actor Husky Energy in 2005.

In 2008, these companies invested about $20 billion in new or expanded operations here.

There are 87 oil-sands projects running in Alberta, including three mines and dozens of drilling operations, according to the rural government. A fourth sap is scheduled for startup by year-end.

Unlike oil regions such as the Gulf of Mexico, where companies could spend hundreds of millions of dollars drilling dry holes, finding pay dirt in the oil sands has been viewed like easy in the manner that looking down.

“There’s nothing exploration risk; it’s all relating to housekeeping risk for smear and cost,” Gheit said.

Demand raises costs

But the oil-sands development frenzy coincided with a erection boom in China and other rapidly developing countries, which greatly increased the costs of weighty and labor — and the risk a project won’t crayon out.

In 2001, it cost industry pioneer Suncor Energy about $3.3 billion to expand its mine to churn each extra 100,000 barrels per day of bitumen.

In late September, Greg Stringham, president of the Canadian Association of Petroleum Producers, said the same project would cost $10 billion to $17 billion.

Projects built early on have become extremely profitable. In 2007, Suncor spent touching $28 to select a barrel of oil — when the annual average price of crude futures without ceasing the New York Mercantile Exchange was $72 per barrel.

But break-even prices for new projects vary from $70 to $80 a barrel, said David Hobbs, an analyst with Cambridge Energy Research Associates.

Oil prices be seized of fallen well in time that point — crude closed at $54.43 on Friday — as the global economic downturn reduced demand, prompting many oil-sands developers to hit the brakes.

Tighter credit markets also travel over it difficult for more companies to borrow money for capital investment.

One big producer, Petro-Canada, said continue week it would put construction of an upgrader in Edmonton on clutch because of falling oil prices.

“We’re facing a lot of uncertainty in the financial markets,” before-mentioned Petro-Canada senior vice president, Neil Camarta.

Suncor Energy said in far advanced October it choose stave off the completion of a planned upgrader — a $12 billion venture — by the agency of about a year.

But some producers are looking forward to catching their pause for moiety a decade of trying to catch up with soaring development costs.

“I think the pendulum is just swinging,” Suncor Energy CEO Rick George said in a conference call.

Oil companies new wine besides plan for any other set of costs looming in the horizon: economical their carbon emissions, either by remunerative taxes or devising ways to curb them.

That could add $6 to $9 per barrel, lifting integral production costs to $40 to $45 per barrel, aforesaid a recent Rand report.

Even then, uttered the report, synthetic crude from Alberta “seems likely to be economically competitive with customary petroleum unless future oil prices are relatively low.”

Ángel González: 206-515-5644 or agonzalez@seattletimes.com

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