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Federal regulators are moving to sell the remnants of failed IndyMac Bank before year-end, mopping up from the second-largest bank failure this year.

It was unclear whether the government would sell it off as a whole or in pieces. IndyMac had about $32 billion in assets when it was seized by the FDIC. Its collapse is expected to cost the federal bank insurance fund $8 payday loan.9 billion. Final bids for its assets were due Dec. 15.

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How is your money protected when you open an account with an investment adviser?

It’s good to ask questions right at the beginning of a relationship.

Pushed to do so by governments, the investment industry has set up compensation funds to reimburse clients in case of corporate failures.

Unfortunately, these funds can’t help when investments go down in value. Nothing protects you from losses – except time and patience – when stock markets drop.

First question: Which investment firm are you dealing with? What is the corporate name that appears on the letterhead?

Let’s look at RBC, Canada’s largest bank, which has many operating divisions that sell investments.

You might do business with RBC Dominion Securities Inc. (a full-service broker), RBC Direct Investing Inc. (a discount broker) or Royal Mutual Funds Inc. (a mutual fund dealer).

There’s also RBC Insurance Services Inc., which sells insured investments called segregated funds.

You need to know the full company name – RBC or Royal Bank is not enough – because that’s the only way you can find out which compensation fund covers you if the company goes under.

RBC Dominion and RBC Direct Investing are both members of the Investment Industry Regulatory Organization of Canada (IIROC). If you’re a client, your investments are covered by the Canadian Investor Protection Fund.

Royal Mutual Funds belongs to the Mutual Fund Dealers Association. Investments are covered by MFDA Investor Protection Corp.

Finally, RBC Insurance Services is a member of Assuris, which is funded by the life insurance industry and covers your investments if the company fails.

The role of these protection funds is to transfer assets from an insolvent company to a solvent company. They do it quite seamlessly without clients even knowing what is going on behind the scenes.

CIPF is the oldest fund health insurance quote. Since being started in 1969, it has seen 17 members become insolvent. All eligible customers had their assets returned to them.

Thomson Kernaghan, which collapsed in 2002, was the last investment dealer whose losses were covered by the fund.

"Others have wound up their businesses since then, but didn’t require CIPF protection," says chief executive Rozanne Reszel.

Clients of member firms are covered for up to $1 million in cash and securities (such as GICs, mutual funds, stocks, bonds, commodities and futures contracts).

U.S. dollar cash and securities and other foreign account balances are also eligible for coverage.

If you have two separate accounts with the same dealer – an RRSP/RRIF account and a non-registered account – each qualifies for up to $1 million coverage.

The MFDA Investor Protection Corp. is similar to CIPF in what it covers and the amount of coverage (up to $1 million).

Customers who have accounts in Quebec are not covered; MFDA is not recognized as a self-regulatory organization in the province.

The Investor Protection Fund has had no claims against it since inception in July 2005, says chief executive Joni Alexander.

Mutual fund dealers rarely go bankrupt. But mutual fund management companies have gone under in a couple of recent cases, leaving investors unprotected.

There are no laws yet requiring mutual fund managers to set up funds to compensate customers in an insolvency.

Assuris was set up in 1990. If you have money on deposit, you are covered for up to $100,000.

Rules for segregated funds are complex. Check www.assuris.ca.

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Ontario’s ailing auto sector will get the CPR it needs from the federal and provincial governments to avoid a "doomsday scenario" that would result in thousands of job losses, Ontario Economic Development Minister Michael Bryant said today.

A report prepared for the Ontario government warning Canada could lose more than 580,000 jobs within five years if the Detroit Three automakers go out of business shows that a proposed $3-billion rescue package is needed to avoid a "catastrophic" chain of events, Bryant said.

"We are talking about CPR, literally, CPR for a company to avoid it from going under and causing a chain of events that would be catastrophic to the economy," Bryant said.

"It’s our job as government, because there is no private capital available, to step in and provide that CPR and eventually that life support to allow the intensive care to these businesses that will allow them to transform."

On Friday, federal Industry Minister Tony Clement said Ottawa and Ontario agreed to provide the equivalent of 20 per cent of whatever emergency aid the Bush administration gives to the companies – a figure proportional to the number of vehicles produced in Canada.

The aid won’t come until the U.S. makes its own plans known. The plan has been criticized by some for using taxpayer money to bailout international companies that have failed to manage their own affairs.

Bryant said the government isn’t looking to enhance or even preserve shareholder value for GM, Ford and Chrysler, nor does it want to necessarily sustain the current management.

"We’re not just talking, in that sense, about GM and Chrysler as manufactures themselves, it’s also all of their creditors, all of those workers, all of those suppliers, all of those parts manufacturers and all of those car dealerships," he said payday loans for bad credit.

"All that adds up to a massive industry.

"Auto is to Ontario what the oilsands is to Alberta, and I don’t anybody would suggest that the oilsands is expendable to our economy."

The report paints a gloomy picture if the Ontario, federal and U.S. governments do not bail out the automakers.

It warns the collapse of General Motors, Ford and Chrysler would send lasting shock waves through the economy, and that Ontario alone would lose 517,000 jobs.

If auto output by U.S.-based manufacturers in Canada was cut in half, at least 157,400 jobs would be lost right away, 141,000 of them in Ontario.

"This report says that Canada is better off providing life support to GM and Chrysler because the demise of auto in Canada is the economic equivalent of a nuclear freeze with catastrophic effects that would knock us into a deep recession," Bryant said.

He denied that the report is alarmist or that it was released to rally support for the government’s plans.

"They’re doomsday scenarios and the governments of Ontario and Canada will make sure that they don’t happen," he said.

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For St. Louis-area Chrysler workers and the community, the possibility of reopening the Chrysler LLC minivan plant in Fenton seems almost too alluring, too unthinkable to believe.

Then, the unthinkable was suggested in a news report Tuesday.

According to the Toronto newspaper The Globe and Mail, Chrysler Canada Inc. warned Ottawa and Queen’s Park that the automaker could close two assembly plants and shift the manufacturing work to the United States if it doesn’t get emergency funding from the Canadian government.

Such a shift would include dusting off the Fenton plant that was idled six weeks ago today, according to the Globe and Mail report, citing anonymous sources briefed on plans Chrysler submitted to Canadian lawmakers.

But was the warning, if true, just a bluff to spur Canada to provide financial aid? Or, was the threat a public ploy to garner support among U.S. lawmakers, who also are considering an aid package for the Detroit Three? Or both?

A Chrysler spokeswoman declined to comment on the report.

Joe Shields, president of the union that represents the Fenton minivan workers, said he couldn’t speculate about the possibility of resuming minivan production in the St. Louis area. "I haven’t been told anything," said Shields of United Auto Workers Local 110.

Foreign and domestic automakers have been battered by high gas prices and a global credit crunch. Chrysler is in a particularly precarious situation because its product portfolio is laden with sport utility vehicles and pickups at a time when consumers want small cars.

The automaker’s U.S. sales through November are down 28 percent from a year ago. In Canada, it reported a 1 percent dip during the same time period.

Any money, from anywhere, certainly would be welcomed, analysts say.

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"Chrysler is desperate for cash right now, and they are looking at all sources to keep the lights on," said Ken Elias, a Scottsdale, Ariz car insurance quotes.-based partner at auto consulting firm Maryann Keller and Associates.

According to The Globe and Mail, Chrysler is asking for nearly $1.3 billion in U.S. dollars from the Canadian government and warned it could transfer its production of sedans from a Brampton, Ontario, plant to a facility in Detroit. The automaker also said that it could shift production of its Dodge Grand Caravan and Chrysler Town & Country from a plant in Windsor, Ontario, to Fenton’s South Assembly Plant.

While Elias said the shift is a possibility, he added that Chrysler would need to examine "the economics of the whole situation" before making such a move. That includes looking at the work force costs, the price of shipping vehicles and other operational expenses.

At the moment, the production change is speculative and may be a political move, said Richard Cooper, vice president of J.D. Power and Associates’ Canadian operations in Toronto. He said any aid from Canada would depend on the terms the U.S. makes with Chrysler and the other domestic automakers.

A production shift would be a reversal from the message St. Louis-area workers got from Chrysler this summer.

In June, Chrysler said it could satisfy demand for the Chrysler Town & Country and Dodge Grand Caravan minivan — which had a 20 percent drop in sales through June compared with the same time in 2007 — with three shifts in Windsor. Some Windsor workers also build the Volkswagen Routan.

As Fenton workers protested the idling of the minivan plant this summer, Chrysler said the Windsor operation always was the primary spot for making minivans. The Fenton plant, officials said, was for overflow.

Shields of UAW Local 110 said Tuesday that he’s not getting his hopes up for any production shift back to St. Louis until he hears from the international UAW. But Shields said the local, regional and international unions will continue to lobby for reopening the plant.

"We haven’t given up by any means," he said.

Tuesday’s report also comes less than a week after local union officials said Chrysler will shed more than 1,800 Fenton hourly workers from its payroll through severance and early retirement packages.

atablac@post-dispatch.com | 314-340-8140

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WASHINGTON — The latest evidence of the deepening recession, already the longest in a quarter-century, came Wednesday in a pair of reports that found little relief in sight.

The U.S. service sector shrank far more than expected in November, as employment, new orders and prices plunged, hurting retailers, hotels and airlines. Meanwhile, the Federal Reserve said Americans hunkered down heading into the holidays, forcing retailers to ring up fewer sales and factories to cut back on production.

The Institute for Supply Management’s closely watched gauge of activity in service industries, where most Americans work, showed that for every company adding jobs, eight cut payrolls last month. That ratio led some economists to boost their forecasts for layoffs for November to levels not seen since the early 1980s.

"This is consistent with payrolls falling by about 500,000" for the month, said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, N.Y. "Let’s hope it is very wrong."

Analysts expect the nation’s jobless rate, when announced Friday, will hit 6.8 percent, on its way to a reading that they project could be closing in on 9 percent a year from now.

The view was equally gloomy in the Fed’s beige book — the latest snapshot of business activity compiled by the Fed from its 12 regional banks. It reported that "overall economic activity weakened across all Federal Reserve districts" since October.

The beige book reported that retailers were bracing for a weak holiday shopping season, manufacturing activity had slowed sharply and bank lending was contracting as the financial sector endures its worst crisis in seven decades.

Many analysts expect the Fed, which cut interest rates by a full percentage point last month, to cut rates by a half-point at its policymakers’ last meeting of the year on Dec. 16. In cutting rates, the Fed is trying to help stimulate lending and halt the economy’s slide.

A panel for the National Bureau of Economic Research on Monday said the country has been stuck in a recession since last December. At 12 months, the recession is already the longest since a severe 16-month slump in 1981-82 fast cash advance. Many economists say the downturn ultimately will set a record for the post-World War II period.

"I am looking for this recession to last 18 months, ending in June," said David Wyss, chief economist at Standard & Poor’s in New York.

In another report, the Labor Department said productivity, the amount of output per hour of work, rose at an annual rate of 1.3 percent in the July-September quarter. That was slightly higher than the 1.1 percent increase initially reported a month ago. And it was better than the 0.9 percent rise economists had expected.

Wage pressures rose at an annual rate of 2.8 percent. That was the biggest jump since a 4.5 percent rate in the fourth quarter of last year, but it fell below the 3.6 percent advance originally reported.

The Fed monitors productivity and wages to make sure inflation isn’t getting out of hand. But analysts say worries about the deepening recession would trump any inflation concerns in the minds of Fed policymakers.

The ISM report said its services sector index fell to 37.3 in November from 44.4 in October, far below the reading of 42 analysts had expected. Of the 18 industries in the survey, including warehousing, real estate, restaurants and wholesale trade, only one — health care and social assistance — reported growth.

One reason labor costs have eased is that companies have been aggressively laying off workers as demand has fallen. Job losses through October this year have totaled 1.2 million. More than half that figure came since August as the economy’s downward spiral accelerated.

Economists predict wages will remain depressed as job losses grow. Productivity growth probably will turn negative in the current quarter and the first three months of 2009 before beginning to rebound, said Nariman Behravesh, chief economist at IHS Global Insight. He forecast that productivity growth for next year will be a weak 0.9 percent.

Analysts had expected a big downward revision in productivity for the third quarter given that overall output, as measured by the gross domestic product, was revised to show a decline of 0.5 percent at an annual rate. That was a bigger drop than the 0.3 percent decrease originally reported. But the drop in output was outpaced by an even bigger decline in hours worked.

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Manulife Financial Corp. expects to report a $1.5-billion loss for the fourth quarter, the first time it has ever failed to book a profit since going public, and plans to issue new common shares to bolster its capital position.

The global insurance and financial-services group (TSX: MFC) said today it will issue $2.1 billion in new common shares to bolster its capital position.

The new stock is priced at $19.40 per share, and shares in the company were trading at $19.57 – down 89 cents – in the morning. Manulife shares have 52-week high and low of $42.14 and $16.28.

The firm said that eight institutional investors will buy $1.125 billion worth of shares in a private placement, and $1 billion worth of stock will be issued to the public through a bought deal with an underwriting syndicate.

Manulife is scheduled to report fourth-quarter results on Feb. 12, and it will be the first quarterly loss since its initial public offering in 1999.

Manulife also said that, assuming no further massive stock-market carnage, it expects to report net income of $900 million for 2008 – a "poor performance," CEO Dominic D'Alessandro characterized it, and far below analyst expectations of more than $3 billion.

"It is primarily due to the unprecedented decline in worldwide equity markets," he added.

"However, our business fundamentals continue to be very solid, as evidenced by our strong insurance sales and new business embedded value growth."

The early disclosure of expected losses was likely done as part of the requirements for the share offering memorandum, suggested Chris Blumas of Morningstar.

Even with the latest disclosure, there's still another month left in the current quarter, which means that projected losses could potentially deepen.

"Things have just gotten worse and worse over the last year and a half" on the markets, Blumas said. "When it'll stop, nobody knows."

"In the end it's still a great company with a strong core franchise, it's just that this decline in the equity markets was a risk they were willing to accept that they didn't hedge, and that's kind of bit them in the butt," he added credit report.

At the same time, Manulife said it will reduce a credit facility arranged last month with Canadian banks to $2 billion from $3 billion.

"This issue of common shares along with the renegotiated credit facilities will noticeably bolster our already strong capital position" stated D'Alessandro.

"These transactions provide us with the flexibility to absorb the accounting impact of future volatility in financial markets and, as importantly, will allow us to take advantage of acquisition opportunities that are emerging out of the current industry environment."

Reserves for variable annuity guarantees are expected to total $5 billion at year-end, up from $526 million at the beginning of the year. These reserves cover possible payments seven to 30 years in the future, but setting aside the money now is largely blamed for the anticipated fourth-quarter loss.

"It is important to note that the increase in reserves represents a non-cash charge which has been estimated as if the equity market deterioration was permanent," D'Alessandro stated.

"Should markets recover, as one would normally expect, these reserves would be released into income."

Meanwhile, Manulife said, the stock sales are expected to close Dec. 11 and will raise its consolidated capital ratio – assets relative to regulatory risk-weighted requirements – to 235 per cent, “one of the highest in the company's history."

The underwriters have an overallotment option on $150 million of additional stock at the same $19.40-per-share price.

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FRANKFURT–Chemical company BASF SE said Wednesday it is temporarily closing 80 plants worldwide due to slumping demand and cutting production at 100 more, including facilities in Texas and Louisiana. Some 20,000 workers are affected.

It also abandoned its goal to match last year's profit, citing slowing demand for its products, particularly from automotive customers.

BASF shares plunged 14.7 per cent to euro21.68 ($27.39) in Frankfurt after the announcement.

BASF spokesman Gareth Rees said the shutdowns and slowdown have already begun and will extend into January. Workers were being encouraged to take vacation time and reduce their overtime.

In a statement, the Ludwigshafen-based maker of everything from fertilizers and paints to glues and ingredients for cosmetics said it was trying to stem any overcapacity at its operations "as a result of a massive decline" in demand.

The measures will affect major plants in Freeport, Texas; Geismar, Louisiana; Ludwigshafen, Germany; Antwerp, Belgium; Nanjing, China; and Kuantan, Malaysia.

"BASF already drew attention to the difficult economic situation at the end of October," Chief Executive Juergen Hambrecht said in a statement. "Since then, customer demand in key markets has declined significantly. In particular, customers in the automotive industry have canceled orders at short notice.''

Last year, the company's pretax profit was euro7 cash advance in one hour.6 billion on sales of euro57.9 billion. For 2008, BASF said it doesn't expect to achieve that figure.

Hambrecht said "it was difficult to foresee how the coming year would develop and said that BASF was preparing for tough times.''

The company saw its third-quarter earnings fall 38 percent to euro758 million ($959.1 million) from euro1.2 billion a year earlier.

In Ludwigshafen, it signed an agreement with its employee council to take advantage of flex time and vacation there, moves that will affect 5,000 workers.

"We are responding flexibly to market developments and are acting quickly," Hambrecht said. "BASF will now focus even more closely on cost and budget discipline, and will use opportunities arising from the crisis.''

He said the moves would not affect its planned 6.1 billion Swiss franc (euro4 billion; $5 billion) acquisition of Switzerland's specialty chemicals firm Ciba, which it hopes to complete by the first quarter of 2009.

"We will also proceed swiftly with the planned acquisition and integration of Ciba to further optimize our business," Hambrecht said.

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Stocks tumbled Monday, ending a choppy session lower as recession jitters outweighed relief that the government’s programs to shore up the financial system have gotten underway.

Investors also weighed a better-than-expected September new home sales report.

The Dow Jones industrial average (INDU) lost 203 points or 2.4% according to early tallies, after having been on both sides of breakeven throughout the session. Verizon rallied 10% after its profit report, but it was one of only 3 Dow components to rise.

The Standard & Poor’s 500 (SPX) index fell 3.2% and the Nasdaq composite (COMP) fell 3%. All three major gauges closed at fresh five-year lows.

Tuesday brings the release of the October consumer confidence report.

Stocks had seesawed on both sides of unchanged throughout the session as investors geared up for critical events due later in the week and early next.

As a result, Wall Street is unlikely to move much over the next few sessions, said Harry Clark, CEO of Clark Capital Management Group.

Ahead of the election, the Federal Reserve is expected to announce an interest rate cut at the conclusion of its two-day meeting Wednesday.

"The rate cut this week will help a bit, but we really need to get past the election right now," Clark said.

The start of some of the government’s rescue programs this week is significant, Clark said, but it’s still going to take several weeks for the impact to be felt and borrowing rates to improve more substantially.

Recession fears decked stocks last week, near the end of a brutal month on Wall Street. The credit crisis, sluggish corporate profit outlook and slump in commodity prices have all exacerbated fears that a recession is imminent, if not already underway.

These underlying issues aren’t going to disappear anytime soon, but there are signs that the stock market is closer to hitting bottom, said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research.

Detrick said that stocks are the most "oversold" they’ve been since the period surrounding Black Monday in October 1987. That means that on a technical basis, it wouldn’t be hard to spark a big bounce. Additionally, the level of money sitting in mutual funds and the level of investor fear are good contrarian indicators. Plus, November, December and January are typically good months seasonally on Wall Street.

However, there’s nothing typical about this year or this time period on Wall Street, he said, and the usual factors may not carry much weight.

"You have the uncertainty of worldwide recession and the credit markets are still a problem," Detrick said. "For the market to see a significant bounce, we’d need to see signs that our economy and the global economy are turning around."

He said that the recent housing market reports have been positive, but that doesn’t change the broader economic outlook.

Brutal month: With just one week left in October, the Dow is down 24.7%, the S&P 500 is down 27.2% and the Nasdaq is down 27.7%.

The Dow is currently on track to post its worst month ever on a point basis and fifth worst ever on a percentage basis, according to Stock Trader’s Almanac info going back to 1901.

The S&P 500 is currently on track to post its worst month ever on a point basis and third worst ever on a percentage basis, going back to 1930.

The Nasdaq is on track to post its fourth-worst month ever on a point basis and its second-worst month ever on a percentage basis, going back to its inception in 1971.

Global market effect: World markets continued to retreat as the new week began.

European markets ended lower, with the London FTSE closing down 1%, erasing bigger session losses. Asian markets tumbled overnight, with the Japanese Nikkei falling 6 one hour cash loan.6% to a 26-year low on worries that the strong yen will hurt exports. The Hong Kong Hang Seng fell 12.7% to a more than four-year low.

The declines followed a Sunday statement from the G7 warning about the excessive volatility of the yen, which hit a 13-year high versus the dollar Friday. Analysts said the statement could mean the government is set to intervene in the currency markets.

The dollar continued to retreat versus the yen on Monday and gained against the euro. Bets that the Bank of England and European Central Bank will have to cut rates aggressively over the next few months have weighed on the euro and pound lately.

Banks and credit: Nine big banks are set to get $125 billion from the Treasury Department this week as part of the $700 billion bank rescue plan passed last month.

Ten regional banks said Monday that they will get at least $18 billion under the bailout plan.

Also beginning this week: The Fed’s previously announced program to buy up commercial paper, short-term debt that businesses depend on to fund daily operations.

Despite the government’s efforts, lending has remained constrained, with short-term borrowing rates the one exception.

Libor, the overnight bank-to-bank lending rate, edged lower to 1.26% from 1.28% Friday, according to Bloomberg.com. It was a modest retreat after two days of gains. On the upside, that still kept Libor below the Fed’s benchmark lending rate of 1.5%, seen as a good sign. Libor hit a record 6.88% earlier this month at the height of the market panic.

The 3-month Libor rate, what banks charge each other to borrow for three months, inched lower to 3.51% from 3.52% Friday.

The TED spread, the difference between what banks pay to borrow from each other for three months and what the Treasury pays, narrowed to 2.67% from 2.70% Friday. The spread hit a record 4.65% earlier this month. The narrower the spread, the more willing banks are to lend to each other.

Treasury prices were little changed, with the yield on the 10-year note at 3.68%, roughly where it stood late Friday. Treasury prices and yields move in opposite directions.

The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, slipped to 0.75% from 0.86% late Friday, showing investors would rather see little return on their money than risk the stock market.

Last month, the 3-month yield reached a 68-year low around 0%, as investor panic hit its peak.

Results: Dow component Verizon Communications reported higher quarterly earnings that met estimates on higher sales that beat forecasts. Verizon (VZ, Fortune 500) shares jumped over 10%.

With 45% of the third-quarter reports out already, profits are currently on track to have fallen 11.3% from a year earlier, according to the latest estimates from Thomson Reuters.

Oil, gas and gold: U.S. light crude oil for December delivery fell 93 cents to settle at $63.22 a barrel, after falling to a 17-month low in morning trading.

Prices have been sliding since crude peaked at a record $147.27 a barrel on July 11, with speculators pulling out of the market on bets that global demand is slowing. Investors have also had to raise money fast amid the stock market slump and have done so by dumping their oil positions.

Gasoline prices fell another 3.1 cents overnight, to a national average of $2.668 a gallon, according to a survey of credit-card activity by motorist group AAA. It was the 40th consecutive day that prices have decreased. During that time, prices have fallen by $1.18 a gallon, or more than 30%.

COMEX gold for December delivery rose $12.60 to settle at $742.90 an ounce. 

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Gas prices continued their decline one day after falling below $3 a gallon for the first time in nearly nine months, according to a daily survey of credit card swipes released Sunday.

The average price of unleaded regular fell to $2.95 a gallon, down 3.7 cents, according to the Daily Fuel Gauge Report issued by motorist group AAA. Prices have fallen more than 30 cents a gallon in the last week and 90 cents, or 23%, in the last 32 days.

The current national average is $1.16, or 28%, off the record high price of $4.11 that AAA reported July 17.

The last time the average price for a gallon of regular unleaded gasoline dropped below $3 a gallon was Jan. 25, when it reached $2.99.

Alaska has the most expensive gas, with prices averaging $3.90. The cheapest gas is found in Oklahoma, with prices averaging $2.54.

The decline comes as hurricane season winds down and oil prices drop over concerns that a prolonged economic slump would curb demand for energy savings account payday advance.

Oil prices rose above $74 a barrel in premarket trading Monday after settling Friday at $71.85 a barrel in New York. The rebound comes ahead of an expected production cut by the Organization of Petroleum Exporting Countries.

The cartel, which controls two-thirds of the world’s oil supplies, is set to hold an emergency meeting that begins Oct. 24 in Vienna.

OPEC ministers have expressed concern over the rapidly declining price of oil. Chakib Khelil, OPEC’s president, said Sunday that members are considering a "substantial" cut and that the oil market is oversupplied by about 2 million barrels a day.

A barrel of crude has lost roughly half its value since hitting an all-time high above $147 a barrel in July.  

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Time and possibilities are a jumble in the 2008 investment world, but looking ahead rather than behind is what investing is all about.

Experts agree that fundamental changes under way in our financial system will provide a different scenario for tending to our money in the year 2020.

The united resolve of International Monetary Fund nations to "use all available tools" to prevent major financial institution failures indicates the global nature of that scenario.

A lot will depend on financial institutions, on government and on us. Either we learn from what went wrong and revise our credit and saving habits, or we’re doomed to repeat mistakes.
Some believe the current shakedown bodes well for the future.

"Investing will have changed significantly for the better by 2020," said Bruce Bittles, chief investment strategist for Milwaukee-based Robert W. Baird Inc. "We’re in the position we are today because the country over several decades had become a nation of consumers, not savers, who had been borrowing to buy foreign goods."

A dozen years from now, U.S. consumers will have returned to a more traditional savings ethic and will save 8 percent of their income, which was the savings rate until it began eroding in the 1990s, Bittles said. And don’t worry too much about a slow economy, he added.

"A protracted slow economy doesn’t mean the stock market can’t do well, because the market typically does well in a slow-growth economy," Bittles said. "It will be very bullish long-term if we move back into a savings ethic in which we fund our own liabilities and loans."

The investor mind-set must be patience because it will take a while to get through current woes, said Chris Brown, chief investment strategist for Pax World Management Corp. in Portsmouth, N.H. Companies that survive as winners will be stronger and face less competition.

He noted that Warren Buffett of Berkshire Hathaway is obviously excited about possibilities because he invested in Goldman Sachs and General Electric Co. as seemingly once-in-a-lifetime opportunities.

"We’re going to see people saving more for retirement, but they’ll also be working longer because they hadn’t saved enough early on," Brown said. "By 2020, there will be a huge shift in spending habits in which saving, not spending, is rewarded and you’ll no longer be punished for saving by low interest rates."

We must remember not to have short memories.

"I would assume that people and investment firms in 2020 will remember the dangers of leverage," said E. William Stone, chief investment strategist with PNC Wealth Management in Philadelphia electronic check payday advance. "We may have a better appreciation for seemingly hidden risk or the risk of chasing excess returns."

Because investment returns will revive at various times throughout the 2010 decade, there’s a chance this could energize investors to chase returns once again, Stone said. The lessons of today may have been forgotten and greed will take over again.

The undeniable staying power of greed has other experts worried.

"By 2020, peoples’ tolerance for risk will return," said Lawrence Harris, professor of finance and business economics at USC’s Marshall School of Business.

Yet in 2020 you’ll find positive differences, such as the greater importance of alternative energy. That means plenty of windmills in the Midwest and in the oceans, but oil prices "going through the roof," Harris predicted. There will be long-term upward pressure on commodities due to growth in the world population and rising education levels that make people more prosperous, he said.

Experts hope it will become easier to invest in understandable instruments in 2020. Many of today’s problems were masked in complex financial vehicles with obscure descriptions. Subprime was only widely understood when it was too late.

"You may see a movement toward simplicity on the part of investors in which complex products are shunned, but that will take a while," Stone said. "A lot of complex financial products currently aren’t traded on exchanges, so we may also see a push to have more of them on exchanges where they can be monitored closely."

Global markets will loom large in 2020.

The U.S., Europe, China and India should remain locked in "very, very slow" economic growth for a long period of time, predicted Bittles. Yet even though China, India and Latin America may falter the next couple of years, Harris considers it inevitable their economies will grow.

There likely will be one global system with united goals, as foreshadowed recently by the IMF, rather than 200 independent economies, Brown said. The U.S. will be the biggest driver, but by 2020 a number of emerging economies also will have clout.

For now, expect the rising U.S. dollar and falling foreign securities to continue to give American investors a double dose of financial pain, Bittles said.

andrewinv@aol.com

2008, TRIBUNE MEDIA SERVICES INC.

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