America's Richest Small Towns

By Venessa Wong, Bloomberg Businessweek
Jan 21, 2011
Want to buy Billy Joel's Sagaponack home? Last month the piano man dropped the price on his oceanfront house on Long Island's East End again, this time from $19.9 million to $18.5 million. It started out at $22.5 million when he first listed the property in 2009.

And Joel is not alone. Across the U.S., prices last year continued to decline even in the richest neighborhoods. Sagaponack, a village with a population of only 582 (it swells during the summer), saw home values drop 14.5 percent from 2009 to 2010-yet it once again earned the No. 1 position on Businessweek.com's ranking of the Most Expensive Small Towns in the U.S. It held on to the top spot because, despite the dip, median home values were $3,406,640, the highest in the nation, according to real estate website Zillow.com.

Working with the website, Businessweek.com identified the 50 most expensive small towns (populations less than 10,000) nationwide where median home values are the highest. We evaluated data on 4,624 cities and census-designated places from November 2010, the most recent available. Some expensive communities, such as Bel Air, Calif., were not included as they are neighborhoods rather than cities or census-designated places. Of the 50 most expensive places-many of which are second-home markets-nearly half are in Long Island's Nassau and Suffolk counties and about one-quarter are in California. None of the towns in the ranking had a median home value of less than $1 million.

Biggest Price Declines

Values dropped in 33 of the 50 most expensive small towns. The biggest decline, 15.7 percent, came in Woodside, Calif., home to such tech billionaires as Oracle's (ORCL) Larry Ellison and Apple's (AAPL) Steve Jobs. Values in the second-most expensive town, Jupiter Island, Fla., were down 11.3 percent from a year ago, to just over $2.8 million, and in No. 4, Los Altos Hills, Calif., they were down 13.6 percent, to a bit more than $2.1 million.

In eight of these towns (five of which are among the top 10 most expensive), values were more than 10 percent below levels of a year ago. Nationwide, home values were down 5.1 percent, Zillow.com's data indicate.

Only 17 places experienced increases in home values. The winner was Kings Point, N.Y., a wealthy suburb of New York City on Long Island's Gold Coast, where prices rose 13.5 percent.

In the Hamptons, "prices have not yet rebounded," says Michael Schultz, vice-president in Corcoran's East Hampton office. With prices down, he expects activity to pick up in the first quarter this year.

Fewer High-End Sales

Home to wealthy Wall Streeters, corporate executives, and celebrities, the Hamptons saw both unit sales and prices down year-on-year after rising in early 2010. The third-quarter drop in the median sale price in the Hamptons-North Fork market was due to a shift away from high-end sales-only 11 homes sold at or above $5 million in the third quarter, down from 20 sales a year earlier, according to a report by Miller Samuel, a New York real estate appraisal services firm.

"Across the board, everyone brought their homes down 15 percent to 20 percent. Sellers are becoming more realistic" and buyers are more conservative, says Harald Grant, senior vice-president in Sotheby's International Realty's Southampton office.

After a strong first half in 2010, unit sales in Sagaponack and nearby Bridgehampton were down 18 percent year-on-year in third quarter, and the median sale price was down 53 percent, according to a report from real estate brokerage Corcoran. Despite this short-term softness, "Sagaponack is a strong market because it has cachet," Grant says.

A Premium to Rub Elbows

What makes small towns such as Sagaponack attractive is their proximity not just to natural beauty and first-class golf courses but also to other wealthy people. That's why the most expensive small towns often cluster around major financial centers. A survey of U.S. metropolitan statistical areas by consultancy Capgemini shows that New York City had 667,200 high-net-worth individuals, or people with investable assets of $1 million or more, in 2009-far more than any other metro in the country. Other wealthy areas include the Los Angeles metro area (235,800), Chicago (198,100), Washington, D.C. (152,400), and San Francisco (138,300).

Of the 50 most expensive small towns, 22 are in New York-namely, Long Island-and 13 are in California. Others were in Colorado, Florida, Massachusetts, Maryland, New Jersey, Washington. Making the ranking for the first time was even one town in Tennessee. Belle Meade (a very rich town in Tennessee).

Some well-known markets are less active. "Our really high-end market is almost frozen," and buyers do not seem to want to buy above the $6 million level, says Paul Grover, a partner in Robert Paul Properties, a Cape Cod brokerage. With Wall Street turning around, he anticipates that demand will pick up, "but we'll see it in New York first."

That note of hope is one that many real estate brokers and home sellers across the U.S. share. In expensive small towns like Sagaponack, however, even the battered prices might strike many Americans as wealth beyond the dreams of avarice. It's hard for someone who lives in a house valued in the mid-six figures-or less-to empathize with sellers asking prices in the seven- or even eight-figure range. But no owner likes to take a haircut when selling his home. Just ask Billy Joel.

Here's America's Five Most Expensive Small Towns:

No. 5: Water Mill, N.Y.
Median Home Value: $2,111,688
Price change '09-'10: -10%
Population: 2,137
2010 Rank: 6
Water Mill, about 90 miles from Manhattan, offers riding stables, golf courses, and some of the finest sailing and fishing waters in the Northeast. The town has been home to actor Richard Gere, fashion designer Adrienne Vittadini, publishing heiress Anne Hearst, and real estate investor Andrew Borrok.

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No. 4: Los Altos Hills, Calif.
Median Home Value: $2,161,255
Price change '09-'10: -13.6%
Population: 7,981
2010 Rank: 4
The elite town of Los Altos Hills, a wealthy Silicon Valley community 35 miles south of San Francisco and 17 miles north of downtown San Jose, encompasses 8.4 square miles. It has 65 miles of trails and off-road paths for walking, running, bicycling, or even horseback riding. Residents have included Google co-founder Sergey Brin, Yahoo! co-founder Jerry Yang, Hewlett-Packard co-founder David Packard, and venture capitalist Kelly Porter. Median household income is $218,922, estimates the U.S. Census Bureau.

No. 3: Kings Point, N.Y.
Median Home Value: $2,379,905
Price change '09-'10: +13.5%
Population: 5,132
2010 Rank: NA
This Long Island village, home of the U.S. Merchant Marine Academy, is reputed to be the inspiration for West Egg in F. Scott Fitzgerald's The Great Gatsby (Kings Point even has a road named Gatsby Lane). The area has two main parks: Steppingstone Park, which offers mooring for more than 300 boats, and the 175-acre Kings Point Park. Kings Point was home to Chrysler founder Walter Chrysler, retailer Henri Bendel, and comedian Alan King, according to longislandexchange.com.

No. 2: Jupiter Island, Fla.
Median Home Value: $2,810,434
Price change '09-'10: -11.3%
Population: 875
2010 Rank: 2
The town of Jupiter Island, which developers in the 1920s originally envisioned building into a Hollywood-like center for production companies and movie stars, is well-known as one of the wealthiest places in the country. The U.S. Census Bureau estimates per capita income to be $235,758. It has a permanent population of 584, with a seasonal population of approximately 1,775, according to the town website. Jupiter Island has been a second home for many old wealthy American families such as the Doubledays, Fords, Heinzes, and Mellons, and residents have included golfers Greg Norman, Nick Price, and Tiger Woods, President George H.W. Bush, actor Burt Reynolds, and baseball star Mike Schmidt, according to Corcoran.

No. 1: Sagaponack, N.Y.
Median Home Value: $3,406,640
Price change '09-'10: -14.5%
Population: 582
2010 Rank: 1
Southampton's ritzy village of Sagaponack maintains its rank as the country's most expensive small town in 2011. The village, which covers eight square miles, has been home to musician Billy Joel, Apollo Management Chief Operating Officer Henry Silverman, and former Kinray Chief Executive Officer Stewart Rahr. It is also the site of Fair Field, the 63-acre oceanfront estate of Renco Group Chief Executive Officer Ira Rennert, who owned military Humvee maker AM General. At 6,000 square feet and with a 164-seat theater, three swimming pools, and a two-lane bowling alley, Fair Field is one of the largest private houses in the country.

The fast lane to retirement

4 Radical Strategies to Retire Sooner
Mark Patterson, On Thursday January 27, 2011, 2:44 pm EST

For millions of baby boomers, the financial gap between today and a successful retirement is deep and wide. When confronted with this reality, many folks simply give up, lamenting that they will never be able to retire or will continue working until age 75. But it may not have to be that way, if you are willing to adopt radical strategies to accelerate your retirement plan and close that financial gap. Here are a few ideas to consider:

1. Work a second job. You need more income now so you can save more for retirement. If you are healthy and the nest is empty, fill some spare time with more work. I am friends with a couple who each work full-time in conventional 9-to-5 office jobs. One spouse also works evenings and weekends selling ladies shoes in a mall department store on commission. She makes more money from that part-time job than she does at her regular job.

2. Become a single car family. Most married couples are two car families, even if the kids are gone and one spouse is not working. Operating costs including gas, insurance, maintenance, and repairs and carrying costs such as depreciation, taxes, and interest for a car or SUV can easily average $6,000 to $10,000 per year and even more for luxury vehicles. (Check Edmunds.com or ConsumerReports.org for data for your vehicle.) Gas prices are on the rise. Getting rid of the second vehicle can save you thousands of dollars for retirement. Commute with others, take public transit, share a ride with your spouse, or ride a bike instead. It can be done with careful planning.

3. Push your kids off the payroll. Many boomers find it emotionally difficult to completely cut the ties that financially bind them to their children. It starts with college expenses that drag on as the kids fail to graduate on time or need help paying off student loans. It continues with supporting boomerang kids. I know folks who continue to pay their kids car insurance or cell phone bills, even after the offspring are gainfully employed. When your child-rearing days are done, love your children, but be politely and firmly selfish about your money. You will need it when you retire more than they will now.


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4. Start a spending fast. Most of us eat too much. We also spend too much. We often combine those vices by eating out regularly. Look at your budget and see if that's you. If so, go on an extreme spending fast. Vow to go an entire month without restaurant food. Also, avoid the drive-through and skip the exotic $5.00 cups of coffee. Stash the money you don't spend in your retirement savings. Think about what it will buy when you really need it. The next month, start another spending fast, this time targeting your cell phone or cable bill.

Most people who read these suggestions will roll their eyes and vow not to take such radical actions in their own lives, even if their retirement hangs in the balance. My message in response is this: The pain of financial discipline will be far less than the pain of retirement regrets.

Mark Patterson is an engineer, patent attorney, baby boomer, and author of The Failsafe Retirement System. He blogs on matters of personal finance and retirement planning at Tough Money Love and Go To Retirement.

Is what's good for GE still good for America ?

Good for GE, Good for America ?
The interests of Obama and Immelt—the GE chief and new jobs adviser—increasingly overlap
Source: Bloomberg Business Week
By Diane Brady and Rachel Layne
Jeffrey R. Immelt might have expected some blowback. With unemployment still high and a charged political atmosphere in Washington, anyone asked to chair a new President's Council on Jobs and Competitiveness was likely to face scrutiny. Sure enough, when President Barack Obama named the chief executive officer of General Electric (GE) as his choice on Jan. 21, Immelt was labeled a crony capitalist by the right and a destroyer of American jobs by the left for his decision to close plants in the U.S. in recent years. Others wondered how he would dispassionately manage his new role while running a $150 billion-a-year company under enormous pressure from Wall Street.

From the Oval Office, the answer is clear: What's good for GE is good for America. The company, says White House senior adviser Valerie B. Jarrett, "is competing in a global marketplace, and it is winning. It's moving jobs back to America, it's exporting goods all over the world, and that's really the model that we think is ideal."
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The Immelt courtship started during Obama's Asia trip in November. At a meeting in India, Immelt had a chance to see the President advocate for U.S. companies, while Obama got a closer view of GE's success in selling big-ticket products abroad. More than half of GE's sales and its 304,000-strong workforce are outside the U.S., and the company rang up $17 billion in exports from its stateside operations last year.

Obama called Immelt, 54, from Hawaii during his Christmas vacation and asked him to take the helm of the new council. After running the idea by GE's board, Immelt called the President back a few days later to accept.

To some investors, taking the role is practically a fiduciary duty. Stephen Hoedt, a Cleveland-based analyst for Key Private Bank, whose parent company owns 17 million GE shares, says Immelt may be "able to affect policy at the highest level." Brian James, co-head of research at fund manager Loomis Sayles, says he hopes Immelt, a Republican, gets "some insights into what's going to impact GE coming out from Washington," adding "this appointment simply can't be bad for GE."

Just how much access—and success—Immelt will see is an open question. Fostering job growth is a challenge that has confounded the brightest minds. Immelt has agreed to chair an advisory group that may not wield much influence. The panel it replaces—the President's Economic Recovery Advisory Board, on which Immelt also served—met with Obama four times during its two-year lifespan. The new council is scheduled to meet with the President once a quarter.

For GE, there could be many side benefits. The interests of Immelt and Obama increasingly overlap. Immelt needs the right policies in place to drive growth in areas such as infrastructure, cleantech, health care, and finance. Sales of wind turbines and solar panels are tied to U.S. energy policy and emissions standards. Decisions over whether to upgrade the power grid, invest in high-speed rail, buy jet engines, or modernize hospital systems are often made at a political level.

What Obama does or says on the world stage is of great interest to a company that needs open borders and political goodwill to thrive. As Gwen Ruta, who heads the Environmental Defense Fund's Corporate Partnerships program, says: "It's a short hop from his thinking about GE's strategy to where the jobs are going to be."

Advising the President on job creation could prove fruitful for GE in other ways. Immelt's mandate touches on a host of issues important to a company that spent $39.3 million last year lobbying Washington, more than any other corporation, according to the Center for Responsive Politics. In a Jan. 21 call to discuss fourth-quarter earnings, Immelt said he'd focus on such areas as competitiveness in jobs, exports, global tax policy, regulations, and manufacturing. "I'm honored to be able to work on something that has importance in a broader economic context," he said. While he must keep GE's business and the council legally separate, stronger bonds might not hurt when GE is battling the Administration on issues such as continued funding for an alternative engine for Lockheed Martin's (LMT) Joint Strike Fighter.

Although critics such as Representative Marsha Blackburn (R-Tenn.) may disagree with the decision to have Immelt lead the council—she argues a small business owner or entrepreneur "may have been a better fit"—the GE chief certainly shares Obama's focus on job growth through green technology, infrastructure spending, and increased efficiencies in health care. "People want to see business and government work together, both in the U.S. and globally, to drive innovation, employment, and growth," Immelt wrote in a 2009 letter to shareholders. In the last two years, GE has announced plans to add some 6,500 manufacturing jobs in the U.S.
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In some ways, Immelt is starting to sound like a politician himself. Whether in speeches or op-ed pieces, he talks about the need for a national policy to create jobs from exports. Immelt has more time to spend in Washington—when not calling on other government leaders—after moving Vice-Chairman John Rice to Hong Kong in early January to lead GE's global operations. Given the uncertainty in GE's home market, not to mention opportunities to participate in earmarked projects and policy debates, Sterne Agee analyst Nick Heymann argues, Washington is a good place for Immelt to be. "This is where the opportunities to influence are," he says.

The bottom line: With its focus on infrastructure and cleantech, Immelt's blueprint for jobs dovetails with Obama's policy agenda.


With Julianna Goldman, Lisa Lerer, and Jonathan D. Salant. Brady is senior editor at Bloomberg Businessweek in New York. Layne is a reporter for Bloomberg News.

Impact of lifestyle on personal finance

Source: USA Today
Evolving life stages bring changes to personal finance
By Adam Shell, USA TODAY - Monday January 31, 2011
NEW YORK — Carving out a winning personal finance plan today is increasingly less about how old you are and more about what stage of life you're in.

The cookie-cutter approach to managing money has become outdated and unworkable for many Americans, as massive demographic shifts, fast-changing lifestyles and the fallout from the recent financial crisis have upended even the best-laid financial plans.

No longer do most people go to college and marry in their 20s, have a family and buy a home in their 30s, work for one company for life, and retire financially secure in their 60s.

Life is more complicated, more unpredictable and more unsettled today.

Indeed, financially disruptive stuff seems to happen more frequently these days and at much different stages of peoples' lives — often when they least expect it and are most vulnerable.

A job loss and bleak job prospects, for instance, mean falling behind on bills, devouring savings and maybe even moving back in with parents or starting your own company out of necessity. Americans are living longer, and that means more adult kids are supporting or caring for aging parents. Marrying later — or more than once — and having kids or a second family later in life mean bigger expenses, such as college tuition, while retirement inches ever closer. College, once a rite of passage for teens, is now both a lifeline — and a big unexpected bill — for the fortysomething set returning to college in large numbers in a bid to retool their careers and stay economically viable.

All that added complexity is causing fresh money headaches for people ranging from those just embarking on their life journey as well as those entering or already enjoying their golden years.

• Ron McElhaney Jr., 46, of Savannah, Ga., for example, is having a tougher time saving because he is on his second marriage and pays child support for his two kids plus helps support the two children from his new wife's previous marriage.

• Harry Nieman, 74, of Pittsburgh, says he and his wife, Betty, 73, have had their retirement interrupted by one college-educated son who lives with them after getting laid off three years ago. The former banker is also providing financial help to a second son and his two kids after a job loss.

• Sandra Taylor, a 59-year-old divorced banker who lives alone, says she is delaying her retirement a few years to boost her savings because of a job loss three years ago and the limitations of just one income.

• Brittany Rose, 22, a fifth-year student at Virginia Commonwealth University, started her own business a few years back while a sophomore because of a lack of job opportunities and as a way to take some of the financial pressure off her parents.

Recalibrating financial plans

With increasing frequency, these disruptive unplanned life events are forcing more folks to tear up or recalibrate their financial plans in favor of an updated plan that better addresses their situation. Money once intended for one financial goal must be diverted to more pressing needs.
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"The stages and circumstances of peoples' lives often trump personal finance basics," says Tony Ogorek of Ogorek Wealth Management, a financial planning and money management firm in Buffalo. "You have to be creative in advising people today. With social mores changing, we no longer have a traditional life cycle to point to. There are no more pre-set stages anymore. The Burger King model of 'serve it up your way' is where the whole (personal finance) planet is going."

Shifting demographics, including the aging of the Baby Boom generation, is one major factor turning the Personal Finance 101 playbook upside down, says William Frey, a demographer at the Brookings Institution.

The world in the wake of the financial crisis is less financially friendly for Boomers. That reality has forced them to rethink retirement and how and where they live.

There has been a big downturn in the migration of Boomers to different parts of the country to retire, Frey says. He attributes that to the housing bust, which has reduced the amount of equity in their homes and made it more difficult for them to sell. Despite a stock market rebound, the drop in 401(k) retirement balances has also resulted in less financial flexibility for those on the cusp of retirement.

These negative financial factors mean the "trend of people working longer" is likely to be extended further into the future, says Frey.

The fact that many Americans are now living into their 80s also places greater financial pressure on Boomers' adult kids, many of whom act as caregivers, provide financial support or monitor their parents' care at nursing homes.

"We haven't faced these issues in such big numbers before," says Frey.

To get a clearer picture of how societal changes and economic upheaval have created new personal financial issues, consider some of the money challenges faced by a number of folks at different stages of their lives.
On their own

With nearly one out of 10 Americans unemployed and job growth sluggish, many college students are no longer attending campus job fairs or sending out résumés in hopes of landing entry-level jobs.

Instead, they are starting their own businesses. Meet the twentysomething CEO.

Take Rose, the Virginia Commonwealth University student. She's not even out of college yet but spends most of her time building her own business, More Than Cheer, which specializes in upgrading the skills of cheerleaders through classes, camps and coaching.

Her upstart business pays the rent, helps offset her tuition bills and helps pay off student loans and credit card balances, which run higher because she used credit to help get her business off the ground.

"Originally, I had planned on working for somebody else," Rose says.

"But," she says, "I saw an opportunity to use my company as a means of supporting myself while staying in school.

"Now, as I am getting ready to graduate, I am even more motivated to make my company more profitable because of the lack of job opportunities."

The bad news: She is pouring any leftover cash back into the business, which means she is not putting money into her retirement account as aggressively as she would like.

In the past five years, the percentage of U.S. entrepreneurs that started businesses "out of necessity" more than doubled, to 28.9% in 2010 from 13.2% in 2006, according to data compiled by Babson College.

"A higher proportion of entrepreneurs started businesses out of necessity, because they had no other options for work," says Donna Kelley, associate professor of entrepreneurship at Babson.

And in a sign of young Americans' growing interest in taking the entrepreneurial route, applicants to the Entrepreneurs' Organization's Global Student Entrepreneur Awards, which are limited to full-time college students running businesses with six months of profits, have risen more than 250% since 2007.

"More collegiate folks now view starting a business as a career choice coming out of school," says Ryan Meyer, an EO spokesman.

Dinesh Wadhwani, 21, a junior at Babson, also was not excited about the limitations of working for an established company. So he started ThinkLite, a company that uses advanced green technology and custom-manufactured light bulbs to help commercial businesses cut their monthly lighting bills by as much as 80%.

"The recession," the young entrepreneur says, "has actually helped my company because companies are much more sensitive to cost savings."

His motivation: "The ambition to have something of my own. I could have just crushed my grades, landed an interview and got a good job."

Instead, he spends his time dealing with lawyers, auditors and clients.

Wadhwani has yet to start funding his retirement. Instead, he is involved in raising capital via lines of credit from roughly 90 manufacturers and suppliers he does business with.

"Going to class is the third thing on my plate," he says. "First is customers, and the second is the company's supply chain."

Multigenerational living

Another trend that is influencing money matters and living arrangements is the growing number of multigenerational living arrangements, caused either by economic need or cultural shifts related to immigration.

"Families have to help themselves as they never have before," says Stephen Melman, director of economic services at the National Association of Home Builders. In fact, a model home designed by NAHB with multiple generations in mind is big, is all on one floor and has separate wings to accommodate, say, a family as well as grandparents under one roof.

Pew Research data show that in 2008 16%, or 49 million, of the U.S. population lived in households that contained at least two adult generations, up 33% from 1980. And due to the fallout from the housing bust, the number of households in which multiple generations lived under the same roof surged 2.6 million from 2007 to 2008.

Nieman, the retiree in Pittsburgh, fits that description. He and his wife, Betty, have the youngest of their four adult sons living with them because of a job loss three years ago and an unsuccessful job search despite applying for hundreds of jobs. "His unemployment ran out 1½ years ago," says Nieman, who is also financially helping another son and his two kids after he lost his construction job.
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The need to help his kids has resulted in some money-saving choices, says Nieman. "We sold our vacation home in Florida two years ago and now rent for only three months in the winter."

Demographic expert Harvey Dent, president of HS Dent Foundation and author of The Great Depression Ahead, says managing personal finances around life stages is important. More important is being mindful of the economy's life cycle when deciding whether to be aggressive or conservative with finances. He uses the four seasons to describe the economic cycle and stresses that the economy is now in its winter season, which calls for a cautious investing stance.

"I don't care if you are 25 or 65 years old, in economic winters most investments fall in value, including stocks," says Dent. "The economy's life cycle is more important than an investor's, because it is more pervasive."

Families later in life

Mothers having kids later in life are also upending more traditional financial arrangements. In 2008, 14% of births were to women ages 35 or older, up from 9% in 1990. That means financial sacrifice and tough choices for moms who are working at the time of the birth.

Swapna Patel, a 36-year-old from Houston, had her second child last year, a life change that led to her decision to leave the workforce and her 13-year career as an information technology consultant. She and her husband, Rajesh, 39, decided that caring for the kids was more important than money.

But that decision has brought financial struggles. Despite starting a freelance headhunter business, the family has taken "a major hit to their income." For the first time in their lives, "We are not putting money into savings or retirement accounts," she says.

Patel says one of her main jobs now is to make sure money doesn't leave the house. She clips coupons and looks for deals on the Internet, and says she hasn't spent more than $5 on new clothing for her children since leaving the workforce. To save cash, the couple refinanced their mortgage, lowering their monthly bill by $400.

McElhaney is now at the stage of his life where it is time to pay for college — a few years earlier than expected. Because he remarried, he now has four kids to put through college — two from his first marriage and two from his current wife's prior marriage. One of his stepsons is already in college, and the other is in junior high. College costs for his son, now in sixth grade, and his daughter, in ninth grade, are coming up in a few years.

The need for tuition comes after a few lean years for McElhaney's job-recruiting business: "We are paying our bills and watching our nickels and dimes."

Says Bob Cohen, a financial planner at Financial Strategies & Wealth Management, "Investors want more flexibility, more than previously, to be able to adapt to these uncomfortable times."

Should you invest in the long run ?

Source: Businessasiaone.com
Long-term investing under threat

By Lynette Khoo

LONG-TERM investing is likely to decline in the coming years as markets become more volatile and traditionally long-term investors seek liquidity, said GIC deputy chairman and executive director Tony Tan. On the other hand, demand for long-term funds will increase dramatically given the rise of emerging economies and their infrastructure and investment needs.

Speaking on The Future of Investing panel at Davos, Dr Tan urged policymakers to consider the broader impact of their regulatory solutions and avoid blanket regulations that would deter long-term investors. This includes mark-to-market accounting rules, and capital controls to temper hot money inflows.

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Dr Tan, who is also Singapore Press Holdings chairman, noted that though the global economy has recovered from the financial crisis, other risks remain high. These economic, political and market risks include the unresolved eurozone debt crisis, as well as growing imbalances such as potential asset price bubbles in Asia and sovereign debt risks in key major developed economies like the US.

The use of mark-to-market rules and the compensation model in the financial sector have also caused financial companies to become more short-term oriented, while investors have become increasingly concerned with short-term price fluctuations, Dr Tan said.

The difficulties of cashing out of real estate and private equity commitments in 2008 and 2009 have also led investors to rebalance their portfolios towards more liquid assets, he added.

Despite the apprehension over illiquid assets, however, the rise of emerging economies and their infrastructure and investment needs will create significant new demand for long-term capital, he noted.

A study by McKinsey showed that if consensus forecasts for global growth are realised, global investment will amount to US$24 trillion in 2030, from the current US$11 trillion. The Asian Development Bank also projected that developing Asia would require US$8 trillion for infrastructure projects through 2020.

Such large infrastructure needs could widen the gap between capital supply and demand, raising long-term interest rates and reversing the low interest rate environment that the world has enjoyed for the last few decades, Dr Tan reckoned.
'Under these circumstances, I would like to encourage policymakers to consider the broader impact of their regulatory solutions and avoid blanket regulations that would deter long-term investors. For instance, excessively rigid mark-to-market accounting rules and risk capital requirements may unintentionally constrain long-term investors by preventing them from riding out short-term price fluctuations.'

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He also highlighted the importance of keeping global capital markets open. Even as Asian economies are concerned about volatile hot money inflows and the risk of overheating and asset bubbles, capital controls should not inadvertently discourage long-term capital investments in illiquid long-term assets in recipient countries as such long-term capital is crucial for stable and sustained economic growth, he said. 'If governments closed their capital markets to long-term investors, recipient countries will face higher capital costs while investors will see their opportunity set shrink.'
This article was first published in The Business Times.

Is Southern Sudan suitable for investment ?

Source: eturbonews.com
Now is the time to consider investing in Southern Sudan
By Wolfgang H. Thome, eTN | Jan 30, 2011

(eTN) - The Undersecretary in the Ministry of Wildlife Conservation and Tourism in Southern Sudan, Dr. Daniel Wani, threw the doors wide open for potential investors in the sector last week, following the successful independence referendum. In details availed from Juba, he was quoted to have said that his ministry was seeking an immediate investment volume of US$150 million from private sector investors in the aviation, hospitality, and safari sectors, while also encouraging private-public partnerships in the wildlife sector.
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Opportunities exist now across the entire Southern Sudan, not just the capital Juba – which is also capital of the Central Equatoria State – but the other nine state capitals, too, where accommodation and hospitality services will be in much demand after independence.

Juba presently has no hotel of international top standards, and while hotels, often called "camps," have over the past 5 years graduated from initial tents over prefabricated and air-conditioned units to the conventional brick and mortar construction, much needs to be done to bring quality in both construction and finishing, along with management expertise.

The wildlife sector also presently has only one partially-functioning lodge on offer in Nimule National Park, while the other 5 national parks require investments to open them up to tourists. Initially this is thought to be rolled out through mobile or semi-permanent tented camps, the classic traditional "safari style." while undoubtedly the construction of more permanent lodges in key positions across those parks will also get underway.

In the run up to the formal independence date, tipped to be July 9, 2011, much added work needs to be done in regard to creating an investment code, spelling out investment incentives, resolving issues about foreign exchange – freely transactable across the East African Community but very strictly regulated by Khartoum’s regime so far – and most important an institutional, legal, and regulatory framework covering the wildlife and tourism sectors, a key demand for instance by potential investors from Kenya, Uganda, and further abroad.

Other issues which need clarification are the visa regime; the present mandatory police registration of visitors, another relict from the police state imposed in the country by Khartoum so far; and the general question of accessibility of the parks and game reserves across the South through roads or by air.

More investment opportunities await those bold enough to take the early leap into the Southern Sudan for ventures "on the Nile," where for instance in Uganda the adventure tourists find white water rafting, boating, kayaking, and much more, all of which can be replicated in the soon to be independent Southern Sudan.
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Already connected very well by air from Nairobi – from where the most flights each day depart for Juba – other neighboring countries like Uganda and Ethiopia now also operate daily scheduled flights from their own main international gateways to Juba. This guarantees daily connectivity for visitors from abroad, a key ingredient when the marketing of the new country’s wildlife and culture-based tourism attractions gets underway.

For now, there are exciting prospects coming up with arguably Africa’s last frontier being opened up for exploration, and the migration of the white-eared kobs, second only to the Serengeti migration in terms of numbers, will be a huge magnet for visitors from around the world to come and see.

Pfizer forced to deny reports of avoiding VAT in Germany

Source: Guardian
• Accusation of elaborate €300m tax scheme
• German authorities investigated six managers
By Richard Wachman
Sunday 30 January 2011
The world's biggest pharmaceuticals company was today forced to deny it had deployed an elaborate tax avoidance scheme to dodge a €300m (£257m) bill owed to the German government.

Investigations into Pfizer, the American drugs group, manufacturer of Viagra, are said to have spread to Ireland and Belgium amid allegations the company avoided value added tax payments for years.

According to information acquired by Der Spiegel, the German magazine, tax investigators accuse the multinational of having "intentionally obstructed" the "necessary gathering of tax information" and to have avoided significant tax payments.
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The state prosecution in Mannheim, as well as tax investigators have been scrutinising six Pfizer managers since 2006. They have searched factories, storage depots and shipping departments as well as offices and private residences of the managers.

Prosecutors have asked the authorities in Dublin and Brussels to co-operate with the enquiry.

Officials are reported to be concerned with the way Pfizer organizes its European business and how it declares taxes. But the firm tonight issued a statement, saying: "Pfizer has operated in accordance with the tax regulations in Germany and therefore believes the claims made in the Der Spiegel piece are unfounded. The company believes it has applied the proper treatment to its transactions and has made all appropriate VAT payments.

"In fact, Pfizer paid to the Federal Republic of Germany the VAT that the German tax authorities have alleged was under-reported by Pfizer."

In Britain, hundreds of big companies use complex arrangements to restrict the sums of cash they pay to the Exchequer.

An investigation by the Guardian last year uncovered some of the ingenious and perfectly legal tax strategies employed by these companies. Some of the schemes – devised by highly-paid accountants and lawyers – had obscure names such as "Dutch sandwich", "double Luxembourg" and "thin capitalisation".

High street banks are among the groups that have been accused of tax avoidance. Whistleblowers alleged that Barclays set up a series of schemes to avoid paying hundreds of millions in tax. The schemes were said to be so complex that HM Revenue and Customs struggled to unravel them. Internal memos suggested that these schemes involved an intricate circuit of offshore Cayman Islands and Luxembourg companies. Barclays went to court to obtain a gagging order banning the Guardian from publishing the documents. The bank has vigorously denied all allegations of tax avoidance. Recently it said: "We have a policy of full and explicit disclosure to HMRC. This is a policy we have adopted for many years."
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Diageo, the drinks company, was reported to be paying a relatively small amount of tax. The firm transferred the ownership of lucrative brands, such as Johnnie Walker and Gilbey's Gin, to a subsidiary in Holland, where little tax was paid on profits. Diageo said it "pays all taxes we are obliged to pay, and we have now settled all the issues with HMRC relating to the transfer of our brands businesses to the Netherlands and their ongoing operations".

Two big drug firms, GlaxoSmithKline and AstraZeneca, made arrangements so that their brands are owned in low-tax locations in the Caribbean. It means their UK operations paid royalties to the subsidiary in the tax haven for using the trademarks, reducing profits and the tax due in Britain.

GSK said it was a "widespread and totally accepted practice". The firm could bring its trademarks back to Britain following the government's offer to reduce corporation tax on profits generated from the fruits of UK research.

AstraZeneca said there was nothing wrong with the practice and all transactions involving the UK were disclosed to HMRC.