Bond investors, beware

Vanguard chief investment officer, Gus Sauter, see low returns ahead, especially for bonds.

(Money Magazine) -- As Chief Investment Officer of Vanguard, George U. "Gus" Sauter, 58, is responsible for a staggering amount of fund investors' money -- some $1.9 trillion.

More important, he's saved a lot of investors' money. Almost 60% of Vanguard's assets are in passively managed index funds, so Sauter's biggest job has been to pare costs so shareholders keep more of their return. (It may not be glamorous, but it has paid off in performance.)

Along the way, Sauter guided the company into a booming market for exchange-traded funds, the portfolios that can be traded like stocks.

His perch as top investor at the country's largest fund manager has also given him a sharp view of the big picture. And part of that picture today is that bond investors -- who added $27 billion to Vanguard funds alone so far this year -- may be in for a bumpy ride.

Sauter retires from Vanguard at the end of the year. He spoke with MONEY senior writer Kim Clark; their conversation has been edited.

In the past five years, we've had a crisis on Wall Street, wild volatility, and outflows from equity funds. Are investors losing faith?

We're worried about that. But we do not think the markets are broken. I can't recall too many periods in my 25 years here where we didn't experience volatility. The market was down 21% on Oct. 19, 1987. And then the Asian contagion in the fall of '97, the Russian debt crisis, the tech bubble bursting.

Now we've got European debt, and we've got the fiscal cliff. Still, that does not convince us at all that you won't get normal returns going forward.

Why? Seems like there's a lot of economic danger ahead.

It turns out equity returns are not related to economic growth. The best predictor of future returns over the long term -- over, let's say, a five-or 10-year horizon -- tends to be current valuations. The market is priced at about 13 times [expected] earnings, and that is a little bit cheaper than normal.

Related: Why 'cheap' stocks aren't always good

What about bonds?

The best predictor of bond returns is the yield to maturity of the 10-year bond. The 10-year Treasury is at less than 2%, so returns would probably be 2%, maybe 3%. Historically bonds have returned about 6%. It's difficult to see how we could get that.

You've seen big inflows into your bond funds. Are you concerned investors are overdoing it?

Yeah. We're trying to educate clients to be aware of the risks. A rise in rates will negatively impact their principal. At the same time, we do believe that even with lower expected returns, bonds play an important part in the portfolio: diversification. You want to have that anchor.

Vanguard founder Jack Bogle has criticized overuse of exchange-traded funds. You've created dozens of them.

We think that ETFs are just a different way to distribute an index fund. You can invest in our Total Stock Market Index fund (VTI) either through the conventional share class or you can invest in the ETF.

Related: Jack Bogle - Champion of the small investor

It comes down to investor choice. Jack is concerned that people become market timers with ETFs. We have some research that is contrary to his view. Our ETF investors [in broad-based funds] do not have substantially different time horizons than our conventional shareholders.

I think Bogle's concern is about all the ETFs that focus on just a narrow slice of the market. Aren't those likely to be used by market timers?

I certainly share the concern with the proliferation of ETFs in the marketplace. We have data that show that with narrowly defined investments, investors are not invested in them on the way up. They pile in at the top and then ride them on the way down.

But you created funds for sectors like energy and health care.

We have funds for broad sectors, but we don't have industry funds or single-country funds. There's a level where you have to call it quits.

I was telling somebody I was going to interview the guy in charge of the big index funds, and he asked, "How can that be a full-time job?"

You want to see the number of people we have? [Laughs.] Indexes change more often than you might imagine. There's a lot of trading involved. On a given day, we'll do 5,000, maybe 10,000 trades.

Your last hurrah has been to change the indexes tracked by many Vanguard funds, including Total Stock Market. What exactly did you do and why?

We changed index providers. Index licensing fees have been a very rapidly growing component of costs, and we found a way to reduce that by switching. It will save hundreds of millions of dollars [for our clients] over time.

Related: How to measure career success

How does it change the funds?

For example, the index provider we will use for international funds classifies South Korea as a developed market, whereas the current index considers it an emerging market. Every person I know who knows anything about South Korea says it's a developed country. As a result, our developed markets index funds will now include South Korean stocks.

Are there any changes with the funds that follow U.S. stocks?

The Center for Research in Security Prices, which created the new U.S. indexes, have a process they call "packeting." Say a stock is transitioning from being a small- cap stock to midcap. Normally, Vanguard Small Cap Index would have to sell the stock, and then Mid-Cap Index would have to buy it.

With packeting, only half of the weight moves into that new classification. In the next quarter, if the stock remains above that band, only then does the remainder move. When you're at the border, you don't want to flip-flop back and forth. This cuts turnover by about 25%, and that means lower transaction costs.

Last question: Why retire so young?

As they say, it's the miles, not the years. And I wanted to have time to do other things.

First Published: December 3, 2012: 6:03 AM ET

21.29 | 0 komentar | Read More

BlackRock: There's hidden value in CASSH

The CASSH countries make up the latest catch-phrase on Wall Street.

NEW YORK (CNNMoney) -- Move over BRICs. Look out PIIGS. Here comes CASSH.

The CASSH countries -- Canada, Australia, Singapore, Switzerland and Hong Kong -- make up the latest catch-phrase on Wall Street.

Russ Koesterich, global chief investment strategist for asset manager BlackRock (BLK, Fortune 500), coined the term in a recent blog post. "Because what the financial markets desperately need is another acronym," he said.

All kidding aside, Koesterich believes CASSH countries offer hidden value, and recommends investors increase their exposure.

Here's why.

While they are obviously very different, the CASSH countries have certain things in common that make them attractive as a group, according to Koesterich.

Unlike the United States and Europe, the CASSH countries all emerged from the financial crisis in a comparatively healthy state. There is no fiscal cliff or systemic debt crisis in these countries, which generally have balanced budgets and low levels of unemployment.

Given the advantage of a strong balance sheet, the CASSH countries are poised to outpace their larger rivals in economic growth next year.

Koesterich estimates that gross domestic product in the CASSH countries will expand 3% on average in 2013. That compares with about 1% in the euro area, and little more than 2% in the United States and Japan.

"Overall, the three developed markets are struggling with a number of headwinds," he said, pointing to unsustainable public debt and continued deleveraging by households and business. "These are developed markets that don't suffer from those headwinds."

Related: World's 40 best-performing stock markets in 2012

At the same time, the CASSH countries boast advanced economies and liquid financial markets. That should make investing in them less risky than emerging markets like Brazil, Russia, India and China.

The CASSH countries are also home to profitable corporations that compete on a global scale. Yet stocks in these countries generally trade at valuations similar to those in larger markets.

Of course, there are still risks.

Koesterich says investors should be aware that fluctuations in foreign exchange rates can eat into investment returns when converted back into U.S. dollars. But he maintains that foreign exchange risks are "balanced" for the CASSH countries and broadly similar to those in other overseas markets.

Related: World's 5 hottest stock markets

It's also important to diversify.

Koesterich recommends a portfolio with a 20% exposure to Canada, Australia, Singapore, Switzerland and Hong Kong. This equal distribution should help mitigate the currency risk and balance out the "basket" of countries.

Exchange-traded funds are probably the easiest way to execute this strategy. Under its iShares family of ETFs, BlackRock offers investors exposure to the CASSH countries via the MSCI Canada Index Fund (EWC), MSCI Australia Index Fund (EWA), MCSI Singapore Index Fund (EWS), MCSI Switzerland Index Fund (EWL) and MCSI Hong Kong Index Fund. (EWH)

Canada and Australia both represent big bets on commodity prices, while Singapore and Hong Kong are global financial centers. Switzerland is also a play on banking, although the nation is also home to major pharmaceutical and consumer staples companies.

Some investors may be turned off by the exposure to commodity prices that Canada and Australia imply, given the dour outlook for global demand. But the risk of a slide in prices for crude oil or metals is roughly the same in the United States, according to Koesterich.

Likewise, the banking sector continues to recover from the financial crisis and adapt to new regulations. Koesterich acknowledged that bank stocks can be volatile, but that is not necessarily a bad thing. In addition, banks in Singapore, Hong Kong and Switzerland are generally in better shape than rivals in places like Portugal, Ireland, Italy, Greece and Spain.

First Published: December 3, 2012: 6:08 AM ET

21.29 | 0 komentar | Read More

U.K. targets Google, Amazon, Starbucks on taxes

Britain accuses multinationals of not paying their fair share. Starbucks is reveiwing its approach to tax in the U.K.

LONDON (CNNMoney) -- Britain is to clamp down on tax avoidance by major international companies after a parliamentary committee dubbed efforts by corporations such as Google, Amazon and Starbucks to minimize the amount they pay in the U.K. as "outrageous."

"Global companies with huge operations in the U.K. generating significant amounts of income are getting away with paying little or no corporation tax here," said lawmaker Margaret Hodge, who chairs the public accounts committee. "This is outrageous and an insult to British businesses and individuals who pay their fare share."

Executives from Google (GOOG, Fortune 500), Amazon (AMZN, Fortune 500) and Starbucks (SBUX, Fortune 500) appeared before the committee last month, as it sought to illustrate the wider problem of corporate tax avoidance.

All three companies say they comply with U.K. tax laws but the pressure is beginning to tell. Starbucks said Monday it was reviewing its approach to taxes in the U.K. "We have listened to feedback from our customers and employees, and understand that to maintain and further build public trust we need to do more," Starbucks said in a statement, adding that it will release more details later in the week.

The British government is stepping up efforts to close loopholes for big companies as an economic slowdown makes it harder to meet revenue targets and in the face of criticism from voters and local businesses who say they are paying an unfair share of taxes.

Related: Buffett renews argument for millionaire's tax

The U.K will spend an additional £77 million pounds to hire more specialist inspectors and investigators in the hope of collecting £2 billion more per year from multinationals and wealthy individuals. Transfer pricing arrangements used by global firms will also come under greater scrutiny.

"The government is clear that while most taxpayers are doing their bit to help us balance the books, it is unacceptable for a minority to avoid paying their fair share, sometimes by breaking the law," finance minister George Osborne said in a statement.

Britain is borrowing more than it expected this year due to the impact of slower economic growth on revenues. It has a tax gap - the difference between tax collected and tax owed based on the letter and spirit of the law - of £32 billion.

Osborne is due to give an updated budget statement Wednesday. He will face the uncomfortable choice of abandoning his commitment to cut debt by 2015-16 or announcing further austerity measures, the Institute for Fiscal Studies said last week.

In a report published Monday, the public accounts committee said the evidence provided by Google, Amazon and Starbucks was generally "unconvincing" and drew the conclusion that multinationals were exploiting existing legislation to move offshore profits generated from activity in the U.K.

It described Starbucks' claim that it had lost money for 14 of its 15 years in the U.K. as "hard to believe".

"This was inconsistent with claims the company was making in briefings to its shareholders that the U.K. business was successful and it was making 15% profits in the U.K.," the committee said.

Related: Corporate profits hit record as wages get squeezed

The committee also criticized Amazon for being "evasive and unprepared" and said Google had undermined its position that profits should be taxed in the jurisdictions where the activity occurred by remitting non-U.S. profits to Bermuda.

Amazon, which runs its European operations from Luxembourg, said it pays all applicable taxes in every jurisdiction it operates within.

It generated some 25% of all international sales, worth about £3.35 billion, from the U.K. in 2011. Reported revenues for its U.K. subsidiary was £207 million with a tax expense of £1.8 million, the committee said in its report.

Google, which paid £6 million in corporation tax on UK revenues of £396 million, declined to comment but said last month it played by the rules and that politicians could choose to amend them if they saw the need.

Osborne also announced a new agreement with the U.S. to increase the amount of information automatically exchanged between the two countries on potentially taxable income.

First Published: December 3, 2012: 8:24 AM ET

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Sanergy turns poop into profit in Kenya's slums

Kenyan entrepreneur Agnes Kwamboka operates a Fresh Life pay-per-use toilet franchise.

NEW YORK (CNNMoney) -- In China's Hunan Province, using the bathroom often means squatting over a dirty hole in the ground. An estimated 2.5 billion people around the world lack adequate sanitation -- more than a third of the global population -- and 2 million die each year of diarrheal disease.

To David Auerbach, that is both a human-rights crisis and an entrepreneurial gold mine. He and his business partners hatched a plan for profiting on both ends of a messy problem: Sell pay-per-use toilets to local entrepreneurs, then collect the waste and sell that too, after converting it into fertilizer.

Auerbach spent several years in China teaching English after college, then moved on to stints at the Clinton Foundation and Endeavor, a non-profit that supports entrepreneurs in emerging markets. At MIT's Sloan School of Management, he teamed up with fellow grad students Ani Vallabhaneni and Lindsay Stradley. Vallabhaneni had worked with a chain of dialysis clinics for low-income patients in the Philippines, and Stradley was a veteran of Teach for America and Google.

On a trip to Kenya, the trio saw locals paying about 5 cents to use an unlined pit latrine. Even more common were "flying toilets" -- plastic bags used as a toilet, tied off and then thrown outside. The ground is often covered in them.

When they returned, the three cofounders -- all 31 now -- wrote the business plan for Sanergy and its brand of Fresh Life toilets. Their vision won the 2011 MIT $100K Entrepreneurship Competition and landed the $100,000 Diamond Prize at the 2011 MassChallenge Startup Competition and Accelerator.

A Fresh Life toilet is 3' x 5' and made of prefabricated concrete. The floor has a squat plate and two holes, one for urine and one for solid waste, that lead down to removable waste cartridges. The toilets are sold at cost for $500, which includes installation, painting and daily waste collection. Owners are considered franchisees and have to supply toilet paper, soap and a hand-washing stand.

Right now, Stradley says, there are 150 toilets operating in Nairobi's crammed Mukuru slum, and the company is selling another five to 10 toilets per week. About a third of Fresh Life operators have already purchased an additional unit.

Bob Orengo, a franchisee in Mukuru, sees about 47 customers a day. At five Kenyan shillings a pop, that's about U.S. $19 a week.

"It's a good way to start your own business and be self-employed," he told CNNMoney through an interpreter.

Another Fresh Life operator in Mukuru, Esther Muniyiva, has about 96 customers a day and makes around $40 a week. The big benefit, she says, is that the area around the toilet is clean: "Some people think the toilet is so clean that they could eat in there too."

Joshua Boger, the former CEO of Vertex Pharmaceuticals, was one of Sanergy's judges in the MassChallenge competition. He says one of the company's biggest challenges now is how fast to scale up.

"You don't build a fertilizer plant for a million people if you only have 100 customers, so they have to go slow -- but not too slow," he says.

Related story: 7 best new global cities for startups

Sanergy collects about 1.5 tons of waste each day and sold its first batch of fertilizer in July -- two tons at market price, which generally runs $300 to $600 a metric ton, Stradley says. That's about twice the global price because, thanks to a local fertilizer shortage. It's badly needed by Kenya's huge horticulture industry, one of the largest flower exporters to Europe.

It takes Sanergy four to six months to change raw human waste into fertilizer. The process could be sped up with an investment in infrastructure, and Stradley says the company plans to build a high-tech waste management facility within the next year.

The same waste can be used for both fertilizer and biogas, but the company isn't operating at a scale yet where it makes sense to generate electricity to sell back to the grid, Stradley says: "We need about a thousand toilets to have enough waste to do that."

If Sanergy's plans pan out, that won't be a problem. Within five years, the company's founders want to provide toilets to more than half a million Africans, generating 11,000 tons of fertilizer annually and 7.5 million kilowatt-hours of electricity.

Their aim is to be profitable within 18 months and to raise an equity investment round of $2 million in early 2013. But investors might question whether the model is sustainable, says Jenny Aker, an assistant professor of development economics at the Fletcher School at Tufts University whose research focuses on West Africa.

"If sanitation services aren't commonly used or culturally appropriate, would the community be willing to pay for it?" she asks. If Sanergy expands into rural areas, the impact will probably be much lower than in urban zones , simply because there are fewer potential customers, says Aker.

And there's the issue of using human waste as fertilizer. It's fine if it's just used in the flower industry. "What would people think about using human manure as part of growing their food?" Aker asks. "That's something to consider long-term."

First Published: December 3, 2012: 5:36 AM ET

19.33 | 0 komentar | Read More

Bond investors, beware

Vanguard chief investment officer, Gus Sauter, see low returns ahead, especially for bonds.

(Money Magazine) -- As Chief Investment Officer of Vanguard, George U. "Gus" Sauter, 58, is responsible for a staggering amount of fund investors' money -- some $1.9 trillion.

More important, he's saved a lot of investors' money. Almost 60% of Vanguard's assets are in passively managed index funds, so Sauter's biggest job has been to pare costs so shareholders keep more of their return. (It may not be glamorous, but it has paid off in performance.)

Along the way, Sauter guided the company into a booming market for exchange-traded funds, the portfolios that can be traded like stocks.

His perch as top investor at the country's largest fund manager has also given him a sharp view of the big picture. And part of that picture today is that bond investors -- who added $27 billion to Vanguard funds alone so far this year -- may be in for a bumpy ride.

Sauter retires from Vanguard at the end of the year. He spoke with MONEY senior writer Kim Clark; their conversation has been edited.

In the past five years, we've had a crisis on Wall Street, wild volatility, and outflows from equity funds. Are investors losing faith?

We're worried about that. But we do not think the markets are broken. I can't recall too many periods in my 25 years here where we didn't experience volatility. The market was down 21% on Oct. 19, 1987. And then the Asian contagion in the fall of '97, the Russian debt crisis, the tech bubble bursting.

Now we've got European debt, and we've got the fiscal cliff. Still, that does not convince us at all that you won't get normal returns going forward.

Why? Seems like there's a lot of economic danger ahead.

It turns out equity returns are not related to economic growth. The best predictor of future returns over the long term -- over, let's say, a five-or 10-year horizon -- tends to be current valuations. The market is priced at about 13 times [expected] earnings, and that is a little bit cheaper than normal.

Related: Why 'cheap' stocks aren't always good

What about bonds?

The best predictor of bond returns is the yield to maturity of the 10-year bond. The 10-year Treasury is at less than 2%, so returns would probably be 2%, maybe 3%. Historically bonds have returned about 6%. It's difficult to see how we could get that.

You've seen big inflows into your bond funds. Are you concerned investors are overdoing it?

Yeah. We're trying to educate clients to be aware of the risks. A rise in rates will negatively impact their principal. At the same time, we do believe that even with lower expected returns, bonds play an important part in the portfolio: diversification. You want to have that anchor.

Vanguard founder Jack Bogle has criticized overuse of exchange-traded funds. You've created dozens of them.

We think that ETFs are just a different way to distribute an index fund. You can invest in our Total Stock Market Index fund (VTI) either through the conventional share class or you can invest in the ETF.

Related: Jack Bogle - Champion of the small investor

It comes down to investor choice. Jack is concerned that people become market timers with ETFs. We have some research that is contrary to his view. Our ETF investors [in broad-based funds] do not have substantially different time horizons than our conventional shareholders.

I think Bogle's concern is about all the ETFs that focus on just a narrow slice of the market. Aren't those likely to be used by market timers?

I certainly share the concern with the proliferation of ETFs in the marketplace. We have data that show that with narrowly defined investments, investors are not invested in them on the way up. They pile in at the top and then ride them on the way down.

But you created funds for sectors like energy and health care.

We have funds for broad sectors, but we don't have industry funds or single-country funds. There's a level where you have to call it quits.

I was telling somebody I was going to interview the guy in charge of the big index funds, and he asked, "How can that be a full-time job?"

You want to see the number of people we have? [Laughs.] Indexes change more often than you might imagine. There's a lot of trading involved. On a given day, we'll do 5,000, maybe 10,000 trades.

Your last hurrah has been to change the indexes tracked by many Vanguard funds, including Total Stock Market. What exactly did you do and why?

We changed index providers. Index licensing fees have been a very rapidly growing component of costs, and we found a way to reduce that by switching. It will save hundreds of millions of dollars [for our clients] over time.

Related: How to measure career success

How does it change the funds?

For example, the index provider we will use for international funds classifies South Korea as a developed market, whereas the current index considers it an emerging market. Every person I know who knows anything about South Korea says it's a developed country. As a result, our developed markets index funds will now include South Korean stocks.

Are there any changes with the funds that follow U.S. stocks?

The Center for Research in Security Prices, which created the new U.S. indexes, have a process they call "packeting." Say a stock is transitioning from being a small- cap stock to midcap. Normally, Vanguard Small Cap Index would have to sell the stock, and then Mid-Cap Index would have to buy it.

With packeting, only half of the weight moves into that new classification. In the next quarter, if the stock remains above that band, only then does the remainder move. When you're at the border, you don't want to flip-flop back and forth. This cuts turnover by about 25%, and that means lower transaction costs.

Last question: Why retire so young?

As they say, it's the miles, not the years. And I wanted to have time to do other things.

First Published: December 3, 2012: 6:03 AM ET

19.33 | 0 komentar | Read More

BlackRock: There's hidden value in CASSH

The CASSH countries make up the latest catch-phrase on Wall Street.

NEW YORK (CNNMoney) -- Move over BRICs. Look out PIIGS. Here comes CASSH.

The CASSH countries -- Canada, Australia, Singapore, Switzerland and Hong Kong -- make up the latest catch-phrase on Wall Street.

Russ Koesterich, global chief investment strategist for asset manager BlackRock (BLK, Fortune 500), coined the term in a recent blog post. "Because what the financial markets desperately need is another acronym," he said.

All kidding aside, Koesterich believes CASSH countries offer hidden value, and recommends investors increase their exposure.

Here's why.

While they are obviously very different, the CASSH countries have certain things in common that make them attractive as a group, according to Koesterich.

Unlike the United States and Europe, the CASSH countries all emerged from the financial crisis in a comparatively healthy state. There is no fiscal cliff or systemic debt crisis in these countries, which generally have balanced budgets and low levels of unemployment.

Given the advantage of a strong balance sheet, the CASSH countries are poised to outpace their larger rivals in economic growth next year.

Koesterich estimates that gross domestic product in the CASSH countries will expand 3% on average in 2013. That compares with about 1% in the euro area, and little more than 2% in the United States and Japan.

"Overall, the three developed markets are struggling with a number of headwinds," he said, pointing to unsustainable public debt and continued deleveraging by households and business. "These are developed markets that don't suffer from those headwinds."

Related: World's 40 best-performing stock markets in 2012

At the same time, the CASSH countries boast advanced economies and liquid financial markets. That should make investing in them less risky than emerging markets like Brazil, Russia, India and China.

The CASSH countries are also home to profitable corporations that compete on a global scale. Yet stocks in these countries generally trade at valuations similar to those in larger markets.

Of course, there are still risks.

Koesterich says investors should be aware that fluctuations in foreign exchange rates can eat into investment returns when converted back into U.S. dollars. But he maintains that foreign exchange risks are "balanced" for the CASSH countries and broadly similar to those in other overseas markets.

Related: World's 5 hottest stock markets

It's also important to diversify.

Koesterich recommends a portfolio with a 20% exposure to Canada, Australia, Singapore, Switzerland and Hong Kong. This equal distribution should help mitigate the currency risk and balance out the "basket" of countries.

Exchange-traded funds are probably the easiest way to execute this strategy. Under its iShares family of ETFs, BlackRock offers investors exposure to the CASSH countries via the MSCI Canada Index Fund (EWC), MSCI Australia Index Fund (EWA), MCSI Singapore Index Fund (EWS), MCSI Switzerland Index Fund (EWL) and MCSI Hong Kong Index Fund. (EWH)

Canada and Australia both represent big bets on commodity prices, while Singapore and Hong Kong are global financial centers. Switzerland is also a play on banking, although the nation is also home to major pharmaceutical and consumer staples companies.

Some investors may be turned off by the exposure to commodity prices that Canada and Australia imply, given the dour outlook for global demand. But the risk of a slide in prices for crude oil or metals is roughly the same in the United States, according to Koesterich.

Likewise, the banking sector continues to recover from the financial crisis and adapt to new regulations. Koesterich acknowledged that bank stocks can be volatile, but that is not necessarily a bad thing. In addition, banks in Singapore, Hong Kong and Switzerland are generally in better shape than rivals in places like Portugal, Ireland, Italy, Greece and Spain.

First Published: December 3, 2012: 6:08 AM ET

19.33 | 0 komentar | Read More

What's my retirement 'Number'?

NEW YORK (CNNMoney) -- What number do we need to hit to retire comfortably? $1 million, $2 million, more? -- Jim Rodgers, Madison, Wisc.

Your question is timely: Mutual fund titan Fidelity recently released its estimate of how much people should have in savings to retire. The Number: eight times final salary.

That figure caught my attention because it's a lot lower than most targets you see. Just last month MONEY recommended you shoot for a nest egg of 12 times your income by retirement.

These numbers vary for many reasons, which I'll get into below. But the real issue here is that no single figure can possibly reflect your specific financial circumstances. At best this kind of number is a ballpark estimate for how much you should save, not a substitute for planning. Before you use one as even a rough guide, though, you should know what goes into it.

Fidelity assumes retirement at age 67 and figures your savings must last 25 years. We reckon you'll retire at 65 and want your savings to support you for 30 years. Those two more years on the job, which can boost your Social Security check by 15% to 20%, plus the fact that your savings don't have to last as long, shrinks your target.

Related: Why high-income savers need to put more away now

Another variable is how much you'll draw from your savings. Fidelity aims to provide 85% of your after-tax income, an approximation of what you were actually spending. After estimating how much Social Security will provide, the number crunchers calculate your withdrawals. With a $75,000 salary at retirement, you'd need to take just over $35,000 from your savings the first year.

This methodology seems reasonable to me, but then things get tricky. Pulling $35,000 from a $600,000 portfolio ($75,000 times eight) represents a withdrawal rate of almost 6%. To have a reasonable chance of your savings lasting 25 to 30 years, most advisers suggest something closer to 4%.

When I asked Fidelity senior vice president Steve Feinschreiber for the probability that a portfolio would last 25 years starting with a near-6% withdrawal rate, he estimated it "very roughly" at 70%. A Morningstar retirement-income calculator put the likelihood at about 50%.

Related: Can I afford to retire early?

Finally, the higher your income, the less of your salary Social Security will replace and the more you'll have to withdraw. In fact, Fidelity concedes that with a six-figure income your target might have to be higher than eight.

To be safe, I'd recommend you shoot to save 10 to 12 times your salary. Better yet, use an online tool like Fidelity's own Retirement Income Planner or T. Rowe Price's Retirement Income Calculator to get an estimate of your retirement readiness.

Look at The Number if you want. Just don't pin your fortunes on any single one.

First Published: November 30, 2012: 12:28 PM ET

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Judge orders Paul Ceglia to pay Facebook $100,000 in fees

Ceglia will have to reimburse Facebook for more than $89,000 in legal and expert fees, plus nearly $7,000 for related travel.

NEW YORK (CNNMoney) -- A federal judge has ordered Paul Ceglia, an upstate New York man who claimed he's owed 50% of Facebook, to pay the social network nearly $100,000 in legal and travel fees.

The order came after Ceglia canceled 10 planned depositions in July and August at the last minute, after Facebook had already paid its lawyers to prepare for and travel to the depositions. Seven were scrapped with less than 48 hours' notice, and three were canceled with less than 24 hours' notice.

As punishment, Ceglia will have to reimburse Facebook for more than $89,000 in legal and expert fees, plus nearly $7,000 for related travel.

The bizarre Ceglia-Facebook legal saga began in July 2010, when Ceglia filed suit in New York claiming that he paid Facebook founder Mark Zuckerberg to build a website similar to what became Facebook, and that they agreed to split the company. Both Facebook (FB) and Zuckerberg have strenuously denied Ceglia's claims.

Ceglia's credibility took a big hit last month when federal agents arrested him on charges of perpetuating a "multi-billion-dollar scheme" to defraud Facebook. If convicted, Ceglia faces up to 40 years in prison.

The government's complaint against Ceglia echoes Facebook's accusations. Ceglia "doctored, fabricated, and destroyed evidence to support his false claim," according to a statement from the U.S. attorney's office. The complaint accuses Ceglia of altering a contract and inventing emails that didn't exist.

This week a federal jury indicted Ceglia on the fraud charges. His lawyer, Dean Boland, also filed a motion to withdraw from the case -- although Ceglia is fighting to keep him. Boland did not return a call seeking comment.

Ceglia has already lost several legal teams in the past. A judge will have to decide whether Boland will be allowed to leave the case.

First Published: November 30, 2012: 12:05 PM ET

21.29 | 0 komentar | Read More

European bailout funds downgraded

The European Union flag flies amongst member countries' national flags in front of the European Parliament in Strasbourg, France.

NEW YORK (CNNMoney) -- Another day, another European downgrade.

Ratings agency Moody's announced a downgrade Friday of the continent's main bailout vehicle, the European Stability Mechanism, knocking it one notch from prized Aaa status to Aa1.

The ESM, which was finalized in October, is a bailout fund designed to have a lending capacity of €500 billion that can issue bonds and also receives funding from European member states. It was conceived as an eventual replacement for the European Financial Stability Facility, which has backed bailouts for Greece, Portugal and Ireland.

The EFSF received a similar one-notch downgrade Friday.

Moody's said the moves were driven by its downgrade of France earlier this month from Aaa to Aa1. France is the second-largest contributor to the two bailout vehicles after Germany, kicking in roughly 20% of the funding for each. Moody's said there was "a high correlation" between the creditworthiness of the bailout funds and that of their largest contributors.

The agency maintained its negative outlook for both the ESM and EFSF, meaning further downgrades are possible.

Klaus Regling, managing director of the ESM and CEO of the EFSF, called the downgrades "difficult to understand."

"This rating action does not inhibit ESM or EFSF in any way," he said in a statement Friday night.

Related: Europe's jobless lines keep growing

In downgrading France earlier this month, Moody's cited the country's fiscal challenges, weak growth prospects and exposure to additional eurozone shocks.

Yet Moody's said France was still in good shape when compared to its neighbors, citing its large and diverse economy and praising its commitment to structural and fiscal reform. France's borrowing costs remain low, with the country's 10-year bond yielding around 2% in recent months, suggesting investors do not view the country as a credit risk.

Fellow ratings agency Standard & Poor's downgraded France from AAA back in January.

First Published: November 30, 2012: 6:07 PM ET

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Judge orders Paul Ceglia to pay Facebook $100,000 in fees

Ceglia will have to reimburse Facebook for more than $89,000 in legal and expert fees, plus nearly $7,000 for related travel.

NEW YORK (CNNMoney) -- A federal judge has ordered Paul Ceglia, an upstate New York man who claimed he's owed 50% of Facebook, to pay the social network nearly $100,000 in legal and travel fees.

The order came after Ceglia canceled 10 planned depositions in July and August at the last minute, after Facebook had already paid its lawyers to prepare for and travel to the depositions. Seven were scrapped with less than 48 hours' notice, and three were canceled with less than 24 hours' notice.

As punishment, Ceglia will have to reimburse Facebook for more than $89,000 in legal and expert fees, plus nearly $7,000 for related travel.

The bizarre Ceglia-Facebook legal saga began in July 2010, when Ceglia filed suit in New York claiming that he paid Facebook founder Mark Zuckerberg to build a website similar to what became Facebook, and that they agreed to split the company. Both Facebook (FB) and Zuckerberg have strenuously denied Ceglia's claims.

Ceglia's credibility took a big hit last month when federal agents arrested him on charges of perpetuating a "multi-billion-dollar scheme" to defraud Facebook. If convicted, Ceglia faces up to 40 years in prison.

The government's complaint against Ceglia echoes Facebook's accusations. Ceglia "doctored, fabricated, and destroyed evidence to support his false claim," according to a statement from the U.S. attorney's office. The complaint accuses Ceglia of altering a contract and inventing emails that didn't exist.

This week a federal jury indicted Ceglia on the fraud charges. His lawyer, Dean Boland, also filed a motion to withdraw from the case -- although Ceglia is fighting to keep him. Boland did not return a call seeking comment.

Ceglia has already lost several legal teams in the past. A judge will have to decide whether Boland will be allowed to leave the case.

First Published: November 30, 2012: 12:05 PM ET

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