So I Married an Avatar

Shava Nerad's wedding was a dream. The blue sky that kissed the dome of the ornate gazebo where she tied the knot on Feb. 9 was painted with an impressionist's brush. Her dress was speckled with rubies. Her self-composed vows were filled with passion. "In this life and the next I am yours," she wrote. "You are my second life."

The promise is especially fitting, given the setting of the ceremony. Nerad, a 48-year-old resident of Somerville, Mass., got married in Second Life, a virtual world where people interact with others online through computer-generated avatars (BusinessWeek, 5/1/06). Nerad chose Second Life for her wedding backdrop in part because she and her fiance, Matthew "Fish" Fishman, bonded over their shared love for the virtual world and used Second Life to stay in touch, despite travel and other commitments, during their 18-month courtship.

Virtual Courtship

Fishman, a 3D graphic and performance artist, also makes part of his living by building virtual events -- including weddings -- for brands and individuals in the game. "On a number of occasions when we were apart, we would use Second Life to feel close to each other because it is an immersive experience," says Fishman, who is performing a Second Life wedding Feb. 14. "You can hug each other."

This Valentine's Day, people are using the Web to connect and find love in ways that go far beyond matchmaking sites. Virtual worlds such as Second Life and Cyworld enable people to do everything from chat to get dinner and dance -- virtually. Meanwhile, the friendship circles that develop by way of sites such as Facebook and MySpace (NYSE:NWS - News) are redefining the notion of meeting a partner through a "friend." And online matchmaking services help users find a mate by matching by not only personality type but also the presumably correct DNA combination.

PersonalityZone, a free site that sorts users into one of four personality types, is seeing increased traffic this season thanks, in part, to people searching for the type that most meshes with their own. The "Love Zone" section of the months-old site is one of the most frequented among the 2,000 people who visit the site each day, says CEO Kip Parent. "There are a lot of pitfalls in pure opposites, and the complementary personality types work really well," Parent says.

Serious Chemistry

For people who want to ensure they and their mate have the right chemistry, there are several new services promising to match people with compatible chemical makeups. For slightly less than $1,000, ScientificMatch gives customers a lifelong membership to its DNA-based dating service. The company scans cells from the inside of members' mouths for immunity markers to help them find someone who passes the smell test -- literally. ScientificMatch founder and President Eric Holzle says pheromones are key to physical attraction. The chemicals are thought to advertise, among other things, a person's immunities. People are naturally, if subconsciously, attracted to other people whose immunities differ from their own, Holzle says. The idea is that the couple's offspring will be better protected against illness. "We are offering chemistry," he says.

Of course, smell isn't everything. That's why part of the service, and the price tag, includes personality and preference matching as well. "There are many factors involved in finding somebody who you will fall in love with," says Holzle. "We are at the very tip of the iceberg in our understanding of human attractions."

The Science of Love

Matchmaking services say they are getting better at figuring it out, however. As online dating becomes mainstream, sites such as eHarmony.com and Perfectmatch.com promise their algorithms can find the people best suited to each other based on answers to online questionnaires.

EHarmony boasts that 2% of marriages nationwide happen through its site, based on an online survey of nearly 3,000 adults conducted by Harris Interactive and eHarmony in January. The company, which requires members to answer a 258-question survey about themselves (BusinessWeek, 2/20/06), won't discuss details of how it matches couples. But Galen Buckwalter, eHarmony's vice-president for research and development, says a key is similarities. "Opposites attract, but then they attack," says Buckwalter, who says he's been "happily married for 12 years." Differences, particularly in values, turn into perennial conflicts in long-term relationships. "We are not trying to change the magic of love, but long-term relationships are very complex and not all aspects of them are completely unknown to science," he says.

Of course, you can only learn so much about a person from a digitized avatar, online personality test, or even DNA analysis. Fishman concedes he was first attracted to Nerad's physical appearance. He saw her across a crowded cafe and felt struck. "I am standing there eating cake, and there is this beautiful woman," he recalls.

Virtually Free

Shared interests and Second Life, however, have kept them together, says Fishman. Nerad proposed in the real world, but Fishman popped the question in the virtual world by having the words appear floating in the virtual sky. Fishman spent weeks preparing the graphics and art for the virtual wedding, which was attended by about 50 virtual friends. For all the planning and pomp that go into a virtual wedding, getting legally married still requires some real-world paperwork. The couple plan an official (read: real) ceremony later this year.

Nerad says the virtual event was no less special. For her dress, she spent 2,500 Lindens, the Second Life currency that's pegged to the dollar, or about $10. That same amount can also buy mansions in some parts of the game. "I am never going to have a dress like that in real life," Nerad says.

Shelter from the Storm

The numbers are grim, even if they seem familiar by now. In 2007, lenders filed foreclosure notices on 90,782 homes in Illinois, up 25.3% from a year earlier. That tally puts the state among the top 10 nationally in foreclosures, says RealtyTrac, an online real-estate database. The figures are likely to go even higher in 2008. Subprime mortgages with adjustable rates -- given to home buyers with less than pristine credit -- will become more costly in 2008 as teaser rates expire. The Center for Responsible Lending predicts that in the next two to three years, 25,000 people in the Cook County area will lose their homes.

But homeowners aren't the only ones getting hurt. As home sales stumble, mortgage brokers and real estate agents are finding themselves out of work. Nationally, 86,000 mortgage jobs were cut in 2007 because of a sickening market. In Illinois, that meant 1,738 people were laid off, according to MortgageDaily.com, an online news publication. Some of these former brokers are moving into sales jobs, in retail or automotive, for instance, while others are finding work in the growing loss-prevention departments of banks. Another home for these mortgage refugees? Nonprofit housing-aid organizations.

Chicago has a half-dozen such groups -- the biggest is Neighborhood Housing Services, which has 100 employees in 10 offices -- and they all have similar programs: advising first-time buyers, lobbying for "affordable" housing, and, in the case of NHS, offering reduced-rate mortgages. Recently, they're spending most of their time in foreclosure counseling. That means meeting with homeowners who are months behind in their mortgage payments, helping them plan a budget so they can resume payments, and contacting lenders to try to work out more-lenient terms. The flood of calls to these nonprofits happened just as brokers and Realtors were being tossed out of work. And who better to help squeezed homeowners keep a roof over their heads?

Mr. Business

Jose Pletz is a big man who is always crisply dressed -- pressed suit, shiny shoes, clean, well-manicured hands. The 57-year-old can't help it: He has been in business since he was 20 years old. But he no longer has to dress the part. Since last July, he has been a loan originator at business-casual Neighborhood Housing Services, handling loan applications for refinancing, first-time purchases, and foreclosure avoidance. If someone has fallen behind in his mortgage payments, NHS can lend him the money to get back on track.

Pletz moved to Chicago from Laredo, Tex., in 1971 and settled in the largely Hispanic Little Village neighborhood. He had done well in finance and accounting classes in Laredo, and he got a job at a bank here a year later. It was the beginning of a life in banking, serving a largely Hispanic clientele. By 1979, he was a vice-president at Metropolitan Bank & Trust. He also picked up the nickname "Ticketmaster." He explains: "I was always selling tickets to Boys & Girls Club events, raffle tickets for charity. Giving back to my community has always been important."

After a series of jobs in finance, he hired on with LMC Mortgage in 2003 as a manager and loan originator. He worked with more than 40 banks to come up with mortgage funding, he says, but did most of his business with a few: Countrywide Finance (NYSE:CFC - News), Wachovia's (NYSE:WB - News) World Savings, Decision 1, and Banco Popular (NasdaqGS:BPOP - News). He helped clients apply for every kind of loan, including the now notorious "no-doc loans" and stated-income loans -- risky products that required no proof of the borrower's income. Pletz tried, he emphasizes, to ensure that clients understood what they were getting into, but he passes responsibility for any problems with defaults or delinquencies onto the banks, which set the loan terms.

"Everyone tries to blame the brokers for this crisis, but you can't tell the future when you are a mortgage broker," he says. "You can't always predict that someone is going to have an accident and not be able to pay their bills. When people sign a contract, they have to abide by the terms of that contract."

Signs of trouble in the industry came for Pletz last March, when he closed a deal on a house purchase for a client, secured a loan from New Century Bank, and then waited for the funds to appear. They never did. New Century had gone under. Pletz and his colleagues began hearing about more and more home buyers left hanging after funding evaporated. "I remember thinking: I gotta get out." Pletz learned about a job as a loan originator with NHS and started in the Wicker Park office last July.

He speaks of his new work with rapture: "It's like a family here. We all help each other." He says his take-home pay is almost the same: At LMC he was paid some $50,000 a year; at NHS he makes about $35,000, but he also gets health-care benefits and a 401(k) plan. Asked if he will ever return to being a mortgage guy, he shakes his head no. "I want to retire here."

The Survivor

Brenda Reyes, 40, a soft-spoken woman with long brown hair and a gentle smile, grew up in Aguascalientes, Mexico. She spent her early years traveling back and forth between Mexico and Chicago with her family -- her dad owned a funeral home in Mexico -- until she settled in Chicago in 1992. After working for several years in sales at Harlem Furniture, she started working as a Realtor in 2002, working mainly on the South Side and in west suburban Melrose Park, Berwyn, Cicero, and North Lake.

During a good year Reyes sold 40 houses. With most of the homes going for $150,000 to $200,000, she earned about $120,000 a year in sales commissions. She received three awards from Century 21 for being a top seller. She stresses that despite the high volume, none of the people she sold homes to is in a mess now. "I am extremely cautious," she says, "and I always pushed people toward loans they could afford."

She started worrying in mid-2007 when she says she'd put a yard sign advertising a home for sale -- and get no calls. "In the good days, you'd get 10 calls the first day. Now, I was getting nothing." The last home she sold, in September, belonged to a colleague -- a real estate broker who couldn't afford her mortgage payments.

To make ends meet, Reyes began working part time as a private tutor for elementary school students but says she was consumed with worry about how she'd support her family. She has three kids under 10 and a husband who was making significantly less as a jail guard in McHenry County. "It started to become a question of, do I get diapers or put gas in the car?" She applied for a job as a foreclosure counselor at the NHS Fox Valley office in Elgin last summer. She finally heard back from the organization in December.

Reyes spends most of her day counseling homeowners who have fallen behind in payments to get them back on track. In Elgin, lenders filed 560 foreclosure notices in the first eight months of 2007. Her clients include a construction worker who lost his job when his homebuilding company went under. Now he's about to lose his house.

Although she loves the work, she says getting by on its $40,000-a-year salary is tough. She agonizes over every purchase, no matter how small, and says free passes for the Field Museum are the only outings her family can afford these days. "I'm walking on one leg now," she says, "just getting by."

The Ex-Shark

Johnny Placeres is a short man with good posture, a firm handshake, and a flirtatious manner. When he was in his prime, from 2002 to 2005, he arranged mortgage loans for 50 houses a year to a largely Hispanic population in Elgin, pulling in $150,000 a year. It's easy to picture him wheeling and dealing, charming the grandmothers in Spanish, cracking jokes with the younger kids, seducing everyone into signing up for a home-buyer loan. "I'm so glad I'm out of that," he says. "I feel so much better about myself."

Placeres, 47, moved to Chicago in 1976 after a childhood in Puerto Rico. He spent four years in the Army, in Texas and Germany, and then settled down for good in Elgin in 1984. He worked as a cook at a Hyatt hotel, spent a year selling life insurance, then 10 years at a copier-repair company. He thought he could make better money and set his own hours working for a mortgage broker, so he moved into real estate in 2002, hopping from Banco Premier (now called Capital Bank) to Fox Valley Mortgage, to Platinum Mortgage, and to Grand Mortgage. He ended up as a loan officer at MidAmerica Bank, which later became National City (NYSE:NCC - News).

During the boom, Placeres made about $150,000 a year in commissions. Guidelines were loose: "We were giving out loans to anyone with a pulse." The pace was grueling. His phone was on 24 hours a day because he was terrified of missing a call, which meant a sale would go to someone else. "I was a shark, always going for the kill."

In late 2006, he noticed a change. Typically, he says, he had been seeing eight to 10 people a week looking for home loans. Now, he was helping the same number obtain home-equity lines of credit so they could do home repairs or pay off credit-card debt. This meant much less money for Placeres. If he originated a $300,000 mortgage for a client, he'd get 1%, or $3,000. Home-equity loans were typically smaller, and, according to his bank's policy, his commission was limited to 0.5%. "It was over," he says. "I was spending a lot more time on Monster.com (NasdaqGS:MNST - News)."

He landed at NHS, as director of its Elgin office, last November. He oversees the group's counselors and puts together seminars, warning people about mortgage scams. He's also digging himself out of a hole: When business dried up last year, he took out a line of credit to support his wife and two kids in college. He'll have to repay it slowly, on a salary of $55,000 a year. But after a restless life and multiple career changes, he says he doesn't mind slowing down for a while.

Talking Your Way In

For thousands of wannabe MBAs sweating admissions decisions, Wake Forest's Babcock Graduate School of Management has an uncommon solution: Talk more, sweat less.

Instead of waiting for weeks to hear from business schools, applicants in Babcock's "Done in a Day" program get the decision only hours after an all-or-nothing admissions interview. Rather than agonize over syntax in their written application essays, applicants discuss "verbal essays" before an admissions panel that has already pored over the candidate's academic and professional histories.

Stacy Poindexter Owen, director of admissions at Babcock, says the program, which has been in place for several years, was the first one-day business school admissions program in the country. "When we first proposed it, some people in the office said, 'One day? That's crazy!' But the students love it." Students admitted through the program perform as well as those who go through the regular admissions process, she says.

The interview panel is a cross-section of the school. It can comprise admissions officers, professors, career service members, and even alumni. An intimidating group, perhaps, but Anup Dashputre, a Babcock first-year accepted through the program, says the admissions team makes the high-stakes interview feel welcoming.

Real-Time Pitch

"I felt very comfortable in the interview," he says. "It's great for the student because of the limited wait time, but it's also impressive that the school has so much confidence in its new students that it can make the decision in one day."

The quick turnaround is appealing, but there's a risk. Applicants forgo weeks of unhurried essay revising for a high-intensity, real-time pitch -- essentially, B-school application hardball.

Dashputre says the key to winning over the admissions team is to provide a complete answer to the vital question: Why Babcock? "The career management person really hammered into my background and made sure that I could defend my choice of Babcock," he says. "They really drove into that question and had me understand how I fit into the school's programs."

Done in a Day isn't just an attention-grabbing gimmick. Owen says it's a more effective application process because it forces applicants to demonstrate the kind of preparedness and grace under fire required in the business world.

"How many companies are asking for writing samples in the real world?" she says. "Not a lot. It's about the people. We ask some tough questions. We're hard on people. It takes a competent applicant to be able to put up with that."

All or Nothing

It sounds like a practical approach: business schools assessing applicants as self-promoters and pitchmen rather than names and numbers on paper. But Owen knows of only one other one-day admissions program in the country, at William & Mary's Mason School of Business.

In Mason's Fast Track Admissions program, students go to Williamsburg, Va., for a full day of activities that ends with a similar comprehensive interview. Andrew Behringer, a first-year at Mason, says the "whirlwind tour" kept him from 8 a.m. until 3 p.m. hustling across campus for meetings and key interviews. "I talked to first- and second-years, I attended an executive partners program, and I sat in on some classes. It really gave me a better understanding of what the school is all about," he says.

Despite the risks of an all-or-nothing interview, Behringer sees huge advantages in the more personal and immediate assessments offered at Babcock and Mason. "When they decide so quickly, it's fresh in the minds of those who make the decisions," he says. "If you're reading notes from a few months ago, it can get lost in the jumble."

Bond insurer plan may inject positive note

NEW YORK (Reuters) - Efforts to rescue a distraught U.S. bond insurance industry could inject a positive note on Wall Street but the economic data and earnings reports on tap for this week are unlikely to change a downward trend for stocks.

Investors this week will get minutes from the January meeting of the Federal Reserve's policy makers, data on January inflation, and a regional Fed gauge of factory activity in February from the U.S. mid-Atlantic region.

Profit reports from top retailer Wal-Mart Stores Inc (WMT.N) and Hewlett-Packard Co (HPQ.N), both slated for release on Tuesday, could provide new insight on consumer sentiment.

However, while clear help for beleaguered bond insurers could spark a relief rally in stocks, there is little on the horizon to break the bearish bias, said Joseph Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.

"The only thing near-term that can give the market some comfort is a comprehensive work-out plan for the (bond) insurers," Battipaglia said. "Outside of that, however, the market is really trendless with no leadership."

"Sentiment is still negative; there's a lack of commitment and conviction on the part of cash buyers to put money to work and the news (this) week is probably not going to excite anybody."

U.S. financial markets will be closed for the Presidents Day holiday on Monday.

Fear of recession and morass in credit markets caused by a slumping U.S. housing sector have spooked investors and kept stocks, especially financials, under water so far this year.

Reports of softer store traffic at Best Buy (BBY.N) in January and a decline in a consumer sentiment index to 16-year lows pushed the Dow and Nasdaq lower on Friday.

However, the benchmark Standard & Poor's 500 Index rose on a rally in food stocks spurred by news of a stake that Warren Buffett's Berkshire Hathaway Inc took in Kraft Foods Inc

(KFT.N).

The Dow Jones industrial average (.DJI) fell 28.77 points to 12,348.21 on Friday, as the S&P 500 (.SPX) gained 1.13 points at 1,349.99 and the Nasdaq Composite Index (.IXIC) fell 10.74 points at 2,321.80.

For the week, the S&P 500 and the Dow both added 1.4 percent, while the Nasdaq climbed 0.7 percent.

The release of economic data generally cause stock market indexes to budge, but the outlook remains lower, said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

"We're still searching for the bottom, but the bottom line; the trend is down," Saluzzi said. "You'll catch your rallies here and there, but right now we're in a down trend."

A fresh look at housing comes on Tuesday when the National Association of Home Builders releases its homebuilder sentiment index. The NAHB/Wells Fargo Housing Market index for February is expected to show a reading of 19, the same in January.

Readings under 50 mean more builders view market conditions as poor than favorable.

On Wednesday, the Labor Department will release its Consumer Price Index for January, which economists in a Reuters survey expect to show rose 0.3 percent. Core CPI, which strips out volatile food and energy items, is expected to gain 0.2 percent.

Also that day, the text of minutes from the meeting of the Federal Open Market Committee on January 29-30 will be released.

On Thursday, the Philadelphia Fed's business activity index for February is expected to show a reading of negative 11 compared with negative 20.9 in January.

Analysts expect Hewlett-Packard, the world's top PC-maker, to report higher quarterly profits on Tuesday, but they also expect a muted forecast due to slowing demand for computer hardware as companies trim spending on technology.

Profit also is expected to rise at Wal-Mart, the world's largest retailer, despite a charge for its Japanese operations, as penny-pinching shoppers search for low prices on necessities like food and laundry detergent to offset the slumping U.S. economy.

Despite a dark cloud hanging over the stock market, there are pockets of the consumer economy that still have money, snapping up PDAs, GPS devices and iPhones, said Zachary Karabell, senior economist at Fred Alger Management Inc.

Also, many companies have strong balance sheets and are ripe to make strategic purchases, and sovereign wealth funds are ready to invest, he said.

"The disconnect in these markets between things that are doing well and things that are doing badly is huge," Karabell said.

Fed chief sought opinions amid turmoil

WASHINGTON - Federal Reserve Chairman Ben Bernanke consulted with predecessor Alan Greenspan, major financial players and even a speech consultant as he grappled with growing economic turmoil.

Bernanke met with Greenspan, who ran the Fed for 18 1/2 years, on Jan. 2. That was eight days before Bernanke delivered a major speech that was unusually direct and made clear the Fed was prepared to aggressively lower interest rates to bolster an ailing economy.

Three months earlier — on Oct. 2 — Bernanke had a two-hour meeting with communications expert Andrew Gilman, president of CommCore Consulting Group.

Gilman worked with Bernanke on speech delivery, according to both Gilman and Fed spokeswoman Michelle Smith. Gilman's bio says he has worked as a communications strategist and a crisis counselor. Gilman's session with Bernanke, however, did not involve crisis management, Smith and Gilman said.

The information on the meetings was contained in documents obtained under the Freedom of Information Act by Ken Thomas, a lecturer in finance at the University of Pennsylvania's Wharton School. Thomas provided the documents to The Associated Press.

The documents cover the time frame of September through January — a particularly turbulent period as the double-blows of a housing and credit crisis strained the economy, rocked Wall Street and fanned recession fears.

The information simply lists Bernanke's contacts through the day. It does not provide information about the content of meetings or telephone calls. But it does provide a rare glimpse into one of Washington's most mysterious institutions.

The housing and credit debacles are Bernanke's biggest challenges in his two years as Fed chairman. Those problems threaten to push the economy into its first recession since 2001, if they haven't already. How well Bernanke, a former economics professor and scholar of the Great Depression, handles these crises will shape his effectiveness, his credibility and his legacy at the central bank.

In early September — before the Fed starting cutting interest rates — Bernanke had separate meetings with people including Goldman Sachs Group Inc.'s chief executive, Lloyd Blankfein, former Treasury Secretary Larry Summers and Wachovia Corp. chief executive Ken Thompson. On Sept. 18, the Fed lowered interest rates for the first time in more than four years. The rate reduction came after the housing slump worsened and the credit markets took a turn for the worst, throwing Wall Street into turmoil.

The documents show that throughout the September to January period, Bernanke talked frequently to Treasury Secretary Henry Paulson, former chief of financial powerhouse Goldman Sachs. Bernanke also talked with his central bank counterparts in other countries, an array of economists, lawmakers, including House Majority Leader Steny Hoyer, D-Md. , and corporate chiefs , including Ford Motor Co. chief executive Alan Mullaly.

The Fed sliced interest rates again in October and once more in December — but Bernanke came under increasing criticism on Wall Street and elsewhere for not acting more aggressively to deal with the economy's problems. During that period, Bernanke met with major financial players, including Morgan Stanley's Robert Scully, JPMorgan chief executive Jamie Dimon and Robert Wolf, head of UBS Investment Bank.

A turning point of sorts came on Jan. 10 — when Bernanke signaled in his speech a more forceful stance. The Fed slashed rates by a rare three-quarters percentage point on Jan. 22, after Bernanke convened an emergency session following a nosedive in stocks worldwide. The Fed acted again — just eight days later — lowering rates by a half percentage point.

And, on Thursday, Bernanke signaled rates would likely move lower to combat the growing dangers to the economy.

Iran opens its 1st oil products bourse

TEHRAN, Iran - Iran established its first oil products bourse Sunday in a free trade zone on the Persian Gulf Island of Kish, the country's oil ministry said.

A statement posted on the ministry's Web site said 100 tons of polyethylene consignment was traded at the market's opening on the island, which houses the offices of about 100 Iranian and foreign oil companies.

Oil and petrochemical products will be traded in Iranian Rials, as well as all other hard currencies, the statement quoted Iranian Oil Minister Gholam Hossein Nozari as saying. About 20 brokers are already active in the market, it said.

"The bourse provides an economic opportunity for Iranians, other countries and foreign customers," Nozari was quoted as saying.

Iran produces more than 20 million tons of petrochemical products per year.

Iran has already registered for another oil bourse, in which it has said it hopes to trade oil in Euros instead of dollars, to reduce any American influence over the Islamic Republic's economy.

A bourse official, Mahdi Karbasian, told the IRNA official news agency that such an oil market would begin operating within the next year.

While most oil markets are traded in U.S. dollars, Iran first floated the idea of trading oil in Euros in the early 2000s during the tenure of reformist president Mohammad Khatami. It gained new life after the nationalist Mahmoud Ahmadinejad was elected in 2005.

As the fourth-largest oil producer in the world, Iran has a measure of influence over international oil markets. The country ranks second for output among OPEC Countries, and controls about 5 percent of the global oil supply.

Tehran also partially controls the Persian Gulf's Strait of Hormuz, through which much of the world's oil supply must pass.

Iran has sought to wield its oil resources as a bargaining tool in its ongoing standoff with the West over its nuclear program.

The U.N. Security Council is considering imposing a third set of sanctions on Iran for defying a request to halt uranium enrichment. But Tehran has expressed doubt that the world body would impose sanctions on the country's oil sector, because such a move would likely drive global oil prices higher.

Asset managers feel the pain

TORONTO (Reuters) - No quick turnaround is in sight for the shares of Canadian fund-management companies, which have been pounded in 2008 as sliding stock markets hurt assets under management and slowed mutual fund sales.

Canadians usually sock money away at this time of year for their retirement savings. But the annual RRSP season, as it's known, is off to a weak start, and skittish investors are opting to park their cash in money-market funds until there is some semblance of market stability.

Not surprisingly, the independent companies that create and sell mutual funds have been poor performers in early 2008.

"It's going to be fairly difficult for the large-cap players to dig themselves out of the hole they're in right now," said Dundee Securities analyst John Aiken. "It's not that anybody's doing anything wrong, it's just that we've had a moderating outlook."

The stocks of AGF Management and CI Financial have tumbled by 21 percent and 19 percent, respectively. That far outpaces the 4.4 percent year-to-date decline in the broad Toronto Stock Exchange composite index, and a 7 percent drop in the S&P/TSX Financials index.

At IGM Financial -- the country's largest fund company with C$119 billion ($118 billion) in assets under management -- shares are down 13 percent.

IGM is really two fund companies under one roof, Investors Group and Mackenzie Financial, and numerous analysts consider it to be the most defensive name in the sector.

IGM "should have the least downside risk relative to its closest peers," Genuity Capital analyst Gabriel Dechaine said in a note on Friday entitled: "Sometimes boring can be beautiful."

In late January, RBC Capital Markets analysts said 12-month total returns for stocks in the sector could range from a drop of 20 percent, if the TSX falls further, to an optimistic scenario in which returns hit 40 percent on average. That would require a big, double-digit rally on the Toronto market, they noted in a report.

Patient investors or those with a value bent might consider buying now.

"I think the market is already pricing in a bad year for these things," said Paul Harris, a portfolio manager at Avenue Investment Management in Toronto.

With bigger players such as CI or IGM, investors get companies with large market shares, diversified product offerings, and "a decent yield," even taking CI's announced distribution cut into account, Harris said.

"These are well-run companies, they have huge market shares, and they are not expensive at these levels," Harris said.

"I think you can wait it out and you'll do well with them."

If market volatility continues, IGM is "far and away" the best placed because its Investors Group unit distributes mutual funds exclusively through its own sales force, giving it more resiliency in sales, Dundee analyst Aiken said.

"This is where you see the absolutely stunning low levels of redemption rates," Aiken said.

Redemption rates at Investors Group are about half the industry average.

Investors Group had 4,331 financial consultants at the end of 2007, after adding more than 400 during the year.

While there are costs in recruiting and training new consultants and opening offices, "we are also seeing productivity improvements throughout the organization" as mature consultants sell more product, Murray Taylor, head of Investors Group and co-president and co-CEO of IGM, told a conference call on Friday.

On the Mackenzie side of IGM, net redemptions have plagued its Ivy brand of mutual funds. But they should perform well in the current environment due to the team's investment style, said Mackenzie president Charles Sims, who is IGM's other co-president and co-CEO.

Investors will have a chance to hear from CI Financial, which reports quarterly results on Wednesday, and from rival AGF Financial, which holds an investor forum on the same day.

($1=$1.01 Canadian)

Borse Dubai says would consider Qatar bid for LSE

DUBAI (Reuters) - Borse Dubai said on Sunday it would consider selling a stake in the London Stock Exchange Group (LSE.L) to Qatar, but had not received any approaches and was unlikely to sell any stake in the short term.

Borse Dubai and the Nasdaq Stock Market (NDAQ.O) should close a $4.9 billion deal this month to buy Nordic and Baltic stock exchange operator OMX (OMX.ST). Under the tie-up, Borse Dubai gets Nasdaq's 28 percent stake in the London Stock Exchange (LSE).

"If the Qatari government wishes to strike a deal in the future then it would be subject to negotiation," Borse Dubai Chairman Essa Kazim told reporters.

Any stake sale would "absolutely not" occur in the short term, added Soud Ba'alawy, the firm's deputy chairman.

Qatar owns 15 percent of the LSE through the Qatar Investment Authority (QIA), its $60 billion sovereign wealth fund.

The QIA planned to use its stake in the LSE to develop its own capital markets, a person familiar with the fund told Reuters last month.

QIA subsidiary Qatar Holding and Borse Dubai were in talks for Qatar to exchange its 10 percent stake in OMX for at least part of Dubai's stake in the LSE, people familiar with the matter said in December.

Borse Dubai had not agreed on any deal "whatsoever" with Qatar on selling its stake when Qatar sold its entire OMX holding to Borse Dubai earlier this month, Kazim said. Borse Dubai owns 97.6 percent of OMX.

FINANCING PLANS

Borse Dubai planned to raise $4.2 billion in a syndicated loan to finance the acquisition, Mukhtar Hussain, global head of principal investments at HSBC, one of the bank's arranging the deal, told reporters.

Syndication would start this week in Hong Kong, London and Dubai and was likely to conclude by February 27, Hussain said.

Barclays Plc, Citigroup, Goldman Sachs, Bank of Tokyo-Mitsubishi and Emirates NBD are also mandated lead arrangers for the loan, he said, adding he was confident it would be fully subscribed.

Under the OMX deal, Nasdaq agreed to take a 33 percent stake in the Dubai International Financial Exchange (DIFX), set up by the government of Dubai in 2005 to operate according to international regulatory standards.

The exchange, to be re-branded as Nasdaq DIFX, planned to expand in the Middle East, Africa and Asia, as it seeks to tap into economic and population growth in emerging markets, Ba'alawy said.

First, however, the exchange would focus on building healthy pipeline of new listings of securities this year, Borse Dubai Chief Executive Per Larsson said, declining to be more specific.

U.S.-based NanoDynamics pulled out of a planned listing in Dubai, the DIFX said on Friday.

Shares of DP World (DPW.DI), the first firm to list shares exclusively on the exchange, have tumbled more than 30 percent since they debuted in November. Since then, global stock markets have tumbled on concerns about a global credit crisis and a possible U.S. recession.

Lackluster reports leave stocks mixed

NEW YORK - Stocks finished mixed as lackluster economic reports offered Wall Street little incentive to place big bets ahead of a long weekend.

Disappointing data on manufacturing, consumer confidence and import prices reminded investors on Friday that the economy is struggling. As a result, a week that began with a rally closed on a subdued note.

A New York Federal Reserve survey on regional manufacturing indicated that conditions have deteriorated this month, while the preliminary Reuters/University of Michigan survey on consumer sentiment for February showed a marked decline from the prior month. A Labor Department report found that import prices have jumped amid higher oil prices.

Friday's market declines, while not severe, occurred a day after investors' revealed their skittishness about the economy and sent stocks down more than 1 percent. The pullback, which came after strong gains earlier in the week, followed somewhat downcast remarks about the economy from Federal Reserve Chairman Ben Bernanke.

With stock markets closed Monday for the Presidents Day holiday and fresh economic concerns, investors appeared uninterested in making any sizable moves.

"The fear factor still sits in the minds of investors," said Bill Schultz, chief investment officer at McQueen, Ball & Associates in Bethlehem, Pa. "We just can't get over that hurdle."

The Dow Jones industrial average fell 28.77, or 0.23 percent, to 12,348.21. The blue-chip index ended the week with a gain of 1.36 percent.

Broader stock indicators were mixed. The Standard & Poor's 500 index edged up 1.13, or 0.08 percent, to 1,349.99 to finish the week with a 1.40 percent gain. The technology-heavy Nasdaq composite index fell 10.74, or 0.46 percent, to 2,321.80 to close the week with an advance of 0.74 percent.

Government bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.77 percent from 3.82 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude oil edged up 4 cents to settle at $95.50 a barrel on the New York Mercantile Exchange.

Not all economic findings that arrived Friday portended further weakness but, over all, investors seemed unimpressed. The nation's central bank said that industrial output showed a modest increase last month, as expected, largely because of strength from utilities.

But investors remain worried that consumers who are uneasy will be reluctant to open their wallets — an alarming prospect as consumer spending accounts for more than two-thirds of economic activity.

Comments from Bernanke on Thursday outlined the concerns. The Fed chief issued a sobering but not entirely unexpected prediction that economic growth in much of 2008 is likely to be "sluggish" before gathering strength later in the year. He told the Senate Banking Committee that further losses were likely at banks from soured mortgages.

"What's dominating the market lately is the bad economic data that continues to confirm that the economy is slowing," said Alexander Paris, economist and market analyst for Chicago-based Barrington Research. Though he said we are not necessarily in a recession, more and more economists are coming to that conclusion.

Schultz of McQueen, Ball & Associates predicted that volatility will remain on Wall Street as investors try to sort through their concerns about the financial sector.

The uncertainty lapping at Wall Street is due in part to the opaque nature of subprime mortgage debt. Many of these loans, which are now going bad, were sold off in exotic debt packages whose worth is difficult to determine. The concerns about faltering debt have stoked worries about the solvency of bond insurers and sent some borrowing costs higher, disturbing normally staid parts of the financial sector that help pedal the economy.

In corporate news, Priceline.com Inc. said its fourth-quarter earnings more than doubled amid a 62 percent increase in gross travel bookings. The online travel company jumped $21.83, or 21 percent, to $124.06.

Declining issues outnumbered advancers by about 9 to 7 on the New York Stock Exchange, where volume came to 1.50 billion shares.

The Russell 2000 index of smaller companies fell 3.80, or 0.54 percent, to 701.52.

Overseas, Japan's Nikkei stock average finished down 0.03 percent. Britain's FTSE 100 closed down 1.56 percent, Germany's DAX index fell 1.87 percent, and France's CAC-40 fell 1.79 percent.

Asia shakes off weak Wall Street lead

Asian stocks traded at levels near to Friday's close, with investor sentiment not too affected by the pessimistic US consumer confidence data that pushed down Wall Street last week.

Tokyo's Nikkei 225 stock average opened up 0.8 per cent 13,737.00 in early afternoon trading, while the broader Topix was up 0.5 per cent at 1,341.59. The yen recently traded at 107.80.

Toshiba contributed to the gains, increasing 5.6 per cent to Y827, as investors cheered news that the consumer electronics company was nearly ready to admit defeat and exit the HD DVD business. Sony, which backs the rival Blu-ray format, added 1.4 per cent to Y4,930.

In Australia, all attention was on Australia & New Zealand Banking Group, whose shares plummeted after it said profit growth for the year would be erased by provisions it's making for derivative investments. Shares of the company slumped 5.8 per cent to A$22.50, dragging down the overall S&P ASX 200 index 0.7 per cent to 5,566.30.

Other banks were also dragged down, with National Australia Bank (NYSE:NAU) sliding 2.8 per cent to A$29.72, while Westpac Banking (NYSE:WBK) dropped 3.4 per cent to A$22.56.

Investors took a more positive view of DBS, the Singapore bank that announced a S$400m writedown and an 18 per cent drop in quarterly profit on Friday, and the stock traded up 1.9 per cent at S$18.24. The Straits Times Index, recently traded down 0.1 per cent at 3.085.04.

South Korea's Kospi also managed to fend off the effect of potential losses from the weaker US data, and was recent trading up 0.1 per cent at 1,697.14, led by shipbuilders.

Hyundai Heavy, the world's largest shipbuilder, gained 0.1 per cent to Won373,500.

The Hang Seng was unchanged, while the shares of mainland China traded in Hong Kong rose 0.5 per cent. Shares in Shanghai were up 1.4 per cent at 4,561.13.

Reports that Japanese and South Korean steel companies had reached an agreement to pay Vale, a Brazilian miner, 65 per cent more for iron ore in the next fiscal year led to a mixed reaction in stocks. Nippon Steel gained 3.4 per cent to 575, while South Korea's Posco dropped 1.7 per cent to Won506,000.

Shares of BHP Billiton (NYSE:BHP), Australian iron ore miner, dropped1 per cent to A$38.91, while Rio Tinto's fell 1.5 per cent to A$135.08.

Centro Properties shares were up 3 per cent, after rising as much as 17 per cent, on news its lenders agreed to give it two more months to make debt repayments.

Rising oil prices aided the shares of energy companies in Australia. Woodside Petroleum shares gained 2 per cent to A$50.85, while Santos (NASDAQ:STOSY) gained 3.8 per cent A$14.17. Brent spot oil traded near to $98 per barrel.

Palladium traded at another record of $2,087 on more power shortages in South Africa.

Economic woes reveal a long-felt unease

Even when experts were declaring the economy healthy, many Americans voiced a vague, but persistent dissatisfaction. True, jobs were relatively plentiful over the last few years. It was easy to borrow and very cheap. The sharp rise in the value of homes and plentiful credit cards encouraged a nation of consumers to get out and buy. But to many people, something didn't feel right, even if they couldn't quite explain why.

Now the economic tide is receding, and the undertow that was there all along is getting stronger.

Take away the easy credit and consumers are left with paychecks that, for most, haven't nearly kept pace with their need and propensity to spend.

The frustration of $3 gas and $4 milk, the worries about health care costs that have risen four times the rate of pay, become much more real. The retirement security that is only as good as the increasingly volatile stock market seems much less certain.

Americans' declining confidence in their economy is triggered by a storm of very recent pressures, including plunging home prices, tightening credit, and heavy debt. But it is compounded by anxiety that was there all along, the result of a long, slow drip of worries and vulnerabilities.

"The economy is currently in recession or arguably close to recession and that's certainly weighing on the collective psyche," says Mark Zandi, chief economist of forecaster Moody's Economy.com. "But ... I do think there is an increasing level of angst that is more fundamental and is not going to go away even when the economy improves."

Much of that anxiety is the uncomfortable, but expected jolt of the economic roller coaster. During a downturn, people become less confident about keeping their jobs or being able to find new ones, meeting household expenses and about the prospects for the future.

But there may be more to it than just cyclical ups and downs.

What does the economic future hold? Many Americans feel increasingly unable to answer that question with assurance, and they appraise it with a sense that they are less in control of the outcome.

In Westminster, Colo., a Denver suburb, George Apodaca hears that uncertainty from the maintenance workers, drivers and others enrolled in the home budgeting class he teaches. Most have steady jobs, but are just getting by. They talk about challenges like the rising cost of getting to work or medical bills, not as new problems but as a continuing struggle.

"People in my class, they don't know what a recession means or what a boom means," says Apodaca, a counselor for Colorado Housing Enterprises. "They're worried about buying the groceries, buying the gas."

A year ago — months before economic alarms went off — nearly two of three Americans polled by The Rockefeller Foundation said that they felt somewhat or a lot less economically secure then they did a decade ago. Half said they expected their children to face an economy even more shaky.

Other polls have registered similar unease in the past few years, showing large numbers of Americans dissatisfied with the economy, and worried about retirement security, health care costs, and a declining standard of living.

The surprising thing about many of these readings isn't that they've recently skyrocketed. It's that in recent years they've registered consistently high levels of worry without ever seeming to ease.

"This has just been a period of great disconnect between what the aggregate economic statistics show and what leading politicians talk about and what ordinary Americans are feeling," said Jacob Hacker, a Yale University professor and author of "The Great Risk Shift," which charts increased economic insecurity. "I think people are saying, where did the gains go? Where did the boom go? And now that it's gone, what are we going to do?"

Those uncertainties have been submerged for the past few years. The war in Iraq and the threat of terrorism dominated, drawing attention away from day-to-day economic concerns. With employers adding workers, people's appraisal of the economy focused less on jobs, the long-standing measure of financial security.

Many people gauged their well-being in wealth — looking at the stock market, and much more broadly, the rise of real estate prices, said Susan Sterne, president of Economic Analysis Associates.

Americans borrowed freely against the value of their homes. But now there is nothing left to shield them from the insecurities rooted in the old measures of economic prosperity.

Except for the late 1990s, pay has been stagnant for more than a generation, barely keeping pace with inflation. In 1973, the median male worker earned $16.88 an hour, adjusted for inflation. In 2007, he earned $16.85.

For many families, the stagnation has been moderated by the addition of a second paycheck as more women went to work, and their pay rose over the same period.

But the largest gains went to workers at the top of the pay scale. Now, economic worries are rising fastest in households with smaller paychecks, and that chasm is widening.

"Over the past decades, whether inflation was much higher or lower, or incomes grew faster or more slowly, there has never been such a wide divergence in the experiences" separating richer households from poorer ones, Richard Curtin, the director of the University of Michigan's consumer survey said in summing up the most recent figures.

That insecurity shows in small, but telling ways. Shoppers at drug store chain Walgreens Inc. are increasingly bypassing name-brand cough syrups and pain relievers and choosing cheaper store brands. Wal-Mart Stores Inc noticed that many people who received its gift cards for the holidays used them in January to buy food and other necessities instead of extras.

The pullback by consumers contrasts with years of continued spending that long seemed to contradict mounting worries.

Worker optimism, which soared in the late 1990s, never fully rebounded after the last, brief recession. Although jobs again were plentiful, it became clear the new economy's opportunities came with few of the old assurances.

Rennie Sawade, the son of a Michigan auto worker, majored in computer science because he saw no future on the assembly line. He was rewarded with a job at Oracle Corp., but lost it in late 2005 when the company shifted his department's work to India. Sawade, who lives in Woodinville, Wash. near Seattle, has been unable to find a full-time replacement, instead jumping from contract job to contract job.

The contractor offers a 401(k), but contributions are entirely up to workers. When Sawade's wife was diagnosed with thyroid cancer last year he missed the equivalent of two weeks work — and pay — to take care of her. The job has health insurance but still left the family with a bill for more than $2,000. Contractors call to offer other jobs, but the pay is frequently disappointing, he says.

"It was pretty well known when I was working on my bachelor's degree that the auto industry was going to move overseas," he says. "Everybody said get into technology because you'll have a career. Now it looks like the same thing is happening to technology."

Cutbacks and changes by employers also have pushed heavy responsibilities on to workers, many who find themselves unprepared.

In the past decade, scores of companies have frozen or eliminated benefit plans providing a guaranteed pension. Many have replaced them with 401(k) plans whose future worth depends on workers' investment skill. Almost half of all households are at risk of coming up short in retirement, according to the Center for Retirement Research at Boston College.

Worry also grew about the cost of health care, with good reason. Since 2001, the cost of health insurance has gone up 78 percent — about $1,500 more per year for the average family, according to the Kaiser Family Foundation. Over the same period, wages rose about 19 percent, and inflation about 17 percent. About four in 10 people polled by the group say they are worried about paying more for health care or insurance.

Even the consumption made possible by easy credit has helped turn up the financial pressure. The number of products — from air conditioners to cell phones — that Americans say they can't live without has grown substantially in recent years, according to the Pew Research Center. About 6 in 10 working Americans polled by the group say they don't earn enough to lead the life they want.

Economic confidence is, largely, a self-fulfilling prophecy. The more consumers believe the economy is heading downhill, the more likely they'll rein in spending that will contribute to a downturn.

"I think if people were generally more satisfied and less anxious perhaps they would be more resistant to thinking things were deteriorating rapidly," says Andrew Kohut, president of the Pew Research Center.

Maybe the downturn in optimism is temporary. Americans are voracious consumers and persistent optimists.

But some believe a fundamental change in behavior and mind-set is taking place. Since the early 1980s, consumers' contribution to the economy has risen from 63 percent, near where it had long hovered, to 70 percent. Baby boomers spent generously on growing families. Interest rates and inflation dropped, making homes and other assets worth more and cutting borrowing costs. The spread of easy credit promoted spending.

Now, those are drying up and the population is aging. Older households don't spend as much, and often assess the economy more conservatively. Over the next generation, that could drive consumers' contribution to the economy back down to the low-60 percent range, Zandi said.

"There were tail winds behind" the growth in consumer spending over the last 25 years, he says. "Now there are headwinds."

Schwarzenegger signs budget cuts, warns more to come

LOS ANGELES (Reuters) - California Gov. Arnold Schwarzenegger on Saturday signed six budget-cutting bills that will close the projected $3.3 billion shortfall in the state budget this fiscal year, but warned that more spending cuts would be needed.

The spending cuts were approved by the Democratic-led California legislature on Friday and will take a combined budget shortfall for California's current and next fiscal year, which had been expected to to top $14 billion, down to just over $7 billion.

But the reductions fell short of the original proposals of Schwarzenegger, a Republican, to meet the financial challenges California faces because of flat revenues brought on by a sharp housing downturn.

"I respect the fact that it is not exactly what I proposed," Schwarzenegger told reporters as he signed the bills into law.

"There is much more to come. This is only the beginning," he said.

Schwarzenegger had originally proposed sweeping across-the-board reductions for state agencies. The agreed cuts, which are expected to take effect immediately, largely address spending in education and social services.

Fitch Ratings last month warned that California was at risk of a credit rating downgrade if state officials failed to address budget shortfalls promptly.

Standard & Poor's reduced its outlook on California's general obligation bonds from positive to stable last year.