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The Wall Street Journal Education Program Weekly Review & QuizCovering front-page articles from Sep 23-29, 2006Professor Guide with Summaries Fall 2006Developed by: Scott R. Homan Ph.D., Purdue University

Questions 1 – 12 from The First Section, Section A

H-P's Hurd Admits'Disturbing' TacticsWere Used in ProbeBy PETER WALDMAN, DON CLARK and STEVE STECKLOWSeptember 23, 2006; Page A1http://online.wsj.com/article/SB115894648857471466.html

PALO ALTO, Calif. -- In an admission remarkable in the annals of U.S business, Hewlett-Packard Co. Chief Executive Mark Hurd described how the respected Silicon Valley titan employed a series of tawdry tactics in its effort to trace leaks from its board.Making his first extensive public remarks since the H-P leak scandal broke more than two weeks ago, Mr. Hurd on Friday also said Chairman Patricia Dunn, who had launched and overseen the probe, had resigned and left the board. Mr. Hurd, who had planned to inherit her title in January, assumed the title. A person familiar with the matter said two other employees closely associated with the probe are leaving the company.But Mr. Hurd, who took no questions during brief remarks to journalists at H-P's suburban-office-park headquarters, also left many issues unaddressed. While acknowledging that investigators used "disturbing" tactics, he failed to explain how the company had let the probe veer so far off track.He offered apologies to H-P board members, journalists and others for violating their privacy, but confirmed only a few details about the tactics employed and when he knew them. The investigation to plug the leaks used a range of extraordinary tactics, including obtaining private phone records using false pretenses and tailing both a director and a reporter for The Wall Street Journal. Another reporter, for CNET News.com, was sent a doctored email by H-P investigators that could provide the sender information about where it was sent.While taking responsibility for the matter, Mr. Hurd also depicted himself as playing a limited role in a probe run by Ms. Dunn and the board. He admitted to attending only a brief portion of a July 2005 meeting on the probe and said he was aware of a plan to plant a phony news tip in an email to a reporter in 2006, though he said he did not approve the use of email "tracer" technology that could show if the document was forwarded to a source.

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He said that in March 2006 he received a verbal and written summary of the probe. But, he said, "I did not read it. I could have, and I should have."Mr. Hurd's appearance was partly aimed at getting ahead of a hearing Thursday before the House Energy and Commerce committee, which is investigating the H-P probe. He, Ms. Dunn and others are scheduled to testify, and are likely to face intense questioning on the many unanswered questions.Mr. Hurd also reiterated a point he has made all along: that board leaks are harmful, and that it was Ms. Dunn's job to expose them. "The intent of the investigation was absolutely proper and appropriate," he said. But the "tactics do not reflect the values of H-P." H-P's code of conduct, he said, "unfortunately broke down, and no one in the management chain, including me, caught it.""What began with an investigation with the best intentions," he said, "has ended up turning in a direction we could not have possibly anticipated."After Mr. Hurd spoke, Michael J. Holston, of the law firm Morgan, Lewis & Bockius LLP, provided new details of the prominent role played in the leak investigation by H-P subcontractors. But while identifying some of the employees who were involved -- including general counsel Ann Baskins -- he left their involvement and fates unclear.Mr. Hurd said Morgan Lewis was hired on Sept. 8 to conduct an independent review of its leak probe. By hiring the firm -- which Mr. Hurd stressed reported to him, not H-P's board of directors -- the H-P CEO seemed to be distancing himself from the board and from the company's longtime outside counsel, Larry Sonsini, with the firm of Wilson Sonsini Goodrich & Rosati. H-P had said in an earlier public filing that its board retained Wilson Sonsini to investigate the leak probe. A spokeswoman said Mr. Sonsini was unavailable for comment.The revelations -- and Ms. Dunn's resignation -- capped a week in which it increasingly became clear that H-P had lost control of its crisis management. Its shares, which have risen sharply under Mr. Hurd's tenure and had been unaffected through much of the crisis, fell more than 5% Thursday as investors fretted that H-P's CEO could be dragged deeper into the scandal.In 4 p.m. New York Stock Exchange trading Friday, shares were up 24 cents at $35.11. In after-hours trading, H-P shares rose 32 cents, to $35.43. Mr. Hurd spoke after markets closed.

1. H-P announced that former Chairman Patricia Dunn is now____.a. the CEOb. the VP of Operationsc. the VP of Intelligenced. Resigned from the company. Correct

2. At H-P Mr Mark Hurd is now ______.a. the CEO Correct b. the VP of Operationsc. the VP of Intelligenced. Resigned from the company.


Seeking Expansion in Urban Areas, Wal-Mart Stores Gets Cold ShoulderBy KRIS HUDSON and GARY MCWILLIAMSSeptember 25, 2006; Page A1http://online.wsj.com/article/SB115914876072572773.html

Cities like Boston might be the best hope for Wal-Mart Stores Inc. to grow in the U.S. For the retail giant, that's a problem.Last year, Wal-Mart's discussions about opening its first store here, in retail space that was soon to be vacated, spurred public outcry. The retailer eventually dropped its pursuit of the property. "Wal-Mart does not suit the clientele we have in the city of Boston," says Mayor Thomas Menino, explaining his opposition. "They don't pay wages that are sufficient. Their benefit structure is poor. I don't need employers like that in our city."Mayor Menino has no such qualms about trendier rival Target Corp., which he has been actively recruiting. "It's a different image they have in how they market their product and the appearance of their stores," he says. "That's a lot to do with it, the image of the store."For years, Wal-Mart, of Bentonville, Ark., thrived in rural and suburban America where land was cheap and local governments didn't interfere. Now Wal-Mart is trying to break into the last areas of the country where it isn't dominant, and the going is tough.Hit by stiff competition from cut-rate retailers, strong unions and labor restrictions, Wal-Mart recently withdrew from Germany after eight rough years, taking a $1 billion charge in the process. In China, Wal-Mart has only 64 stores, or one for every 20 million Chinese. Its expansion, which includes plans for another 18 to 20 stores this year, is subject to the whims of China's Communist Party.Last year, Wal-Mart applied to open a specialized bank in Utah, pledging to use it for credit-card transactions and accepting deposits from charities, not to open branch banks. That didn't forestall an outcry from critics, bankers and politicians, and in July the Federal Deposit Insurance Corp. imposed a six-month moratorium on such applications.To jump-start sales in the U.S., the company has begun revamping the merchandise and layouts of existing stores to appeal to specific groups, such as African-Americans and Hispanics. It is stocking trendier items such as organic food and designer décor. The move represents a risky departure from the company's successful one-size-fits-all strategy.Investors are skeptical whether Wal-Mart can continue to rely on U.S. expansion to sustain its growth. Wal-Mart's shares trade at 16.6 times projected earnings, below the ratios notched by rivals Target Corp. and Sears Holdings Corp.Some on Wall Street would prefer the company tap the brakes on its building plans. New urban stores cost a lot to build and operate, and might not be as successful as other areas, at least initially. Due mostly to local resistance, Wal-Mart says it sometimes takes twice as long to plan, construct and open stores in markets such as California compared with a typical time frame of 18 to 24 months.



Wal-Mart dominates rural America, with 45% of its stores located in rural and semi-rural counties, according to market researcher ACNielsen. The retailer is acting to correct the imbalance: In the 12 months since July 2005, two-thirds of the stores opened by Wal-Mart have been in urban or semi-urban areas, ACNielsen says. Wal-Mart won't provide information about future store openings.Yet sales gains at new stores, located mostly in urban areas, are lower this year than last, indicating that urban shoppers might be turning up their noses. Joanne Dudevoir, 53, a computer specialist for the Defense Department in Boston, dismisses the company with a wave of her hand. "I don't do Wal-Mart. There's nothing there I need to shop for."Wal-Mart says it will prosper even in challenging markets if it serves customers well. The company adds that it has a "very disciplined approach" to building new stores. Wal-Mart is on track to expand its square footage in the U.S. this year by 8%, its average over the past six years, adding the equivalent of nearly 40 regional malls. Wal-Mart executives said in June that the retailer has plans for at least another 1,400 U.S. stores, but it has not announced a time frame in which all will be built."With more than 3,900 stores and clubs in the U.S., we represent a small number of retail outlets in the United States and a much smaller percentage internationally," the company says. "We see continued opportunity for growth and we are committed to that growth."Community opposition to Wal-Marts dates back to the early 1970s, when Vermont passed a law requiring regional planning commissions to consider the environmental and economic impact of large developments.Opposition has grown more organized in recent years as nonunion Wal-Mart advanced on union strongholds. In California, Wal-Mart's pledge to open 40 supercenters -- massive stores offering general merchandise and groceries -- precipitated a four-month strike of grocery unions in 2003 as rival chains sought to cut labor costs to compete. A year later, Wal-Mart suffered a setback when voters in the Los Angeles suburb of Inglewood decided by a three-to-two margin to reject a proposed Wal-Mart store.Wal-Mart officials characterize Inglewood as an anomaly, noting that they have won 32 of 39 such public votes during the past two years. The majority of new Wal-Marts face little or no opposition, they say.Today, politicians and residents use a variety of snares and roadblocks to slow the giant's advance. Recently, the Institute for Self-Reliance, a community activist group based in Washington, D.C., launched a Web site -- www.bigboxtoolkit.com -- where Wal-Mart opponents can gather data to use in public speeches and letters. The organization has helped 30 towns adopt ordinances to block big retailers and advised about 100 others.The institute supports what it calls "sustainable communities," or those that grow using their own environmental and economic resources. It opposes big retailers, contending they take more from communities than they contribute.In New York City, which has no Wal-Mart, the company's opponents helped kill proposed stores in Queens and Staten Island. In February, the city council approved plans for a retail center near Yankee Stadium with a proviso that only retailers already operating in the city could locate there. Translation: Wal-Mart need not apply.


Wal-Mart has won some victories on the urban battlefield. In 2004, it won approval to open its first store in Chicago, in a depressed neighborhood on the West Side, which is set to open later this month. The city's alderman responded by passing a law mandating that big retailers pay employees an hourly wage of at least $10 and health-care benefits equivalent to at least $3 an hour.

3: In the 12 months since July 2005, ________ of the stores opened by Wal-Mart have been in urban or semi-urban areas. a. one-fourthb. one-halfc. two-thirds Correctd. three-fourths

4. Mayor Thomas Menino said "______ does not suit the clientele we have in the city of Boston". a. Filenesb. Macy’sc. Targetd. Wal-Mart Correct

In a Turnaround,Slowing EconomySpurs Bond RallyBy MICHAEL HUDSONSeptember 26, 2006; Page A1http://online.wsj.com/article/SB115924070878573998.html

In one of the bigger surprises in financial markets this year, a growing sense that the economy is slowing and inflation receding is fueling a rally in the nation's bond markets, pushing Treasury-bond yields to their lowest levels in months.The rally -- which started 10 weeks ago and has gained momentum in the past few days -- may help to shape the outlook for both the economy and for investments in coming months. Some doubt the rally will last, but if it does, lower interest rates could help buoy stock prices, make it easier for investors to make potentially risky bets with borrowed money, and ultimately help soften the blow from a weaker economy and a cooling housing market.Because bonds pay fixed interest, their yields go down as investors bid up their prices, and vice versa. Earlier this year, Treasury yields rose as investors fretted that a strong economy would pump up inflation. Inflation eats away at bond returns, so investors dumped Treasurys, which pushed bond prices lower and their yields higher.Now, in the upside-down world of bond investing, bad news about the economy has investors turning back to bonds, which is pushing yields back down, essentially making it cheaper to borrow money.In June, a Wall Street Journal survey of 56 private economists showed that all but 13 expected bond yields to finish the year above 5%. Late yesterday afternoon, however,



the yield on the 10-year Treasury note hit 4.55%, its lowest level since February and a large drop from 5.25% in late June."Looks like I'm wrong again today, right?" said Morgan Stanley economist Richard Berner. "I think the extent of this rally has caught a lot of people by surprise."

5. In one of the bigger surprises in financial markets this year, a growing sense that the economy is slowing and inflation receding is fueling a rally in the nation's ______.a. stock marketsb. bond markets Correct c. oil marketsd. currency markets

6. Because bonds pay_______, their yields go down as investors bid up their prices, and vice versa.a. triple interestb. double interestc. quarterly interestd. fixed interest Correct

In Alliance Talks, GM to SeekBillions From Renault, NissanBy MONICA LANGLEY and JOSEPH B. WHITESeptember 27, 2006; Page A1http://online.wsj.com/article/SB115927472085074207.html

PARIS -- General Motors Corp. is prepared to tell Nissan Motor Co. and Renault SA today its price for a three-way alliance: A multibillion-dollar payment from Renault and Nissan to compensate for the greater value the Detroit auto maker believes it would bring to any partnership.The planned demand for an "equalizing contribution" is the latest sign that talks among the three auto giants are in trouble and could blow up. Carlos Ghosn, chief executive of both Nissan and Renault, is to meet today in Paris with GM chief Rick Wagoner.GM's request for a payment shows that the two camps are still far apart not only in evaluating the benefits of a deal but even in agreeing on what constitutes an alliance. Mr. Ghosn has envisioned broad cooperation along the lines of the existing tie-up between Nissan and Renault, which doesn't involve any such payments.The two sides have hit snags in recent weeks as GM executives, including Mr. Wagoner, who were initially surprised by the alliance proposal have raised concerns behind the scenes about its fairness to GM. The executives believe GM is already on the road to a turnaround on its own, and they have had mixed results in earlier tie-ups, including a failed alliance with Italy's Fiat SpA. They see Renault and Nissan as inferior to GM in global reach. Mr. Ghosn's argument -- that the car makers must join forces to contain rampaging Toyota Motor Corp. -- has yet to make headway.Last week, a frustrated Mr. Ghosn met with Nissan executives in Tokyo, with Renault executives in Paris participating by conference call. "There are great synergies, but



GM has shown little true interest in an alliance from the start," Mr. Ghosn told his team, according to people familiar with the discussion. The executives decided to see what happens today. "I'm playing for the long term," Mr. Ghosn concluded. "We'll see in Paris if GM is serious or not."Mr. Ghosn's definition of serious is a sweeping alliance that includes Renault and Nissan taking ownership stakes in GM, as they have already done in each other. Renault and Nissan team up in manufacturing, engineering and purchasing.Such a deal is unlikely to be offered or accepted by Mr. Wagoner. In recent days, GM executives have been determining exactly how much to ask for at the talks today, to ensure both sides get the same benefit from the alliance. While the talks could break apart as early as today, the possibility remains that the two chiefs, once they meet face-to-face, will find a way forward. The two sides have set themselves an Oct. 15 deadline to reach a decision.The Detroit auto makers are facing a crisis caused by a combination of high labor costs, high gas prices and an onslaught from Japanese and Korean auto makers. Detroit has depended on big gas-guzzlers to fuel its profits because its costs are too high to profit from small cars. But the market is recoiling from some of their most profitable products such as sport-utility vehicles and pickup trucks. GM, which lost more than $10 billion last year, has seen its U.S. market share fall to around 25%, about half of what it was at its peak three decades ago.If the talks collapse, the aftermath could be delicate for both CEOs.Mr. Wagoner will face his board Oct. 3 and lay out his management's analysis that an alliance would favor Nissan-Renault. Mr. York is likely to ask hard questions about any bias in the numbers and push for an independent board study.Mr. Ghosn, who avidly wants to align with a North American partner, could shift his sights to Ford Motor Co. In a meeting with his top executives from around the world yesterday, Mr. Ghosn told them they have shown that a global alliance has great rewards. "If a Detroit company realizes -- sooner or later -- that an automotive alliance makes sense," Mr. Ghosn said, "we will have the right mindset and skills to be that partner."The idea of a world-spanning alliance among GM, Renault and Nissan was first broached in late June by Las Vegas billionaire Kirk Kerkorian, who holds a 9.9% stake in GM, and Mr. Kerkorian's representative on GM's board, Jerome York.The spark for the proposal was Mr. York's admiration for Mr. Ghosn, who rescued Nissan from near-collapse and made it one of the most profitable big car makers in the world. The 52-year-old Brazilian-born executive is a celebrity in Japan and the subject of persistent speculation as to which sick auto maker he might be persuaded to save next. Ford Chairman Bill Ford Jr. reached out to him, without success, before hiring Alan Mulally from Boeing Co. this month to become Ford's new chief executive.In January, Mr. York, a veteran of large-scale rescue missions at Chrysler and later International Business Machines Corp., praised Mr. Ghosn in a widely watched speech. Mr. York urged GM to adopt Mr. Ghosn's approach to its turnaround effort, by setting clear goals, reorganizing management and creating a sense of urgency.The next month, Mr. York took a seat on GM's board. By late spring he was pondering what GM could do beyond Mr. Wagoner's existing turnaround plan as the company continued to lose North American market share and suffer from a negative cash flow.


When Messrs. York and Ghosn were in London in May they had dinner together. Mr. Ghosn, who was already interested in finding a North American partner, proposed a three-way alliance between Nissan, Renault and GM, say people familiar with the conversation.

7. General Motors Corp. is prepared to tell _______ its price for a three-way alliance.a. Nissan and Saabb. Nissan and Renault Correct c. Nissan and Fordd. Nissan and Toyota

8. GM, which lost more than $10 billion last year, has seen its U.S. market share fall to around _____ about half of what it was at its peak three decades ago..a. 5%,b. 15%,c. 25%, Correct d. 35%,

In Immigrant Fight,Grass-Roots GroupsBoost Their CloutBy MIRIAM JORDANSeptember 28, 2006; Page A1http://online.wsj.com/article/SB115940950734176279.html

AN BERNARDINO, Calif. -- Armed with a computer and less than $100, Joseph Turner two years ago formed a group called "Save Our State." His goal: save California from turning into a "Third World cesspool" of illegal immigrants, he says. The group doesn't have a formal membership, and Mr. Turner counts barely 2,000 people on his email list and message board.Yet this meager base has proved to be a powerful springboard. Through his Web site, Mr. Turner has recruited supporters to hold confrontational protests outside Home Depot stores, where unauthorized workers often gather to seek jobs. He has also helped ignite a nationwide movement by local governments to crack down on illegal immigration. So far, about 10 towns have passed ordinances to drive out undocumented immigrants after getting the idea from Mr. Turner. Dozens of other towns are considering such measures."My idea of activism is aggressive, street-level and in-your-face activism," says Mr. Turner, who strikes a clean-cut look with slicked-back black hair and icy blue eyes. He adds: "I don't believe in turning the other cheek."Mr. Turner is part of an anti-immigrant brushfire that is gathering force at the grass-roots level around the U.S. Small groups like Mr. Turner's Save Our State are cropping up from coast to coast, recruiting members and devising tactics to tackle illegal immigration in their communities. Critics call many of these groups racist, a charge organizers deny. What no one disputes is that they are tapping into widespread



frustration over the federal government's failure to adopt a national immigration policy while a deeply divided Congress clashes over how to deal with 12 million illegal immigrants.The Center for New Community, a Chicago organization that tracks immigration issues, says there are 211 so-called nativist groups -- groups that advocate protecting the interests of native inhabitants against those of immigrants -- across the U.S., up from 37 two years ago. The Southern Poverty Law Center, which tracks extremist groups, also says nativist groups are on the rise and that several are hate groups, including Mr. Turner's Save Our State. The law center defines a hate group as one that singles out and promotes hatred of another group, based on ethnicity, language, religion, sexual inclination or immigration status. Mr. Turner denies he runs a hate group.These grass-roots organizations are having an impact. In North Carolina, state legislators say the fierce opposition of one anti-illegal immigration group torpedoed a bill proposed last year that would have allowed undocumented students who graduate from state high schools to pay in-state college tuition. In Georgia, another group's mobilization efforts were crucial to passing a bill last spring to curb illegal immigration. In Arizona, a group called Protect Our City is pushing for local officials, including police officers, to help federal authorities enforce immigration laws within Phoenix.The groups are often one-man shows, steered by tech-savvy leaders who creatively use the Web to mobilize support for immigration protests, boycotts, legislation and media coverage in their areas. Their influence is amplified as they find each other online and coordinate their efforts. Save Our State has occasionally joined forces with a North Carolina group as well as the volunteer group Minuteman Project, which patrols the border with the goal of stopping illegal immigrants from entering U.S. soil.Several budding groups receive funding from older, well-endowed national organizations, such as the Federation for American Immigration Reform, which has been battling immigration for decades. Ron Woodard, head of NC Listen, a North Carolina group, says he improved his public-speaking skills in courses sponsored by FAIR. The Washington, D.C.-based national group, which advocates curbing legal immigration as well as stopping illegal entries to the U.S., also provided his group with "minor" financial support, he says.Striking a ChordThese groups often strike a chord in small towns and areas where Hispanics are relative newcomers. Immigrants are increasingly bypassing traditional Hispanic centers in big cities, California and the southwest. Instead, they're settling in smaller, homogeneous towns and in Middle America, where many residents are still unaccustomed to them and fear that wages are being undercut by immigrants taking blue-collar jobs in their community."The financial costs to Georgia taxpayers of supplying [bilingual] education, incarceration, medical care and social benefits to the hundreds of thousands of people who are here in violation of our laws is becoming impossible to ignore," declared one Web site run by a Georgia grass-roots group, the Dustin Inman Society. "Someone please point to a case of wages in Georgia having gone up because of illegal immigration!"


Anti-immigrant sentiment has swept the U.S. before, targeting Irish, Italian, Jewish, Chinese and Japanese newcomers. In response to public outcry against the influx of immigrants from Southern and Eastern Europe after World War I, Congress passed the Quota Act of 1921 and then the even more restrictive Immigration Act of 1924. These days, hostility is directed at Spanish-speaking immigrants, especially illegal immigrants who are decried as a burden on taxpayers and a threat to national security.William Gheen, a former conservative campaign strategist and legislative assistant, formed the Americans for Legal Immigration-PAC, or ALIPAC, on Sept. 11, 2004, the anniversary of the terrorist attacks. Hispanic illegal immigrants aren't blowing up skyscrapers, "but they steal American jobs, depress American wages and can wreck American lives," Mr. Gheen says. "They're the enemies in our streets." He says his group, run from his home in Raleigh, N.C., boasts supporters from all 50 states and has raised $40,000 so far this year. "Most contributions come from concerned individuals, checks for $25 to $50," Mr. Gheen says.The money comes from people like Lisa Mercier, a Hartselle, Ala., homemaker and devout southern Baptist who says the issue piqued her interest when Latino gangs moved into her former neighborhood on the outskirts of Washington, D.C. "With terrorism the way it is, we can't have our border wide open," she says, adding: "All the poor would like to come here."Last year, four North Carolina lawmakers introduced a bipartisan bill that would entitle undocumented students who graduate from North Carolina high schools to attend universities paying in-state tuition. Mr. Gheen mounted an opposition campaign on the Web, lobbied in the halls of the state legislature and spread his message on a conservative radio talk show.Several state legislators who signed the bill subsequently asked to remove their names from it. The bill never moved out of committee."This little organization got it on talk radio and created a firestorm," says North Carolina State Representative Paul Luebke, a Democrat and a primary sponsor of the bill. "Right-wing talk radio amplified the message. They hammered away on it incessantly. This enraged large numbers of people."Mr. Luebke also says Mr. Gheen preyed on the discomfort felt by many white North Carolinians over the increased visibility of Latinos -- the spread of Mexican restaurants and stores, Spanish-language signs and Spanish-language movies at video stores. With manufacturing jobs also moving overseas, "the brown immigrant was an easy scapegoat," says Mr. Luebke.Mr. Gheen says his is a "moderate group" and denies trying to stir up racial animosities.In Marietta, Ga., the local grass-roots group is the Dustin Inman Society, named for a teenage boy killed several years ago in a car accident that allegedly involved an illegal immigrant. The group is led by D. A. King, a 54-year-old former Marine who sports a close-cropped haircut and says he was snubbed by Mexicans who moved into a house in his neighborhood in the 1990s. He says he grew even more frustrated when local and immigration officials ignored his calls to take action against the house, which he believed was overcrowded with illegal immigrants.


Mr. King shuttered his insurance business of 20 years in 2003 to devote himself full-time to educating Georgians about the adverse impact of illegal immigration, organize rallies around the issue and work the halls of the Georgia state legislature.The crowning of his efforts was the passage in April of the Georgia Security and Immigration Compliance Act, a state bill chockablock with provisions to stop illegal immigration that will begin to go into effect in July 2007. "We were sliding down a slippery slope on the way to 'Georgiafornia,' " says Mr. King, referring to California, which is often used as the poster child of excessive Latino immigration.Effective WeaponA key proponent of the immigration bill, his single most effective weapon was organizing protests at the Capitol "for the media and state governments to see," says Mr. King. He also praised the bill on radio and in newspaper columns. "I made it impossible for politicians to ignore the issue," he says.Republican State Senator Chip Rogers, who wrote the Georgia bill, says Mr. King was "instrumental in ensuring people interested in illegal immigration were aware of the bill. He sent lots of email, went on radio often and wrote in local papers about it. He touched just about every potential media outlet."In the network of anti-illegal immigrant activists, few have risen higher or faster than Joseph Turner. He still relishes a moment 12 years ago, when he took the stage at his half-Hispanic high school in working-class Riverside, Calif., to endorse a controversial ballot initiative to ban illegal immigrants from receiving state benefits. The senior drew such a heated response that he was sequestered in a gym afterward until tempers were calmed."I believe in the superiority of America and American culture," he says. If the federal government isn't doing its job, he says, direct democracy should provide solutions. He calls for deporting all illegal immigrants, saying, "the net benefit of illegal aliens is negative."Mr. Turner grew up in Southern California's so-called Smog Belt, which includes San Bernardino and other working-class towns. His biological father, an alcoholic, walked out of his life when he was about eight years old, he says. His mother remarried a Mexican-American, whom Mr. Turner considers his father. He heard a lot of Spanish growing up. Mr. Turner says his mother was a drug addict who spent time incarcerated, and describes his stepfather as a "former gang banger" who abused drugs and was imprisoned. Both have since been rehabilitated, he says. Mr. Turner's mother, Janice Aguayo, confirms his account.Incensed by the outcry of civil-rights and Hispanic groups against roundups of undocumented immigrants by U.S. authorities in southern California in 2004, Mr. Turner started his own group to battle illegal immigration, Save Our State. His first target was Home Depot, where immigrants often wait for homeowners seeking an extra hand at gardening or painting.

9. In California undocumented workers often look for work outside of _______. a. Kmartb. Searsc. Wal-Martd. Home Depot Correct


10. Joseph Turner two years ago formed a group called ______.a. "Save Our Way."b. "Save Our Name."c. "Save Our State." Correct d. "Save Our Forest."

As Stocks Near a High, PressureBuilds for a Professional InvestorBy E.S. BROWNINGSeptember 29, 2006; Page A1http://online.wsj.com/article/SB115949665354177581.html

As the Dow Jones Industrial Average flirts with a record high, Jon Brorson is sitting at the base of what professional investors call "a wall of worry."Mr. Brorson, a Chicago money manager with $2.3 billion under his supervision, is one of many doubters who stayed on the sidelines as the market marched ahead this summer. Now the Dow is up 9% in just over two months, within five points of its record closing high of 11722.98 after briefly crossing it yesterday. Investors like Mr. Brorson figure others are driving it too high, setting it up for a fall. They've been expecting a slowing economy to shrink corporate profits and lead to a pullback.Oddly, these doubters are part of the dynamic that has let the market do well.When the Dow hit its record in January 2000, most pros cheered it on. This time, many have been skeptical. The market's recent gains are based largely on hopes the Federal Reserve's interest-rate management will slow the economy enough to prevent inflation without making companies and consumers suffer. But investors with a different view worry that the Fed rarely has been able to raise interest rates without serious economic consequences.So far, these skeptics have been outvoted. As stocks have risen, they've seen their holdings suffer -- slowly prompting more and more to throw in the towel and buy the kinds of stocks that benefit from a resilient economy. The gradual conversion of skeptics into stock-buying bulls has provided the fuel for gains. Hence, the cliché: A steadily rising market often "climbs a wall of worry."Mr. Brorson's worries served him in May. Then, he shifted toward "defensive" companies whose sales tend to hold up in all kinds of economies, such as drug makers, food producers and electric utilities. His May move was gutsy -- and right. The Dow got to within 81 points of its record and then fell 8% into July.Now, as it rises, he's fighting the trend again. Doing so keeps him up at night and, his wife says, makes him irritable. His travails over the past two months show just how hard it is even for dedicated pros to call the turns. It's especially hard at times like these when investors are debating whether a shifting economy will change stocks' direction."I am wiped out when I get home each day," says Mr. Brorson. He's typically in bed by 9 p.m.Managing money has been his dream since high school, when he first began buying stocks. But at Northern Trust Corp., a big financial group in Chicago that caters to the



wealthy, he initially was passed over for an investment job. He was so annoyed he demanded to know why he didn't get it. He got the next one.After leaving Northern Trust in 1990 to set up his own firm, he was lured back to run most of Northern Trust's mutual funds. His ability to anticipate market shifts helped him weather the post-bubble bear market of 2000-02 better than many. By 2002, headhunters were calling.A Sunday-school teacher for 23 years at his Scandinavian church, Mr. Brorson is a buttoned-down 49-year-old. He is a Midwest conservative down to his black shoes with a banker's cap toe, which he repeatedly ties and reties in the office when he's nervous. His suit is often a navy blue with pinstripes. "Sloppy dress means sloppy work, a sloppy mind," he says. But Mr. Brorson also has a flair for adventure, dog-sledding in Michigan's Upper Peninsula and kayaking in the Baltic Sea with his Swedish cousins.He attacks the workday, rising at 4:50 a.m. and, after showering and praying, riding a crowded double-decker train. To be one of the first off, he sits on its stairs, his briefcase jammed behind him as he races through two newspapers.In late 2002, Mr. Brorson and his team quit Northern Trust for money-management firm Neuberger Berman. The switch meant more pay and independence, but big-time pressure. The main goal in his old job had been to protect assets. But Neuberger Berman, now part of Lehman Brothers Holdings Inc., is determined to outdo the competition. It had fired his predecessor just before Christmas that year for being behind the curve. "The mindset is 180 degrees different," he says.Mr. Brorson sets the direction for a variety of investment accounts including three mutual funds, letting portfolio managers pick most of the individual stocks. For three years, his team rode what proved to be a resurgent market, mostly staying ahead of the pack. But early this year, he got worried. A string of Fed interest-rate boosts was putting a drag on the economy, as were high oil prices. Yields of 10-year Treasury bonds had pushed above 5%, pulling mortgage rates up. Consumers showed signs of restraining their borrowing and spending.Pulling out of a winning bet is one of the hardest things for investment pros to do. It means selling your strongest positions while others are buying and prices are high. Yet if you wait for stock prices to weaken, it may be too late. Mr. Brorson's stomach churned as he cut back on stocks tied to economic strength, such as copper company Phelps Dodge and aircraft maker Boeing, and shifted into "defensive" ones such as Coca-Cola."It is hard to kick out the girl that brought you to the dance and go over to Bertha," Mr. Brorson says.When the market cracked in mid-May, he was exultant, as his move to caution had put him ahead of the more-bullish competition

11. The market's recent gains are based largely on hopes the Federal Reserve's interest-rate management will slow the economy enough to prevent ____without making companies and consumers suffer.a. inflation Correct b. buyingc. selling


d. holding

12. A steadily rising market often "climbs a wall of_____.".a. bear skinb. Ivyc. worry Correct d. debt

Questions 13 – 17 from Marketplace

Problems for PlayStation 3Could Bring Other Sony SetbacksBy YUKARI IWATANI KANE in Tokyo and NICK WINGFIELD in SeattleSeptember 25, 2006; Page B1http://online.wsj.com/article/SB115889740564671131.html

With its powerful new microchip and next-generation videodisc player for high-definition movies, Sony Corp.'s ambitious PlayStation 3 game console, due out Nov. 17, has the makings of a superb consumer gadget. Sony is betting that in addition to doing well on its own, the console will spur sales of the company's high-definition movies, fast-action videogames and high-definition television sets.But a series of PlayStation 3 setbacks, which could lead to inroads by rivals, illustrate just how risky Sony's strategy is. On Friday, less than two months before PlayStation 3's scheduled release, game-unit head Ken Kutaragi announced a surprise 20% price cut -- to about $410 -- for the player in the Japanese market. Criticism of the high price "has been relentless in Japan," he explained in a speech at the Tokyo Game Show.Already, the unit's launch had been postponed from the spring. And two weeks ago, citing manufacturing difficulties, Sony delayed the PlayStation 3's launch in Europe until March and halved its shipment target for this year to the U.S. and Japan.These developments could give Sony's rivals, especially Microsoft Corp., a crucial opening in one of the most heated battles in technology and entertainment. By releasing its Xbox 360 game console last November, Microsoft made a strategic bet that getting out ahead of Sony would give it an advantage, and Sony's delays have only widened that head start.Meanwhile, Nintendo Co., a veteran Japanese game company that was being dismissed as a has-been by some industry executives and analysts several years ago, is looking unexpectedly strong. Its new console, Wii (pronounced "we"), scheduled for release two days after PlayStation 3, lacks the raw graphics horsepower of the Sony and Microsoft consoles, but an innovative motion-sensitive controller will allow users to play games in a new way, wielding the device like a tennis racket, fishing pole, sword or gun.It's hard to imagine a scenario right now where Sony dominates as they have in the past," says John Taylor, a veteran games analyst at Arcadia Investment Corp. in Portland, Ore.



Early this decade, the PlayStation 2 grabbed more than 70% of the market for the previous generation of game consoles. But in the new generation, 10 million Xbox 360 consoles and four million Wiis are expected to have been sold by the end of 2006. Meanwhile, Sony predicts it will ship only two million PlayStation 3s by year end. No one is writing off the PlayStation 3, but some analysts believe that by ceding the head start, Sony could have to settle for dividing the market into roughly equal shares with its rivals.During its golden age in the 1980s and 1990s, Sony reigned supreme in consumer electronics with innovative products like its Trinitron television sets and Walkman portable music players. But it was slow to expand into the flat-panel TV market, and it has lost the portable-music market to Apple Computer Inc.'s iPod.

13. Sony’s PlayStation 3 ____.a. is expected to grab more than 70% of the marketb. launch was delayed in Europe until March and halved its shipment target for this year to the U.S. and Japan Correctc. has an innovative motion-sensitive controller will allow users to play games in a new way, wielding the device like a tennis racket, fishing pole, sword or gun d. has increased its price 20% for the Japanese market

Employees ForsakeDreaded EmailFor the Beloved PhoneBy JARED SANDBERGSeptember 26, 2006; Page B1http://online.wsj.com/article/SB115923906128273954.html

In the beginning there was spam, and the world saw that it was bad, including Stephen Jukuri. But he has changed his mind. "I love it," he gushes. "I can get rid of it. Delete. Delete. Delete."What craters Mr. Jukuri's day is deciding if, when and how to respond to his normal email. "Now that anyone can email me about anything, they seem to," he says. "Every single 'Forward' I've ever gotten fits into that category" of everything and anything, he says. The hail of email has gotten so bad that he created a folder called "Limbo" where as many as 600 stale-mails have piled up since November 2003, including several from his high-school friend Laura, who's pretty miffed by his lack of response."We've reached the too-much-information age, but we really haven't reached the communication age," he says.Email, heralded as one of the greatest productivity tools of our time, is terrific for mass mailing, trading files, getting a word in edgewise, and providing evidentiary manna for plaintiff's lawyers.But with an estimated 84 billion messages sent world-wide each day, according to research consultancy IDC, it's sometimes hard to put your finger on the efficiency of email while digging out from a pile of it. Like bad advice, self-importance and ugly carpeting, there's just too much of it in the office. Email Backlash 2.0's features



include an overtendency to send it, an inability to respond to it, and a conversation slower than smoke signals.That's why the telephone is looking ever better these days. "If Bill Gates invented the telephone and Alexander Graham Bell invented email," notes Dennis Fluegel, a retired senior project manager, "we would all be saying, 'You should get one of these telephones, you can actually talk to someone, hear what they are saying, and you don't have to use a keyboard!' "Maria Jepson, a psychotherapist, can't give up on email cold turkey. But she won't give into it either. Suited to "quick and dirty" exchanges of information, email is terrible for conversations, which are reserved for the phone. "I use email less than I did five years ago," she says.Evidence of the harrowing burden of email is everywhere. Experts, advising us how to manage email, use words like inbox "triage" and promote the phone, pen and paper to make email more efficient. In a study conducted by research firm Basex, more people (31%) categorized normal email as "most disruptive" than characterized spam that way (27%). It's no wonder that people who can afford to outsource email farm it out. According to the ePolicy Institute, 43% of administrative professionals ghostwrite email under an executive's name and, tellingly, nearly one-third of them are deputized to delete it.One problem that has emerged is email's double standard: People love the convenience of email for themselves but resent it in the hands of CC: addicts, joke forwarders and URL pushers.If only email involved the inconvenience of letter writing, which "effectively prevented people from using it to say things like, 'OK,' " says Jonathan Powers, a graduate student. That's why he thinks electronic postal fees, considered a remedy to combat twitchy fingered spammers, should also be applied to friends and colleagues -- in other words, neo-spammers.With email wheat-to-chaff ratios increasingly out of whack, overload decimates what economists would call "scarcity value," and makes messages easier -- if not completely necessary -- to ignore. Or, in the case of high-tech executive Joe Michaels, to ignore without technically ignoring. "If you ask more than one question in an urgent email," he says, "the respondent undoubtedly will only answer the question you care about least."Clifford Gormley, a network administrator, notes another axiom: "If you CC multiple people to answer a question in an email, very often nobody responds." It's the hitchhiker rule: The more cars there are, the easier it is to ignore the hitchhiker, he says. And nonverbal cues such as the red exclamation point meant to signify a message's urgency often don't. Says Mr. Gormley: "Ninety five percent of the time they're only a high priority in the sender's mind."A part of the torment arises from the fact that email, stripped of paralinguistic cues (intonation) and nonverbal messaging (eye rolling), can lead to ambiguity, naturally requiring more email. That's why email conversations can drone on as much as five times as long as a telephone call, estimates Daniel McFarlane, principal member of Lockheed Martin's engineering staff, who has researched interruptions. "Email is not a friction-free productivity tool," he says.


Companies have tried to stanch the flow. Two years ago, Jeremy Burton, then a vice president of marketing at Veritas Software, was so tired of wading through email that he enacted a Friday ban on email in his department. Violators would be fined $1, and the first was also forced to wear a scarlet "E" emblazoned on his chest. Months later, the company merged with Symantec, and the ban "didn't survive," says a spokeswoman.Three years ago, the founder of Caudwell Group, which operated 350 cellphone-gear stores in the United Kingdom, dubbed email a "cancer of modern business" and banned email use in the stores. The move made people more likely to use the phone, a spokesman says. But, over time, the ban was breached. "I don't think a business can eradicate email," he says. "The temptation will always be there."

14. Some companies are trying to use the telephone more than e-mail because ___.a. email is terrible for conversationsb. you can actually talk to someone, hear what they are saying, and you don't have to use a keyboard!c. it is difficult to wade through the huge amounts of e-mailsd. All of the above Correct

Pitching 401(k)sTo Generation YIs a Tough SellBy JENNIFER LEVITZSeptember 27, 2006; Page B1http://online.wsj.com/article/SB115932459790775181.html

Financial firms are struggling to make a tough sell: Convincing 20-somethings who have barely flown the coop that it's time to put aside cash for a nest egg.Until recently, mutual-fund companies and brokerage houses have spent far more time courting blue-blooded heirs, thrifty millionaires from the World War II generation -- and, of course, affluent baby boomers. Now, titans including mutual-fund companies FMR Corp.'s Fidelity Investments and Vanguard Group Inc. and banker Wachovia Corp. are wooing the boomers' babies, too. Their targets are the so-called echo boomers, or Generation Y, loosely defined as those 18 to 27 years old.It's no small feat getting young people -- worried more about student loans, credit-card debt and Saturday night -- to save for retirement. Only about a third of those in the 21-to-30-year-old group contribute to their 401(k) plans, according to the Employee Benefits Research Institute, a Washington, D.C., think tank. Now, through quirky marketing campaigns featuring pizza parties, iPod promotions and even fake letters from parents, the industry is trying to get Generation Y to think about tomorrow."All these companies are spending seven figures" to find ways to exploit this "generational shift," says James Chung, president of Reach Advisors, a Boston-based research firm. The ones that figure it out, he says, "will clean up."In 2005, financial firms shelled out $200 million to hawk their retirement plans, four times the amount only four years ago, says Peter Demmer, chief executive of Sterling Resources Inc., a financial-services consultant based in Paramus, N.J. Mr. Demmer



says the money is aimed primarily at the young to replace the drain from aging boomers.

15. Generation Y is loosely defined asa. 18 to 27 years oldb. Baby boomersc. echo boomersd. Both a and c Correct

Taming Peanut AllergyTakes ResearchersDown Uncertain RoadBy JANE ZHANGSeptember 29, 2006; Page B1http://online.wsj.com/article/SB115948851573077455.html

In a world of wheat-free cookies and dairy-free ice cream, the peanut industry is helping fund the quest for a "nut-free" peanut.Peanuts aren't nuts at all, of course, but legumes, or seeds, as are beans and lentils. An estimated 1.5 million Americans, including some 600,000 children, experience allergic reactions to peanuts, ranging from hives to nausea to sometimes-fatal anaphylactic shock. With most of the annual 150 food-allergy deaths blamed on peanuts, many schools have created peanut-free zones or gone totally "peanut free."The number of children with peanut allergies has skyrocketed, doubling from 1997 to 2002, according to a study in the Journal of Allergy and Clinical Immunology. And it's a mystery why peanut allergies are causing more problems. One explanation is that physicians are more adept at detecting them. Another is that the modern environment may be, in a sense, too clean: If the human immune system were exposed to more allergens, a peanut might not send it into overdrive.An approved asthma drug, Xolair, may be useful in treating peanut and other food allergies; injected into patients, it would reduce certain antibodies that are thought to cause anaphylactic food allergy. Last year, though, clinical trials came to a halt after two children, who had been given peanut protein in a screening to gauge the severity of their allergy, experienced anaphylactic reactions. The drug's makers -- Genentech, Novartis and Tanox -- are working with the Food and Drug Administration to design a new trial, Genentech says.Determined scientists, in some cases with peanut-industry funding, are trying to develop other therapies, or a vaccine, to prevent or reduce the severity of peanut reactions. A nut-free peanut would be genetically altered so that it is less likely to set off an immune response. Peanut farmers and food processors have given $5.6 million over the past decade to eight scientists, mainly for peanut-allergy work, says Howard Valentine, of the American Peanut Council.Two researchers -- Wesley Burks, chief of pediatric allergy and immunology at Duke University Medical Center, and Hugh Sampson, his counterpart at New York's Mount Sinai School of Medicine -- are trying to create a vaccine. They have slightly modified the three peanut proteins responsible for most reactions so they don't trigger such



strong reactions from human mast cells. By administering the modified proteins to subjects in slowly increasing doses, they hope to condition their immune systems to tolerate more. They have tested the therapy on mice and plan to start on humans in a year or so.

16. The peanut industry is helping fund the quest for a ____ peanut.a. pug-freeb. calorie-freec. fat-freed. nut-free Correct

Better Virtual MeetingsBy WILLIAM M. BULKELEYSeptember 28, 2006; Page B1http://online.wsj.com/article/SB115940854148276257.html

A new generation of high-end video-conference systems is facilitating virtual meetings that users say are almost like being there -- especially compared with conventional systems plagued by jerky video and speech that isn't synchronized with lip movements.The high-end systems with broadcast-quality cameras and a row of 50-inch plasma screens cost as much as $1 million for a two-location system ($500,000 more for each additional one), plus as much as $18,000 a month for high-speed phone lines. That is as much as 50 times the cost of older, less sophisticated systems.Sir Peter Walters persuaded fellow directors at GlaxoSmithKline PLC., to install equipment made by Teliris Inc., in 2002 after terrorist threats disrupted air travel between London and Philadelphia. Sir Peter, the retired chairman of BP PLC, says when he was first shown the system by Martyn Lewis, a former BBC news anchor who is chairman of Teliris, "I was absolutely astonished, having seen only ordinary video-conferencing before." Teliris is a closely held firm with dual headquarters in New York and London.Sir Peter says when he first sat down in a videoconference room at investment bank Lazard Ltd. in London and talked to people in a similar room in New York, "they were almost life-size. It was perfect vision, perfect voice. You almost wanted to reach out and shake their hands." He says Glaxo found the systems so useful, it has installed systems in 15 locations. They are used by scientists, researchers and top executives for collaboration. Other customers for Teliris's $150,000 rooms include Finnish cellphone giant Nokia Corp. and Whitehouse Station, N.J., drug maker Merck & Co.The so-called telepresence market is now attracting some major players. In December, Hewlett-Packard Co., Palo Alto, Calif., began selling a system called Halo, with each outfitted room now priced at $425,000. The system was jointly developed with DreamWorks Animation SKG Inc., the Glendale, Calif., cartoon maker, which wanted a way to links teams of animators in northern and southern California. H-P has installed 63 systems and is adding 10 a month; customers include PepsiCo Inc., Purchase, N.Y., and Advanced Micro Devices Inc., of Sunnyvale, Calif. Cisco Corp.



Chairman John Chambers announced in the spring that the giant San Jose, Calif., networking company plans to enter the market this year.Polycom Corp., a Pleasanton, Calif., speakerphone maker that is the market leader in conventional videoconferencing, combined its technology with designs from an early developer of telepresence systems and is now stepping up sales efforts for systems that cost $250,000 to $500,000 a room. In contrast, Polycom's standard systems sell for $5,000 to $80,000 a room. The No. 2 videoconference firm, Tandberg ASA in Oslo, Norway, plans to introduce a telepresence system in January, says chief technologist Hakon Dahle. Both Polycom and Tandberg base their telepresence systems on technology standards already used in videoconferencing, which they say makes it easier to link in traditional systems than it is with the proprietary systems sold by H-P and Teliris.Roopam Jain, who follows videoconferencing for market researcher Frost & Sullivan, says the high-end systems may make videoconferencing more a part of the culture at many companies. "A good quality telepresence will catch the attention of C-level executives. Even if it saves a few C-level trips it can have significant impact on return-on-investment," she notes. Ms. Jain says the world-wide videoconferencing market amounted to $1.15 billion last year and forecasts it will increase 22% a year through 2010. Still, she says, while videoconference rooms have been installed in many big companies "usability is still an issue. It hasn't been widely adopted yet."Telepresence makers and users say the experience is so much better in the high-end rooms that employees clamor to reserve space. Ken Crangle, general manager of H-P's Halo division, says H-P already had many videoconference rooms installed, but their poor quality meant they averaged only seven hours of use a month. Halo rooms average 160 hours of use a month. He says once the systems are installed for executives and directors, other managers quickly move to book the rooms at other times. "Then you get the peasants-with-pitchforks problem," when lower level employees get upset about being bumped out of a room by the CEO, Mark Hurd, Mr. Crangle says.He says most customers find they can justify the costs of the Halo systems in about six months by the savings from avoided travel. He says time savings with the systems are even more important. H-P manufacturing managers credited their Halo systems in the U.S. and Asia for cutting in half, to six months, the time taken to move an inkjet cartridge manufacturing line to a plant in Singapore from one in Corvallis, Ore. The managers said they avoided 45 trans-Pacific trips.Telepresence engineers employ a variety of techniques for making virtual meetings more lifelike. Rather than having a single large monitor at one end of a conference room, they place a row of four to six 50-inch plasma screens along one side of a room, with live participants on the other side of the room along a conference table. In some systems, high-quality videocameras are placed just above the screens. Polycom says it has achieved a more-lifelike effect by placing cameras behind the screens, so live participants are shown staring directly into the eyes of the remote person.The increased cost of telepresence systems in part reflects the huge bandwidth they require compared with regular videoconference systems that run at as slow as 384 kilobits a second. Telepresence requires dedicated lines running at two megabits a second or more. That provides high-definition video and audio, and allows one


speaker to interrupt another without muting the other party. Using expensive land lines rather than satellite links virtually eliminates latency delays between speaker and listener.Marc Trachtenberg, president of Teliris, says his company's systems are designed to make sure that sounds are synchronized with the picture, so that words come out only when speakers' lips are moving. Seven speakers along the wall ensure that words are spoken from the direction of the speaker.Despite the optimism of telepresence systems makers, Andrew Davis, managing partner of Wainhouse Research LLC, a Brookline, Mass., market research firm, says he thinks much of the talk is hype. "It's a lot of publicity over stuff I don't believe will be that important. But it will drive interest in videoconferencing." He says that like car buyers visiting showrooms to look at Corvettes but buying Malibus, corporate customers may look at telepresence systems and then buy new high-definition videoconference systems that are "almost as good for one-10th the price."Justine Kanter, development manager of Pearson PLC, the big London publisher of magazines and textbooks, says Teliris's telepresence system, which Pearson uses in London and New York, provides a much better experience than videoconference systems she has seen. "In meetings, you can pick up real subtlety of expressions," she says. "People are much more honest."

17. New “telepresence” systems for video-conferences are gaining popularity becausea. they are much less expensive to useb. they are making virtual meetings more lifelike Correctc. they increase the need for expensive traveld. they use satellite links to eliminate delays between speaker and listener

Questions 18 – 23 from Money & Investing

Investors Confront Dark Side of Slow GrowthBy PETER A. MCKAYSeptember 23, 2006; Page B1http://online.wsj.com/article/SB115896615162071817.html

Here is a question investors are pondering heading into the final week of this year's third quarter: Is a slowing economy good news or bad news?Most investment pros maintain that a gradually weakening economy, for now, is a good thing because it will keep the Federal Reserve from raising its interest-rate targets.But a vocal minority maintains that, with the Fed already on hold, having left interest rates steady for its past two policy meetings, the time for that benign scenario to play out has already passed. In the bears' eyes, slower economic growth will lead to weaker corporate profits and reduced consumer spending. Lower gasoline prices will help, but that could be offset by reduced household wealth because of the recent housing slowdown, the bears say.



The stock market's seesaw trading Friday -- and throughout the past week -- reflected that split in thinking.In the middle of the week, the Dow Jones Industrial Average was closing in on its record of 11722.98, reached in January 2000. A two-day selloff at the end of the week raised doubts about whether it would soon clear that hurdle. Former Fed Chairman Alan Greenspan's utterances moved the bond market, and oil prices fell.The Dow Jones Industrial Average was down nearly 60 points at one point Friday, but a late round of buying trimmed its losses. The blue-chip average finished down 25.13 points, or 0.2%, at 11508.10, off 0.5% on the week, and is now about 215 points from its all-time high."It's too early yet to say it won't make it back to the record," said Jim Bianco, president of Bianco Research, a market-research firm in Chicago. "If it pulls all the way back to 11000, then I'd say OK. But this move doesn't have enough conviction to it."Mr. Bianco noted that, for the first time in about three years, financial bets in the futures market Friday reflected a small chance that the Fed could cut rates at the policy makers' next meeting in October."That doesn't mean a cut is going to happen, by any stretch," said Mr. Bianco, citing the 4% odds. "But it's just an interesting fact that people are even beginning to entertain the idea seriously enough to put money into it." Lower interest rates are considered good for stocks because they reduce the cost of corporate debt, thus helping profits, and encourage consumer spending.Strategist Bob Hoye of the Vancouver research firm Institutional Advisors believes such sentiment is misplaced. "The thing is, by the time the Fed eases, it's usually too late," said Mr. Hoye, who believes stocks will continue to pull back.Another selloff in crude oil helped to keep stocks' losses in check Friday. Hurt by strong supply trends, oil futures for November delivery fell $1.04, or 1.7%, to $60.55 a barrel, off 5.4% on the week at the New York Mercantile Exchange.The Nasdaq Composite Index fell 0.8%, or 18.82 points, to 2218.93, off 0.7% on the week. And the broad Standard & Poor's 500-stock index fell 0.3%, or 3.25, to 1314.78, off 0.4% on the week.Treasurys rallied, helped by reports that Mr. Greenspan, in remarks at an event sponsored by investment-management firm Drake Management LLC, cited weak housing prices as a factor that might lead the current Fed governors to adopt a looser monetary policy, which some interpreted as a hint that a rate cut might be in the works.Outside the U.S., stocks fell in dollar terms. The Dow Jones World Stock Index, excluding U.S. stocks, slipped 0.58%, or 1.27 points, to 217.39.

18. Most investment pros maintain that a gradually weakening economy, for now, is a good thing because it will keep the Federal Reserve from ______.a. raising its interest-rate targets Correct b. lowering its interest-rate targetsc. doubling its interest-rate targetsd. removing its interest-rate targets


Some CurrenciesGet Hit as PricesOf Resources FallBy KAREN RICHARDSONSeptember 25, 2006; Page C1http://online.wsj.com/article/SB115914559204772688.html

As prices for oil, gas and metals take a hit, they are giving the countries that produce these commodities a run for their money.The currencies of countries like Canada, Australia and Chile -- sometimes called "commodity currencies" because they are so heavily supported by the export sales of natural resources -- are starting to fall as commodities prices wobble off recent highs.Since peaking in mid-May, the CRB index, a broad measure of the performance of commodities compiled by the Commodity Research Bureau, has fallen about 15%. Oil is down 21% from its high on July 14, while natural gas is down 59% in 2006. Gold, while up 14% for the year, is down about 18% from its 12-month high. Copper is off about 14% since May.All of this stems from hints of slowing growth in the U.S. economy, which translates to less demand for energy and other commodities. Last week, the stock market closed lower as investors fretted over softer-than-expected economic data. In an unexpected twist, hedge fund Amaranth Advisors reported big losses after betting wrong on natural gas.The broader market shrugged that off, but the Dow Jones Industrial Average -- which until recently was approaching record levels -- still fell 52.67 points, or 0.5%, during the week to 11508.10, leaving it up 7.4% for the year.Investors have done well buying shares of natural-resources companies like miners and loggers for the past five years. But with the commodity boom looking shaky, nervousness has risen. Also, concern about speculators exiting these markets could cause more havoc.Will commodity prices bounce back soon? A look at commodity currencies would indicate that such a surge isn't likely anytime soon."The next five to six quarters are going to be tough," says Abhijit Chakrabortti, head of global investment strategy at J.P. Morgan Chase & Co. "Where you could get a lot of concern is Canada and Australia."Adding to the vulnerability of these main commodity currencies is how speculators such as hedge funds trade in the foreign-exchange markets. Often, they use complex derivatives that can be difficult to sell in volatile markets. When faced with selling pressure from either redemptions or margin calls, these investors are more likely to dump their actual currency holdings than the derivatives, because it is easier."There's infinitely more liquidity in the currency markets," says Robert Kowit, head of global fixed-income investments at Federated Investors Inc.The Canadian and Australian dollars, up about 42% and 48%, respectively, since the end of 2001, have edged off their highs in the past few months. The Canadian dollar, called the "loonie" because the dollar coin features the common loon, has softened about 1.7% since hitting a high June 12 at just under 1.10 to the U.S. dollar. The



Australian dollar has fallen 2.6% to just under 76 U.S. cents from its high of about 78 cents on May 11.Booming energy prices have helped support the loonie, and Canada sells a great deal of natural gas and oil to the U.S. Many analysts agree that Canada, at least in the short term, could be hit hard if the U.S. economy slows significantly during the next 12 months. Canada relies on selling oil, lumber and cars across the border, but its merchandise trade surplus shrank in July to its lowest level in more than three years.The loonie's day in the sun may not be over, though. Analysts say it will strengthen again over the longer term -- assuming the U.S. growth cycle starts again in about 18 months. That is because of Canada's wealth of natural resources, especially oil and natural gas, which will continue to be in high demand for years to come."Canada has such a strong fundamental bid to its currency that it's hard to see the loonie falling very far," says Carl B. Weinberg, chief economist at research firm High Frequency Economics. "It doesn't mean people can't get killed on a day-to-day basis, though."John Rothfield, a currency strategist at Bank of America, estimates the Canadian dollar will end 2006 at the current rate of about 1.12 to the dollar but will strengthen to about 1.09 to the dollar -- its 12-month high -- by the end of 2007.The Australian dollar has a similar outlook. Highly exposed to base metals and precious metals due to its big mining industry, the Australian economy is poised to feel pressure if commodity prices fall further. The Journal of Commerce's base-metal index has fallen about 4% since July and is expected to fall an additional 10% over the next several months, according to Sue Trinh, a currency strategist at RBC Capital Markets in Sydney."That would limit the Aussie to go higher," Ms. Trinh says. She argues, however, that Australia's proximity to fast-growing China makes its long-term promise greater than Canada's.In Latin America, high copper prices helped to push the Chilean peso up about 22% against the dollar since the end of 2001. Recently, economic growth has slowed as copper prices have fallen, prompting the Chilean central bank to lower its forecast for 2006 gross domestic product.The peso, which in December reached about 510 to the U.S. dollar, has weakened to about 540. Bank of America expects it to soften to 570 in the first quarter of 2007 before ending at about 560 by the end of next year.

19. The Canadian dollar is known as thea. “duckie”b. “loonie” Correctc. “maple leaf”d. “moosie”

Sweden GetsInto the SpiritOf Privatizing


By DEBORAH BALL and JASON SINGER in London and JOE HALLINAN in ChicagoSeptember 26, 2006; Page C1http://online.wsj.com/article/SB115923518945273870.html

A change in the government of Sweden could uncork one of the liquor industry's hottest brands: Absolut vodka.The center-right opposition party defeated Sweden's ruling Social Democrats, and in its first week in office, it is talking about selling off and privatizing many state-owned companies, the crown jewel of which is Vin & Sprit AB, owner of Absolut.The vodka brand would be one of the biggest trophies to come on the market in the liquor industry. Absolut is the world's third-largest premium liquor by volume, after Smirnoff vodka and Bacardi rum. Vin & Sprit could be valued at €4.3 billion ($5.5 billion), analysts say.Any sale could be a year or more away. Still, liquor-industry executives are talking about potential buyers.Pernod Ricard SA's chief executive, Pierre Pringuet, said the world's No. 2 liquor maker by volume could be a possible bidder. "You would be surprised if I were to say that there was no interest on our part in such a brand," he said last week. "If the privatization of V&S is started, there is no doubt that all of the industry will be there."Absolut would help Pernod expand in the U.S., where it is currently the No. 4 competitor by volume, and just one-third the size of market leader Diageo PLC. However, Pernod would have to give up the distribution rights to Stolichnaya vodka, because Pernod's contract with Soyuzplodimport, the Russian producer of Stoli, blocks it from owning rival vodkas. Pernod is in talks with SPI to buy the brand outright.Other possible bidders could include Constellation Brands Inc., Fortune Brands Inc., Brown-Forman Corp., all of the U.S., and Bermuda-based Bacardi Ltd. Bacardi spent about $2 billion in 2004 to acquire boutique vodka brand Grey Goose."We look at all opportunities in the beverage alcohol space," said a spokesman for Constellation, who declined to elaborate about Absolut. Representatives at Fortune, Brown-Forman and Bacardi declined to comment.Analysts regard Fortune as a potential front-runner because it already distributes Absolut in the U.S. and is part of a joint venture with Vin & Sprit to distribute the vodka overseas. If any other player buys Absolut, it will have to pay a penalty to break the distribution agreements. Dresdner Kleinwort estimates that could cost as much as €300 million. Since Fortune wouldn't have to pay such penalties, it could potentially afford to pay a higher price for Vin & Sprit.Beer maker Anheuser-Busch Cos., which has indicated an interest in entering the spirits market, also could consider making a bid. The company has test-marketed a liqueur product, Jekyll & Hyde, in the U.S., and is known to be unhappy with the growth of spirits at beer's expense. A spokeswoman for the company declined to comment.Diageo, the world's biggest liquor company, likely couldn't bid for Absolut because it owns Smirnoff vodka and would face antitrust issues, analysts said.If an auction develops, analysts said, the price could soar. "It would be negligent of the Swedish government not to try to create an auction," said Andrew Holland, an analyst



with Dresdner Kleinwort. In such a case, he said, the price could go above €4.3 billion.

20. Vin & Sprit AB, owner of Absolut vodka is owned by the country of ______.a. Sweden Correct b. Polandc. Russia d. Italy

Heads or TailsBy JUSTIN LAHARTSeptember 27, 2006; Page C1http://online.wsj.com/article/SB115931557407274997.html

Stock-market investors seem convinced the U.S. economy is easing into a soft landing. Treasury-market investors are signaling something much more jarring. Who's right?Yesterday, the Dow Jones Industrial Average hit its highest level in six years. Its close of 11669.39 was just a small step from the all-time closing high of 11722.98 hit in early 2000.Stock prices are driven by earnings, interest rates and investor mood swings. Stock investors seem to think that -- despite a housing downturn -- the economy will keep growing enough for earnings to continue their upward march. They're also cheered that the Federal Reserve seems likely to hold off on more interest-rate increases, thanks in part to the recent drop in oil prices, which is taking pressure off of inflation.Their favorite analogy is 1995, when the Fed stopped raising short-term interest rates. The economy slowed just a little, and the Dow rose 33%.Bond investors look at the same backdrop but see something more severe. They worry most about inflation. They bid up bond prices when the economy slows and eases inflation pressures. Bonds have rallied lately, sending yields on 10-year Treasury notes (which move opposite their price) to seven-month lows near 4.5%. That's well below yields on short-term Treasury securities, like three-month bills. When long-term yields drop much below short-term yields, it often indicates that investors foresee the economy stalling and forcing the Fed to lower rates to revive it.When the Fed stopped raising rates in early 1995, long-term yields were solidly higher than short-term yields. Back then, in other words, the bond guys didn't foresee a sharp slowdown as they do now.Some analysts say the bond guys are wrong this time."The recent bond rally started from an artificially low yield level," Jason Rotenberg, of money manager Bridgewater Associates, wrote in a note yesterday. Bridgewater has been calling for a bond selloff for weeks. Mr. Rotenberg says the bond market is myopically watching a struggling housing market and ignoring other signals of the economy's strength.If the bond market's assessment of the economy is too morose, the stock market's might be too sanguine. In either case, somebody could end up with unhappy returns.

21. Stock prices are driven by



a. earnings b. interest ratesc. investor mood swingsd. All of the above Correct

How Now Dow?By JUSTIN LAHARTSeptember 28, 2006; Page C1http://online.wsj.com/article/SB115940559037076193.html

Stocks look a lot cheaper today than they did in January 2000. That's when the Dow Jones Industrial Average hit its all-time closing high. With that record just a few points away, the question investors must answer: Are stocks cheap enough?With the Dow's close yesterday at 11689.24, its 30 component stocks trade at 19 times their combined earnings per share of the past 12 months, according to Thomson Financial. That's well below the price/earnings ratio of 26 the Dow carried when it hit the 2000 record. The lower a P/E ratio, of course, the cheaper a stock.But since the late 1980s, the Dow's P/E has tended to be a bit lower than it is now. If earnings were about to soar, that wouldn't matter. But the economy seems to be slowing down, and company profit margins are already as wide as they've ever been. After four years of strong growth, in other words, a new profit boom seems unlikely.For the Dow to go much higher, interest rates would have to fall or investors would have to tolerate more expensive stocks. That can happen. The big move the Dow started in late 1994 and ended in 2000 was marked by progressively higher P/E ratios. But the Dow's P/E at the beginning of that march was less than 17, meaning it had more room to climb. It also came with an unsustainable euphoria in the markets about stocks and a steep decline in long-term interest rates. Today, long-term rates are exceptionally low and seem unlikely to go much lower."The big driver of the market here has been the fact that [interest] rates and oil prices have come down," says Byron Wien, chief investment strategist at hedge fund Pequot Capital Management. "The question is: What does it do from here? My view is that both earnings and interest rates will be pushing against you."Back when the Dow hit its record in January 2000, Mr. Wien was one of Wall Street's biggest bears on the stock market. Now he says he's just cautious. And that might be the right way to view the impending party when it sets a new record.

22. The big driver of the stock market has been the fact that _______ have come down, according to Byron Wien, chief investment strategist at hedge fund Pequot Capital Management.a. interest rates and oil prices Correct b. interest rates c. oil pricesd. consumer demands

Hold Your Breath



By VANESSA.O'CONNELLSeptember 29, 2006; Page C1http://online.wsj.com/article/SB115948957791577467.html

The Dow industrials finished a whisper away from a record close yesterday, and investors can thank the world's smokers and a few sympathetic judges for helping.Among the Dow's 30 components, the best-performing stock in the past six years -- and one of the three biggest contributors to the average's gains -- is Altria Group, parent company of Philip Morris USA, the nation's largest cigarette maker.Since January 2000, when the industrials hit their record of 11722.98, Altria's share price has increased by more than a factor of three, from $24 a share to $76.97.But events this week suggest it might not keep marching higher.The big factor behind Altria's rally has been a string of legal victories in some once ominous-seeming antitobacco lawsuits brought by smokers and the U.S. Justice Department. The victories seemed to set the stage for Altria to spin off its 88%-owned Kraft Foods Inc. unit, the biggest food company in the U.S.Spinning off Kraft was impossible when Philip Morris was under the shadow of so much litigation, because Altria could have been accused of transferring assets in order to avoid paying cigarette plaintiffs.Philip Morris's strategy of challenging nearly every judgment against it has paid off. Many large plaintiff awards have been reduced on appeal, and the higher courts have ruled that some cases can't be treated as class actions. That has Altria investors clamoring for the long-sought corporate breakup.A Kraft spinoff would allow the maker of Oreo cookies and Velveeta cheese to trade without being weighed down by uncertainty over the long-term prospects of the tobacco business. A new chief executive officer took charge of Kraft this summer, seeming to set the stage for a spinoff, something investors thought might be announced at the company's approaching Oct. 25 board meeting.Now it looks like they'll have to wait longer. This week, a federal judge granted class-action status to tens of millions of smokers of "light cigarettes" -- exposing tobacco companies to a new $200 billion legal claim. The tobacco companies vow to appeal. But in the meantime, another Kraft-spinoff delay seems likely.So investors will need to keep holding their breath ... for the Dow industrials and the Altria restructuring they've been waiting for.

23. Among the Dow's 30 components, the best-performing stock in the past six years and one of the three biggest contributors to the average's gains is _____, parent company of Philip Morris USA.a. Altria Group Correctb. PUGGOc. Salem Groupd. AC Group

Questions 24 – 26 from Personal Journal, Section D



Leading by Example: Research ExploresMoms' Role in Girls' Health and NutritionBy TARA PARKER-POPE September 26, 2006; Page D1http://online.wsj.com/article/SB115922623333873656.html

Most parents try to set a good example for their kids. But increasingly researchers are focusing on the uniquely powerful influence a mother's health behaviors have on her daughter.A number of studies now show that the choices a mother makes -- from the beverages she drinks to where she keeps the family snacks -- dramatically affect her daughter's nutrition, long-term health and risk for being overweight. This week, some of the nation's top nutrition researchers are gathering in New York City to discuss the importance of mother-daughter role modeling and the long-term implications for a woman's health.Although fathers obviously are important role models to their children, researchers pay special attention to the role of mothers because women traditionally make food and nutrition choices for the family. And because girls are at higher risk than boys for eating disorders when they are young, and for osteoporosis later in life, much of the existing research focuses on girls and how eating patterns, calcium consumption and exercise habits are influenced by mothers. However, researchers say the lessons learned from watching mothers and daughters likely can be useful for parents and children of both genders.The overall lesson is obvious but not well-followed: It's what you do, not what you say, that has the biggest impact on a child's health. A number of studies show that a mother's own nutrition choices appear to be far more influential than any other attempts she makes to control what her child eats. One recent study looked at about 200 girls, some of whom consumed healthful diets with less than 30% fat and others who ate high-fat diets. Notably, mothers of girls in the high-fat group were more likely to attempt to restrict food and pressure their daughters to eat differently. At the same time, mothers of high-fat eaters were far more likely to be high-fat eaters themselves, according to the 2001 study in the journal Pediatrics."Parents often don't realize how much opportunity they have to shape what kids are doing," says Leann Birch, director of the Center for Childhood Obesity Research at Pennsylvania State University in Philadelphia and co-author of the study. "In some ways we are much better off to encourage parents to be good models, rather than to tell kids to eat their vegetables. If parents would just shut up and do it themselves, they would be much more successful," in keeping kids healthy.And numerous studies show that restricting what kids eat typically backfires. Children of women who frequently attempt diets or who put treats far out of reach are more likely to binge on sweets and overeat when they are finally given access to the forbidden foods. Dr. Birch cites one study of preschoolers that looked at how the availability of certain snacks influenced how much the kids wanted to eat them. The researchers used fig cookies, making them available at any time or putting them away in a glass jar. The result: Kids didn't pay much attention to the snacks when they were easily available, but clamored for them when they were restricted.



"They paid a lot more attention to the things that had been restricted," says Dr. Birch. "They took more and they ate more."Surprisingly, the beverages a mother chooses to drink often have a profound influence on her daughter's health. Beverages are often packed with calories that don't fill you up, and studies have shown that children who consume high levels of sodas, juice and flavored drinks are at higher risk for being overweight. Children of women who often consume soft drinks typically drink more soda and less milk than children of women who don't regularly consume sugared soft drinks, according to a 2001 study in the Journal of Nutrition that was funded in part by the dairy industry.Part of the reason a mother's beverage choice makes such a difference is that mothers tend to do the grocery shopping and are likely to stock the fridge with the type of drinks they consume themselves. But mothers also serve as role models.Role modeling is also particularly important when it comes to exercise. Studies show that both fathers and mothers can influence a child's physical-activity level simply by exercising themselves. But mothers are uniquely important for two reasons. Since kids tend to model their exercise behavior after the same-sex parent, a mother's exercise habits are particularly important because studies show that compared with boys, the average girl's exercise level drops dramatically after the age of 9. And a mother's views about exercise also matter because they tend to manage family logistics. Mothers who make the effort to sign up kids for sports and chauffeur them to practice are more likely to have kids who exercise."We're trying to emphasize to the moms that they're being watched whether they realize it or not," says Christina Economos, assistant professor at the Friedman School of Nutrition at Tufts University in Boston, who is speaking at the role-modeling summit this week. "They're going to have a big impact on their daughter's lives and the choices they make."

24. Mothers have a big impact on their daughter’s health in the following waysa. women traditionally make food and nutrition choices for the familyb. actually eating healthy foods themselves and not just telling their kids to eat healthyc. mothers can influence a child's physical-activity level simply by exercising themselves d. All of the above Correct

A Victory for the EconomistsWho Want InvestorsTo Change Their BehaviorBy JONATHAN CLEMENTS September 27, 2006; Page D1http://online.wsj.com/article/SB115931757934575041.html

Congress has voted, and now it's official: Investors are irrational.Thanks to this year's pension law and yesterday's proposed rule from the Labor Department, it's becoming easier for companies to automatically enroll employees in their 401(k) plans and thereafter increase the amount these employees save each year.



That's good news for ordinary investors, who often foolishly fail to sign up for their 401(k).But it's also a triumph for behavioral-finance economists, who have championed the idea of automatic enrollment. Expect further triumphs in the years ahead. It seems we often goof when making financial decisions -- and Wall Street and corporate America are turning to behavioral finance for help.• Getting framed. All this is a tad controversial. In building their models, economists have traditionally assumed that people behave rationally, and many view behavioral finance as little more than a series of clever anecdotes. Nonetheless, behavioral finance has caught the attention of business executives seeking to improve decision making by employees and customers. To date, the biggest impact by far has been on the 401(k).In the 1990s, the prevailing wisdom was that, if you gave 401(k) investors enough information and enough investment choices, they would make wise decisions. The reality: Some 22% of eligible employees fail to participate in their company's 401(k), according to Chicago's Profit Sharing/401(k) Council of America. And those who do participate often end up with undiversified portfolios, stashing too much in company stock or leaving everything in a money-market fund.Enter behavioral-finance economists. Their stunningly simple insight: How choices are framed can greatly affect investors' decisions."A traditional 401(k) is a voluntary regime," says Stephen Utkus, director of the retirement-research center at Vanguard Group, the Malvern, Pa., fund company. "You have to make all these decisions. But with the new 401(k), it's an opt-out regime."If employees in today's cutting-edge 401(k) plans don't make a choice, they are automatically enrolled, the amount they save each year is automatically increased, and their contributions are directed into a diversified portfolio. Employees can always opt out -- but many don't."It gets them to do what they would probably do anyway, if they had taken the time to think about it," says Shlomo Benartzi, an economics professor at the University of California, Los Angeles.Prof. Benartzi, together with the University of Chicago's Richard Thaler, devised the "Save More Tomorrow" program, in which 401(k) investors have their contributions automatically increased over time. He also recently launched the Behavioral Finance Forum, which aims to help financial firms put behavioral-finance ideas into practice.• Needing help. The Behavioral Finance Forum should have plenty of work. We may now get ample help with our 401(k). But we struggle with many other financial decisions. Consider three common mental mistakes. • We insure against small risks, even as we ignore the big ones. For instance, we'll purchase extended warranties for our television set and our computer, but we won't bother with long-term-care or life insurance. To be sure, not everybody needs these policies. Still, according to insurance researchers Limra International in Windsor, Conn., just 41% of adults have bought life


insurance on their own. Meanwhile, Washington's American Council of Life Insurers says a mere 10% of seniors have long-term-care insurance.Ted Mathas, chief operating officer at insurer New York Life, believes most folks know they need coverage. "But there's no motivation to act on any given day," he says. "People only buy because they talk to an insurance agent or because there's a traumatic event, such as their third cousin dying."• Over the past decade, mutual-fund companies have embraced the Web, offering easy account access and heaps of performance data. Yet, if anything, all this information has made us more skittish about the market and more likely to chase hot funds. "Maybe we're providing too much information, and we're providing it too often," says UCLA's Prof. Benartzi. "People have more chance to focus on short-term performance."To counteract this, he says, mutual-fund companies might redesign their Web sites. One possibility: Put more emphasis on long-term performance and on whether investors are on track to meet their goals.• When we hear how much money we need for retirement, the sum can seem so daunting that many folks throw in the towel. What to do? T. Rowe Price Group has shifted strategy, instead telling clients what sort of retirement lifestyle they will have based on their current portfolio and savings rate. "We'll say, 'You can afford 20% of your current lifestyle in retirement,' " says Christine Fahlund, a senior financial planner at the Baltimore fund company. "We don't tell them about the humongous amount they need to accumulate and instead tell them about the percentage of salary they need to save each year. We reframed the problem in such a way that people can touch it and feel it."

25. Three mistakes that are often made when it comes to financial planning area. being over-insuredb. that we insure against small risks, even as we ignore the big ones Correctc. only 22% of eligible employees participate in their company's 401(k)d. saving too much for retirement

The Mommy Drain: EmployersBeef Up Perks to LureNew Mothers Back to WorkBy SUE SHELLENBARGER September 28, 2006; Page D1http://online.wsj.com/article/SB115940435130676163.html

Amid the joys and rewards of having a baby, taking maternity leave can touch off a series of losses at work. Stepping out for childbirth often means giving up perks, status, bosses' attention and bonds with colleagues. All this can make it easier to break the umbilical cord -- the one that once bound you to your job, that is -- and to quit or defect to another employer.



One result for employers has been a damaging loss of skilled employees. Among working mothers who return to work within a year of childbirth, the proportion who go back to the same employer is declining, Census data show.The mommy drain has become serious enough that a few companies are embracing some real innovations to stop it. These employers, from Bank of America and Accenture to Booz Allen Hamilton and DuPont, are going beyond flexible work arrangements to find solutions to nitty-gritty problems for mothers on leave such as loss of pay, bonuses and career prospects.A 2005 study of 1,092 companies showed a shift away from offering full pay during maternity leave; only 7% of employers surveyed by Families and Work Institute, New York, offered new mothers any pay at all after the initial six- to eight-week period of medical disability following childbirth. But a separate study, of 87 leading employers recognized for their family-friendly benefits, showed that 59% offer extended maternity-leave pay."The companies that are leading edge are" sweetening the pot for mothers, says Ellen Galinsky, the institute's president. Fueling the pattern, says Phil Lacy of consulting firm Towers Perrin, is competition "for all these high-energy women in their late twenties or thirties who are having children."Some employers are seeing grass-roots demand. Bank of America found in a 2003 survey of more than 100,000 employees that better maternity benefits was a big concern. The company responded by offering as many as eight weeks' parental leave at 100% pay -- not only for mothers, but for fathers as well. Two years ago, PricewaterhouseCoopers also enriched its parental leave plan by adding 15 paid days off to the paid disability period for moms. (Dads get the 15 paid days off, too.)Other firms are building better alternatives to the Mommy Track. In a plan called "internal rotation," Booz Allen Hamilton is creating weighty internal jobs for consultants who need a break from heavy travel, but still want to do substantive work. After returning from maternity leave, Cindy Vanderlinde-Kopper, who once traveled two to four days a week, switched last year to an internal position as a business-development director. "There have been bumps" in the road clarifying her new role, she says. "But I've been stimulated and interested in what I'm doing, and it allows me to progress" on a career path.Accenture is helping women extend maternity leaves. Under its "Future Leave" program, the company early this year began helping employees set aside part of their pay in anticipation of financing up to three extra months of leave, with benefits; 12 of the 36 participants so far have been women tacking the time onto their maternity-leave allowances, says Jill Smart, a senior managing director. The program enabled Aimee Wilson, a manager in Seattle, to cobble together a total of 7½ months of time off, including vacation time, with her new baby this year. Ms. Wilson says she had considered quitting, but the long leave, plus returning to work part time, kept her on the job.Other companies are amending pay-for-performance plans to make sure women aren't unfairly deprived of bonuses and incentives because they are out on disability leave, says Michael Carter, a vice president with Hay Group, a consulting firm. Under such plans, anyone on disability leave -- women on maternity leave tend to be the biggest group -- may risk failing to hit annual targets, even though she may be performing


very well while she is at work. Increasingly, Mr. Carter says, employers are pro-rating annual targets, enabling such employees who meet the pro-rated objectives while at work to receive performance rewards.Many major employers are making improvements in this area. DuPont formalized written policies in 2003 to ensure managers are consistent in giving employees on disability leave the performance rewards they deserve, a spokeswoman says.To keep mothers in the loop, J.P. Morgan Chase, Ernst & Young and Deloitte & Touche are offering moms discussion boards and mentoring through employee networks run by SelectMinds, a corporate social-networking provider, says Anne Berkowitch, SelectMinds' chief executive. The networks help mothers keep abreast of career opportunities and new developments, she says.Another strategy: Simply making mothers feel wanted. Children's Healthcare of Atlanta throws parties for expectant mothers with prizes, gifts and a fashion show of corporate maternity wear. "We want you back," Linda Matzigkeit, a senior vice president, tells attendees. The hospital concern is retaining 86% of mothers after maternity leave, up from 63% in 2004 before the showers began. One possible reason, says expectant mom and registered nurse Beverly Alvarez: The events "make us feel like Children's really cares about us."

26. Perks offered to encourage retention of employees who are new parents include a. extended maternity leavesb. “internal rotation” in which employees still do substantive work but do not have to travel as muchc. amending pay-for-performance plans to make sure women aren't unfairly deprived of bonuses and incentives because they are out on disability leaved. All of the above Correct


the wall street journal weekly · web viewjustine kanter, development manager of pearson plc,...

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