***
***
source: http://mjperry.blogspot.com/2009/11/us-share-of-world-gdp-remarkably.html
" ... might mistakenly assume that the
significant economic growth over the last 40 years in China, India and
Brazil has somehow come "at the expense of economic growth in the U.S." ...
Because of advances in technology, innovation, and significant
improvements in U.S. productivity, America's share of total world
output has remained remarkably constant at a little more than 25% ..."
***
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Online: Class
October 27, 2007; Page W2
The University of California, Berkeley, is letting millions of people sit in on its classes, free.
The school is posting full-length videos of its lecture courses on YouTube. So far, it has uploaded more than 200 videos to the site, showing courses ranging from human biology to physics. Popular lectures include Google co-founder Sergey Brin's open discussion of search technology and neuroscientist Marian Diamond's classes on human anatomy (pictured).
![[Downloads]](http://online.wsj.com/public/resources/images/PT-AG756_PK_Dow_20071026150617.jpg)
The school has equipped 20 classrooms to record
lectures and will capture about 50 courses this semester, or about 3%
of the course catalog. Eight courses are available on YouTube; the rest
can be found at webcast.berkeley.edu. Shishir Kakaraddi, a 21-year-old engineering student
in Bangalore, India, recently watched Mr. Brin's lecture on the site
and liked it so much he invited a couple friends from school to watch
it with him a second time. "I only wish there was more computer
science," he says of the YouTube course offerings. Other schools are joining the program, too. Two weeks
ago, the University of Southern California launched its own YouTube
channel, which includes a lecture from Homeland Security Secretary
Michael Chertoff. The Berkeley YouTube channel has been viewed about one million times since its launch earlier this month. HOW TO FIND IT: Go to www.youtube.com/ucberkeley. Write to Jamin Brophy-Warren at Jamin.Brophy-Warren@wsj.com
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Get a free credit score. Several Web sites -- Credit.com, CreditKarma.com and Quizzle.com -- allow consumers to check their credit scores free. Although CreditKarma and Quizzle offer scores developed by the credit-reporting companies, including TransUnion and Experian, and not the widely used FICO score developed by Fair Isaac Corp., they can still provide users with a quick snapshot of where they stand. At CreditKarma.com, consumers can estimate how certain actions -- such as applying for a new card, being late on a payment or paying on time -- will change their score.
It's also a good idea to check your detailed credit reports at least once a year, which you can do free of charge at annualcreditreport.com.
Unprepared for the Rainiest of Days
HEY! Good news! I’ve thought of some new things to worry about. Let’s run through some of the threats hanging over our economy:
First, there’s that gigantic trade deficit, approximating $800 billion a year and growing. The deficit tab for oil alone is almost $1 billion a day.
The only way we can square it up with our creditors is to sell them chunks of our country. We are like a rich drug addict who sells off the family heirlooms to finance his habit. Our habits are oil and Japanese and German cars and French wine and Bolivian tin and Chilean copper, and, little by little, we are transferring ownership of our nation’s wealth to pay for it.
Some sour day, the world will look at our deficits and at our dollar and say it doesn’t want to hold our greenbacks as reserve currency any more. It will say, “I will take the euro instead,” or a basket of currencies — which is already happening. Then the dollar will fall, maybe drastically, and the trade deficit will soar. After all, we’re addicts who can’t stop buying foreign resources and products. When that happens — if it does — the inflation will be staggering.
And then, of course, we end up as the world’s leading industrial basket case, a ward of China in matters economic, our freedom of maneuver hemmed in drastically because foreigners own so much of us and of our labor to service the debts.
Then there is Medicare, which has an unpaid liability of about $34.2 trillion over the next 75 years, and more like $75 trillion over a longer period. This is perilously close to the value of all of the physical assets of the United States. That has certain implications for whether we can really count on Medicare as we age.
Topping all of these worries is the endless supply of people who hate America and want to blow themselves up to hurt us in many corners of the world, including the energy heartland, the Middle East. And of course, there’s Vladimir V. Putin’s Russia, with a stranglehold on Europe’s energy needs. Mr. Putin’s Russia has more power over Western Europe than Stalin ever dreamed of. Is this good for a stable world economic order?
Then there’s the apparent — yes, apparent — need to cut back on hydrocarbon use to keep the earth from overheating, and the strain that this puts on the economy.
But here’s the new one (Did you think I forgot?): the nation’s average hourly wage per worker, adjusted for inflation, has not grown since my old boss, R.N., was president.
One big reason is that we have a labor force that includes a big lump of low-paid people, and that this lump is growing as fast as they are willing to work. Possibly, the composition of the labor force predicts that the growth of the average wage will be sluggish for some time. This has an effect on consumption of consumer goods, a vast swath of the economy. Eventually, it might change, but it might not. This will have an impact on our ability to compete with other nations in terms of labor-force productivity.
As Lenin famously asked, “What is to be done?” Many years ago, my dad told me a fine aphorism: “In troubled times, it’s better to have more money than less.”
The future I see is possibly economically shaky. I hope I am wrong. But if I am not, we will need even more money than we ever dreamed if we want to retire.
When gasoline is $10 a gallon, when the dollar is worth one-third of a euro, when we have had to raise interest rates sharply to defend the dollar, when the government tells us that anyone with income of over $60,000 doesn’t get Medicare any more, when the bill for national defense requires a major tax increase — we are going to wish we had saved a lot more for retirement.
The world is a troubled place. To my old eyes, it does not look as if it’s getting any less troubled.
In such times, it is extremely good to have large savings. This seems basic. We should all own lots of foreign stocks, lots of diversified exchange-traded funds and index funds and very carefully chosen annuities. But very few of us do. Forty percent of boomers have no savings for retirement. Median savings for retirement among the boomers is barely $25,000. Much of the savings is concentrated among the wealthy.
It will be too late when we’re 75, or even when we’re 65. We have to start now. I visited an elderly friend in the hospital in Redwood City, Calif., two weeks ago.
“What wisdom do you have to offer ?” I asked him.
“It’s better to be rich and healthy than sick and poor,” he said.
Start saving, right now.
Ben Stein is a lawyer, writer, actor and economist. E-mail: ebiz@nytimes.com.
Osprey in Maryland USA
http://www.nytimes.com/2007/06/02/business/02money.html?pagewanted=print
More Advice Graduates Don’t Want to Hear
Last year at this time, as college graduates walked out into the world, I wrote a column giving advice on how they could save money.
In droves, parents sent the column to their children. And some of those children wrote to me to vent. What I suggested was impractical, many said. How would you like to try to live on $40,000 a year in Washington or San Francisco, several asked.
What I was proposing was not radical. It was mostly the simple things my mother had drummed into me. It was advice like diverting 10 percent of your income to savings before anything else and ignoring raises and putting them into savings, too. Learn to cook, I said, and never borrow money to pay for a depreciating asset.
I also suggested cutting out the latte habit, which was my symbol for those little things in life that when turned into a habit, add up to money that could have been spent on something worthwhile and memorable.
Other people, my wife among them, pointed out that I may have been too draconian on that point. Consistent savings is a lot easier if there are small rewards along the way, otherwise, life seems as if it is just one bowl of cold grass porridge after another.
Fine feedback, indeed, and my wife’s counsel reminds me that I should have added one other bit of advice: find a partner and stay together. Study after study show that two can live more cheaply together than each alone and that divorce is the great destroyer of wealth.
But, dear graduates, the crux of the advice is still compelling. While there may be a debate among economists about how much 50- and 60-year-olds should be saving for retirement, there is little dispute about how much the young should save: more.
Saving while young is critical. It isn’t just because of the power of compounding. By that I mean that if you start saving now it will build to a larger nest egg by the time you are 65 than if you wait to start at 45. Or to put it another way, you can save a smaller amount now rather than a larger amount later.
Bank $250 a month for 40 years in a I.R.A. or a 401(k) and you will receive about $500,000, assuming a 6 percent return. Start at age 45 and you would have to put in $1,078 a month to generate the same amount by age 65.
But there is another compelling reason to get into the habit of saving. (Here is where this column also turns into advice for the older folks who are giving you this to read.) People who save a lot get used to a lower rate of consumption while working, so less money is needed in retirement.
Stretching to save a little more yields a double dividend. You accumulate more assets and you lower the amount you will need in retirement because you will not have the habit of spending extravagantly to feel fulfilled.
Inevitably though, we return to the question: How can you possibly afford to put away that much? If you are only making $40,000, a not-untypical starting salary for a college-educated professional in a big city, the weekly gross of $769 works down to $561 in take-home pay after income taxes and payroll taxes for Social Security and Medicaid.
Were you to divert 10 percent of your salary to a 401(k) plan, the bottom line becomes $509.
In other words, a regular habit of savings costs you $52 a week. You easily frittered that away last week on things that you cannot even recall this week. A useful exercise that proves the point: For a week, try to list everywhere you spend cash or use your credit card.
Could you save another 10 percent a week, or $50? If you do, you are nearly set for life.
Can you live on $1,950 a month? Rents being what they are in certain cities like New York, San Francisco or Washington, sure, it will be tight. People do it by finding a roommate and watching their expenses (or asking for an occasional handout from Mom and Dad).
There may be another compelling reason to save and that is that while many aspects of retirement savings are predictable, the big unknowable is health care costs. “If you believe in the logic of the life cycle model, then once you get used to peanut butter, all else follows,” said Jonathan Skinner, a economics professor at Dartmouth College who has studied retirement issues and recently wrote a paper titled “Are You Sure You’re Saving Enough for Retirement?” for the National Bureau of Economic Research. “That’s the assumption that I am questioning: Do people want to be stuck in peanut butter in retirement?”
He said he came to the conclusion that a strategy to reduce retirement expenses “will be dwarfed by rapidly growing out-of-pocket medical expenses.” He noted projections based on the Health and Retirement Study, a survey of 22,000 Americans over the age of 50 sponsored by the National Institute on Aging found that by 2019, nearly a tenth of elderly retirees would be devoting more than half of their total income to out-of-pocket health expenses. He said, “These health care cost projections are perhaps the scariest beast under the bed.”
As Victor Fuchs, the professor emeritus of economics and health research and policy at Stanford University, told me, money is most useful when you are old because it makes all the difference whether you wait for a bus in the rain to get to the doctor’s appointment or you ride in a cab.
“Saving for retirement may ultimately be less about the golf condo at Hilton Head and more about being able to afford wheelchair lifts, private nurses and a high-quality nursing home,” Professor Skinner said.
His best advice for people in their 20s and 30s: maximize workplace
matching contributions, seek automatic savings mechanisms like home
mortgages and hope “that their generation can still look forward to
solvent Social Security and Medicare programs.”
Over the last two years I’ve been dispensing advice in this space about how to spend and save more wisely. This will be my last column for a spell as I am taking on editing duties that give me little time for reporting. But before I go, I want to remind the young graduates, their parents who scrimped and saved to get them there, and anyone else who stuck with me this far that are a few other rules of life worth considering.
Among them are the following. Links are available at nytimes.com/business:
¶Never pay a real estate agent a 6 percent commission.
¶Buy used things, except maybe used tires.
¶Get on the do-not-call list and other do-not-solicit lists so you can’t be tempted.
¶Watch infomercials for their entertainment value only.
¶Know what your credit reports say, but don’t pay for that knowledge: go to www.annualcreditreport.com to get them.
¶Consolidate your cable, phone and Internet service to get the best deal.
¶Resist the lunacy of buying premium products like $2,000-a-pound chocolates.
¶Lose weight. Carrying extra pounds costs tens of thousands of dollars over a lifetime.
¶Do not use your home as a piggy bank if home prices are flat or going down or if interest rates are rising.
¶Enroll in a 401(k) at work immediately.
¶Postpone buying high-tech products like PCs, digital cameras and high-definition TVs for as long as possible. And then buy after the selling season or buy older technology just as a new technology comes along.
¶And, I’m sorry, I’m really serious about this last one: make your own coffee.
= == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = ==
YEN CARRY TRADE // REVERSE YEN CARRY TRADE
= == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = == = ==
http://www.bloomberg.com/apps/news?pid=20601085&sid=aIKEc7rlWUDQ&refer=europe
Housewives Outmaneuver UBS, Deutsche Bank Trading Yen (Update1)
By Kosuke Goto
June 18 (Bloomberg) -- Japanese businessmen, housewives and pensioners betting against the yen in their spare time are wrecking the forecasts of the world's biggest currency traders.
The yen has slumped 4.6 percent to a 4 1/2-year low against the dollar this quarter, making it the worst performer among 72 major currencies and confounding predictions by strategists at Deutsche Bank AG and UBS AG for gains of about 1 percent.
The banks didn't reckon on the risk appetite of Japanese individuals, who are borrowing money like never before to buy currencies with higher yields. They tripled their trading in the year ended March to a record $11 billion a day, according to Tokyo-based Yano Research Institute Ltd., publisher of an annual report on the business. Globally, currency trading by retail investors rose 54 percent in 2006, according to research firm Greenwich Associates in Greenwich, Connecticut.
``Japan's interest rates are too low,'' said Hiroshi Ono, a 40-year-old sales clerk at a telephone company in Tokyo. Ono said he has made about $17,000 since March by borrowing $200,000 of yen and buying U.S. dollars to take advantage of the 4.75 percentage-point difference between Japanese and U.S. interest rates.
Japanese investors are borrowing yen at the central bank's 0.5 percent overnight lending rate and buying higher-yielding currencies in New Zealand, the U.K., Australia and even Brazil to increase returns on 1,536 trillion yen ($12.5 trillion) in savings. The strategy is called the carry trade.
Low Rates
Japan's overnight rate, the lowest among major economies, is 7.5 percentage points less than New Zealand's key rate and 3.5 percentage points below that of the European Central Bank.
``Japan's margin traders have the power to support currencies against the yen,'' said Derek Halpenny, a strategist in London at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's biggest lender. ``We estimate they make up 15 percent of yen trading in Tokyo hours. Maybe even more.''
The yen slumped 1.4 percent last week, its biggest drop in five months, to 123.44 per dollar. It dropped 1.5 percent to 165.26 to the euro. The currency traded at 123.46 per dollar and 165.28 per euro at 9:08 a.m. in Tokyo. Halpenny predicts the yen will reach 125 per dollar before ending Sept. 30 at 123.
``The yen carry trade is still alive,'' said Koji Fukaya, senior currency strategist in Tokyo at Deutsche Securities, a Deutsche Bank subsidiary. ``Capital outflows from Japan remain steady and more than we expected.''
Bane of Pros
The Frankfurt-based bank, the biggest currency trader according to Euromoney magazine, forecast at the end of March that the yen would trade at 117 per dollar by June 30, matching the median of 39 analysts, traders and investors in a Bloomberg News survey. Zurich-based UBS, ranked second, predicted 116.
In late December, Deutsche Bank forecast the yen would rise to 113 yen by the end of the first quarter and UBS predicted 111. It fell to 117.83.
UBS and Deutsche Bank are sticking to their forecasts for a stronger yen, saying central bank curbs on money supply will starve the carry trade.
``Tighter global liquidity will contribute to increased volatility and enable the yen to strengthen as the carry trade is unwound,'' said Ashley Davies, currency strategist in Singapore at UBS, which expects the yen to gain to 121 per dollar in a month and to 117 in three months.
Global Trading
Retail investors' strategy of selling yen during rallies helped push volatility implied by one-month dollar-yen options on June 5 to 5.85 percent, the lowest since the Bank of Japan began compiling data in August 1992, compared with 10.15 percent on March 5. Lower volatility may encourage carry trades, as it implies smaller exchange-rate fluctuation risk.
``They are the bane of professional currency traders,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., who has been trading in Japan's capital city for 25 years. ``It's becoming hard to make money as the dollar-yen doesn't move as it used to, because of their constant buying on dips.''
Global trading by investors other than banks, fund managers and companies surged 54 percent last year, said Peter D'Amario, a consultant at Greenwich Associates. The category, which includes retail investors, accounted for 16 percent of trades handled by 1,700 firms surveyed, up from 10 percent a year earlier. It grew 80 percent in Europe, 55 percent in Asia Pacific and 30 percent in the Americas.
In Japan, individuals have opened 600,000 so-called margin trading accounts at brokerages that lend money for currency bets, 80 percent more than a year ago, according to Yano Research.
Buying on Dips
When the yen fell to a two-week low of 162.20 yen against the euro on May 25, Naoko Ogawa, a 34-year-old freelance writer, used a 1,000 euro ($1,300) deposit to buy 10,000 euros. She sold four days later, close to a then-record high of 164.29 yen.
``You just need to buy the dollar and the euro on dips, then sell them at a profit,'' said Ogawa, who added that she has made a 20 percent return on her 1 million yen trading account since December. ``It's better than stock trading, as you can rely on daily interest.''
Deposits in margin trading brokerages have risen 60 percent to $4.9 billion in the past year, Yano Research found. While that's about 2 percent of the $272 billion that Japanese individuals have put into mutual funds that invest overseas, borrowing typically makes their positions 10 to 30 times larger.
Real, Lira
Japanese traders stepped up their purchases of the New Zealand dollar when the Reserve Bank of New Zealand sold its currency on June 11, weakening the so-called kiwi by as much as 1.8 percent.
Margin traders' net long positions in the New Zealand dollar against the yen doubled to $347 million on that day from $180 million on June 8, according to data from Tokyo Financial Exchange. Long positions are bets that a currency will rise. A carry trade that bought the New Zealand dollar funded with yen would have returned 14 percent so far this year.
Deutsche Bank officials began weekly visits with 30 Japanese margin trading brokerages after the orders they channel through the firm doubled in a year, said Drew Bradford, head of global finance and foreign exchange in Tokyo, where the lender's currency sales team has tripled to 17 in a year.
``The growth is phenomenal,'' he said. ``They are buying pounds, Australian and New Zealand dollars. The more adventurous are looking at the Brazilian real and Turkish lira.''
Risk Appetite
In an April report, the Bank of Japan highlighted the risk that investors may make imprudent decisions based on ``favorable'' assumptions about foreign-exchange and interest rates.
Governor Toshihiko Fukui followed that with another warning, saying expectations that rates will stay low could invite ``inefficient'' investment. ``If stock and bond markets or the yen carry trade become unbalanced and unwind, that would have a negative effect on the economy,'' he told lawmakers on June 5.
When the carry trade collapsed in 1998 following Russia's debt default, the yen jumped 20 percent in less than two months. The biggest challenge to the strategy this year came when Chinese stocks slumped on Feb. 27, prompting fund managers to cut riskier investment and pay back yen loans. The yen rose 2.3 percent in a single day, the biggest gain since July 2005.
Japan's recovery has actually helped to weaken the yen by increasing the appetite of local investors for risk, said Masafumi Yamamoto, currency economist at Nikko Citigroup Ltd. in Tokyo and a former Bank of Japan currency trader.
``It is likely Japanese retail investors will continue to increase their foreign currency exposure, especially to that of high-yielding currencies like the New Zealand dollar,'' he said.
To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net .
Last Updated: June 17, 2007 20:19 EDT. . . . . . . . . . . . . .
Popular Advice You Shouldn't Take
July 1, 2007
If you're in your 20s, the world may not throw money at you -- but you'll get plenty of free financial advice.
For instance, you have no doubt been told to save diligently, fully fund your employer's 401(k) plan and avoid credit-card debt. And those are all good suggestions.
But there are other suggestions that aren't quite so good -- including these four popular pieces of advice.
1. AMASS CASH
If you are just out of school, you probably have all kinds of financial ambitions, including buying a car, purchasing a home and trying your hand at stock-market investing. But according to some financial experts, your top financial priority should be amassing an emergency reserve equal to six months of living expenses, with this cash tucked away in conservative investments like money-market funds and certificates of deposit.
Let's be honest: This is dull, unrealistic and -- I would argue -- not all that sensible. Even if you regularly sock away 10% of your after-tax income, it might take four years or so to amass six months of living expenses. At that juncture, you are supposed to leave this money in low-risk investments, where it will earn modest returns for the rest of your life.
Sound bad? It gets worse. While you were building up your emergency reserve, you were likely neglecting important goals like funding your 401(k) plan, which might earn you a matching employer contribution, and saving for a house down payment.
My advice: Forget the emergency reserve. Instead, stick at least enough in your 401(k) to get the full company match. Next, fund a Roth individual retirement account. If you still have extra money to save each year, by all means stash it in conservative investments in a regular taxable account.
If you get hit with a financial emergency, tap the money in your regular taxable account first. But you could also borrow from your 401(k). In addition, at any time, you can pull out your Roth contributions -- but not the account's investment earnings -- without paying taxes or penalties.
You could also use your taxable account and Roth for a house down payment. Once you have bought the house, set up a home-equity line of credit, which you can then use as an emergency reserve.
2. BUY BIG
That brings me to another piece of conventional wisdom that's often doled out to folks in their 20s: Buy the biggest house possible.
I have some sympathy with this suggestion. If you are early in your career and you expect sizable pay increases in the years ahead, you may want to stretch to buy a somewhat larger house.
After all, if you purchase a place that you quickly become dissatisfied with, you could soon find yourself trading up to a better home. That will mean forking over a 5% or 6% selling commission, mortgage-application costs, lawyer's fees, moving expenses and more.
Don't, however, misconstrue what I am saying. I am not endorsing the contention that real estate is the best investment you can make, that you should buy the largest house possible or that you should take out the largest mortgage possible.
Borrowing a huge sum to purchase an unnecessarily large house is financial foolishness. You will saddle yourself with hefty monthly mortgage payments and a lifetime of large utility bills, maintenance costs, property-tax payments and home-insurance premiums. Rather, when buying that first home, you should strive to purchase a place that's the right size for you and your family -- and that you can see living in for a good long time.
3. GET A LIFE
Insurance agents often push folks in their 20s to buy cash-value life insurance, arguing that it's far cheaper to purchase these policies when you are young.
Don't do it. To be sure, under the right circumstances and with the right policy from the right company, cash-value life insurance can be a decent investment. But for those in their 20s, these policies are unlikely to make sense.
Remember, the principal reason to buy life insurance is to protect your family -- and you may not even have a spouse, let alone kids. And if you are married with young kids, you no doubt need a heap of coverage. The cheapest way to get that coverage is with term life insurance, which offers a death benefit and nothing more.
Cash-value life insurance, by contrast, combines a death benefit with an investment account. Because the premiums on these policies are so high, you will likely skimp on coverage, which means your young family won't be fully protected. Moreover, if you buy a cash-value policy, you probably won't have the spare cash for other, better investment opportunities, such as funding a Roth IRA and your employer's 401(k).
4. GO FOR GROWTH
Those in their 20s are encouraged to invest heavily in stocks, because they have decades until retirement and thus plenty of time to ride out market declines. This is good advice -- in theory.
In practice, I would be a little cautious. You don't want to invest heavily in stocks and then panic and sell during the next market plunge. Yet that's a real danger if you are new to the market and you have never lived through a market decline.
My suggestion: Start with 60% stocks and 40% bonds. If you find yourself unperturbed by market swings, move your stock allocation up to 85% or 90% after a year or two.
[or 30% stocks, 30% bonds, 30% real estate (buy and fix up an old house or apartment yourself or with a friend, share a small vacation property or commercial building with other young investors: learn real estate by trying these)]
Younger investors are often also told to favor highflying growth stocks. Growth stocks can be wild short-term performers -- but the hope is that they will deliver superior long-run returns.
Unfortunately, there's a good chance this hope won't be fulfilled. Academic studies suggest the highest returns are earned not by growth companies, but by prosaic bargain-priced value stocks.
I am not, however, suggesting you load up on value. Instead, start by building a well-diversified portfolio that includes both growth and value stocks, as well as offering exposure to the broad U.S. market and to foreign markets. If you later want to add a tilt toward value stocks, be my guest. But your top priority should be broad diversification.
Signing Up for E-Signatures
July 3, 2007
Seven years ago, after Congress validated "electronic signatures" in a new law, John Crowley tested the technology with an eye toward using it at his mortgage- and banking-services company. He quickly decided it wouldn't work.
The software for computerizing pen-and-ink signatures on contracts, mortgages and other important documents was too complicated for most people to use, said Mr. Crowley, now chief information officer of Fidelity National Financial Inc., a Jacksonville, Fla., surety and title-insurance company. The software involved multiple steps and high-tech "digital certificate" software that people had to download to their computers for extra security, he said.
A lot has changed. Today, small companies such as Seattle's DocuSign Inc., Sertifi Inc. of Chicago and EchoSign Inc. of Palo Alto, Calif., have launched Internet-based technology that makes signing contracts on a computer simpler and more user-friendly, often involving fewer clicks than buying a book or a pair of pants online. E-signature products also have gained legitimacy as they have withstood legal challenges, giving executives more confidence that contracts signed online are just as binding as pen-and-ink ones, said executives at companies that are using the technology now.
It all convinced Mr. Crowley to give e-signatures another try. In a few weeks, Fidelity National will start using e-signatures in a pilot with a major mortgage lender. The lender will let people refinancing their mortgages sign a power-of-attorney document online with DocuSign, speeding up the process and possibly cutting paper and postage costs. Mr. Crowley also hopes the effort will help his company to reduce mortgage fraud, since people who use it have to answer multiple security questions before they are allowed to view and sign the documents online.
"To the extent [these] technologies can help us take [fraud] out of the mix, we are all over it," he said. Other DocuSign customers include Microsoft Corp., which said it is using e-signatures to complete thousands of contracts a month online, and mortgage company First Magnus Financial Corp. in Tucson, Ariz.
The main draw of the new e-signature services is cost savings and convenience. Instead of sending one contract back and forth between parties via fax or overnight mail so that everyone can physically sign one original document, e-signatures allow the whole process to be done online. At First Magnus's lender-services arm, for instance, the company is using DocuSign to streamline insurance-policy processing and has cut transaction costs by 58% in the last year, resulting in tens of thousands in dollars of savings a year, said Jeff Arnold, the president of First Magnus Lender Services.
The new, Web-based e-signature services aren't as complicated to use because they don't require people to download special "digital certificates" from companies such as VeriSign Inc., which help authenticate Internet transactions and continue to be used in many industries. Some doubters want more proof that the new hosted Internet services are as secure as the older technology. Technology researcher Gartner Inc. estimates that through 2010, 75% of organizations required to use electronic signatures will choose "low cost, low technology" solutions instead of more complicated technology.
Companies considering e-signatures face a dizzying array of product choices in a fragmented and sometimes confusing market. With the hosted service sites, companies such as DocuSign allow customers to post documents on a secure Web site and send parties there to "sign" them electronically. (After answering several questions to receive a password, people use a computer mouse to click on a signature line, flagged with computerized yellow sticky notes. A cursive-style imprint of their name appears on the line.) Users can even select their favorite font for the lettering.
Other more established companies, such as Montreal's Silanis Technology Inc. sell e-signing software that companies can download directly onto their computers, although it also offers Web-based products. Interlink Electronics Inc., of Camarillo, Calif., makes software as well as electronic signature pads, such as those many big retailers use for credit-card purchase.
EOriginal Inc., of Baltimore, touts itself as an "e-vaulting" vendor: It works with companies such as DocuSign, Sertifi and Interlink to digitally archive signed documents and create document audit trails. That is important should contracts ever be challenged.
Concerns linger about the security and long-term storage of electronic documents, said Kristen Noakes-Fry, an analyst with Gartner. But, she adds, "I'm very optimistic about the market myself."
With DocuSign's e-signature product, the process starts when one party to a contract or other agreement gets an email saying they have documents to be signed. To sign, the user needs to register for DocuSign's service, a process that involves going to the Web site and getting a password. The company asks several security questions, such as listing recent addresses, which it can check against available data, such as motor-vehicle records.
Once the registered user clicks on a link in their email, they are taken to a DocuSign Web site to view the documents they need to sign. They click in the right places and then send the documents -- in Adobe Systems Inc.'s PDF format -- back to DocuSign for storage and archiving. DocuSign charges customers based on the volume of signatures they process. The service is priced per "envelope," usually $3 to $5 an envelope for big companies, a price that is far cheaper than an overnight package, DocuSign said.
DocuSign said it has processed more than three million online signatures since it was founded four years ago and is on track for transactions to increase 400% this year.
Some companies are using the technology for outbound sales and marketing calls: First Magnus Lender Services said it uses DocuSign to "freeze" customers when it gets them on the telephone to discuss insurance. If a person tells the First Magnus phone marketer that they are interested in an insurance policy, the marketer can ask them to go online as they are talking on the phone and walk them through the sign-up process within minutes. First Magnus's Mr. Arnold said his company has increased the number of policies sold by 24% since it started using DocuSign in this manner.
Write to Rebecca Buckman at rebecca.buckman[AT]wsj.com
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Unincorporated Business Tax (UBT) ... A tax is charged to every individual or unincorporated entity carrying on a trade, business, or profession – in whole or part – in New York City. New in 2009: An Unincorporated Business is only required to file a UBT return if its gross income is more than $95,000 before deductions for cost of goods sold or services performed.
Certain taxpayers and preparers who use tax software may be required to file electronically. They could be subject to civil penalties if they do not. The civil penalties for deficiencies due to fraud have been increased. A new false and fraudulent penalty has also been added.
