Most boneheaded financial moves of 2008

We hardly know where to begin this year -- what with the rogue traders, megalomaniac CEOs, billion-dollar losses and utter financial meltdown -- but in the end, we think these 7 offenses, and their many practitioners, are the worst of the bunch.
By Catherine Holahan, MSN Money

This is part one of a year-end wrap-up package. To read Part 2, on the year's best moves, click here.

This year, many of the brightest minds in business made some truly boneheaded moves. Some may blame the messes they caused on bad luck. Some may blame it on fear. But investors should definitely blame some of it on greed. We do.

In fact, we blame billions of dollars in losses on greed, pride, sloth, gluttony and the rest of the seven deadly sins, to remind all that great wealth and power exist side by side with human frailties familiar to us all.

Here is MSN Money's staff-generated list of the biggest financial blunders of the year, together with our best shot at explaining how people could make mistakes this huge.

Tell us: Your pick for 2008's dumbest money moves
Greed
Jerome Kerviel, Société Générale's (SCGLF, news, msgs) rogue trader.

Kerviel, a former options trader at France's second-largest bank, is this year's poster boy for risk tolerance run amok. It didn't appear to bother Kerviel when risky positions collapsed. He doubled down, then doubled down again. Société Générale alleges the 31-year-old manipulated its systems to place as much as €50 billion (about $63 billion at today's exchange rate) on market bets, many of which went bad in the end.

In January, the bank blamed a nearly €5 billion loss on Kerviel. They said he had mocked up fraudulent hedges to conceal the all-or-nothing nature of the risk he had taken on, in essence treating bank funds like his own personal blackjack stash. Kerviel maintains the bank knew what he was doing and didn't care as long as he made money. Way to be greedy, Kerviel.

Also afflicted: mortgage-backed securities traders.

But let's not let the bank off the hook. Or Wall Street. Kerviel's alleged actions are emblematic of a trading culture that turned some of the world's biggest financial institutions into casinos. Obsession with quarterly profits encouraged too much risk taking, too much leverage and too little careful research and planning for the long term. The attitude on Wall Street seemed to be that as long as you're making money this quarter, the potential for disaster doesn't matter. Not to worry about those pesky cyclical real-estate downturns.

Pride
Jerry Yang, the departing CEO of Yahoo (YHOO, news, msgs).

Any observer who read the details on the negotiations between Jerry Yang and Microsoft (MSFT, news, msgs)CEO Steve Ballmer could see that something other than Yahoo's long-term earnings potential was behind Yang's dogged refusal to accept Microsoft's $33-per-share acquisition offer.

The problem was Yang's ego. Yang wanted to keep Yahoo -- the company he built from nothing with partner David Filo -- independent, so he could be the boss. His attitude seems to have changed after Yahoo's stock went into a nose dive last summer.

Now, Microsoft and Yahoo may be negotiating again for Yahoo's search business, according to London's Sunday Times. (Microsoft, the publisher of MSN Money, declined to comment on the news.)

You can bet that the offer on the table -- if there is one -- won't come close to what Microsoft was once willing to pay. Yahoo's stock was trading at less than $12 per share last time we checked, and its market capitalization was under $16 billion. When Microsoft made its initial offer in February, Yahoo was trading around $20 per share and had a market cap of $25.6 billion.

Also afflicted: Rick Wagoner, the CEO of General Motors (GM, news, msgs); Alan Mulally, the CEO of Ford Motor (F, news, msgs); and Robert Nardelli, the CEO of Chrysler.

Is coach really that bad? Why would the CEOs of America's three faltering auto manufacturers, on the eve of asking Congress to approve billions in taxpayer-supplied aid, in the midst of a recession, each fly a private jet to Washington to meet with lawmakers?

Talk about unapologetic pride. But they ain't too proud to beg. Now it seems they have learned their lesson. After Congress rejected initial appeals for aid, the CEOs returned to D.C. in a style more fitting for folks arguing to save American auto manufacturing. Mulally, Nardelli and Wagoner drove hybrid vehicles to Capitol Hill. Their entourages also traveled eco-friendly in ethanol-powered hybrids.

And while we're at it, CNBC's Jim Cramer belongs in this category for July comments about the financial press, whom he derided as uninformed for warning of financial disaster due to subprime-mortgage-backed securities and default insurance supplied by institutions such as American International Group (AIG, news, msgs). Three months later, he was telling his audience to pull out of the market altogether after the breadth of the subprime-fueled crisis had become clear.

"It is really important for journalists to look like they are in the room with the big boys, so you talk about CDOs (collateralized debt obligations), you talk about subprime -- it's a fascination with trying to prove that you know as much as the hedge fund managers," Cramer said in July. "Fortunately, I was a hedge fund manager . . . and so I know that the lack of importance it (bad paper) has versus U.S. Treasurys."

How's the hedge fund business lately, Cramer?

Sloth

Angelo Mozilo, the former CEO of Countrywide Financial, now owned by Bank of America (BAC, news, msgs).

Mozilo is one of the most recognizable faces in the subprime-lending fiasco -- a glib, smug, fast-talking salesman to the bitter end, even as his company went up in flames around him.

Countrywide issued billions in loans to subprime borrowers whose ability to repay was in doubt, then packaged up the loans as securities and sold them off to banks, hedge funds and other large investors who would later wonder what was in the packages.

As CEO, Mozilo should have made it his business to know. That's where sloth comes in. Mozilo and all the others doling out subprime mortgages should have taken the time to ensure better risk management. But that's work.

Also afflicted: Joe Cassano, the president of American International Group's financial-products division, and plenty of other high-ranking Wall Street executives.

Here's the thing about getting paid millions of dollars to manage money: You're supposed to know what you're doing. You can't blame the credit-ratings companies for your bad bets. AAA-rated or not, you made the bet. It's your job to know the finer points of what you bet on.
The same goes for selling insurance protection. You'd better have a pretty complete and accurate risk profile on whatever you're insuring, whether it's an ocean liner or a bond. Clearly, Cassano and a lot of other executives who supervised trading in credit default swaps and mortgage-backed securities were not doing their homework.

Gluttony

Aubrey K. McClendon, the CEO of Chesapeake Energy (CHK, news, msgs).

A CEO's willingness to invest in his own company's stock is admirable. But CEOs need to stay aligned with the interests of stockholders. When you use margin to leverage your investment to the point where you have to liquidate shares in your own company during a vicious downturn, that's a case of biting off far more than you can chew. McClendon did exactly that, and he likely has a terrible stomachache as a result.

Also afflicted: all the speculators in corn futures and the hedge fund managers who believed Goldman Sachs (GS, news, msgs) analysts' assertions that oil would hit $200 a barrel this year.

This is a vast country with a well-established taste for gas-guzzling automobiles, but even Americans couldn't stomach $200-a-barrel oil in a recession. We're not that gluttonous. But a lot of traders in oil futures were. In hopes of pocketing huge profits, they foolishly bet that we wouldn't change our consumption habits.

Now they are getting their just deserts. The same goes for the speculators in corn who helped drive the price to all-time highs with bets that ethanol would become the fuel of the future -- this year. Now that corn has dropped 50% from its highs, their profits are history.

Envy

J. Terrence Lanni, the former chairman and CEO of MGM Mirage (MGM, news, msgs).
So maybe Lanni always wanted an MBA. Presumably, he was envious of those who had them. We're not sure why, as his ascendance to the top spot at MGM Mirage would seem to indicate some real ability.

Anyway, rather than go back to business school, Lanni just put an MBA on his résumé. He resigned in November after The Wall Street Journal reported he had never received that master of business administration degree from the University of Southern California, as claimed.
Lanni has since been quoted explaining that his decision to resign was based on his desire to be closer to his family in California.

Lust

"Mortgage sluts," the mortgage wholesalers who traded sex for loan applications.

While destroying trillions in financial value, the subprime-lending bubble was apparently turning soccer moms and manicurists into near prostitutes. In a Nov. 13 article, BusinessWeek finance and banking department editor Mara Der Hovanesian exposed the sex-for-mortgages scandal behind some subprime loans.

According to the article, female mortgage wholesalers had sex with mortgage brokers in exchange for loan applications, which the women then bundled and sold as securities to investment houses.

Said one mortgage wholesaler quoted in the story, "Women who had sex for loans were known very quickly."

Wrath

Henry Paulson, Treasury secretary.

Paulson is not an angry man. But it seems he felt he had to punish somebody for the mortgage market meltdown, and Lehman Bros. (LEHMQ, news, msgs)happened to be first in line.

What Paulson hadn't realized was that this bit of retribution would plunge the world into downward spiral of doubt about the reliability of all credit instruments. If Lehman could go under, whom could we trust? Speaking of wrath, Paulson's flip-flop on bailout policy (he rode to the rescue of Bear Stearns creditors, then turned his back on those holding Lehman paper) made him a focus of fury among investors who got burned. In Paulson's defense, the mortgage market mess could not have occurred without the concerted efforts of hundreds of Wall Street traders and executives focusing single-mindedly on lining their own pockets. A mess that big cannot be blamed on the mistakes of one man.

Also afflicted: fiscal conservatives.

Another day, another multibillion-dollar bailout funded by you, the taxpayer.

P.S. Not that there's a gun to your head or anything, but if you don't sign up for this, we're probably looking at an outcome south of the Great Depression. If you're a fiscal conservative listening to that message, you've got a right to be enraged. But so far as we know, anger remains mostly a counterproductive behavior, and priority No. 1 has to be fixing this mess.

Source: MSN

10 home-buying tips for uneasy times

Mortgages are harder to obtain today, and deals require more money down, but it's still a good time for buyers. Here's how to get the home you want at the best price.

By David Koeppel, MSN Money
Nervous about buying a home?

You should be. Your home is probably the single biggest investment you'll make in your lifetime. With an unpredictable economy, a mortgage crisis and record foreclosures, the commitment to buy can be downright overwhelming.

In recent years, lax lending standards eliminated some of the obstacles, but now lenders are once again getting picky.

The good news is that for those who qualify for a mortgage -- with a steady income, strong credit and a modicum of savings -- this is actually a good time to purchase a home. Mortgage rates are low, and home prices have been declining in most parts of the United States.

To help you navigate the uncertainties, especially if you're entering the market for the first time, here are 10 tips for buying a house:

1. Find out how much you can afford, and stay within your budget.
Don't overreach. Forget the McMansion on the hill if it's beyond your means. Focus on finding something that will offer affordable monthly payments and a debt load you can handle.
Calculator: How much can I afford?

To make sure you fully understand and remain within your boundaries, consider a preapproved mortgage. Many reputable lenders offer them. The preapproval process tells you exactly what you will have to pay. Preapproval also provides some extra peace of mind, ensuring that when the time comes, you'll have financing in place. That can be important to real-estate agents and sellers as well as to buyers.

If you're planning to buy, your household budget should allow for hefty savings toward a down payment, unless you're expecting a generous gift from a family member. The days when first-time buyers could purchase a home with a down payment of less than 10% are gone. Lenders are now requiring buyers to put down a minimum of 10% and sometimes up to 20% to 25%.
"First-time buyers must come to the table with some dollars," says Ilyce Glink, the author of "100 Questions Every First-Time Home Buyer Should Ask" and "100 Questions Every Home Seller Should Ask." "You need more income, a better credit score and to think about how much debt you can carry. It has become a more difficult process."

2. Shop around for the right agent.
Real-estate agents operate on different internal clocks. One may be inclined to call you every day, while another may want to call every few weeks. Ask questions about the agent's approach and try to find one well-suited to your situation.

Ideally, the agent you choose will do a lot of business in your neighborhood of choice and will have been in the business for years, gathering plenty of useful information about lending options, title searches and useful ways to compare properties. Try to avoid real-estate agents who are doing on-the-job training.

"Finding a Realtor is a lot like a short-term marriage," Glink says. "Shop around; look for the Realtor who is working the most. What's their level of experience? Are they a good fit with you personality-wise?"

3. Do your homework.
A diligent and dedicated agent by your side is not enough. Buyers need to research their potential new home and neighborhood as thoroughly as possible. Thankfully, a lot of that work can be done from your bedroom or office computer.

The National Association of Realtors says 84% of buyers use the Internet to help them find a home. Do not be part of that other 16%. You'll find the Net is packed with resources about cities, neighborhoods, crime statistics and school districts. Local bloggers can give today's homebuyers insight into everything from pricing trends to who's feuding with a neighbor down the block.

"The Internet is a terrific tool. When I last looked for a house in 1992, that kind of information was nonexistent," says Elliot Goldstein, 46, who, with his wife, Stacey, 45, and their two children, is planning to move to Hoboken, N.J. "I get virtual house tours, multiple listing services . . . everything I need to find out about Hoboken I can find out online."

4. Visit the neighborhood.
Rich as the information on the Internet is, it's no substitute for showing up. Experts suggest repeated visits to your neighborhood of choice, so you can check out homes for sale and attend open houses. Walk around. Shoot the breeze with the neighbors. Visit the community several times at different times of day.

"Walk it, smell it, hear it," says Dennis Torres, director of real-estate operations at Pepperdine University. "At 3 p.m., maybe your lawn will be overrun with kids getting off school. At 10 p.m., there could be a club that's only open at night playing loud music."

5. Don't be afraid to haggle.
How low can you go? Real-estate agents say it all depends on the pressures facing the individual seller. Some of those pressures are related to particular locations -- towns go up and down in appeal -- and some have to do with the individual's situation. But broadly speaking, if ever there was a buyer's market, this it.

"In a strong market, a seller would laugh off a lowball bid," Glink says. "Now you may be able to bid 20% less than you did nine or 12 months ago. Sellers will entertain lowball bids if they're truly desperate to get on with their lives."

Or at least negotiate a few additional amenities. That was the case for first-time homebuyer Jenna Smith, 23, whose six months of near-constant house hunting in suburban Atlanta taught her what she could and couldn't negotiate.

Smith wound up buying into a new suburban development in January. But first she asked the builder to install hardwood floors instead of carpeting. She also wanted a new refrigerator and microwave. The builder eventually agreed, and Smith had her home -- with hardwood floors and appliances -- for $197,000.

6. Buying foreclosed properties? Proceed with caution.
This gets a bit tricky. Real-estate experts are talking a lot about foreclosed properties. Many suggest that, under the right circumstances, exploitation of a foreclosure can give a buyer a nice home at a very nice price.

Foreclosure filings and bank repossessions are up dramatically, according to RealtyTrac, a California company that monitors homes in stages of foreclosure. So much so that some agents and lenders have been organizing weekend bus tours (one charges passengers $97 a ride) to showcase foreclosed properties in hard-hit cities such as Stockton, Calif., Chicago and New Haven, Conn. The tours have been popular both with shoppers searching for homes and with investors interested in buying multiple properties.

Though buying a foreclosed property can potentially provide big savings, it can also present a lot of problems that may not be apparent. Pepperdine's Torres recommends that buyers avoid homes with title uncertainties and consider only properties that have been officially foreclosed on and deeded back to the foreclosing bank.

7. Find the right lender and mortgage.
Many unscrupulous subprime lenders have been shut down. That doesn't mean there aren't still some shady characters around. Don't be tempted to deal with them. Find a lender with roots in the community and a record of integrity that offers reasonable rates.

It pays to do some comparison shopping. Real-estate agents can be a good source. A good agent should be able to recommend reputable area lenders and help a buyer compare types of loans.
"Mortgage rates are very near historic lows, and inventory is high," says Stephanie Singer, a spokeswoman for the National Association of Realtors.

Thorough research of loan offerings will pay off. Smith, the recent buyer from the Atlanta area, landed a 5.875%, 30-year fixed-rate mortgage from her employer, Merrill Lynch. Merrill required her to come up with a 20% down payment on the $197,000 home, or $39,400. Her monthly mortgage payments are about $1,100.

8. A good home inspector is hard to find. But find one.
In recessionary times, the pride of homeownership tends to suffer. It's not that people don't want to maintain their homes; it's that other priorities intervene. With competing pressures coming from credit card bills, skyrocketing gas prices and rising grocery bills, that new paint job on the house may not make it to the top of the list.

A good inspector can help you spot problems that may result from neglect. Bringing in a home inspector is relatively cheap (often from $200 to $300), but according to Torres, it's the least buyers should do to make sure they're purchasing a home in reasonably good shape. Torres recommends buyers accompany inspectors when they examine a home and look out for anything suspicious. Don't be afraid to ask plenty of questions, he adds.

"Ask what every crack, what every stain might be," Torres says. "Look beyond the cosmetic, the paint, the carpet and the flowers. Check under the steps, check under the eaves."

9. Buy for the long run.
Home buying should be viewed as a long-term investment. Don't expect the kind of price appreciation that occurred in the early 2000s. Buy a home you can live in happily for a good many years, if possible. A long-term commitment will pay dividends in peace of mind.

"A home is about putting down roots," author Glink says. "It's not about fixing or flipping or making a mint no matter what some infomercial tells you."

10. Don't time the market. Do take your time.
When will market prices hit rock-bottom? No one knows for sure, so waiting to get in at the lowest possible price isn't recommended. Still, experts predict it will remain a buyer's market for the foreseeable future, so don't rush.

Goldstein and his wife will be moving into their new three-story row house in Hoboken for about $1.2 million at the end of August, allowing his two children to spend a final summer at the family home in Closter, N.J. If negotiations hadn't gone his way, Goldstein was prepared to walk away, he said.

That's the way to do it.

"Don't let other people talk you into something you don't want," says buyer Smith. "It's your house; they don't have to live in it."

Produced by Anh Ly / Graphics by Joe Farro and Anh Ly

Source: MSN

Top 20 Figures of Speech

By Richard Nordquist, About.com

A figure of speech is a rhetorical device that achieves a special effect by using words in distinctive ways. Though there are hundreds of figures of speech (many of them included in our Tool Kit for Rhetorical Analysis), here we'll focus on just 20 of the most common figures.

You will probably remember many of these terms from your English classes. Figurative language is often associated with literature--and with poetry in particular. But the fact is, whether we're conscious of it or not, we use figures of speech every day in our own writing and conversations.

For example, common expressions such as "falling in love," "racking our brains," "hitting a sales target," and "climbing the ladder of success" are all metaphors--the most pervasive figure of all. Likewise, we rely on similes when making explicit comparisons ("light as a feather") and hyperbole to emphasize a point ("I'm starving!").

Using original figures of speech in our writing is a way to convey meanings in fresh, unexpected ways. Figures can help our readers understand and stay interested in what we have to say. For advice on creating figures of speech, see Using Similes and Metaphors to Enrich Our Writing.

How to Review the Top 20 Figures of Speech
Click on each of the following terms to visit a glossary page. There you will find the definition and several examples of the figure as well as its etymology (which shows where the term came from) and a sound file (so that you'll know how to pronounce the term). For each figure of speech, try to come up with an example of your own.

The Top 20 Figures

1. Alliteration
Repetition of an initial consonant sound.

2. Anaphora
Repetition of the same word or phrase at the beginning of successive clauses or verses.

3. Antithesis
The juxtaposition of contrasting ideas in balanced phrases.

4. Apostrophe
Breaking off discourse to address some absent person or thing, some abstract quality, an inanimate object, or a nonexistent character.

5. Assonance
Identity or similarity in sound between internal vowels in neighboring words.

6. Chiasmus
A verbal pattern in which the second half of an expression is balanced against the first but with the parts reversed.

7. Euphemism
The substitution of an inoffensive term for one considered offensively explicit.

8. Hyperbole
An extravagant statement; the use of exaggerated terms for the purpose of emphasis or heightened effect.

9. Irony
The use of words to convey the opposite of their literal meaning. A statement or situation where the meaning is contradicted by the appearance or presentation of the idea.

10. Litotes
A figure of speech consisting of an understatement in which an affirmative is expressed by negating its opposite.

11. Metaphor
An implied comparison between two unlike things that actually have something important in common.

12. Metonymy
A figure of speech in which one word or phrase is substituted for another with which it is closely associated; also, the rhetorical strategy of describing something indirectly by referring to things around it.

13. Onomatopoeia
The formation or use of words that imitate the sounds associated with the objects or actions they refer to.

14. Oxymoron
A figure of speech in which incongruous or contradictory terms appear side by side.

15. Paradox
A statement that appears to contradict itself.

16. Personification
A figure of speech in which an inanimate object or abstraction is endowed with human qualities or abilities.

17. Pun
A play on words, sometimes on different senses of the same word and sometimes on the similar sense or sound of different words.

18. Simile
A stated comparison (usually formed with "like" or "as") between two fundamentally dissimilar things that have certain qualities in common.

19. Synechdoche
A figure of speech is which a part is used to represent the whole, the whole for a part, the specific for the general, the general for the specific, or the material for the thing made from it.

20. Understatement
A figure of speech in which a writer or a speaker deliberately makes a situation seem less important or serious than it is.

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