Monday, March 7, 2011

Oil price shock; you ain't seen nothing yet

The most common cause of a spiking oil price is supply shock. We may be seeing just such a phenonenon right now with the effective shut down of Libyan oil. But sometimes it’s excessive demand that does the damage.

Forget the present turbulence, which may or may not be temporary. You don’t have to look far into the future, perhaps as little as a year to 18 months, to see that a major demand challenge is looming which even assuming no further disruption to existing production, will challenge the present supply base to breaking point.

As it is, it’s fair to assume the world is closer to full capacity than producers care to admit. Rewind to the last oil price shock in the summer of 2008, and Saudi Arabia, pumping out oil at the rate of around 9.5 million barrels a day, was having to draw on inventories to meet demand. It’s therefore reasonable to assume that 9.5 million bpd then represented maximum capacity.

Since then, the Saudis have brought a further two fields on stream with a capacity of around 2 million bpd, bringing total capacity up to some 11.5 million bpd. But there is generally reckoned to be an attrition rate of around 6pc per annum on existing fields, taking us back to square one in terms of maximum daily output. This is perilously close to what the Saudis are already producing, and makes the assumed buffer of Saudi spare capacity considerably smaller than the Saudis claim. There’s not much slack anywhere else either.

Now look at growth in demand, virtually all of which is coming from China and other emerging markets. Chinese demand at around 10 million bpd annually is already around half that of the world’s biggest oil consumer, the US. But unlike the US, where demand is in gentle decline, in China it’s rising like a rocket. Last year Chinese demand rose by close to 1 million bpd. It’ll probably be a bit lower this year, but not much. More cars are now being bought in China than the US, and they’ve got to run on something.

Nobody believes that Chinese GDP will grow by as little as 3 per cent per annum over the five years, but in order for as much nominal GDP to to be added to the Chinese economy over the next five years as occurred in the last five, that’s in fact all that needs to occur. In reality, growth is likely to be much higher.

Do the math. Almost regardless of what happens to supply, demand will soon be outpacing the world’s capacity to meet it. The economic effect of such a mismatch is to drive up prices to a level where they eventually ration demand. Output will fall to a point which brings demand back into balance with supply. That’s called a recession.

That may be where we are heading this time. Or it may be that the world economy can tolerate rather higher oil prices than it has in the past. We’ll see. But either way, high prices serve an important purpose. One is to stimulate investment in further sources of supply. And as Chris Huhne, the UK Energy and Climate Change Secretary, pointed out in a speech this week, another is to make alternative energy sources economic. By Mr Huhne’s estimation, $100m oil is the point at which clean and green energy become cheaper for the UK consumer than hydrocarbons.

The UK is only 2 per of global demand for oil, so what happens here isn’t going to make a whole lot of difference to the overall picture. But what the US chooses, or is forced to do, most certainly will. Per capita consumption of oil in the US is about twice the European level. The solution to the looming demand problem for oil is therefore to get the US to reform its bad behaviour and consume less of the stuff. This is much easier said than done.

The whole US economy is built around cheap oil, and there is certainly an argument for saying the US cannot physically consume less without taking a big hit to GDP. On the other hand it also means that there is huge scope for efficiency improvements. Relatively small changes in behaviour which need not necessarily be damaging to output – such as automobile sharing or simply using public transport more frequently – could have a big effect on consumption.

In any event, high oil prices are here to stay. In 2008, the price at which US consumers stopped spending was $147 a barrel. It may be a bit higher this time around, but it’s not going to be far off.

VIX on Track for Greater Volatility Be prepared for greater ‘whippiness’ in the VIX

As option trading investors we’ve studied and utilized the CBOE Volatility Index (CBOE: VIX) for years because it measures the implied volatility of the SPDR S&P 500 Index (NYSE: SPY). It also is a measure of trader sentiment and fear/panic/wall of worry sentiment levels. Certainly extremes in the VIX often can be used as pivotal turning points in market timing — but also quite often (especially in recent years) it can be a good leading indication of a volatile, whippy market.

Individual investors can trade the VIX through the iPath S&P 500 VIX Short-Term Futures (NYSE: VXX) and the iPath S&P 500 VIX Mid-Term Futures (NYSE: VXZ) Exchange-traded funds, which track VIX futures prices and their options.

The VIX has basically been in a steady downtrend since a spike in May 2010, but we’ve recently seen an upward burst, likely due to unpredictable political events overseas and a subsequent rise in certain key commodities such as oil. Nonetheless, the recent move in the VIX is interesting from a technical analysis perspective. Take a look at the daily chart below:

VIX Activity

CBOE Volatility Index (CBOE: VIX)

So, we can see above that the 18/18.5 level has increasingly become an important “line of demarcation” in recent months. Basically this area is acting as kind of the bench post below which traders are feeling relatively calm and perhaps complacently bullish, while above it fear/panic levels are rising.

The recent gap up in the VIX on Feb. 22 has now formed an interesting “island” technical pattern — we haven’t yet “filled in” the gap on the downside. Until we do (which may not occur for some time), volatility and whippiness in the stock market are likely to persist. Also note that during this same move the VIX moved above both its Top Acceleration and Bollinger Bands — it hasn’t done this in quite some time and this is another indication that volatility may continue to linger in the short-to-medium term.

Bottom line, the recent VIX activity and pattern is causing us to be somewhat more tempered in our stock market outlook as risk appears to be lingering. The VIX breaking back down below 18 (for more than one day) would likely be a healthy sign for another strong market up-leg.

The Economist - March 5th 2011

The Economist Audio Edition - March 5th 2011
Publisher: The Economist 2011 | Language English | Audio MP3 (Bitrate = 48 Kbps, Sample Rate = 44 kHz) | 196 MB

The audio edition contains word-for-word recordings of all articles published in The Economist, read by professional broadcasters and actors. It is ideal for anyone who wants to listen to articles while travelling, exercising or just relaxing. click here for audio

Without Loan Giants, 30-Year Mortgage May Fade Away

How might home buying change if the federal government shuts down the housing finance giants Fannie Mae and Freddie Mac?

The 30-year fixed-rate mortgage loan, the steady favorite of American borrowers since the 1950s, could become a luxury product, housing experts on both sides of the political aisle say.

Interest rates would rise for most borrowers, but urban and rural residents could see sharper increases than the coveted customers in the suburbs.

Lenders could charge fees for popular features now taken for granted, like the ability to "lock in" an interest rate weeks or months before taking out a loan.

Life without Fannie and Freddie is the rare goal shared by the Obama administration and House Republicans, although it will not happen soon. Congress must agree on a plan, which could take years, and then the market must be weaned slowly from dependence on the companies and the financial backing they provide.

The reasons by now are well understood. Fannie and Freddie, created to increase the availability of mortgage loans, misused the government's support to enrich shareholders and executives by backing millions of shoddy loans. Taxpayers so far have spent more than $135 billion on the cleanup.

The much more divisive question is whether the government should preserve the benefits that the companies provide to middle-class borrowers, including lower interest rates, lenient terms and the ability to get a mortgage even when banks are not making other kinds of loans.

Douglas J. Elliott, a financial policy fellow at the Brookings Institution, said Congress was being forced for the first time in decades to grapple with the cost of subsidizing middle-class mortgages. The collapse of Fannie and Freddie took with it the pretense that the government could do so at no risk to taxpayers, he said.

"The politicians would like something that provides a deep and wide subsidy for housing that doesn't show up on the budget as costing anything. That's what we had" with Fannie and Freddie, Mr. Elliott said. "But going forward there is going to be more honest accounting."

Some Republicans and Democrats say the price is too high. They want the government to pull back, letting the market dictate price, terms and availability.

"A purely private mortgage finance market is a very serious and very achievable goal," Representative Scott Garrett, the New Jersey Republican who oversees the subcommittee that oversees Fannie and Freddie, said at a hearing this week. "No one serious in this debate believes our housing market will return to the 1930s."

Still, powerful interests in both parties want the government instead to construct a system that would preserve many of the same benefits, with changes intended to minimize the risk of future bailouts. They say the recent crisis showed that the market could not stand on its own.

"The kind of backstop that we have now, if it didn't exist, we would have had a much more severe recession and a much sharper fall in home values," said Michael D. Berman, chairman of the Mortgage Bankers Association, which represents the lending industry.

Hanging in the balance are the basic features of a mortgage loan: the interest rate and repayment period.

Fannie and Freddie allow people to borrow at lower rates because investors are so eager to pump money into the two companies that they accept relatively modest returns. The key to that success is the guarantee that investors will be repaid even if borrowers default -- a promise ultimately backed by taxpayers.

A long line of studies has found that the benefit to borrowers is relatively modest, less than one percentage point. But that was before the flood. Fannie, Freddie and other federal programs now support roughly 90 percent of new mortgage loans because lenders cannot raise money for mortgages that do not carry government guarantees.

One prominent investor, William H. Gross, the co-head of Pimco, the major bond investment firm, has estimated that he would demand a premium of three percentage points to buy such loans -- a cost that would be passed on to the borrower.

Proponents of a private market want the government gradually to withdraw its support, allowing investors to regain confidence. They argue that interest rates would eventually settle into roughly the same patterns that held before the financial crisis.

Some supporters of government backing also like the idea, believing that it will demonstrate the need for a backstop.

"I myself am eager to see whether there needs to be a guarantee," said Representative Barney Frank of Massachusetts, a crucial Democratic voice on housing issues.

Fannie and Freddie also make ownership more affordable by allowing borrowers to repay loans with fixed-interest rates over an unusually long period. A person who borrows $100,000 at 6 percent interest will pay $600 each month for 30 years, compared to $716 each month for 20 years.

The 30-year loan first became broadly available by an act of Congress in 1954 and, from then until now, the vast majority of such loans have been issued only with government support. Most investors are simply not willing to make such a long-term bet. They prefer loans with adjustable rates.

Alex J. Pollock, a former chief executive of the Federal Home Loan Bank of Chicago, said such loans would remain available in the absence of a federal guarantee, but they might be harder to find. And lenders might demand a larger down payment. Or a better credit score.

That would be a very good thing, said Mr. Pollock, now a fellow at the American Enterprise Institute.

Longer terms make ownership affordable only by increasing the total cost of the loan, because the borrower pays interest for a longer period. Moreover, Mr. Pollock noted that over the last several years, borrowers with adjustable-rate loans paid less as interest rates fell, while those with fixed rates kept paying the same amount for devalued homes.

"One of the reasons that American housing finance is in such bad shape right now is the 30-year mortgage," he said, noting that such loans are not available in most countries. "For many people, it's not at all clear that that's the best product."

Fannie and Freddie also allow a wide swath of the American public to borrow money at the same interest rates and on the same terms. Borrowers who did not meet their standards were forced to pay higher interest rates to subprime lenders, but the companies essentially persuaded investors to treat a vast number American families as if they were interchangeable.

They took messy bunches of loans, with risks as variable as snowflakes, and created securities of uniform quality, easy to buy and sell. The result was one of the most popular investment products ever created.

And in its absence, experts on housing finance say that fewer borrowers would qualify for the best interest rates.

Susan M. Wachter, a real estate professor at the University of Pennsylvania, said a new government guarantee was needed to preserve a homogenous market.

"There needs to be a systematic way of preventing" fragmentation, said Professor Wachter. "That's what we need a bulwark against. Because if there isn't, it will occur."

The government seems least likely to maintain a final set of benefits -- leniencies in loan terms that taxpayers effectively have subsidized for borrowers.

Fannie and Freddie slashed the requirements for down payments in recent years, saying that they were helping people with minimal savings become homeowners. Two-thirds of the borrowers whose loans were guaranteed by the companies from 1997 to 2005 made a down payment of less than 10 percent. But borrowers who invest less default more often. The Obama administration has said that it wants the companies to demand a minimum down payment of 10 percent.

A quirkier example is the ability to "lock in" an interest rate. Fannie and Freddie permitted lenders to make such promises at no risk because the companies had already obtained commitments from investors. In the companies' absence, borrowers seeking rate locks may need to pay for them.


Recession, Employment Ratio, Participation Rate

The Two Most Important Charts For The Near-Term Future Of Oil Prices

With nobody having any clue how the MENA situation will play out (and those who tell you otherwise can be immediately dismissed as full of feces to be ridiculed in perpetuity by everyone but CNBC where they will have a guaranteed contributor slot), and as crude has promptly become the most volatile asset class (as Zero Hedge predicted last summer when we lamented the death of equities) recently experiencing an unprecedented 7 Sigma move which likely led to the liquidation of at least one asset manager, there are two main charts which matter for the oil. On one hand, the Crude Oil non-commercial net specs are at an all time high: well over 100% more than during the oil time highs in crude in 2008. This means that speculators are anticipating an even more powerful move higher than that seen in the summer of 2008 when Crude hit $150 (it also presents the possibility of an unprecedented plunge in oil should the speculative thesis not be realized). Just as important, the performance of energy as a subsegment of all commodities is currently materially underperforming all other commodities, with Previous, Agircultural and Industrial commodity classes all doing far better than crude and its peers. Should there be a rotation out of other commodities into the energy complex, look for crude to surge far beyond $125 in the next few weeks. All it would take is one Saudi geopolitical spark.

Total WTI non-commercial net spec contracts and Crude Light pricing:

Total commodity returns by class:

Bank of England chief under fire after warning Britain is at risk of another financial crisis

In an interview with The Daily Telegraph, Mervyn King said that “imbalances” in the banking system remain and are “beginning to grow again”.

But leading economists, including a former Tory advisor and the chief executive of the British Bankers' Association, have criticised his comments.

Tim Congdon, who served on the Treasury Panel of Independent Forecasters (the so-called "wise men") under the last Conservative government, called the remarks "unjustified".

He said: "The truth is the financial sector is very important to the British economy. He's been at the Bank of England for twenty years... I find it incredible that he's now attacking the structure of the industry.

"If you criticise the banks you reduce their credibility and then people worry about them. The important thing for the Governor of the Bank of England is to help them."

Angela Knight, chief executive, British Bankers' Association, said: "We view the Governor with the highest respect, but in this instance there are a number of points with which we disagree.

"The banking industry recognises that some of its number got it badly wrong during the crisis. Since then the industry has reformed radically.

"We work closely with our customers of all sizes and types and in doing so have created one of the largest financial centres in the world and a great contributor to the British economy. We achieved this together by doing our business well - not by doing it badly.

"We entirely agree that no bank should believe it can fall back on the taxpayer. The changes from top to bottom within the industry have ensured the risks are well controlled, and all banks have put recovery and resolution plans in place to answer the too-big-to-fail question and so safeguard customers and the taxpayer against the remote consequences of any future failure."

In the interview Mr King urges high street banks to take a better, longer term view towards their customers and to stop focusing on the need to “simply maximise profits next week”.

He accuses them of routinely exploiting their millions of customers. “If it’s possible [for financial services firms] to make money out of gullible or unsuspecting customers, particularly institutional customers, [they think] that is perfectly acceptable,” he says.

The Governor criticises the “weight put on the importance and value of takeovers” and raises concerns that companies with good reputations have been “destroyed” in the search for short-term profits.

Mr King expresses regret for not sounding a louder warning over his concerns before the last banking crisis.

The Governor’s remarks are a warning to George Osborne, the Chancellor, as a government commission considers whether to force high street banks to sell off their investment banking arms.

Mr Osborne is thought to be against such a plan, but Mr King is due to ultimately become responsible for banking regulation and his views are, therefore, critical.

In the interview, the Bank Governor says: “We allowed a [banking] system to build up which contained the seeds of its own destruction.

“We’ve not yet solved the 'too big to fail’ or, as I prefer to call it, the 'too important to fail’ problem.

“The concept of being too important to fail should have no place in a market economy.”

When asked whether there could be a repeat of the financial crisis, Mr King says: “Yes. The problem is still there. The search for yield goes on. Imbalances are beginning to grow again.”

Mr King, who rarely gives interviews, suggests that the culture of short-term profits and bonuses within the banks may ultimately be responsible for the problems.

He says that traditional manufacturing industries have a more “moral” way of operating.

“They care deeply about their workforce, about their customers and, above all, are proud of their products,” he says. “[With the banks] there isn’t that sense of longer term relationships.

“There’s a different attitude towards customers. Small and medium firms really notice this: they miss the people they know.”

The Governor adds that good businesses “keep a clear vision of who their customers are, and are run by people who don’t think they should simply maximise profits next week.” He says that the payment of bonuses is part of this cultural problem. “Why do banks in general want to pay bonuses?” Mr King asks. “It’s because they live in a 'too big to fail’ world in which the state will bail them out on the downside.”

Over the past 30 years, he says, “we changed Britain away from a sclerotic economy with inefficiencies and problems in labour relations. Everyone got to the point where we no longer expected government to bail us out.”

He says this changed with the banking crisis. 'But, surprise, surprise, the institutions bailed out were those at the heart of the crisis. Hedge funds were allowed to fail, 3,000 of them have gone, but banks weren’t,’ he says.

The comments will embarrass the Chancellor, who recently concluded a deal with the banks under which they would be able to resume the payment of bonuses in return for boosting lending.

Mr King does not back down from recent comments that appeared to back the Government’s strategy for reducing the deficit. Ed Balls, the shadow chancellor, recently accused the Governor of becoming too political.

Mr King said: “It is inconceivable that the Governor has no view on the size of the deficit and the need to reduce it. It would be a dereliction of duty for me not to warn. You need a credible plan to reduce it, over the lifetime of a Parliament. But it is for ministers, not for me, to say how this should be done.”

In the interview, the Governor gives little clue as to whether an interest rate rise is imminent.

Mr King says there is a “perfectly reasonable case for doing it now” but he added that increasing rates too soon would be a “futile gesture”.

Country PEG Ratios

Yesterday we highlighted the stocks in the Russell 1,000 with the lowest PEG ratios. Today we take a look at a different PEG ratio analysis. A few years ago we decided to use the PEG ratio to analyze country valuations. To do this, we use the P/E ratio of the country's most widely followed equity market index and the country's estimated GDP growth for the current year. Just like with stocks, the lower the better for country PEG ratios.

Below is a list of PEG ratios for 22 countries. As shown, China tops the list with the best country PEG ratio at 1.94. It is followed very closely by India at 1.95. Both China and India have higher than average P/E ratios, but their GDP growth more than makes up for it at 9.50% and 8.50%, respectively. Singapore and Russia, which rank 3rd and 4th, get to their low PEGs by having much lower than average P/E ratios and slightly better than averaged estimated GDP growth. Spain, on the other hand, has a P/E ratio similar to Singapore and Russia, but its expected GDP growth is so low at 0.60% that it has the highest PEG ratio of all the countries shown. Someone looking at just the P/E ratios for Spain, Singapore, and Russia would see a similar valuation, so this is a good example of where the country PEG ratio can help identify the more attractive country/countries.

For those wondering where the US stands in terms of PEG ratio, it's closer to the bottom of the list than the top. However, the US does have the most attractive PEG ratio of the G-7 countries. If you're looking to invest in developed nations, the US is the best place to be at least based on this valuation measure.

Energy UITs – Oil Stocks With Dividends as High as 10%

All energy investments and oil stocks are liable to give active investors a wild ride in these uncertain times. But some offer more potential ways to profit than others when it comes to energy investments. Take so-called oil and gas unit investment trusts like the BP Prudhoe Bay Royalty Trust (NYSE: BPT). These investments are a unique sub-group of oil stocks with big opportunity, particularly in dividend payouts.

A lot of UITs in the energy sector originate in Canada, although a few are in Texas and elsewhere. They’re similar to real estate investment trusts or REITS in that they’re structured somewhat like partnerships. Typically UITs invest in productive assets. That is, wells already pumping out oil and gas from proven reserves.

Like REITS, a UIT also pass nearly all of their profits directly to investors in the form of dividends. BP Prudhoe Bay Royalty Trust (NYSE: BPT), one such trust that’s been talked up lately, pays a projected 8.5% dividend – not too shabby in a world of 1.3 percent CD yields and an average dividend yield in the S&P 500 of just under 1.8% as of this writing.

But dividends are only way BPT and similar issues such as Pengrowth Energy Trust (NYSE: PGH), Baytex Energy Trust (NYSE: BTE), and Hugoton Energy Trust (NYSE: HGT) could serve investors well, going forward. If you believe continued tensions in the Middle East and elsewhere will move energy prices higher, then you might see energy UITs rising in price. Logically speaking, the number of investors piling on should grow faster than the total number of assets held within the sector.

You could hold on to BPT if you’re bullish on the company and the sector and bask in the dividends, or you could potentially boost profits by selling covered calls on your shares. Covered calls are an options trading strategy that novice investors may want to steer clear of, since they can be complicated. Basically, by selling a call, you give someone else the right to buy your shares at a designated price, referred to as the strike price. The risk is that if your calls are exercised (or bought by someone else when the strike price is reached), you might lose out on a forthcoming dividend. But if you’re careful, it’s possible to avoid this.

One more options strategy possible with the BP Prudhoe Bay Royalty Trust and other UITs would be to protect any forthcoming dividends while also safeguarding your principal. The way to do that is with a collar options trade. A collar is another sophisticated investment that involves selling a call and using the proceeds to buy a put option. Your downside risk is limited here, but again it is a sophisticated strategy maybe not for novices.

But even the most simple investing strategy can find power in energy UITs because of the big dividends. Even if shares flatline, an 8% dividend is an 8% return on your investment. That’s not too shabby in these volatile times.

25 Ways to Waste Your Money

Plug your financial leaks, and pocket the savings.

Has your budget sprung a leak?

Nearly everyone has spending holes. And as with other kinds of leaks, you may have hardly noticed them. But those small drips can quickly add up to big bucks. The trick is to find the holes and plug them so you can keep more money in your pocket. That extra cash could be the ticket to finally being able to save, invest, or break your cycle of living from paycheck to paycheck.

Here are 25 common ways people waste money. See if any of these sound familiar, then look for ways to plug your own leaks:

1. Carrying a balance. Debt is a shackle that holds you back. For instance, if you have a $1,000 balance on a credit card that charges an 18% rate, you blow $180 every year on interest. Get in the habit of paying off your balance in full each month.

2. Overspending on gas and oil for your car. There's no need to spring for premium fuel if the manufacturer says regular is just fine. You should also check to make sure your tires are optimally inflated to get the best gas mileage. And are you still paying for an oil change every 3,000 miles? Many models nowadays can last 5,000 to 7,000 miles between changes, and some even have built-in sensors to tell you when it's time to change the oil. Check your manual to find the best time for your car's routine maintenance.

3. Keeping unhealthy habits. Smoking costs a lot more than just what you pay for a pack of cigarettes. It significantly increases the cost of life and health insurance. And you'll pay more for homeowners and auto insurance. Add in various other expenses, and the true cost of smoking adds up dramatically over a lifetime -- $86,000 for a 24-year-old woman over a lifetime and $183,000 for a 24-year-old man over a lifetime, according to "The Price of Smoking" (The MIT Press).

Another habit to quit: indoor tanning. There is now a 10% tax on indoor tanning services. As with cigarettes, the true cost of tanning -- which the World Health Organization lists among the worst-known carcinogens -- is higher than just the price you pay each time you go to the salon.

4. Using a cell phone that doesn't fit. How many people do you know who have spent hundreds of dollars on fancy phones, and then pay hundreds of dollars every month for the privilege of using them? Your phone is not a status symbol. It is a way to communicate. Many people pay too much for cell phone contracts and don't use all their minutes. Go to or to evaluate your usage and see if you can find a plan that fits you better. Or consider a prepaid cell phone. Compare rates at

5. Buying brand-name instead of generic. From groceries to clothing to prescription drugs, you could save money by choosing the off-brand over the fancy label. And in many cases, you won't sacrifice much in quality. Clever advertising and fancy packaging don't make brand-name products better than lesser-known brands.

6. Keeping your mouth shut. No one wants to be a nuisance. But by simply asking, you may be able to snag a lower rate on your credit card.

When shopping, watch for price discrepancies at the cash register, and make a habit of asking, "Do you have a coupon for this?" You might even be able to haggle for a lower price, especially on seasonal or perishable items, floor models or big-ticket purchases. Many stores will also match or beat their competitors' prices if you speak up. And try asking for a discount if you pay cash or debit -- this saves the store the cut it has to pay the credit-card company, so it may be willing to give you a deal. It doesn't hurt to ask.

7. Buying beverages one at a time. If you're in the habit of buying bottled water, coffee-by-the-cup or vending-machine soda, your budget has sprung a leak. Instead, drink tap water or use a water filter. Brew a homemade cuppa joe. Buy your soda in bulk and bring it to work. (Better yet, skip the soda in favor of something healthier.)

8. Paying for something you can get for free. There's a boatload of freebies for the taking, if you know where to look. Some of our favorites include restaurant meals for kids, credit reports, software programs, prescription drugs and tech support. You can also help yourself to all the books, music and movies your heart desires at your local library for free (or dirt cheap).

9. Stashing your money with Uncle Sam rather than in an interest-earning account. If you get a tax refund each April, you let the government take too much money in taxes from your paycheck all year long. Get that money back in your pocket this year -- and put it to work for you -- by adjusting your tax withholding. You can file a new Form W-4 with your employer at any time.

10. Being disorganized. It pays to get your financial house in order. Lost bills and receipts, forgotten tax deductions, and clueless spending can cost you hundreds of dollars each year. Start by setting up automatic bill payment online for your monthly bills to eliminate late fees and postage costs. Then get a handful of files to organize important receipts, insurance policies, tax documents and other statements.

Finally, consider using free budgeting software such as to see exactly where your money goes, making it much harder for you to lose track of it.

11. Letting your money wallow in a low-interest account. You work hard for your money. Shouldn't it work hard for you too? If you're stashing your cash in a traditional savings account earning next-to-nothing, you're wasting it. Make sure you're getting the best return on your money. Search for the highest yields on CDs and money-market savings accounts. And consider using a free online checking account that pays interest, such as ones offered by Everbank and ING Direct.

Your stocks and mutual funds should be working hard for you, too. If they've been lagging behind their peers for too long, it could be time to say goodbye. Learn how to spot a wallowing fund or stock.

12. Paying late fees and missing deadlines. Return those library books and movie rentals on time. Mail in those rebates. Submit expense reports on time for reimbursement. And if you make a bad purchase, don't just stuff it in the back of the closet and hope it goes away. Get off your duff, return it and get your money back before you lose the receipt.

13. Paying ATM fees. Expect to throw away nearly $4 every time you use an ATM that isn't in your bank's network. That's because you'll pay an ATM surcharge, and your own bank will hit you with a non-network fee. Consider switching to a bank, such as Ally Bank, that doesn't charge ATM fees and reimburses you for fees other banks charge. Another way to avoid fees if there's not an ATM in your bank's network nearby is to get cash back when you make a purchase at the grocery store or drugstore.

14. Shopping at the grocery store without a calculator. Check how much an item costs per ounce, pound or other unit of measurement. When you comparison-shop by unit price, you save. For example, if a pack of 40 diapers costs $13, that's 33 cents per diaper. But if you buy a box of 144 diapers for $35, that's 24 cents per diaper. You save 27%! (Of course, buying more of something only saves money if you use it all. If you end up throwing much out, you wasted money.)

15. Paying for things you don't use. Do you watch all those cable channels? Do you need those extra features on your phone? Are you getting your money's worth out of your gym membership? Are you taking full advantage of your Netflix, TiVo and magazine subscriptions? Take a look at what your family actually uses, then trim accordingly.

16. Not reading the fine print. Thought you were being smart by transferring the balance on a high-rate credit card to a low-rate one? Did you read the fine print, though? Some credit-card companies now charge up to 5% for balance transfers. Also watch out for free checking accounts that aren't so free. Some banks are starting to charge fees unless you meet certain criteria.

17. Mismanaging your flexible spending account. For some people, that means failing to take advantage of their workplace FSA, which lets employees set aside pre-tax dollars for out-of-pocket medical costs. Other people fail to submit receipts on time. And the average worker leaves $86 behind in his or her use-it-or-lose-it FSA account each year, according to WageWorks, an employee benefits provider.

18. Being an inflexible traveler. You'll save a lot of money on travel if you're willing to be flexible. Consider traveling before or after peak season when prices are lower. Or search for flights over a range of dates to find the lowest fare. Booking at the last minute also can save you money because hotels and airlines slash prices to fill rooms and planes. And flexibility pays off at blind-booking sites, such as Priceline or Hotwire, which offer deep discounts if you're willing to book a room or flight without knowing which hotel or airline (or other details about the flight) you're getting until you pay.

19. Sticking with the same service plans and the same service providers year after year. Hey, we're all for loyalty to trusted service providers, such as your bank, insurer, credit-card company, mutual fund, phone plan or cable plan. But over time, as prices and your circumstances change, the status-quo may not be the best deal any more. Smart consumers are always on the lookout for bargains.

20. Making impulse purchases. When you buy before you think, you don't give yourself time to shop around for the best price. Take the time to compare prices online, read product reviews and look for coupons when appropriate.

Make it a policy to give yourself a cooling-off period in case you're ever tempted to make an impulse purchase. Go home and sleep on the decision. More often than not, you'll decide you don't need the item after all.

21. Dining out frequently. Spending $10, $20, $30 per person for dinner can be a huge drain on your wallet. Throw in a $6 sandwich for lunch every day and you've got quite a leak. Learning to cook and bringing your lunch from home can save a couple hundred bucks each month. When you do go out, consider getting carry-out instead of dining in (you'll save on the tip and drink), skip the overpriced appetizer and dessert, and search the Web for coupons ahead of time.

22. Trying to time the stock market. In trying to buy low and sell high, many people actually do the opposite. Instead, employ the simple strategy of "dollar-cost-averaging." By investing a fixed dollar amount at regular intervals, you smooth out the ups and downs of the market over time. If you take out the emotion and guesswork, investing can become less stressful, less wasteful and more successful.

23. Buying insurance you don't need. You only need life insurance if someone is financially dependent upon you, such as a child. That means most singles, seniors or kids don't need a policy. Other policies you can probably do without include credit-card insurance (better to use the premium to pay down your debt in the first place), rental-car insurance (most auto policies and credit cards carry some coverage), mortgage life insurance and accidental-death insurance (a regular term-life insurance policy will do the trick).

24. Buying new instead of used. Talk about a spending leak -- or, rather, a gush. Cars lose 20% of their value the moment they're driven off the lot and 65% in the first five years. Used models can be a real value because you can get a car that's still in fine working order for a fraction of the new-car price. And you'll pay less in collision insurance and taxes, too.

Cars aren't the only things worth buying used. Consider the savings on pre-owned books, toys, exercise equipment, children's clothing and furniture. (Of course, there are some things you're better off buying new, including mattresses, laptops, linens, shoes and safety equipment, such as car seats and bike helmets.)

25. Procrastinating. Time is an asset money can't buy. Start investing for retirement as soon as possible. For instance, if a 40-year-old saves $300 a month with an 8% return per year, he'll have $287,000 by age 65. If he had started saving 15 years earlier at age 25, he'd have more than $1 million.

US Economic Calendar for the Week

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
Mar 73:00 PMConsumer CreditJan-$3.5B$3.3B$6.1B-
Mar 97:00 AMMBA Mortgage Index03/04-NANA-6.5%-
Mar 910:00 AMWholesale InventoriesJan-0.5%1.0%1.0%-
Mar 910:30 AMCrude Inventories03/05-NANA-0.364M-
Mar 108:30 AMInitial Claims03/05-370K382K368K-
Mar 108:30 AMContinuing Claims02/26-3750K3750K3774K-
Mar 108:30 AMTrade BalanceJan-$41.5B-$41.5B-$40.6B-
Mar 102:00 PMTreasury BudgetFeb-NA-$196B-$220.9B-
Mar 118:30 AMRetail SalesFeb-1.4%1.0%0.3%-
Mar 118:30 AMRetail Sales ex-autoFeb-1.0%0.6%0.3%-
Mar 119:55 AMMich SentimentMar-78.076.577.5-
Mar 1110:00 AMBusiness InventoriesJan-0.8%0.8%0.8%-