Data & Research May 6, 2009

How Optimistic are You?

See how what’s in your glass compares to your neighbor’s glass.
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Northwestern Mutual recently introduced The Optimism Barometer to test how American optimism is faring. The tool tells you how your optimism matches up to the rest of the nation.

After completing six quick questions, the needle moves to show the individual’s optimism score, which is compared to the results of the rest of the U.S. population, based on research by the Northwestern Mutual. Along with the score, a profile of the people who share the same optimism score is shown—identifying potential crossover characteristics among similarly optimistic or pessimistic people, Northwestern Mutual said.

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For instance, if you score 6 out of 10 on the barometer, it lists similar traits of those other 21% of people with a similar level of optimism. People in that range “feel generally optimistic about their personal success” and are “happy, but not overjoyed, with their current circumstances.”

Don’t assume you know where you fall on the scale. Northwestern Mutual said in a release that “even for those who already see themselves as ‘glass-half-full’ or ‘glass-half-empty’ types, the Optimism Barometer can be revealing.”

The firm plans to track the data collected via the Optimism Barometer and identify general trends nationally and regionally. “It will be interesting to see how—or if—the optimism needle moves in the weeks, months and years ahead,” said Greg Oberland, Northwestern Mutual executive vice president, in the release.

Painfully Optimistic?

The Optimism Barometer was developed using questions from The American Reality Study, commissioned by Northwestern Mutual and conducted by Mathew Greenwald & Associates. The study confirmed the stereotype that, overall, Americans are pretty optimistic.

For instance, two-thirds of respondents (65%) agree with the idea that someday they will get to where they want to be in life, including one-quarter (27%) who strongly agree, according to the study. And even in today’s economic environment, most respondents (58%) at least somewhat agree that the American Dream is still attainable for most Americans.

With that said, only one-third of respondents feel they are doing a good job preparing financially for the future, but it’s at the top of the list of priority goals. In fact, 10% said saving or preparing for retirement is their number one goal, after being healthy (14%), being financial secure (12%), and professional success (12%). Let’s see if optimism can turn into action.

More information and results about the study, conducted in January, is available here.

 

The Markets May 6, 2009

SEC Sues Reserve Over Breaking the Buck

Federal securities regulators on Tuesday charged the two top executives of the Reserve Management Co. money market fund with fraudulently keeping secret the true precarious financial situation of their Primary Fund after Lehman Brothers filed for bankruptcy.
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The Securities and Exchange Commission (SEC) alleged that Chairman Bruce Bent Sr. and vice chairman and president Bruce Bent II failed “to provide key material facts to investors and trustees about the fund’s vulnerability as Lehman Brothers Holdings, Inc. sought bankruptcy protection” and as the $60-billion fund “broke the buck” when the value of its assets fell to $0.97 per invested dollar last fall.

“As we alleged in our complaint, the fund’s managers turned a blind eye to investors and the reality of the situation at hand before the fund broke the buck last September,” said SEC Chairman Mary L. Schapiro, in an SEC statement.

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In December, the staff of the SEC’s Division of Enforcement informed counsel to Reserve Management Company, Inc., of its intent to recommend that the SEC charge the firm with violations of certain provisions of federal securities laws (see “Reserve Management Could Face SEC Charges“).

The SEC alleged, in its complaint filed in federal court in Manhattan, that Reserve Management and the executives misrepresented when the company would provide the credit needed to protect the net asset value of the fund when it never intended to do that.The agency also said the company “significantly understated” the investor requests to withdraw from the fund and failed to provide the fund’s trustees with accurate information on the value of Lehman securities.

The SEC is seeking unspecified civil fines and restitution from Reserve Management and the two executives, as well as to expedite the distribution of the Primary Fund’s remaining assets to investors, and that the court release a significant amount of money that is currently being withheld from investors pending the outcome of numerous lawsuits against the fund, the trustees and other officers and directors of the Reserve entities. After the latest $2.3 billion distribution announced April 17, about $46 billion, or about 90% of fund assets, had been returned to investors, the company said last month.

After Lehman Brothers filed for bankruptcy protection on September 15, Reserve Management board declared its $785 million investment in the investment bank’s debt worthless. That triggered a rush of orders from institutional clients to pull money out, gutting the fund’s value as its managers were forced to sell assets amid sharply declining markets.

On September 16 Reserve Management announced the Primary Fund had “broken the buck” (see “Reserve Primary Fund Promises $20B in Shareholder Repayments“). The Treasury Department stepped in with a temporary program to guarantee money-market funds, but the Primary Fund didn’t qualify and had to liquidate (see “Treasury Extends Money-Market Guarantee Program“).

Reserve Management has been charged by Ameriprise Financial of tipping off certain institutional investors of its Lehman Brothers investment prior to its Primary Fund shares dropping to below $1 in value (see “Lawsuits Spring up from Lehman Brothers Fall’).

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