A River Runs Through the Forecast

The one wrinkle that could still hold up a sharp fall in prices at the pump is the rising Mississippi River, which is flooding parts of several states, and threatens Louisiana between Baton Rouge and New Orleans. It's possible some refineries in the area might have trouble receiving oil shipments, but most analysts discount that issue.

"The market is pretty slack, so there are refineries that could come online and replace those affected by the floods," says Lynch.

The price decline is being driven by several factors. One is that the unusually high price in the last few weeks has itself caused consumers to cut back on driving. According to Lynch, demand for gasoline is down by 300,000 barrels a day, about 3% less demand than last year.

"That's a significant decline," Lynch says. "When you have this kind of run up, you do see consumers start to respond."

At the Top of an Annual Cycle

Kloza says that at the same time, the speculation in oil seems to have been cooled by investors' realization that there are adequate supplies.

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"The truth is oil prices are very tidal, and there is always a high tide that tends to occur around May 5," Kloza says. "This year it was probably a little higher than normal."

Many investors were also expecting the turmoil in Libya to spread to Persian Gulf countries, notably Saudi Arabia after demonstrations in nearby Bahrain, but those upheavals didn't materialize. There have also been a series of unlucky setbacks at U.S. refineries, including power failures, storms and maintenance issues.

Kloza noted that the combination of problems drove up crude oil prices to $115 a barrel domestically and $130 in world markets. That number has recently come down by about $15 a barrel.

"It's more than a drift lower," Kloza says. "Once we get through this notion of possible flooding, it's sharply lower at the pump." The trend will be sharpest in California and other Western states which were the first to feel the sharp increases, he says.

Lynch says he expects to see gas prices sink lower throughout the summer and probably end it below $3.50 a gallon.

The sharp drop will be a help to hard-pressed consumers just as the summer driving season begins. It will also give a needed shot in the arm to the lackluster recovery, which has been dragging at least in part due to high energy prices.

Greenblatt's Choice: Value-Weighted Index Funds

There is yet another way to structure an index -- a value-weighted index fund. This takes the same index of companies -- for example, the Russell 1000 -- but sifts them for bargain stocks. It's this method that Greenblatt favors the most -- but he has a dog in this fight: The index he and his partners have devised uses the value-weighted approach.

Greenblatt recently formed an investment firm known Gotham Capital. Gotham launched its first value-weighted index fund, the Formula Investing U.S. Value 100 (FVVAX), in November 2010, so it's too soon to draw any conclusions about its long-term performance, but historical extrapolations look promising.

"We add value by overweighting those stocks that appear to be the cheapest," Greenblatt says. In an historical analysis over the past 20 years, Greenblatt says his value-weighted index has done 7% a year better than the market index, while carrying the same level of volatility and risk as the S&P 500.

Greenblatt, who teaches the works of legendary value investor Benjamin Graham at Columbia, says that his index also incorporates some techniques of Graham's most famous student, Warren Buffett, who searches for not only cheap companies, but cheap companies with great businesses. Grenblatt explains his methodology in the book and on a specially created website, valueweightedindex.com.

What about traditional value index funds, such as the Vanguard Value Index (VIVAX). By and large, value index funds select a group of stocks in an index like the Russell 1000 by a metric that reflects the least expensive companies. But they then rank them by market cap, not cheapness. So the same problems that apply to traditional index funds -- a tendency to reward high price and punish bargain firms -- is also reflected in value index funds.

Value funds also are often out of sync with the indexes they are drawn from, so the small investor often will have to watch as his investment underperforms the S&P 500 for months or even years at a stretch, which can be hard to stomach psychologically. A potential extra 7% a year is awfully tempting, but it may take a lot of fortitude to hold on until those profits materialize.

Defining Defined Benefits

A defined-benefit plan is a traditional pension that pays out a predictable, steady benefit at at the end of a working life.

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By contrast, a defined-contribution plan is usually something like a 401(k), in which the worker contributes a portion of his income and the employer may offer a matching contribution. A pension is funded by the company, while a 401(k), as many workers have learned to their horror in recent years, rises and falls with the stock market.

In the last decade there has been a major shift away from defined-benefit plans toward defined contribution plans at major U.S. companies.

Glickstein says that of the Fortune 1,000 companies his firm tracks, 586 have some form of defined-benefit plan. Of those, 208 have frozen parts or all of the benefits, meaning either that no new benefits are accruing or that new employees can't qualify for the benefits.

Could an Economic Rebound Revive Pension Plans?

Glickstein says the problem for many workers is that the defined contribution plans are a poor substitute for a pension. According to the Center for Economic and Policy Research in Washington, the average balance in 401(k) retirement plans is only $60,000, far less than is necessary to survive a lengthy retirement.

"We see statistics all the time that suggest that relying on a 401(k) plan as a primary source of retirement income is not going to do it," Glickstein says. "There is a tremendous amount of effort under way on the part of plan sponsors who have moved in that direction to treat the 401(k) plan more like a primary retirement vehicle."

Public sector employees tend to have more access to traditional pensions than private sector workers, but that too is changing. Recent changes in states like Wisconsin have been designed to reduce public sector pension benefits.

Glickstein believes that if the job market improves with the economic rebound, some companies may be forced to resume offering traditional pension plans again, or their employees will flee to firms that do. "The fact that younger employees are now saying they value security and it would matter to them if they had a pension plan, could start influencing employer behavior about what they offer,'" he says.

"If you have a whole bunch of workers who were ready to retire two years ago, but can't afford to because their 401(k)s took a dive, you've got some really big issues in managing your company," he says. "Your ability to manage your workforce and cost effectively move them out of the organization when they are ready to is a really big issue."

Here are the top 10 U.S. industries that offer defined-benefit pensions:

AEI's Viard says the deduction actually "encourages people to own bigger homes or more expensive homes. It is hard to see the public purpose in that objective."

There is no dispute that the deduction benefits higher-income earners more than lower- and middle-income Americans. If you're in the 35% tax bracket, you get $35 of savings for every $100 of mortgage interest you pay, but if you're in the 15% tax bracket, you only get $15. So it's hard to claim that the deduction is targeted at people who are on the fence on the question of buying a home vs. renting.

But a counter-argument comes from Robert Dietz, an economist with the National Association of Home Builders, who says that elimination of the mortgage deduction would have "a huge impact" on first-time home buyers.

In the early years of a 30-year, fixed-rate mortgage, Dietz notes, the largest part of each payment goes directly to interest -- only a little goes to paying down the loan's principal. As a result, he says, recent first-time buyers are the ones for whom interest makes up the largest share of the household budget, and it is they who would be hurt the most by an elimination of the mortgage interest deduction.

Dietz maintains that 70% of the benefits from the reduction in tax liability go to people earning between $50,000 and $200,000 a year. Eliminating the mortgage deduction "would have the effect of delaying the home ownership status of some people, as they would have to accumulate a larger down payment before they became home owners," he says.

Toder says he doubts that elimination of the deduction would divert potential homeowners into becoming renters. "I think what it would probably do is reduce the amount of money you would spend on a house," he says.

And, he notes, if there are no transition rules, current homeowners could get squeezed painfully if the deduction is eliminated while they have to carry on making the same old mortgage payments.

An Alternate Proposal

One plan that is gaining currency was suggested by President Obama's budget reform commission, which was headed by former Sen. Alan Simpson (R-Wyo.) and Erskine Bowles, former chief of staff to President Clinton. They proposed to eliminate the mortgage interest deduction and replace it with a 12% credit for interest paid. While that would be less than many taxpayers now receive for the current credit, lower-income earners such as seniors would be entitled to claim the new credit even if they don't file for itemized deductions.

The current limit for the proposed deduction is mortgages on $1 million homes. Viard says by making interest credit available to people who don't itemize deductions and placing a limit on the dollar value of the house, it wouldn't encourage people to buy more expensive houses.

"This credit is much more focused on what may be the legitimate goal of encouraging home ownership instead of this clearly illegitimate goal, which I am not sure anybody has identified, of encouraging bigger houses," Viard says.

Or perhaps we can eliminate mortgage interest from consideration altogether. After all, Canada and Britain don't allow it as a tax deduction, and the real estate markets are booming in both countries.

But is the program that has provided retirement benefits to millions of Americans since the Depression really broken? Is it causing the federal deficit to spiral out of control as some have suggested?

The Real Numbers on Social Security

Peter G. Peterson, chairman of Blackstone Group, for example, has repeatedly claimed that Social Security is not adequately funded and that younger Americans will have to pay double the amount of Social Security taxes within 10 years. And even the normally sober factcheck.org, which debunks myths propagated by both parties, has repeated claims that Social Security is contributing to the federal deficit.

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The fact is, though, that most of the arguments for why Social Security is facing bankruptcy in the short term are simply not true. As Dean Baker, co-director of the Center for Economic and Policy Research in Washington, says: "The biggest weapon for people who want to change Social Security in a big way, such as privatizing it or seriously cutting benefits, is that the program is on life support." If the program seems like it's going to fade away anyway, people won't feel they have anything to lose by gutting it.

But a close reading of the Trustees report and the Congressional Budget Office analysis paints a different picture. Social Security received about $37 billion less in payroll taxes than it paid out in benefits in 2010. It will have a larger shortfall again this year because the federal government decided to give workers a 2% tax holiday on the amount they pay toward Social Security in 2011.

But Social Security has a trust fund of $2.6 trillion. This is money that was paid into the system but hasn't yet been spent by it. The money is all held in government bonds for which the Treasury must pay interest. It earned $119 billion in interest in 2010 and is projected to receive a similar amount in 2011. Total income in 2010 was $788 billion; total outgo was $706 billion. Does that sound like bankruptcy?

Now, some people regard those interest payments as contributing to the federal deficit. That's correct in in a strictly bookkeeping sense, because the federal government must pay them out of general revenues. But if Social Security didn't own these bonds, someone else would -- perhaps China or a pension fund in California. It is nonsense to suggest they are contributing to the federal deficit, too.

Minor Change Would Help Keep Program Solvent

David Certner, legislative policy director for AARP, points out that the trust fund has enough money to pay all of its projected benefits for the next 26 years. "The rest of the budget is out of balance, not Social Security, which takes in more money than it pays out," he says. Even after the 26 years are up, the program will have enough income from taxes to pay 75% of all benefits.

Certner and Baker both maintain it would be relatively easy to make modest changes to Social Security to close the gap that will emerge in 2037. Among the options: Raise or eliminate the cap on Social Security taxes, which are now paid by employers and employees on only the first $106,900 of income.

Back in 1983, 90% of all wages in the U.S were taxed for Social Security. Today, because of wage inflation, it's only about 82.5%. If the ceiling was raised again to return that percentage to 90%, it would eliminate one-third of the problem. Many people don't even know there is a cap, or that rich people pay less in Social Security taxes as a percentage of income than do middle-income people.

The Poor Die Younger

Others have suggested further raising the retirement age, which is currently 66 and is due to rise to 67 in 2022. But as Baker points out, most of the advances in longevity have come at the upper end of the income scale. Poor people still don't live as long as rich people, so if they have to postpone retirement until age 70, they will face shorter lifespans after stopping work.

In addition, lower income people often have physically demanding jobs, such as custodians, nurses and waiters. For many of them, waiting until 70 years of age to retire would be difficult.

And seniors do need the money. Statistics show that one in three seniors depends on Social Security for 90% of their income. Another third depend on it for two-thirds of their income. "The middle third has seen a lot of damage in terms of other sources of income," says Certner, referring to the market collapse in the financial crisis, the decline in interest on bonds, and the sharp decline in home values. "So you want to do as much as possible to protect the middle income population as well."

Baker has another interesting idea: He suggests taking some of the trust fund money now held in government bonds and investing it in the stock market, where it could earn higher returns. That way, not only would Social security be stabilized, but people could no longer claim that Social Security was to blame for the deficit.

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That prediction succeeded in scaring the small investor out of the muni market. According to market researcher TrimTabs, some $31.5 billion has been yanked from muni mutual funds since that fateful broadcast.

But Whitney's dire scenario hasn't come to pass: Are we out of the woods on the municipal bond front? And, if not, is it still possible to invest in that sector safely?

Marilyn Cohen, CEO of Envision Capital Management, a fixed-income management firm in Los Angeles, says it's still too early to invest anew in munis.

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"I think we're going to have a second wave of selling," says Cohen, co-author of the new book, Surviving the Bear Bond Market. "I think the default rate in the next 12 months is going to be significantly higher than we've ever seen before, because the market has changed."

So what is a conservative investor to do, given that Treasuries are yielding almost nothing? Well, Cohen isn't spurning all munis. She recommends buying one select group that carry virtually no risk: pre-refunded munis, or escrowed to maturity bonds.

These bonds function exactly like regular munis, complete with the tax-free income. The only difference is that the money to pay off the principal and interest has been set aside in an escrow account.

There are several methods used to fund these escrow accounts, but Cohen recommends buying only pre-refunded munis that have U.S. Treasuries in the escrow. She says even though bonds issued by the government-run Fannie Mae and Freddie Mac mortgage issuers are sometimes used, investors should steer clear of those.

The only risk with these bonds is if the U.S. government goes bankrupt, and there's little risk of that, despite the budget battle in Washington.

Dick Bellmer, CEO of Deerfield Financial Advisors in Indianapolis, is also a fan of pre-refunded munis, noting that the more attractive ones are issued by budget-challenged states like California and Illinois. "People say 'I don't want one of those things,'" he says. But they still carry no risk, even when the issuing state's finances are a mess.

The only real drawback is that so many people have cottoned on to the fact that pre-refunded munis with U.S. Treasury escrow have essentially no risk that they are no longer such a great deal as they once were.

Consequently, Bellmer recommends essential revenue bonds as a possible alternative. These bonds are issued by states for such things as municipal water companies. "If they're going to cut off your water, you're probably going to pay your water bill," Bellmer says, "which means the risk as it relates to essential revenue bonds is probably not a lot of risk. You can still get a pretty decent yield off of those kind of bonds."

Bellmer cautions small investors to make sure the bonds they invest in are not illiquid, because few institutional investors can be bothered to get involved in $25,000 bonds. That means there may not be a big market for them, and they could prove hard to sell in a pinch. He prefers holding bonds to maturity, but not every small investor has that kind of flexibility.

Bellmer isn't a big believer in muni mutual funds: He prefers to hold individual muni bonds.

"I know exactly what I am going to get -- a stream of interest payments and the value of the bond back when it matures," he says. "With a longer-term bond fund, people are buying because it pays a higher interest rate."

But what they don't recognize is that when interest rates go up in the economy because of rising inflation, the entire value of the bond fund is going to go down since price and yield move in opposite directions.

Suddenly the higher-yielding fund doesn't look so good, Bellmer says. Then the only possibility of the fund rebounding is if interest rates go down again -- and that may be years in the future.

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It's hard to get a straight answer to that question. If you ask a real estate agent or a banker, they'll tell you with a smile that it's a great time to buy. Then again, they said the same thing back in 2007.

First came higher food prices, thanks to heat in Russia and floods in China and Australia. Then came soaring gas prices as a result of the crisis in Libya. Now, imported consumer goods -- including almost everything from Brazilian orange juice to imported Toyota automobiles -- are going to be joining the upward price trend.

The culprit is the U.S. dollar, which has fallen 5% in the last year. The inflation-adjusted, trade-weighted dollar, which is a measure of the greenback against the currencies of nations we trade with, now stands at its lowest level since the Federal Reserve began keeping records in January 1973.

As the dollar's value falls, the prices of imported goods grow. The falling trade-weighted dollar is closely correlated with higher import prices, explains Carl J. Riccadonna, senior U.S. economist at Deutsche Bank.

"The weakening dollar is driving up import prices and that is translating through to higher consumer inflation," Riccadonna says. "We're seeing it not only in imported goods, but in domestically produced goods that also contain foreign inputs."

Inflation Trickles Downstream

In other words, it's not just finished goods, like Audis and Volkswagens, that are rising in price as a result of the weak dollar. Imported components, such as automobile transmissions and computer chips, also are becoming more expensive. And that means that all the products that use those components, whether they're made in the U.S. or not, also will see their costs rise in turn.

"Those price pressures in the earlier stages are eventually going to be passed along down the line to consumers," Riccadonna says.

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Overall, import prices rose 1.4% in February, the fifth straight month of increases over 1%. Deutsche Bank expects the core producer price index, a measure of wholesale inflation, to rise to 3% by year's end, with consumer prices up more than 2.1%. That's double the current inflation rate.

The expected increase may seem to add insult to injury, considering that imported petroleum prices already have grown 20.6% over the last year, according to the Bureau of Labor Statistics. While energy is excluded from the measure of inflation known as the core consumer price index, the higher fuel and transportation costs also end up increasing costs throughout the supply chain -- and leading to higher consumer prices as well.

Domestic Prices Likely to Rise Too

Can consumers avoid this inflation by simply buying products entirely made in the U.S.? Probably not. If you think you'll just give up French cheese and buy Californian instead, for example, consider this: When domestic manufacturers see competitors' products rise in price because of the weakening dollar, they tend to raise their prices, too.

"If Toyota's prices are going up because of an exchange-rate move, then Ford has a little more leeway on a domestically produced vehicle," Riccadonna says. "What this means is inflation is absolutely going to trend higher over the course of the year."

Logic -- and the rule of supply and demand -- would suggest that as import prices go up, American consumers would buy fewer of them. But that's not what's happening. According to the U.S. Census Bureau, the country imported $166 billion worth of goods in January 2011, compared with $136 billion in January 2010.

Why? While imports are becoming more expensive as the dollar weakens, the U.S. economy is also on the mend. Both consumer spending and business spending is picking up, which has raised the demand for imports, even at higher prices.

Riccadonna says a more important metric than the dollar's value is disposable income. Incomes have been rising for the past year, and that has kept consumers' purchases up despite the higher prices for oil and food. If incomes were not increasing, the economy might have ground to a halt, he says, instead of merely experiencing inflation.

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As it turns out, the main Japanese ETF, ishares MSCI Japan Index (EWJ), is down only 3% year-to-date, which is much less than it fell in the immediate aftermath of the quake and tsunami.

For one thing, the yen hit a record high of 76.25 to the dollar on March 17. Nearly $900 million flowed into the Japanese ETFs in the preceding two days on the expectation that companies would sell foreign holdings and bring the proceeds back to Japan to buy yen.

But then, in the first coordinated intervention in a decade, the central banks of the G7 nations took action in the currency markets to force down the value of the yen - an extraordinary move. It now stands about 80.95 to the dollar, a decline of 5.1% in a week.

"I'm sure a lot of people who were doing this trade were unaware that the yen was at the highest level since 1996," says Michael Krause, president of AltaVista Research in New York, which produces the website etfresearchcenter.com. "That was a very strong risk."

Overpaying for a Stock Basket

The other risk was the so-called premium. Most ETFs are basically baskets of stocks designed to track an index. But the stocks in these ETF and their underlying indexes are in Japan, and the U.S. and Japanese markets aren't open at the same time, the share prices of the ETFs in America are moving when the closing prices of the underlying shares in Japan are a day old.

Those situations can create either premiums or discounts: In the case of Japan ETFs, premiums reached a mind-bending high last week, when funds were selling at a large markup above the value of the underlying stocks. Ishares MSCI Japan Index had a premium of 7.87% and WisdomTree Japan SmallCap Dividend Fund (DFJ) carried a 9.25% premium.

"That was extreme -- you're usually not going to have to pay that kind of spread," says Russell Wild, a financial adviser in Alllentown, Pa., who wrote Exchange-Traded Funds for Dummies."When there is a lot of confusion in the markets, such as after an earthquake, and there is a lot of movement in the markets, you risk buying at a premium."

For the small investor, it can be difficult to gauge all the risk involved. (DailyFinance makes it fairly easy to determine the premium on an ETF. On the DailyFinance homepage, enter the ETF ticker symbol followed by .iv into the "search" field, and it will show you the ETF's net asset value.)

Gambling -- and Losing -- on Egypt ETFs

"It's always better to get a broader, more diversified portfolio so that you are not locked into one thing," says Lawrence Carrel, author of ETFs for the Long Run. "The more narrowly focused you are, the more potential there is that anything that happens in that one particular market is going to lose you a significant amount of money."

Krause says that as a rule, regional funds tend to be less volatile than single-country funds because risk is spread over a larger area and number of currencies. But some single-country funds, such as those based on the British markets, have less volatility than emerging market regional funds.

Another example of the inherent risks of ETF investing overseas is illustrated by what happened to the main Egypt ETF, the Market Vectors Egypt Index (EGPT). Some market observers had also called Egypt was a buying opportunity because its shares had been driven down by street demonstrations against President Hosni Mubarak, who eventually agreed to step down.

Trading in the EGPT was brisk in the U.S., and the ETF moved consistently higher even though the stock market in Egypt was closed for more than a month. When the Egyptian Exchange reopened on Tuesday, stocks dropped 10% and EGPT opened at $15.86, a decline of 17% from its March 9 high.

As Wild notes, money committed to these markets often has to be reclassified from an investment to a speculation. It's fine if you have some part of your portfolio set aside to make such wagers, but they aren't something you should risk your savings on.

That may seem hard to believe after the recent run up in gold's price. With conflict rising in Libya and the crisis still brewing in Japan, the price of gold rose to $1,428 an ounce, up an astonishing 28.8% in the last year. A decade ago, gold was selling for just $268.

"While we do expect inflation to remain a concern, investors who are focused on gold will likely start taking profits and move their money into riskier assets such as equities, which have performed really well in this market," says Brian Bueno, an analyst at research firm IBISWorld, which has just published a report entitled, "Gold's Long Bull Run Is Set to Turn Bear."

Even some noted gold bulls are warning that prices have gone too high and that a major pullback may be in the offing. "Since early this year, I have become cautious about gold's ability to push substantially higher over the near term and have expected instead to see a sharper decline," wrote a commentator on Forbes.com. And investment adviser Mickey Fulp recently told Business Insider that gold is "overdue for a correction," though he remains a long-term bull.

Many American investors have been adding gold to their portfolios because other investments, such as Treasuries, which could always be counted on to produce income, have been such terrible performers in the last few years.

The era of free checking accounts is coming to an end. Many consumers will face an extra $144 a year in account fees, plus higher annual dues for their debit cars, and increased ATM charges may be on the way.

J.P. Morgan Chase (JPM), which has has 27 million checking accounts, has announced it will impose fees ranging from $10 to $12 per month on those accounts -- though the fees can be avoided if you maintain a minimum daily balance of $1,500 or set up a direct deposit of $500 or more each month into your account.

"Honestly, we are looking at the pricing of all of our products and our revenue streams based on some of the changes that are going on right now," says Christine Holevas, spokeswoman for Chase.

Meanwhile, Bank of America (BAC), which has 57 million consumer and small business customers, has started a pilot program to charge new customers in Arizona, Georgia and Massachusetts for checking accounts, says spokeswoman Anne Pace. The four account options on offer have fees ranging from $6 to $25 a month, but customers maintaining a minimum daily balance of $5,000 won't have to pay the fees.

When the results of the test programs are clear, Pace says, the bank will decide whether it will impose the fees nationwide.

A Push Back Against Financial Reforms

Brian Foran, a banking analyst at Nomura Securities International In New York, says the rising fees are part of an effort by the banks to recoup some of the income they lost from two recent regulatory changes.

Thanks to last year's passage of the consumer-protecting Credit CARD Act, the Federal Reserve has changed the rules so that banks can no longer automatically charge overdraft fees on debit card purchases. Customers must actively opt into allowing their account to be overdrawn, or their charges will simply be rejected when their account balance is insufficient.

The larger portion of banks' lost income comes from a reduction in the interchange fees paid on the use of debit cards. Merchants typically paid 2% of a transaction to the banks and credit card companies, but that has been reduced. Under new rules adopted under the Durbin Amendment -- passed as part of last year's financial reform law -- banks can only charge 12 cents per transaction, a decline of about 70% from what they previously earned.

Foran says he estimates banks made $8.7 billion in interchange fees before the new regulations, but will now make only $1.4 billion, a loss of $7.3 billion in revenue.

"J.P. Morgan has a secondary motivation of trying to send a pretty clear message to Washington that if you regulate prices, we have to charge more somewhere else," Foran says.

Looking for Cover to Recoup Their Lost Billions

While big institutions like Chase and Bank of America are the first movers in this trend, smaller banks are preparing to take similar steps. U.S. Bancorp (USB) said on its recent investor conference call that it will likely be forced to implement some kind of fee structure.

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"In general, the smaller banks are looking to the bigger banks to lead the way because that will give them air cover," Foran says.

Nomura estimates big banks may make up as much as 40% of their lost revenues through checking account fees, $1 billion to $2 billion more via annual fees for debit cards, and $500 million to $1 billion by reducing their rewards program benefits for debit transactions.

"Every bank knows that Durbin killed free checking, and every bank knows they need to raise fees, but no bank is terribly excited about being the first bank to raise fees because when you do, a bunch of customers are going to leave the bank and go to some other bank across the street," Foran says.

Lower-Income Customers Will Leave

In an investor's day presentation last month, Chase estimated that 15% of its customers will no longer be able to qualify for free checking. "Based on current attrition rates, we expect 50% to 60% of these customers to leave Chase within the next year," the bank said.

The bank expects to lose many of the lower-income customers it acquired when J.P. Morgan took over Washington Mutual in September 2008 after it was seized by bank supervisors in the largest bank failure in U.S. financial history.

Under the new Chase pricing plan, most customers will be charged $12 a month for their accounts unless they meet the requirements for avoiding the fees. But former WaMu customers in California, Oregon and Washington state will only be charged $10 a month, Holevas says.

In addition to its new checking account charges, Chase has also started a pilot program to boost the fees it charges non-customer for withdrawals from its ATM machines in Texas and Illinois. The fee will be $5 in Illinois and $4 in Texas, up from the current nationwide withdrawal fee of $3. TD Bank Financial Group (TD) and PNC Financial Services (PNC) are also raising their ATM fees.

"You never make tons of money on ATM fees to non-customers, but the idea is you really don't care if you piss off someone else's customer," Foran says. "But it's never going to come close to offsetting the lost revenue from the Durbin Amendment."

As workers continue to try to prevent a meltdown at the Fukushima Daiichi nuclear-power plant, which was damaged by Japan's massive earthquake last week, panic about the possibility of radioactive fallout has spread from northern Japan all the way to the U.S.'s West Coast.

Geiger counters and potassium-iodide pills -- which can help prevent radiation-caused thyroid cancer -- have been flying off the shelves, sometimes at unscrupulous prices.

Alan Morris, president of Anbex Inc., a Williamsburg, Va., company that is the largest supplier of FDA approved potassium iodide in the country, says his business "has been very hectic" since the earthquake hit last week.

"We've been selling a lot of product in the last few days," Morris says. "Our normal sales aren't even remotely close to that."

Fear Sells: Some Ridiculous Markups

Morris estimates that he has filled 15,000 orders for potassium-iodide pills sold under the brand name Iosat. The packages each contain 14 tablets and retail for $10.

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But on Amazon, several retailers, including Neuron Electronics and BP Medical Supplies, are selling the same packets for up to $425.99 each.

"I hear that and I go crazy," Morris says. "That's just disgraceful. We have nothing to do with that. We sell the tablets for $10 and I wish it could be stopped."

Morris says the pills are an effective prophylaxis against thyroid cancer and have been used successfully at Three Mile Island and at Chernoybl in the Ukraine. But experts have argued that such preventive medicine is unlikely to be necessary, given the long distance from Japan, and that more risks than benefits could result from taking the medicine now.

Geiger Counters Fly Off the Shelves

Another hot seller this week is Geiger counters and radiation monitors.

Tim Flanagan, owner of Minerlab, a reseller of Geiger counters in Prescott, Arizona, says his business has been overloaded, especially with orders pouring into his website, geigercounters.com.

"This is demand like I've never seen it," Flanagan says.

All of his radiation detectors are sold out. Since orders started flooding in on Sunday, he's been telling people that the shipping time is several weeks, but on Thursday he began telling them it would take months to get the detectors because of the long backlog.

Selling to Japan

Devin Sper, president of Sper Scientific, a Scottsdale, Ariz., electronics firm, says his company has sold dozens of radiation detectors online for between $323 and $344 each. Orders are also coming in from distributors.

Normally, the bulk of Sper's sales come from scientific laboratories, which use the detectors to check radiation levels at labs after experiments. But now, most of his orders are from the general public, which is worried about Japanese fallout.

"We anticipate that sales will be strong and we've taken steps to increase our inventory," Sper says.

Expecting even greater demand for radiation monitoring in Japan, one wily entrepreneur in Wichita, Kan., even placed an ad on Craigslist's Tokyo website that offers a Geiger counter for $350, plus $35 shipping.

There's no word on how long it would take to arrive.

Financial adviser Bill Losey, who is based in suburban Wilton, N.Y., has a five-point plan for dealing with them. He learned it the hard way: He made many of the same mistakes himself. After he had dug himself out of a hole, he realized that he might be able to use his newfound knowledge to help others.

Here are the five things Losey says you need to do to break those tragic bad-money habits.

1. Make a budget: Most people, even rich people, live without a budget. But don't fret: You don't need a ledger or spreadsheet program to create a budget that works. Simply draw a line down a sheet of paper. On the left side, write down all the money that comes in; on the right, all the money that goes out. "It will show you how much money you are spending on essential items and how much of your income you are actually assigning to frivolous expenses," Losey says. Many of his clients find that they're frittering away between $200 and $800 a month on stuff they don't really need. Once you have found the miscreant bucks, you can use them to pay down debt, pay off your mortgage or save for retirement.

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2. Distinguish between needs and desires: Do you really need that iPad 2 or do you just want it? "Do you understand that by borrowing money, you are actually spending away your future earnings?" Losey asks. These decisions can be difficult because emotions get in the way, fed by slick advertising.

3. Understand the difference between good and bad debt: Bad debt is debt incurred on goods that are going to depreciate in value. It's a debt on something that has no potential to make money. Good debts, on the other hand, are debts that can potentially create value, such as a mortgage, a business loan or a student loan. Of course, just because a mortgage is a good debt doesn't mean that you should take out the largest possible loan -- that also can get you in trouble. But this rule does mean that just about everything you buy on your credit card is a bad debt. Use your plastic for the miles and rewards, but pay off the balance due every month.

4. Educate yourself financially: Many people are convinced they are never going to be able to build wealth, and the root cause of this conviction is a lack of education, Losey says. "We live in a society of financially illiterate people," he says. "You have to educate yourself, because in school nobody teaches you how to manage your money." Losey's not talking about taking a course. Instead, he recommends immersing yourself in financial books and magazines. And you can't just read one book, no matter how good Suze Orman is. Things are changing so fast that you have to keep up with the latest developments. Pop quiz: Do you know the difference between an ETF and an ETN?

5. Set financial goals and take them seriously: When people educate themselves about money, they start to see how the financial world really works and they start to explore their own financial potential. Have a conversation with your spouse or a financial advisor to figure out how much money to save and what to do with it. Should you save to buy a house or put money aside for retirement? What about your children's college expenses? Losey receommends the 1% rule: Save 1% of your salary and take one third of any raises and add that to the pot. He says its best to save for multiple goals, but if you're forced to make a choice, save for retirement before a college education. "You can always finance a college degree but you can't finance retirement," Losey says.

Nearly half of all Japanese women over the age of 20 own a Louis Vuitton handbag, according to equity analysts MF Global. So if you're LVMH (LVMUY), the French parent of the trendy handbag maker, you have to be worrying about the effect of the Japanese earthquake and tsunami on your bottom line.

Luxury brands like Coach and Tiffany in the U.S., and Richemont (CFRUY), Swiss owner of such posh brands as Cartier and Montblanc, have taken huge hits to their stock prices as investors digest the consequences of a prolonged consumer drought in their biggest market.

"We believe the impact could be fairly significant given Japan is currently the largest luxury market globally," says Sunita Entwisle, a luxury analyst at Nomura Securities International. In London. "It's a declining market, but still an important one, and sales were beginning to pick up at the end of last year."

MF Global estimates that Japan accounts for 23% of the world market for hard and soft luxury goods, compared with 13% for China. But about 18% of luxury sales in Japan are made to Chinese tourists, who may just shift their shopping trips to places like Singapore.

Overall, the luxury goods index was down more than 4% Tuesday as news about further possible damage at nuclear power plants began to circulate.

New York-based Coach (COH), which gets 20% of its sales from Japan, has been among the hardest hit. It has 164 stores there, including three in the affected region around Tohoku. Coach shares have dropped 9% in the last two days. Tiffany (TIF) is another U.S. luxury stock that is vulnerable in Japan. It has 56 stores in the country, accounting for about 18% of total sales. Its shares are also down 9% since the earthquake hit last week.

"While not all parts of the country were equally affected physically, recent events will almost certainly dampen the consumer mood/spending," says Nomura analyst Paul Lejuez.

Will Japanese Buyers -- and Shopping Tourists -- Stay Home?

A number of European brands are also taking a hit. In France, Hermes has the largest exposure to Japan, which accounts for about 19% of sales. PPR, owner of Gucci, gets 15% of its sales there. British clothier Burberry (BURBY), whose plaid designs are beloved by office workers in Japanese corporations, only makes about 5% of its sales in Japan, but gets between 18% and 20% of its earnings from a licensing deal there.

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Burberry's local partner is obligated to pay an $80 million annual licensing fee to the parent company, but Burberry has not decided yet whether to demand that payment if sales fall off. "They will have to work out whether it's in their brand's best interests to press for payment within these tragic circumstances," says John Guy, luxury goods analyst at Royal Bank of Scotland (RBS) in London. "There is a risk that if they went ahead and did that, the brand damage could be more longer term if the Japanese consumer became aware that Burberry was pressing for this payment."

Guy notes that most measures of the sales losses expected to be caused by the quake have been limited to the Asian region, and don't include sales of things like sales of handbags to Japansee tourists in Paris. Hermes, whose famed scarves are beloved in Asia, makes one-fifth of its sales in Japan, but another 10% of sales at its French shops are also believed to be to Japanese tourists.

"There is a very high portion of Japanese exposure there as well," he says.

Middle East Turmoil Further Saps Sales

Adding to the luxury sector's discomfort, affluent shoppers in the Persian Gulf, normally big spenders at European boutiques in the region, have also been distracted by the recent outbreaks of political violence. On the heels of upheaval elsewhere in less affluent parts of the Middle East, Saudi troops have moved into wealthy Bahrain, causing disquiet throughout the whole region.

"When you combine the Japanese exposure and the Middle Eastern sales exposure, then you're talking about a significantly higher percentage of sales, potentially," Guy says. "There are a lot of macro things going on."

When the Federal Reserve's interest-rate-setting committee meets on Tuesday to consider whether to change its monetary policy, it will likely be forced to alter the way it views the economy. It will probably rewrite its dismal assessment of unemployment, which has fallen, and acknowledge that the economy seems to be picking up. But will it also admit that the whiff of inflation is much stronger?

Prices for food and gasoline have lept in recent months, but they are not part of the key measure known as "core inflation," so the Fed tends to play down their impact. In his recent Congressional testimony, Fed Chairman Ben Bernanke said "the recent rise in commodity prices will lead to, at most, a temporary and relatively modest increase in U.S. consumer price inflation."

Tell that to Bill Dudley, president of the New York Federal Reserve Bank, who was lambasted by a crowd in New York last week and angrily asked when he's last gone shopping.

Inflation Expectations Surge


There's no doubt that the economy is growing stronger, as reflected by the latest retails-sales report on Friday. Retail spending grew 1% in February, with auto sales -- which increased 2.3% -- providing the biggest boost, increasing 2.3% in the month.

Unemployment has declined to 8.9%, representing a drop of a full percent in only three months. The employment component of the ISM manufacturing index in February reached its highest level since 1973.

A Less Pessimistic Outlook

As a result of these improvements, the Fed is going to have to revise the glum outlook it gave at its last meeting in January, according to Troy Davig, senior U.S. economist for Barclays Capital.

"It's getting to the point where they are going to have to start changing their assessment and acknowledge some firming in consumer spending," Davig says. He added that the employment picture also has been improving rapidly, with the so-called diffusion index showing that companies are hiring more workers than they are laying off.

Both Davig and Carnell say they don't expect the Fed to change its existing zero-percent-interest-rate policy or to step back from its economic-stimulus program of buying $600 billion of Treasury bonds -- even though it adopted that policy when things looked much glummer.

The U.S. policy contrasts sharply with Europe's, which has warned it may start raising interest rates next month to stave off its inflation problem. The news has caused a huge realignment in currency rates, with the euro surging and the dollar falling.

Should the Fed End QE2?

Carnell claims the U.S. bond-buying program, known as quantitative easing, is doing as much harm as good and should end before its scheduled stop in June. "It's an irrelevant policy that's causing all sorts of distortions," he says, noting that it has caused a huge bout of inflation in places such as Brazil and China as investor funds leave the U.S. in search of higher returns.

But, reading between the lines, the Fed seems determined to continue with quantitative easing for the next few months, despite the economy's pickup, Davig says.

What remains unclear is what Bernanke plans to do with another program, announced last August, that calls for the Fed to use the interest it makes from the bonds it owns to buy new Treasuries, further stimulating the economy.

"What's going to happen to the reinvestment is less clear," Davig says, "A natural thing to do is freeze it."

At least if Bernanke rewrites his outlook, American consumers and companies will have a better fix on where things stand. That will help them make better spending decisions in the next few months.

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Marital problems can have many causes: emotional, psychological or even financial. But so far, few have dared to suggest that the roots of these problems can best be described by economics. Can the solution to that cat-and-dog fight over housework really be found in the teachings of Adam Smith and Joseph Schumpeter?

As improbable as it might sound, the authors of a readable new book, Spousonomics: Using Economics to Master Love, Marriage and Dirty Dishes, makes a convincing argument that that's indeed the case. The authors, Paula Szuchman, an editor at The Wall Street Journal, and Jenny Anderson, a Wall Street reporter for The New York Times, obviously embrace economic ideas passionately. They amusingly relate their everyday lives to these weighty prescriptions.

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Many of the economic problems described are actually phenomena of behavioral finance, which blends economics and psychology to explain some common investing mistakes. If it works for your portfolio, will it work with your husband?

Anderson, whose mother was a marriage counselor, has two children of her own and works 12-hour days at the Times, so she knows of what she speaks (and even found the spare time to write a book). When DailyFinance recently caught up with her, she used nine economic theories to help explain common causes of household angst.

1. Comparative advantage: "Many of us going into marriage thinking 50-50 is a natural split for dividing up the labor in the house," Anderson says. But that never works. The solution? Adam Smith's preachings of comparative advantage, in which workers do what they're best at -- or what they can do most efficiently. Managing a house and a family requires enough different tasks that it makes sense for couples to try to find different specializations, Anderson says. "Men aren't good at housework, but your options aren't dishes or nothing, your options are dishes or toilets," she says. "The goal is a lifetime of fairness, but on a day-to-day basis it doesn't work out that way."

2. Pareto efficiency: A market failure is when the free market doesn't assign a correct price to a good or service. Women often give up high-paying careers and get stuck at home providing not only child rearing, but also cooking and cleaning for free. "There is never a discussion of what that is worth, and as a result a lot of resentment would grow," Anderson says. The solution: Pareto efficiency, named after Italian economist Vilfredo Pareto, which seeks to improve the lot of one individual without hurting another. Anderson describes the theory, in essence, as the question, "What can I do that won't make me any worse off but could make my partner better off?" She adds, "It's useful to think of a dozen ways that you can make your partner happy that aren't going to make you any less happy."

3. Loss aversion: Just as investors often avoid selling falling stocks because they hate to lose, couples fail to end arguments simply because they hate to lose. In a survey mentioned in the book, 34% of couples admitted that they kept fighting even when they couldn't remember what they were fighting about. The solution: a 24-hour cooling off period. That solution may come from common sense more than economics, but it works, Anderson says.

4. The endowment effect: We tend to place irrationally high values on items that we already own. In marriage, that same concept often means we'll place an irrationally high value on the way things used to be. "We often default to doing things the way we've always done them," Anderson says. "A better solution is actively deciding to miss what you had and appreciate what you have." The book tells a hilarious anecdote about Szuchman clinging tenaciously to her cherished La-Z-Boy armchair, even though her husband found it plug ugly. In the end, they compromised by selling the armchair and buying a modern desk.

5. Supply and demand: The idea is simple enough: The more something costs, the less people want it. Improbably, Anderson claims this same concept also explains why couples aren't having enough sex -- it costs too much in energy and time. "The majority of people want more sex, but the problem was they were too tired," she said. "The solution is making it easier for themselves rather than making it harder." But who wants to plan their sex lives like they plan their 401(k) contributions? "If that's what it takes, then people need to acknowledge that's how they make it affordable," she says. "They schedule it and set goals for themselves so its not so complicated. In economic terms, that discussion is called transparency."

6. Moral hazard: This occurs when we take unnecessary risks because there are no consequences. For example, people with insurance tend to be more careless. With marriage, it's when people take their spouse for granted because they assume he or she isn't going anywhere. That assumption isn't necessarily true. "The answer rests in the divorce statistics: 50% of marriages end in divorce, so people clearly can go somewhere," Anderson says. The solution, she says, is to set rules and a regulatory framework so that the spouse feels more invested in the relationship, in the same way people with stock options tend not to steal from their companies.

7. Perverse incentives: An example of perverse incentives is when you try to force your husband to do some housework by refusing to clean at all. That might work, but it will more likely lead to a really dirty house. "Economic research shows that incentives like praise, trust and acknowledgement are powerful incentives and that punishment can often backfire," Anderson says. "Make sure there are no unintended consequences." The same economic rule applies to nagging. "We talked to a lot of couples who said that trust and praise are great, but they never seem to work and they always go to punishment." But that doesn't seem to work. Stick with the odds -- praise works more often than nagging, she says.

8. Inequity aversion: People are supposed to act in their own best interests, but often don't. Some people will quit a job because the guy in the next cubicle makes more money, even when it isn't in their best interest to be unemployed. Similarly, relationships have many unfair elements, such as when one spouse gets to have a high-paying career and the other stays home with the children. The solution is to make trade-offs, so both parties feel they are getting a reasonable, if not necessarily the best, deal.

9. Confirmation bias and overconfidence: This is when we look for evidence that confirms what we already think and don't look for contrary proof. "To buy a stock or a house or to be with a person, we look for all the things that are going to confirm for us things we want to believe," Anderson says. This often leads to bad investments, both in real estate and in relationships. The solution, she says, is Austrian economist Joseph Schumpeter's idea of creative destruction, or innovating in the face of change. "You think everything is going to be fine and you don't take precautions for a rainy day; you've picked the perfect person and nothing could ever go wrong." Well it often does, she says, so when it does, blow things up and innovate.