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Alpha and Beta

A popular Wendy's commercial in the 80s made famous the question: "Where's the beef?" Good one. And here's an even better one: "Where's the alpha?" You might want to whip this one out the next time you meet with your portfolio manager.

Alpha is the over-and-above-the-expected return. It is the "value added." Therefore, it makes sense that a positive alpha means an investment has outperformed its market-predicted return, while a negative alpha would mean just the opposite. The expected return is calculated by a formula that takes into account the investment's level of unavoidable risk (aka beta).

Ever stepped into an elevator and after the doors close you become aware of an almost-suffocating scent coming from the woman next to you who must have bathed in perfume? Well, as you know, once the doors close you can't escape the smell until the ride is over. This is similar to beta, which is risk that can't be reduced or diversified away. A measure of "systematic" or market related risk, beta is used as a measure relative to a certain index -- such as the S&P 500.

So, for example, let¿s say your portfolio is managed to compete against the S&P 500. If you generate a better return than the index while not taking on added risk (standard deviation of returns) then you get alpha. Low beta means the market-related risk is low and vice versa for high beta.

Another example, let's say a mutual fund or stock has a beta of 1.5 relative to the S& P500 ¿ that means it is 1.5 times as risky. So, over time, if the S&P 500 goes up 1%, your portfolio should be up 1.5% plus (one can hope) some percentage of alpha. If the S&P 500 is down 1%, your portfolio should be down 1.5%.

Alpha and beta are based off of linear regression of a set of data. Warning: this may cause a high school fifth-period flashback, but it will be over before you know it:
The equation for a line is Y = a + bX.

a = alpha (the Y intercept - the added value)
b = Beta (the coefficient you multiply X by)
X = S&P 500 (in this case)
Y = your portfolio

Home / Markets / Industries / Technology

Bay Area Janitors Vote Overwhelmingly to Authorize Strike

 
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SAN JOSE, Calif., May 17, 2008 /PRNewswire-USNewswire via COMTEX/ ----Janitors who clean Silicon Valley's high-tech and bio-tech corporate campuses including Apple, HP, Intel, Cisco Systems, Oracle, Applied Materials, Yahoo, Google and other facilities voted today on whether or not to walk off the job. Today's overwhelming vote authorizing the janitors' bargaining committee to call a strike, if necessary, means that janitors representing more than 6,000 Bay Area / Silicon Valley janitors could call for a strike at any time.

"I want to be able to imagine a better life for my children, but right now it's hard to think about the future when I'm struggling to pay rent and put food on the table," said Roselia Mora, a janitor who cleans Hewlett-Packard in the Silicon Valley. Roselia has worked as a janitor for 12 years and still brings home less than $350 a week, after taxes.

The strike would be the first major one among California janitors since 2000 when Los Angeles janitors united in SEIU Local 1877 staged a three-week work stoppage and galvanized immigrant workers across the nation, widely considered a watershed moment for labor on the West Coast.

News of the Bay Area / Silicon Valley janitors' strike comes as Los Angeles and Orange County janitors won a new contract with wage gains as high as more than $1,000 a year every year of the four-year pact, expanded pension and family healthcare coverage.

"Silicon Valley's wealthy corporations could do the right thing, like other major corporate leaders in Southern California have done, but are so far choosing to leave hardworking families struggling to make ends meet," said Mike Garcia, president of the janitors' union SEIU Local 1877.

LOW WAGES, HIGH COST OF HOUSING

It would take more than 77% of a Bay Area janitor's wages to pay rent on a one-bedroom apartment in San Jose, according to the U.S. Department of Housing and Urban Development fair market rates FY2008.

Bay Area janitors currently earn wages so low that they do not even account for half of what the Economic Policy Institute says it takes to meet basic needs for a family of four, or $54,000 annually. A janitor would need to work 112 hours a week to support their family on the current wages.

Silicon Valley now leads the nation in average median income, but the janitors' wages fall far below their counterparts in other U.S. cities (New York janitors earn $20.25; San Francisco janitors earn $17.05; Chicago janitors earn $14.20; Silicon Valley janitors earn $11.04).

HEALTH CARE CRISIS

Janitors service some of the most profitable industries and office properties in the country but earn poverty wages and have to choose between paying rent or taking a sick child to the doctor. Bay Area janitors must work more than two and a half years before they become eligible for family healthcare. Los Angeles and Orange County janitors, by comparison, must work only 6 months to become eligible.

COMMUNITY SUPPORT

"Janitors make an important and significant contribution to the success of the Bay Area and Silicon Valley economy," said California State Assembly Speaker Pro Tempore, Sally Lieber (D-22). "The cleaning contractors and their corporate clients are creating a crisis for our communities by condoning the current conditions for these hard-working, low-wage janitors. Silicon Valley leaders like Google, Apple and others need to take responsibility and ensure good jobs for the janitors now."

In April, California state legislators called on the state's top corporations who benefit from the janitor's work to take responsibility for good jobs for the sake of entire communities as they released a report, "The High Cost of Low Wage Service Jobs: How Communities Pay the Price for Poverty Conditions Among Janitors."

Janitors On Strike

Strong coalitions of religious leaders, elected officials including former Vice President Al Gore, and Senator John Edwards, and community supporters concerned about the shrinking middle class and the rising income gap have joined with janitors who have staged high profile strikes. Janitor strikes in Houston, Miami and Boston paved the way for thousands of workers to join the middle class. If janitors choose to walk off the job in the Silicon Valley, it will be the first such strike in the area in nearly a decade.

In 1990 Los Angeles police cut short a march by 400 pro-union demonstrators in Century City, clubbing men and women repeatedly to force them to turn back. Widespread television footage of the police action created substantial sympathy for the janitors, according to the Los Angeles Times. In 2000, janitors staged a three-week strike in Los Angeles that galvanized immigrant workers nationwide and is widely considered a watershed moment for West Coast labor.

In 2006, SEIU janitors in Houston went on strike for more than a month. Hundreds of janitors from around the country poured into Houston to back up the janitors there, and engaged in repeated acts of non-violent civil disobedience. Also in 2006, Miami janitors at the University of Miami staged a nine-week, high profile strike that included civil disobedience, marches, rallies, a tent-city, building occupations, and hunger strike by workers and students.

Historic Opportunity To Raise Standards, Improve Entire Communities

California's corporate real estate giants such as The Blackstone Group and others as well as high-tech and bio-tech corporate giants such as Apple, HP, Intel, Cisco Systems, Applied Materials, Oracle, Yahoo, Google and others who benefit from the janitor's work, have an historic opportunity now during contract negotiations to agree to decent wages and family healthcare.

IRRESPONSIBLE CLEANING CONTRACTORS

Irresponsible cleaning contractors have illegally tried to silence janitors who are standing up for justice, according to charges that the janitors' union is preparing to file with the federal labor board against Able, ABM, One Source, DMS, Service by Medallion and others for intimidating, interrogating, harassing, threatening and retaliating against workers.

"We're standing up for good jobs so our children will have a better future," said Roselia Mora. "We're willing to do whatever it takes so these companies stop breaking the law."

For more information about SEIU Local 1877 Justice for Janitors visit: www.seiu-usww.org.

Service Employees International Union (SEIU) Local 1877 is part of SEIU United Service Workers West, representing more than 40,000 janitors, security officers, airport service workers, and other property service workers across California. SEIU is the nation's largest and fastest growing union in North America with more than 1.9 million members.

SOURCE Service Employees International Union (SEIU) Local 1877

http://www.seiu.org 
Copyright (C) 2008 PR Newswire. All rights reserved
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