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Beyond the Consumer



Money does not create wealth



Updated: 2017-02-19T20:27:01.240-06:00

 



Sharper Image is broken

2008-01-12T10:14:58.477-06:00

Sharper Image, the retail store that prides itself on selling little electronic wonders, can't even maintain its own computer system. For the past month, when attempting to find the value of a gift card on its automated system, the phone goes dead after entering the information and - about 10 minutes later, reports that a "system error" has occurred. Their system error has been occurring for about a month!

Also interesting, their website doesn't allow you to check the balance of a card - a fairly basic function that most retail websites offer. I can only hope that the gift card will cover the balance when I ring up an electric self-cleaning nose hair trimmer and illuminated drink coaster with built in radio. How embarrassing if I were forced to choose between the two.



2007 Financial Report

2007-12-17T18:59:15.921-06:00

I finally sat down and compiled our 2007 financial report and put together a presentation. Unfortunately the 2008 projections will have to wait, but here are some highlights.

Spending on food and utilities are unchanged from last year - though our dining out spending was slightly up, our grocery spending was slightly down.

We spent 10% more on gas this year than last year. Not bad considering gas prices are much higher. Our carpooling efforts, I think, are having a positive effect.

We have paid 59% of our total debt from the beginning of the year. Rough projections still put us at paying it all off in 4 months.

Our emergency fund (not including the bill pay/readjustment account or unscheduled maintenance account) has averaged $2,045 throughout the year, with a range of $1,940 to $2,150. We really didn't need to use it this year.

For the most part, we met or exceeded all of our goals for 2007 (with the exception of me finding a better paying job).

That's about it! I'm looking forward to sitting down and figuring out some goals and estimations for the upcoming year. Of course, overall goals will have to wait until my wife and I go over the year-end report and discuss what they should be.

Anyway, what's the point? I handle most of the finances, so I like to print monthly reports of our spending/balances for my wife to read. At the end of the year, it is nice to have a presentation to show her so she can get a clear picture of where we are financially. For both of us, I think it helps us get on the same page and focuses us on similar goals.



Unscheduled maintenance account nuked

2007-12-09T20:29:55.068-06:00

Today our microwave died. It was a good old microwave and had given its various owners many years of faithful service. Lately however it had begun to act strangely. Last month it inexplicably stopped running. A quick unplug fixed it. Then randomly it would activate its exhaust fan - often in the middle of the night. Then the little lightbulb inside burned out, as well as the little light underneath.

Finally, today at 12:15pm as I attempted to make a bag of popcorn to watch the pilot of season 1 of Heroes (I'd never seen it before) on Netflix, I discovered it was no longer heating anything.

The fan, the light, the random shorts...that I can handle, but a microwave that doesn't heat just isn't acceptable.

Fortunately, I recently started an unscheduled maintenance account. Thus, the $160 microwave was fully covered. However, having just started the fund, the account is now empty...but my wife was certainly happy that we had it! Maybe I'll ask her to use our new microwave to make me some cookies (can it do that?).



AT&T lied to my wife

2007-12-08T09:37:52.068-06:00

My wife lost her AT&T cellphone. Fortunately, someone found it and returned it, but not before we called AT&T to suspend the account. We also needed to get ourselves a new sim card, and that's when the lies began. The rep told her that she couldn't just buy a sim card, that she needed a whole new phone - an AT&T phone of course - to run on their network. He was happy to sell her one for just $170 and an extension of her contract.

So, I called them back and explained the situation to a different rep. She was happy to send me a sim card for $25, which I could then call to activate with whatever phone I had. Having averted this disaster, I noticed a few discrepancies with the rep's information.

- An unlocked phone will work on AT&Ts network with any of their sim cards. You need only program the sim card, not the phone.

- Buying a new phone does not require an extension of your contract.

- You need not call AT&T to "activate" a different phone. Just take your sim card, pop it in another phone, and it will recognize the network.

- Any sim card can be programmed with the serial number provided with the card. You can buy a whole phone from Walmart with a sim card included for less ($18) than what AT&T will charge you just for the card itself ($25).

It is important to remember that when calling AT&T service reps, even those who are not in "sales" departments, are usually either clueless about how any of their services actually work, or are so sales driven that they happily dish out misleading information to land some commission. Everyone you talk to is pushing sales.

In fact, if I had not already been using different phones with our sim cards or had not already purchased prepaid GSM phones (I have a couple of extra sim cards and phones that work just dandy), we might have fallen for the first reps story - leaving us $170 poorer (plus sim card, activation, taxes, and other fees of course).



My available credit exceeds my income

2007-12-07T09:33:23.483-06:00

One of our credit card companies (the one we actually use on a regular basis) has once again increased our credit limit by 48%. It really doesn't matter what our limits are, because we only spend what we can afford to pay off immediately. We are fortunate that we never pay any interest to these card companies because of it. I don't feel guilty, knowing they make a killing on interchange fees.

Still, I can understand how some families manage to get in over their heads. All that credit can look tempting, especially if you have an emergency. The amount of credit they will give you is staggering. In fact, the available credit on our cards (we have 4) now exceeds our total yearly income. It is humbling to think how quickly someone could ruin their lives in the blink of an eye with these tiny pieces of plastic.



Whose interests is the mortgage bailout addressing?

2007-12-06T09:48:50.476-06:00

AllFinancialMatters has a couple of great posts on the mortgage bailout proposals.

http://allfinancialmatters.com/2007/12/04/the-mortgage-bailout-plan-stinks/

http://allfinancialmatters.com/2007/12/05/the-tycoon-report-on-the-mortgage-bailout/

If you haven't heard, it's one of the leading subjects of the political debates: how to save homeowners in over their heads. The popular proposal now, and one that some lenders have already gone forward with on a limited basis, is freezing the rates of soon-to-adjust ARM loans for a specified number of years.

Everyone wants to know who is paying for these bailouts. Taxpayers? Why are we responsible for their problems? Shouldn't it be the bank's problem? Why should the government be involved at all?

Are Bush and Hillary really concerned about the American people and the poor citizens in danger of losing their homes? Or do they realize that massive foreclosures would results in housing prices readjusting to real market values, before the ridiculous housing "boom". With property values plummeting, states would lose billions in tax revenue. It makes you wonder who Uncle Sam is really looking out for.



Is 97k rich?

2007-12-03T13:25:54.557-06:00

An interesting discussion is ongoing at WSJ's Wealth Report, regarding a recent campaign dispute over the future of the social security cap.

http://blogs.wsj.com/wealth/2007/11/29/does-a-97000-salary-make-you-upper-class/

The article is good, but what really fascinated me was the comments. Do people who make 97k feel rich? Are they rich?

As a few pointed out, feeling rich on 97k has much to do with your location. An apartment in NYC eats up far more of your income than in Dallas. We make around $40k a year and our mortgage is $900. This is living in one of the largest cities in America, albeit about 10 minutes in the suburbs. I feel like I'm doing pretty good, but others making much more are barely scraping by. How can this be? Here's what some people had to say.
My base salary is exactly 97,500 wtih 30% upside as performance bonus. I support a wife and 3 young kids. I rent in the Bay Area a home SF home for 2,400
This guy takes home $5,200 a month. Minus his mortgage, he has $2,800 left over. He has no child care expenses, since his wife doesn't work. How does that compare to the average income of $45k a month? His $3k after his residence is more than the average American lives on.
I live in SouthEastern PA in a median priced home for my area ($375K) My wife and I make $132K anuually. I commute to work in a 14 year old car and she has a new SUV. Other then my mortgage ($250K) and my interest free car note I have no other debt. However, the cost of living here is so outrageous I am lucky to save $500/ month.
$7k a month in his pocket each month. He consumes $6,500 of his income every single month. He doesn't feel rich because he's barely making it. But how do people making minimum wage make it where he lives? Obviously they are living somewhere.
People I know in this boat are not living large by a long shot. Older cars, no private schools, modest savings rate, no time or money to play golf…much less join a club.
Very interesting here is the qualifications for being "rich". Private schools. New cars. Playing golf and joining a club. Do you need these things to feel rich?

They don't feel rich, but does that really have anything to do with how much they make? They in the top 6% of the earners in America, which means that they earn more than 94% of their neighbors. The top 6%! What must "upper class" be? 4%? 1%? .05%?

Then, if that makes you middle class, what is lower class? Are 80% of Americans lower class? Are 50% of them poor?

Maybe feeling rich has nothing to do with your income? Maybe people making $130k don't feel rich because, just like their $40k brethren, they max out their lifestyle.



What was Kansas thinking?

2007-11-27T11:10:22.400-06:00

In just about every state you visit, you are greeted at the border by a friendly sign (sometimes quite elaborate signs) and a fancy rest stop. For those passing through the state, you have a great selection of restaurants, convenience stores, and sometimes outlet malls to keep you fed and happy along the trip. Everything about the experience screams "welcome!"

Except, I learned, Kansas.

No, it's clear that Kansas wants you to drive through it as quickly as possible and be miserable while you're there. This is the only reason I can see why Kansas would take the only major freeway that goes through it, turn it into a toll road for which you must pay $10 to get through the state, block off every exit with the exception of the tolls, offer no turn-offs or parking areas, and absolutely refuse to let you make any u-turn (missing your precious exit would surely cost you 3 times the toll fees and add about 2 1/2 hours to your trip).

Could it get any worse than driving an hour without a stop or a bathroom? Sure...because of the few "rest stops" that are on this toll we discover that Kansas is apparently sponsored by McDonald's, because other than prepackaged potato chips, McDonald's is the only food available for the entire journey through their state. I'm glad we packed our own lunches.

Avoid Kansas. Obviously they don't want you there anyway.



Electric company offers to let me pay more!

2007-11-20T18:56:54.436-06:00

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My electric company has included a tempting offer in my bill this month. If I sign up for their flat rate plan with a 12 month commitment, including a mere $100 cancellation fee. This amazing plan that will "save me hundreds of dollars" will do so by billing me at a flat $0.142 per kWh.

Wow!

The only problem is that my bill tells me I'm paying $0.139 per kWh. Uh...thanks for the offer?



Major debt paid off!

2007-11-20T11:00:02.975-06:00

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We just paid off our largest debt! 2 years ago we started with around $25,000 in debt, including a personal loan, student loan, and car loan. As of last night, we have paid the personal debt - the largest chunk - and have shuffled the payments to the remaining ones. We now owe $6,000 on the car and $2,000 on the student loan, putting us on schedule to eliminate it all within the next 4 months.

With this milestone reached we are very excited!



Best financial advice, fewest words possible

2007-11-15T13:42:57.904-06:00

Mine:

"spend < earn"

Any others?



Here's why consumer regulations are useless...

2007-11-09T09:34:36.388-06:00

Consumer Affairs has a report on a debt collector hit with fines for, of course, abusing consumers and lying. The amount of the fine? 1.3 million.

Maybe I'm just a pessimist, but I don't see how this solves anything.

By abusing consumers, making illegal threats, etc, this company likely raked in millions in extra profits. They collect 1.25 million accounts per year. A 1.3 million fine from the FTC is probably listed on their financial report as overhead, along with electricity. Is the FTC making any difference? Of course not...we know this because they allowed this fraudulent company to stay in business.
Under the proposed settlement, LTD will pay a $1.375 million civil penalty. In addition, LTD and its owners, Timothy Feldman and Leonard Pruzansky, and its top managers, John Brewster and Derrek Davis, are permanently prohibited from misrepresenting to consumers that nonpayment of a debt will result in garnishment of wages, seizure or attachment of property, or lawsuits.

They also are permanently barred from using false, deceptive, or misleading representations in connection with the collection of any debt, communicating with a consumer at any unusual time or place, including their place of employment, or harassing, oppressing, or abusing any person.
Is anyone else laughing at this "punishment"? Aren't all of these things already illegal?

Imagine...you rob a bank for 5 million dollars, so the state sues you for 2 million and permanently prohibits you from robbing any more banks.

This is why our regulations are useless...because companies are free to abuse consumers with impunity.



Note to builders: Please stop

2007-11-05T10:31:10.736-06:00

2 years ago I was shopping for a house. We looked into a brand new subdivision in a the suburbs that was being built by KB. We found one we liked, worked it all out, put down a deposit, and "designed" it at the KB Store. It was not fun. If you've never done it before, selecting the options for your house at the KB Store is kind of like being the only customer in a Best Buy on Christmas Eve with 25 rabid commission-paid employees.

Who knew it could cost $600 extra to have a certain color of brick.

After further research, a miserable experience, and additional exploration of the area, we decided to bail out. We walked away because we decided buying a brand new cheap KB house surrounded by other cheap KB houses that all looked the same probably wasn't a good idea. It was the best decision ever.

I drove into that neighborhood to see how it was doing. Not surprisingly, "my" house already looks like a garbage dump and is for sale. Fifty bucks says its a foreclosure. Half of the other homes are also for sale, or "For Lease". If KBs apparent "take the money and run" strategy wasn't bad enough, they're still building houses. I have no doubt we'll be reading about KB and other home builders complaining at the loss of profits soon, and seeing some CEOs resign with multi million dollar severance packages.

Until then, they'll continue to build cheap houses, take more shortcuts on top of the shortcuts they already take, and flood the market with matchstick homes that will fall apart in 10 years, if not the day you move in. No one will want to live there, no one will buy them. These suburbs will be the new slums, taking on the ambiance now reserved for backwards rural trailer parks. At best, the land will be worth more than the house and they'll just be demolished, to be replaced by newer cheaper versions. Throw-away homes, bought and discarded like cheap plastic toys from Walmart. And in the wake of it all, families with foreclosures and bankruptcies.

If you ask me, subprime defaults are only the tip of the iceberg of what is to come in the US real estate market.



Added a new fund to our finances

2007-11-01T14:35:50.225-06:00

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After recently purchasing an automotive part for a minor car repair, it dawned on me that I am missing a very important fund in my personal finance system. The part was only $70, but it could have easily been $100-200, or in the case of a dealer-only part, in the $200+ range. A $200 unexpected expense could not be easily absorbed by our already tight paycheck disbursements. In other words, we don't have $200 of discretionary spending each paycheck (since all discretionary dollars are thus spent during week following the paycheck) to go buy car parts with.

I already have a scheduled maintenance calculator and savings fund for the cars. This includes things that are easily timed and their costs more or less fixed. I know how many times the vehicles will need oil changes, and how much it costs (the price of oil and filter vary very little), so I know how much to save. And it is, of course, expected that something in the car will break down eventually, so this is something that I should be planning for - not something that comes out of our emergency fund. It's not an emergency if I know it's going to happen eventually!

So I created an "Unscheduled Maintenance Fund". It will cover the cost of minor repairs to our vehicles and our home. To determine how much I should contribute to this new fund, I gathered the receipts for all our repairs in the last year and divided by our number of paychecks in the year. This amount will be added to the readjustment account payment and isolated in a separate account (in fact, an ING savings account that I've been toying with ideas about what to do with).

Viola, problem solved. When something breaks in the house or with the cars, we'll have a little stash of money to cover it without wiping out our discretionary dollars or dipping into our emergency fund.



Investopedia stock simulator

2007-10-30T12:26:58.133-06:00

I have been playing this game: http://simulator.investopedia.com/home.aspx, and it's quite a bit of fun. You register (it is free - ad supported) and you can buy/sell stocks based on real feeds. I've found it a great way to get my ears wet in stock trading without actually risking any money (since I have fairly low income). Give it a try!



Comcast: Our 3% price increase is actually 40%

2007-10-29T07:20:53.273-06:00

Comcast took over the ground cable business in Houston, Texas. The transition was relatively smooth, with a low percentage of outages and complaints - despite many people with proprietary email addresses being forced to change names. For many people, like myself, there was little difference except the name on the bill.

That of course lasted only a little while. This is a cable company, after all. Soon after they were firmly in place, they began changing their channel lineups and increasing prices. I could care less about TV, as I only have them for my Internet, but my wife likes to watch television sometimes on the weekends so we have basic cable. For about 5 years, we've had the same package - broadband Internet and basic cable which included all local and regular cable channels (CNN, SciFi, History, etc).

Comcast came in and claimed that they were just shifting things around and adding more channels, as an excuse for the slight 1-6% increase in price, but very little else would change. Was this true? Well, this is a cable company after all. Here's what they really did.

They increased the prices of all their services by 1% to 6%. They then began adding High-Definition channels - channels that they already had in standard definition, but apparently that counts as "adding" a channel. Then they cut out several channels completely. Then they did something very clever, they completely gutted the basic service channel lineup, reducing it essentially to local (and HD local) channels. What did this do? It eliminated the basic cable service entirely, because you get very little from it that you don't get from regular terrestrial broadcasts.

This service is now $17 (up from $15)...paying for cable that gets you nothing. Their next up service package, which includes all of the cable channels we already had before the switch, is around $40/mo. That's a 38% increase in the cost of same-service cable, not the 3% increase they notified us of for our basic service in our last bill.

Very clever indeed. This does a few good things for Comcast. For customers like me, they collect slightly more money while providing vastly reduced services, thus encouraging an upgrade to give them nearly 40% more each month for exactly what I had already been getting. For customers without Internet, it encourages them to either upgrade or ditch cable entirely, since it probably isn't cost effective to provide technical and service support to a customer paying only $17/mo. It also encourages people to look more closely at their bundled packages, which would effectively ensnare consumers into having cable/Internet/phone with a single company - not, in my opinion, a smart move.

So my wife and I are considering hooking up the big antenna in our attic and just getting broadcast TV for nothing, cancel Comcast entirely and switch to AT&T (who we already have a landline phone with). This would cut our current bill in half (their best DSL speed - 6.0mbps download is only $35/mo compared to the $70/mo we now pay for Internet/cable).

We'd already discussed this before, but my wife didn't want to cancel the cable. Now that Comcast has effectively canceled it for her already, she is starting to lean towards getting rid of them and accepting local channels. Maybe it's not so bad that Comcast is so bad.



2007 Roth IRA coming to a close

2007-10-23T09:50:06.876-06:00

Technically, you can still contribute to your 2007 Roth up until April of 2008. The limit for young middle-income folks like myself is $4,000. Unless you make 6 figures, you need not worry about whether or not you can contribute (or whether your maximum contribution limit is lower). More details can be found here.

If you're like me, however, your 2007 budget ends on December 31, and savings afterwards falls into the 2008 contribution. With little more than 2 months left in the year, it's a good time to evaluate your progress and see if you have reached your maximum or exceeded it (yikes, more paperwork!). If you have exceeded it, be sure not only to withdraw the excess dollar amount but also the dollar amount of the interest that your excess earned. The tax you pay will be more than your earnings! There is no penalty for withdrawing excess contributions. Of course, hold on to it and just figure it in to your 2008 contribution.

A quick glance to my investment spreadsheet tells me that I am in no danger of exceeding my limit. Hopefully next year I can increase my monthly Roth allowance.



God wants you to lower your electric bill

2007-10-22T09:06:59.970-06:00

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One of the biggest factors of your utility bills is your heating, cooling, and lighting. Surprisingly however, many people don't use what mother nature already gave us - the sun and wind. I notice that whenever I am at someone else's home, they more often than not have the blinds shut tight and all the lights on in the house, in the middle of the day.

At our house we have a pretty good system of heating, lighting, and cooling. During the summer months we adjust our blinds and open windows to keep the heat out, let the breeze come through, and light up the house. During the day we rarely have a light bulb on because all our blinds are open.

To keep the heat out, we shut all the blinds during the day when we are not home to create a dark, cool house. When we get home we fully open all the blinds on the side of the house that the sun is not striking. On the sunny side, we crack them upwards so that light gets in but does not shine on any walls, furniture, or floor (if anything it shines on the ceiling, which of course also helps lighten the room.

We also select windows to open based on the direction of the wind to maximize the breeze coming through the house. If it's cool enough outside, we just open all of them.

The savings on your electric bills are substantial, and as a bonus you get to sit down to breakfast and say things like, "the angle of the sun sure is giving us lots of light this morning."



My bank randomly charges me $1, then charges me $2 for asking about it

2007-10-19T15:43:27.135-06:00

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So today on my online bank statement (for a secondary checking account) appears "FEE" with a series of numbers followed by "$1.00".

Hmm.

So I call them up and, a quick 20 minutes later, ask a customer service rep why I have a $1 fee on my account. Long story short, it would appear they have decided to start charging me an account fee because of a direct deposit that was cut off several months ago. I ask why the fee has suddenly appeared many months later. He can't explain why, but he tells me I am lucky that I avoided paying all those fees in the meantime.

I feel so lucky.

So I ask if he can waive the fee. He can't. So then I ask him if he's going to charge me a $2 fee for calling him on the phone. He is, and he can't waive that either. Why? Because I'm so lucky that I haven't been paying this other fee for so long.

The conversation is simply comical, and keep in mind we're both lighthearted and chuckling through his ordeal. I am laughing because I think the situation is ridiculous, he is probably laughing because he knows I'm a powerless consumer to be toyed with.

I ask to speak to a supervisor, and 5 minutes later I have my $1 fee waived, my $2 fee waived, and my account converted to a different account type to avoid the fee. I guess the supervisor figured $3 was worth keeping a customer.



Research your financial adviser/investor

2007-10-19T08:18:23.094-06:00

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Our financial adviser handles our Roth IRAs. Beyond that we have our employers 401ks and personal investments that we handle ourselves. I believe a key part to spreading risk is to avoid having one person with total access to your money. Also important is to conduct research on a financial adviser before signing up.

You can do this by visiting NASAA's website, FINRA, and CFP.

Kilpinger offers some of these tips while conducting your research:
  • 60% of those [victims of fraud] had hired a broker based on recommendations from family and friends
  • look for other red flags, such as whether he or she has changed firms every year
  • Check with your state insurance department to make sure the person is licensed and see if the state has taken any disciplinary actions against the salesperson
  • verify that the person really holds the CFP and find out if the CFP Board has taken any disciplinary action against that person
  • learn a bit more about any other designations they're touting. Some require a lot more education and training than others. A few of these designations are primarily marketing tools offered to anyone who pays a big fee and takes an easy test. ("Certified Advisor for Senior Investing", [for example, is a] totally fabricated designation)
  • So it's also important to take precautions to protect yourself -- even if the person checks out. Establish an account at an independent institution (typically a brokerage) to hold your money because some scam artists hide a swindle by issuing false account statements.
  • Never write a check directly to an adviser -- only to the custodial institution, which must send you quarterly statements. And meet with your adviser at least once a year to review your account.



Sell your own house

2007-10-18T12:24:26.368-06:00

A little article on CNN has some tips on selling your own house. You can save a bundle by cutting out the real estate agent who basically drives people to your house and saves you the agony of being there while they look at it. With the power of the Internet, RE agents are essentially worthless. I personally found my home on the Internet and did my own financing. The RE was "there", but he didn't do much that we couldn't have easily done ourselves.

6% commission is way out of proportion to what they actually do. You'll need to do a ton of research to sell your own house, but when you're talking about $10k or so in fees, it is well worth it.

I would hate selling right now though. Someone I knew was selling recently, and it was just a pain because many of the "buyers" couldn't secure financing and had to back out at the last minute.



Banks report losses

2007-10-19T08:19:44.947-06:00

Many of the major banks are reporting losses.

Chase reports 70% loss in its investment banking division.

Bank of America
profit is down 32%.

Countrywide has a whole host of problems, including plummeting stock values and a 20% layoff of their workforce.

Wells Fargo
is also reporting big increases in credit losses, particularly from consumer real estate.

Citibank plunges 57%.

Washington Mutual
reports 72% profit loss.

Wachovia falls 10%.



Disney thinks you will pay more for fruit with their logo on it

2007-10-17T10:37:58.692-06:00

Buying veggie and fruit combination trays are always more expensive than buying it individually and making your own combination plate. Grocery stores have been selling this convenience to adults for quite a while, but now Disney wants to market it to your kids.
Disney has previously sold fruits with character stickers on the packaging as well as frozen pizza and hamburger patties made in the shape of Mickey Mouse's head.

I really want to know who bought hamburger patties in the shape of a Mickey head. Making Mickey's head out of ground hamburger seems to be the simplest thing anyone could do yourself, ever.



Why did you take the ARM?

2007-10-16T10:44:31.600-06:00

Countrywide is getting criticism for not permanently fixing the rates of several hundred thousand homeowners in risk of foreclosure. Part of this is being fueled by a protest group, NACA (or the Neighborhood Assistance Corporation of America).If you take a look at their site, you will see all kinds of emotional statements designed to make you sympathetic to their cause, things that have nothing to do with subprime borrowers in foreclosure. Information such as "Chairman of Countrywide, one of the leading companies, is reported to have earned $22 million per year" seems to encourage the thought that because the CEO of a multi-billion dollar corporation is rich, he should forgive people who haven't been paying their mortgage.These “geniuses” and their companies actually compensated their brokers and agents more if they marketed and closed loans containing abusive yield-spread premiums, low teaser and high re-set rates, and other costly loan terms and conditionsIn other words, it worked like just about every commission based sale out there. Shocking that the company would give higher commission for a loan that makes the company more money.Why on earth would the rates for these loans be so high? Why is lending to people with bad credit and lots of debt result in high rates? They answer it themselves: "almost one in every five subprime loan goes into default", yet they don't seem to make the connection. To be profitable, a bank has to get paid for the money it lends out. If a group of people tend to default at higher rates, their interest rate will be higher to ensure the bank doesn't lose money on those loans.Modify every loan back to the rate at which these borrowers were or should have been qualified, and everyone wins. People can keep their homes and avoid financial ruin, and lenders can still receive payments on mortgages that borrowers can actually afford. Here's the problem, NACA, they weren't qualified for payments they could afford. They were qualified for high interest adjustable rates, and that's exactly what they got. It is not the banks duty to set payments that someone can afford, it is the borrowers responsibility. What you are suggesting essentially shafts every single American paying a regular rate on a 30 year fixed.These “genius” profit barons have pretended to create unparalleled homeownership opportunities for working people and families. Instead, they have preyed upon the most vulnerable, often based on a low credit score -- people with marginal credit and limited resources who could and should have obtained homes through fair lending practices. They charged people interest rates above 10% and often enticed them with teaser rates of 6% and less for the first two years.The banks took a huge risk by putting these people into homes with teaser rates, when all the statistics showed that there was a high probability of default. To make such a venture profitable, they needed to charge higher interest rates later in the loan. These people could have used that time to rebuild their credit, save up to afford the new payments...anything. Instead, they rode along and when the teaser rate expired, cried foul. They can't refinance because, surprise, their credit still isn't any better.Bottom line, it is not the banks responsibility to create a loan that is affordable to the borrower. Their only interest is in creating a loan that is profitable. It is the borrower's responsibility to determine [...]



Happy Easter!

2007-10-16T08:01:56.042-06:00

Easter is only, what, 7 months away? I feel the need to buy a giant inflatable Easter bunny for my front lawn.

But alas, it is Christmas that causes the gift-grubbing credit card swiping frenzy, so we get to be bombarded with it 3 months early. All the stores are stocking for Christmas. They've emptied the Halloween shelves at Target. Their garden section has been gutted in Home Depot. All the decorations, ornaments, fake trees, and inflatable Santa's are ready for sale.

Christmas in October anyone? If you ask me, retailers are frightened. They want to extend the holiday shopping season as long as they can because they fear that all the media hubbub about tightening credit standards and foreclosures is going to keep people glued to their wallets. I don't blame them. That's exactly what they should be doing.
"Consumers have the same number of people on their gift lists, and they tell us they have pretty much the same budget every year," Cohen said.
The question is whether the credit crunch and the collapsing housing market will affect how much discretionary income they have.
Cohen expects a spike in the sale of gift cards, which are a convenient way out for shoppers frustrated by a lack of hot items. About 39 percent of respondents said they intend to buy gift cards this year.
Well, don't companies usually release their hot Christmas items around this time? Maybe we haven't seen any hot new items come out because Christmas is still 3 months away. Just a thought. The only real big item we've seen out has been the iPhone, but what kind of lousy gift is that? "Merry Christmas, here's a $150 monthly payment you're stuck with for 2 years."
At the same time, he said gift cards could hurt retailers because they don't promote an impulse purchase on the part of the gift buyer.
But they are great when the gift card is redeemed, because many people buy something with the gift card and end up spending more to cover the difference. Or a balance is left on the card, which the company can steal with clever fees. Or the card will be lost and never used.

What bothers me most is that I love Christmas. But when you start Christmas 3 months early, bombard us with decorations and holiday music (and keep calling it "holiday season", people are going to be utterly sick of it by the time December rolls around. And what happens when people get sick of Christmas? It stops meaning anything to them, they stop celebrating it, which means sales go down, and the whole deck of cards the marketing industry has created collapses.

I say we protest. Put the credit cards away. Make your own gifts, celebrate quietly with your family, and no Santa's on the front lawn until December.