Thursday, December 17, 2009

A Second Wave of Foreclosures

This chart, which you see above in this blog post, illustrates the second wave of mortgage defaults that are coming. However, there is a thing called "Early Option ARM" and these loans are negatively amortizing already and so it is reasonable to expect they will be reseting early, like now, not next year. Sometime in the next 3 to 12 months, we will see another wave of massive foreclosures. Do you see how debt works yet? Do you see how destructive it is? Economically and politically?

Saturday, December 12, 2009

Something Has Got To Give Soon

We are reaching the point of no return. Soon, if not already, we will have to go into more debt just to pay the interest. What happens then? You might want to think about getting ready. This is building like a snowball and the fallout when all the money being printed by the Fed to fund this filters into the economy, you may not want to be holding U.S. currency. In fact, all the world currencies are tied to the dollar, so you may not want the bulk of your wealth in any currency. The only way I see to minimize the effects of hyperinflation on your wealth is to hold gold or silver, or some similar type of commodity that can be liquidated on the other side of a hyperinflation crisis, but not needed during the crisis.

Friday, July 17, 2009

Spend More Money to Keep From Going Bankrupt?

And you thought you had to spend less money when you are going bankrupt. At least that is what all the financial experts say, including bankruptcy court judges. What universe are we living in now where you can spend your way out of debt?

Monday, March 30, 2009

We are Now Facing the Realities of Debt

Dateline recently aired a show about how deep in debt we are, especially with credit cards, Americans are these days. The show reveals the consequences. It shows how the collection industry is booming as a result, and how they are getting more creative with their strong arm tactics. Follow the link and watch the videos and read about the show.

The Accounts Receivable Management industry advisor that publishes "Inside ARM" reported a rebuttal claiming that the report doesn't represent the industry practices. This is the public stance that any collection agency is going to officially take. However, having worked in collections myself for a while in my previous financial career, I know that what happens behind the scenes is not really like that. Collectors are encouraged to do whatever they need to, but are discouraged from doing it officially. I saw collectors fired when things went bad and the company turned on them making the individual employee the sacrificial lamb for the media. That is exactly what is happening in this report. Employees that were stars, are now bums, simply to save face for the company.

You must know your rights and you must enforce them when you face collectors knocking on your door or otherwise contacting you. To avoid this altogether, get rid of your credit cards before you get into trouble, and establish a crisis fund for emergencies. You don't need to go into debt for an emergency.

Wednesday, March 11, 2009

The Best Time Ever to Cut Up Your Credit Cards

You could make $300 for closing your credit card account! Citigroup, Chase, and Capital One are cutting back on their rewards programs, raising interest rates, and increasing fees. American Express recently offered some of their cardholders $300 to close their accounts. Citibank is offering a $100 gift card to those who were signed up for the "Thank You Rewards" program, and sent out a letter stating that they can revoke any rewards program any time they choose.

If you have a credit card with a reward program, you are spending more than you would otherwise. Chase did some research and found that its cardholders that participate in these reward programs showed a fast increase in spending. Yet at the same time the rewards are becoming harder to cash in. But the result of all this is that cardholders with high credit scores are becoming the new targets, and the strategy is to get them hooked in with rewards programs, and then jack their interest rates up, and start adding fees.

Monday, February 23, 2009

More Debt Problems You Need to be Aware Of

Debt causes inflation, it isn't the only cause, but since we have a "fiat" currency excessive creation of new currency devalues the existing currency. Our government has worked in concert with the Federal Reserve Bank to create almost $1 trillion in new currency in 2008. Here are the numbers from the St. Louis Federal Reserve. This is money already created. In 2009, we should expect to see this number skyrocket due to the bailout money yet to be created from the stimulus bill and bank bailouts. The government is creating a new debt bubble. This is one that will have even more serious consequences than the mortgage bubble that we are now experiencing. This is brought on by having a central bank, in our case the Federal Reserve Bank. Ron Paul has written a simple bill that we need to urge our representatives in Washington to pass that will solve this problem. Go here for more information. Call your congressmen. In the meantime, buy gold, or risk losing your buying power to hyperinflation in the near future.

Sunday, February 15, 2009

What You Can Do To Protect Yourself

Here is a short video for you, to give you a little insight on why you should consider getting completely out of debt.

Thursday, January 08, 2009

Bailout Update

If you take a closer look at the bailout numbers, you will find that it is now exceeding $2 Trillion, with more expected by the Obama administration yet to be announced.

Scott Snider, partner and chair of the government relations and public policy practice at Steptoe & Johnson, Washington, D.C., says $365 billion will be spent on the Troubled Asset Relief Program (TARP). Not all of this money has been spent yet. $125 billion has been promised to "other banks" like those corporations that are becoming banks to qualify for bailout money. (i.e. GMAC). $15 billon of that money was claimed when the government released $7.58 billion to Pittsburgh-based PNC Services Financial Group, Inc., $3.41 billion to Fifth Third Bancorp and $1.3 billion to SunTrust Banks, Inc., including others. $20 billion of the TARP money is being used as seed money for the government’s Term Asset-Backed Securities Loan Facility (TALF) program, under which the Federal Reserve will extend up to $200 billion in non-recourse loans to holders of asset-backed securities (ABS) backed by consumer and small business loans in a bid to free up the ABS market.

After the Bear Stearns' $29 billion bailout in March, was the $200 billion government takeover of mortgage finance giants Fannie Mae and Freddie Mac in early September, AIG for $152.5 billion (more than $127.5 billion has already been spent out of that) then Citigroup for $325 billion. $16.7 billion was spent in other FDIC takeovers of more than 20 banks Washington Mutual was the largetst. Now we are up to $1.1 trillion, not including the remaining $180 billion TARP not yet included in the calculation. There is $1.4 trillion in a commercial paper funding facility, $320 billion for the FHA, $659 billion in money market guarantees and $9 billion in student loan guarantees. The total is another $2.4 trillion.

We thought that the $700 billion number tossed around at the beginning of the crisis was a lot of money. Somehow our government has decided it has a bottomless checking account. So we need to get ready for some serious economic consequences not too far down the road. Stay out of debt, including your mortgage, become financially independent by saving aggressively and intelligently, lower your lifestyle as low as possible, and batten down the hatches.

Monday, January 05, 2009

Bad Bailouts, Good Americans

By Robert P. Fry, Jr.

"I used to have my own construction company," a taxi driver named Bruce explained. "We built houses here locally in Birmingham."

"How big was the company," I asked, "How many houses did you typically build?"

"Anywhere from 10 to 15 or so per year."

"What happened?"

"We had a project going last year with 15 lots. We'd put in all the roads and sewers and had about 9 houses built when everything just stopped dead in its tracks…No buyers. And more than that. No phone calls, no inquiries, no agents calling, nothing. The market for new houses simply died."

"So what did you do?" I asked.

"I'm still not sure that I handled it all correctly," he began. "Ourproblem was the debt on the property. The interest cost was roughly $1,000 per day. So even though we stopped all of our other expenses, there was nothing we could do about that. But we had some other assets. So we started selling things to make the payments. Finally, we got so desperate, we sold my son's Corvette and, after that, the condo in which he was living while attending the University of Alabama.

"I never thought I would have to do something like that," hecontinued, "but the corvette was worth $25,000, which meant we could pay the bank for another month. But even after that, we ran out of money. So we went to the bank and started giving them the unsold houses in lieu of cash every time we got behind on the payments. When we finally ran out of houses to give them, we had no choice but to give them the remaining land and then file for bankruptcy."
"That didn't solve all the problems," Bruce explained, "since we still needed to put food on the table and had other bills to pay. So late last year I leased a cab and started driving. That has worked out pretty well; the cab has really been a blessing. So I decided to buy this cab just a couple of months ago."

Bruce, who looks to be about 50-something – with a daughter out of college and a Corvette-less son who's a sophomore in college – works all night Friday and Saturday, gets up in the afternoon Saturday to watch a little football and gets up Sunday morning to go to church, then starts making runs to the Birmingham airport around 4:30 Monday morning. I heard not one word of complaint about his new life, just the simple statement, "The cab has been a real blessing."
There were, of course, some good chuckles about that. With the move from business owner to cab driver, he admits that some of his friends and family haven't known what to say to him.

"What are you doing these days, Bruce?" my friends ask.

"I'm driving a cab."

"Oh. (Long pause.)…What kind of team do you think the Tide will have this year?"
But Bruce doesn't seem to care much about "what the neighbors say." He cares about what his family says. When it came to selling the Corvette, Bruce told me, "Taking my son for a drive and telling him that I needed to sell his car was probably the lowest and most difficult moment of my life."

"We had done everything that we could for our kids and I was worried that I might have raised some sort of runny nosed-kid who needed a Corvette and would never be able to support himself. In addition to selling his car, we sold the condo where he was living and couldn't even help him pay the rent on his apartment so he had to get a job while going to school."
Bruce then told me how his son had gotten a job and was still doing great in school and now calls him regularly just to ask, "How are things going, Dad?"

At which point I said to Bruce, "So was it worth going intobankruptcy, just to learn that you have a son who is actually astand-up man?"

After a moment's reflection, Bruce smiled, "Yes it was."

Bruce and his family and friends – people who get up every day and do what they need to do to provide for their families and to be good members of their communities – represent all that is still good in America. They are honorable people who spend all that they have to pay their debts, even if, like Bruce, it ultimately leads to bankruptcy. And when their businesses fail and life must go on, they take whatever job they can find to put food on the table.

How unlike the whiny, self-indulgent, profiteers who guided Wall Street's leading investment banks onto the shoals of insolvency. These people, who have nearly destroyed America's banking system, should be acknowledging their failures. Instead, they are demanding ever more of our resources, and of our children's resources, as the price for not making things even worse.
America would be better served if Hank Paulson were driving a cab in Manhattan, instead of trying to give billions of dollars of other peoples' money to his friends and colleagues on Wall Street. As a cab driver, there is some possibility that he would learn the value of a dollar, the importance of community and the inherent dignity of all good work. At the very least, we would all be $700 billion better off, less tips.

Fry is a writer for Agora Financial