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September 2008


I don’t want to belittle the condition of the economy currently. Someone who is close to retirement may have just lost a significant portion of their intended source of income if invested solely in stocks. If you listen to the media and politicians, you might get the impression that the American public is “freaking out” about their money right now and experiencing the downstream effects of high anxiety.

The Today Show’s Dr. Gail Saltz, a psychiatrist, recently appeared on this show and claimed that stress due to money has increased “hundredfold.” The video clip also describes people’s current attitudes as a “state of panic” and “intense fear.”

Dr. Saltz admits that “watching the media constantly is a terrible idea, like being stuck with needles.” That’s a great comment to hear on a popular television show. She also says that more people now will be seeking professional help for their anxiety due to the economic downturn.

I haven’t seen much evidence of panic in my daily interactions, other than what I hear on the radio from politicians. Long term prospects are likely to still be good. I can imagine that panic might set in when someone has their entire portfolio investments tied up in companies that failed or someone set to retire and rely on investment income, but that should serve as a reminder to have an asset allocation appropriate for your needs and reduce exposure to risky investments like stocks when you are relying on the money being available.

Are you panicking or anxious about money right now? Is your financial situation affecting other aspects of your life? Also, do you think the media are accurately portraying people’s attitudes? Share your thoughts, anonymously if you like.

If you want to watch the Today Show clip, it’s available inside this article. RSS readers, please view this article on Consumerism Commentary to view the video. Read the full article →

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Because I believe this economic crisis will end within the next few years or sooner, I took today’s 777+ point decline in the Dow and 8.8% decline in the S&P 500 as a sign that the stock market, as a whole is on sale.

I opened an individual brokerage account at Vanguard after market hours today, in which I invested the minimum $3,000 in VTSMX, the Total Stock Market Index Fund. The trade will probably be effective at the end of business tomorrow, but I’m not sure if I’ll get today’s price (which has not been set yet) or tomorrow’s price. If I get tomorrow’s price, I might miss gaining from a rebound that the stock market might experience tomorrow.

Market timing is risky, but investing right after relatively large drops is more likely to be an opportunity in the long run. The $3,000 is not money marked for retirement, it is from money set aside for some of my more intermediate goals.

Are you taking advantage of the stock market decline? Is it too risky to try to time the market right now?

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The stock market was hoping for good news today regarding the bailout bill. When the House of Representatives voted down the proposal which had support from only 60% of Democrats and 30% of Republicans, the Dow Jones Industrial Average, S&P 500 Index, and the price of oil dropped sharply.

With pressure from the Executive branch, I figured the Legislative branch would fold as quickly as they did with the PATRIOT Act when the immediate threat was terrorism rather than economic crisis. It should be interesting to see how this plays out, but I’ll try not to look at my investments until then. Perhaps I’ll use sharp downturns like today as buying opportunities.

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In the original version of this article, I was under the impression that the Senate had passed this bill already. It hasn’t; they have only just released the details to the public. A vote will come later.

Over the weekend as I watched the Mets end a frustrating season with a disappointing final series, the details of the Senate’s bill to bail out the financial industry, and presumably the economy, were released to the public. I understand that passing a bill requires compromises to be made, but there is one interesting point that reduces the effectiveness of the bill.

Curbs would be placed on the compensation of executives at companies that sell mortgage assets to Treasury. Among them, companies that participate will not be able to deduct the salary they pay to executives above $500,000. They also will not be allowed to write new contracts that allow for “golden parachutes” for their top 5 executives if they are fired or the company goes belly up. But the executives’ current contracts, which may include golden parachutes, would still stand.

The executives in charge of the bailed-out companies will be replaced if they haven’t been already. Those being replaced will not have to face any penalties for driving their companies into the ground by acquiring risky debt. While fully aware of the risks involved, they did not have to bear any personal financial risk. While these executives should be commended for being able to negotiate ridiculous contracts allowing them to fail and still be paid massive bonuses, this should be eliminated for any company that requires “rescuing” with taxpayer money.

President Bush, Treasury Secretary Paulson, and the Democrats and Republicans in Congress are tied to the financial firms on Wall Street. They don’t want to make enemies now, particularly when some individuals currently in government may look for financial jobs in the private sector in the near future.

Let’s hope that the bill presented by the House of Representatives curbs bonuses for executives who mismanaged their businesses to the point that the government needed to enact the biggest market intervention in the history of market interventions.

Will financial executives refuse to allow their companies to participate in the bailout if they don’t receive their multi-million dollar “golden parachutes?” It would be a dumb, selfish move to put the health of the economy on the line until they receive their bonus for driving their companies into the gutter.

Rescue bill unveiled, Jeanne Sahadi, CNN Money, September 28, 2008

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More ING Direct Bonuses Available and Weekend Blog Roundup

by Luke Landes

Once again, I’ve refreshed the list of ING Direct $25 bonus codes. This bonus is available to anyone looking to open a new account at ING Direct, one of the most popular high-yield savings accounts. These bonus codes are provided by Consumerism Commentary readers. Thanks to everyone who has helped another reader by sending in ... Continue reading this article…

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FNBO Direct Savings Account Opening and Review

by Luke Landes

While I’m generally happy with my ING Direct account for a good portion of my savings, I’m looking to spread the money around to take advantage of some higher interest rates. One of the banks I’ve targeted is FNBO Direct, the online arm of First National Bank of Omaha, currently offering 0.70 percent interest yield as ... Continue reading this article…

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Washington Mutual Acquisition: What Happens to Savings Accounts?

by Luke Landes

Late Thursday night, JPMorgan Chase confirmed that it has acquired the deposits (bank accounts), assets, and “certain liabilities” of Washington Mutual. The acquisition has created the largest depository institution in the United States, with over $900 billion in bank accounts alone. WaMu branches will become Chase branches as the acquisition progresses over the next two ... Continue reading this article…

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Credit Cardholders’ Bill of Rights Passes the House

by Smithee

I didn’t think this was even already in motion, but I’m happy to report that the proposed “Bill of Rights” for credit card-holders (which is almost every adult) passed through the House of Representatives by a huge margin: 312 to 112. It’s amazing that 112 Representatives would even vote against such a thing, which has ... Continue reading this article…

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Charitable Giving: A Case of Bad Market Timing

by Luke Landes

I made a mistake, and I should have known better. Last year, I struggled with coming up with a needy non-profit organization that I felt I should support through charitable giving. The indecision stems from the desire to contribute to an organization with a mission that reflected one of my passions and the lack of ... Continue reading this article…

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FBI Investigating Lehman Brothers, Fannie Mae, Freddie Mac, and AIG

by Luke Landes

Thanks to Matt from Web Developer Guru who just a few minutes ago wrote in to let me know about this latest development. The FBI is investigating the financial firms primarily involved with the recent economic collapse, Lehman Brothers, Fannie Mae, Freddie Mac, and American International Group (AIG), and those who have been running these ... Continue reading this article…

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Got Tips for Consumerism Commentary?

by Luke Landes

If you come across an interesting, article, study, or video, and you’d like to see it discussed on Consumerism Commentary, feel free to send an email to tips at this email address. While I can’t write about everyone’s suggestion, I try to pick a few to focus on. I also receive a fair amount of ... Continue reading this article…

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Mark Cuban to Government: Show Us How the $700 Billion Will Be Spent

by Luke Landes

I swear I’m trying to write about topics other than the massive national bailout of the financial industry, but there always seems to be something interesting to say. Yesterday, it was Mark Cuban, owner of the Dallas Mavericks and chairman of HDNet who offered interesting insight. He suggested that the United States Treasury Department list ... Continue reading this article…

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Washington Mutual Increases Savings Account Interest Rate to 4.0% APY

by Luke Landes

February 5, 2009 update: The following information has expired. Washington Mutual no longer offers these rates. Washington Mutual wants your deposits. I received word that starting tomorrow the bank will offer 4.0 percent APY on its online savings account, maintaining its position at the very top of the list of popular high-yield savings and money market ... Continue reading this article…

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Citi Raised My Credit Limit

by Luke Landes

Last week, I received an official-looking notice in the mail. You know the type: the envelope requires you to tear the perforated edges in a specific order and contains security ink so the contents cannot be seen until opened. There is a return address on the envelope but no business name. In my experience, the ... Continue reading this article…

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Gas Stations Charging Credit Users More Than Cash Users

by Luke Landes

Clark Schinger owns a gas station. Like an increasing number of gas station owners, he is charging his customers who use credit cards a surcharge for every gas purchase. Effectively, there are two tiers of prices: one for customers who use credit cards and one for those who use cash. This is apparently not against ... Continue reading this article…

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$700 Billion to Bail Out the Financial Industry: Good Idea or Bad Idea?

by Luke Landes

Over the weekend, President Bush asked Congress to grant the United States Treasury Department the authority to purchase $700 billion in assets from troubled financial companies. The government would create a corporation, like 1933′s Home Owners’ Loan Corporation, to buy mortgage-backed securities at a discount and sell them later for a profit. This is by ... Continue reading this article…

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Weekend Blog Roundup

by Luke Landes

On Saturday, I woke up before dawn to help out as a volunteer for a fundraising event to support the search for a cure for polycystic kidney disease, which affects 1 in 500 people. A friend of mine, whose father has this disease and who has a 50 percent chance on inheriting it herself, organized the ... Continue reading this article…

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Why Put Your Money in an Investment Earning 0%?

by Luke Landes

Yesterday I mentioned that the U.S. Treasury was able to raise $40 billion in a one-day auction of 35-day Treasury bills. When you bid for these investments, you could either compete with others by offering to invest at the lowest interest rate you’re willing to accept or bid “non-competitively,” accepting whatever the Treasury Department determines ... Continue reading this article…

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Where Did the Federal Reserve Get $85 Billion for AIG?

by Luke Landes

When I heard the news that the Federal Reserve Bank of New York is making $85 billion available to American International Group in the form of loans, one of my first questions was about the source of the money. Does the Federal Reserve keep an emergency fund available to bail out companies during financial crises ... Continue reading this article…

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EDIE Tells You if Your Money is Insured By the FDIC

by Luke Landes

Suze Orman is now involved with a marketing campaign for the FDIC, pointing consumers to EDIE, a calculator that halps determine how much of your money held at banks is insured. The aim of the campaign is to help Americans feel secure about leaving their money in banks. The government and the banking industry want ... Continue reading this article…

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