The United States must be approaching the end of the recession when economists begin offering their retrospectives. Even if the data are pointing to an end to the recession, in technical terms, the economy is a long way from recovery. Just look around at the people out of work. Even those who have maintained their jobs are finding it difficult to qualify for mortgages, keeping the real estate industry itching for more handouts like the extension to the home buyers’ tax credit.
And some economists are not convinced that the worst is over. We may be in the lull of a double-dip recession. Wherever the economy is, making predictions, like critiquing wine, is often no more accurate than randomness.
For Fortune Magazine, economist and actor Ben Stein contributed four of the lessons he learned during the recession.
- Economic forecasting is still an extremely difficult gambit
- Financial market forecasting is even more troublesome
- The amount of lying and deception by the financial sector of this country has been breathtaking
- The government has no special abilities to forecast or predict a darned thing
Ben Stein is usually a strong supporter of the financial industry, so it’s nice to see him pointing out some of the flaws inherent in the system. He goes on to reassure investors that staying invested in stocks and bonds while keeping enough liquidity is the best way to weather recessions in the long term. If the second dip rears its head, I would like to believe it will provide more opportunities for investing for growth over the coming decades.
Are you prepared for the next recession?
Photo credit: simonhn
4 lessons from the recession, Ben Stein, Fortune, November 19, 2009
My Honda Civic has an option for cruise control. Unfortunately, most of my driving currently takes place on the New Jersey Turnpike and local highways during rush hour and construction, so I rarely have an opportunity to activate this feature. In the slim occasion I find myself driving on a deserted country road, I activate the cruise control and sit back, letting the car’s computer maintain my speed. I like to imagine cruise control is an auto-pilot device, so I can relax, close my eyes, and wake upon arrival.
If you’ve ever driven with cruise control, you’ll know it is not the same as auto-pilot. You have to be vigilant and aware of your surroundings, even if you’re not keeping your foot on the accelerator pedal. I have the same concerns with the topic of automating finances.
Making your finances automatic is a great way to put your savings into overdrive. I take advantage of technology’s ability to automate in a number of ways:
- My paycheck is directly deposited into my bank account every pay period.
- Several of my bills, as many as possible, are paid automatically and in full every month with the appropriate credit card.
- My credit cards are paid in full every month without me writing one check or clicking one button.
- A number of savings transfers and investments are programmed to occur at the same time every month, again with no intervention.
I would like to say that these features of automation have effectively put my finances on auto-pilot. It is true that I am now free to use the time I would have otherwise spent paying bills and depositing paychecks for other, possibly more worthwhile tasks. I am hesitant to call this system an “auto-pilot,” however. Like driving, I am still in charge and my brain needs to be engaged. If I stop paying attention, the likelihood of a crash increases.
I primarily use three credit cards, two for personal use and one for business use. Despite the cards’ close proximity in my wallet, their cycles have not converged. The payments are due at different times of the month. My checking accounts are debited automatically, so I need to ensure I have enough money in the appropriate accounts at the appropriate times to avoid an overdraft fee. The automation doesn’t permit me to to “set it and forget it.”
The same is true with my bills. I mentioned I drive on the New Jersey Turnpike every day. That’s an expensive commute. I use the E-ZPass system to make the drive go quicker and receive a discount on tolls, but this kind of automation lowers my sensitivity to increasing tolls. Since I’m not stopping at the booth and handing out cash, I don’t see that money leaving my wallet. I look at my quarterly statements from E-ZPass, but with 65 weekdays of toll charges, plus some on weekends, it’s easy to let the increases stay buried in my mind.
I’ve begun to offset the toll increases by opting non-toll roads occasionally but with more traffic lights on these alternate routes, I would have to wonder whether the extra fuel expense negates the savings in tolls.
Even though my utility bills like electricity, cable and telephone, as well as my credit cards, are paid automatically each month, I am sure to review the statement or transactions. It’s tempting to let cruise control handle everything. I mentioned that it’s important to ensure money is in the accounts prior to the automated withdrawals, but more attention is necessary. Reviewing statements and transactions is necessary to catch mistakes.
Mistakes can be on the company’s part or on the consumer’s; at least once I’ve forgotten to cancel a “free for the first month” service and was rewarded with a charge on my credit card. I would have remained ignorant of the charge if I didn’t review the statements and download my transactions into Quicken. And I have also experienced a number of mistakes, such as the cable company charging me for a service they didn’t provide.
Companies are quick to encourage automation because they know a certain percentage of consumers will let “mistakes” slip. That’s a statistic I don’t want to be.
What part of your finances is tackled automatically, and are you on auto-pilot or cruise control? Have you ever encountered mistakes you would have missed if you weren’t paying attention?
Photo credit: mhalon
A year ago, a group of investors offered $20 million to buy the Pontiac Silverdome, the seldom-used, dome stadium that used to be the home for the Detroit Pistons and Michigan Panthers. The deal eventually fell through. In a sign of the state of the commercial real estate market, the winning bid for the Silverdome in auction this week was $583,000.
It cost $55.7 million to build the stadium 35 years ago, but today the location where Pink Floyd surprised fans in 1994 by playing Dark Side of the Moon in its entirety for the first time since 1975 is worth less than the new houses down the street from me.
The lucky buyer is a Canadian company that is said to want to bring soccer to Detroit, but Major League Soccer disavowed any knowledge of these plans.
The whole situation seems suspect. What happened in the last year to drive the market price down from $20 million to less than a McMansion? Did the Canadians get a deal that’s too good to be true? Or should this be expected considering Pontiac’s proximity to Detroit, a city in desperate need of economic recovery?
Photo credit: Dave Hogg
Silverdome sale price disappoints, Mike Martindale, November 17, 2009
The Credit CARD Act of 2009 instructed the Federal Reserve to enact new regulations for gift cards. I have a love/hate relationship with gift cards; they’re convenient gifts to give when you know the recipient is a fan of a certain store. Unfortunately, the past few years have seen restrictions added to gift cards which make them unappealing. Some gift cards expire if not used within a certain amount of time, rendering the money spent to buy the card worthless. Some gift cards come with a monthly fee or an inactivity fee.
It makes more sense to simply give cash rather than a gift card, eliminating the third-parties like stores and payment processors and eliminating any limitations to its use. This avoids the issue of whether fees should be charged for these products. But some people consider the gift of cash inappropriate, more than those who consider the gift of gift cards inappropriate. Thus, the Congress and now the Federal Reserve wants to protect those who choose to buy and those who receive gift cards.
The new regulations call for an elimination of inactivity fees (until the card has been inactive for a year) and eliminations of fees for balance inquiries and transactions. All of the changes to gift cards by law do not need to be made effective until August 22, 2010.
The Federal Reserve is preparing to accept comments from the public for thirty days. You can read the full proposed regulation and in the next few days, you can begin to submit your comments to the Fed here. (Look for Regulation E, R-1377.) Here are some questions to consider as you formulate your comments:
- Are these restrictions necessary when consumers can easily choose not to purchase gift cards?
- Would better disclosure be better than restricting fees?
- There is a cost to offering gift cards; how should stores pay for those expenses if not with fees?
- Should all gift card fees be eliminated, so gift cards are as good as cash in all cases?
- Why wait until August 22? Can the new regulations be implemented sooner?
Photo credit: _rockinfree
On Saturday, an auction in New York featured items once owned by Bernard Madoff. The auction raised over $900,000, beating expectations. Once combined with proceeds from another auction later this week, it’s likely that this money will go to investors who were burned by Madoff’s Ponzi scheme.
Here are some of the items that received winning bids this weekend:
- Two pairs of Ruth Madoff’s diamond earrings: $140,000
- Bernie’s Mets jacket: $14,500
- Three duck decoys: $11,500
- Madoff branded boogie boards: $1,000
- A life preserver: $7,500
Serving 150 years in prison could likely be, from an asset value standpoint, one of the best things to happen to Madoff. Of course, he won’t be able to enjoy the benefits of his celebrity status. The benefits of this auction and Tuesday’s auction of larger assets such as Madoff’s boats will go to his victims. One of these victims is allegedly Zsa Zsa Gabor. She owes $120,000 to the IRS and claims her inability to pay is due to Bernard Madoff who took $7 million of her money through the Ponzi scheme.
Zsa Zsa will assemble the money with the help of her ninth husband and will do what many people do when they owe the IRS money: They will set up a payment plan on pay the debt over time.
Watch eBay and other auction houses; perhaps some of these items will continue to fetch higher prices due to their association with the most popular investment scammer in recent history.
Madoff’s Mets jacket sells for … $14,500, Les Christie, CNN Money, November 15, 2009
Zsa Zsa Gabor says she was victim of Bernie Madoff, Jessica Hudson, Examiner.com, November 15, 2009
Consumerism Commentary was included as an Editor’s Choice in the 229th edition of the Carnival of Personal Finance earlier this month with Seven Zen Principles to Guide Your Money and Your Life.
The guest on today’s Consumerism Commentary Podcast is Nick Corcodilos, author of Ask the Headhunter: Reinventing the Interview to Win the Job and How to Work With Heahunters. Nick is the founder of the website Ask the Headhunter where he offers advice about job hunting.
Today, Tom Dziubek and Nick Corcodilos discuss the job of the headhunter and what job hunters need to do in this economy to get a great job and advance their careers.
Production Number: S02E04
Segment Number: 43
To listen, use the player above (Adobe Flash required), download the podcast here, subscribe to the podcast RSS feed, or use the iTunes link. Note: open links in a new window (Ctrl-click or Command-click) to avoid interrupting the podcast.
[00:00] Introduction from Tom Dziubek
[00:31] Interview with Nick Corcodilos from “Ask the Headhunter”
– [00:51] The job of a headhunter
– [01:32] Assistance with the job search
– [02:47] Bad headhunters’ mistakes
– [04:20] Networking for job seekers
– [06:03] New job search recommendations
– [08:03] Searching for jobs online
– [10:34] Negotiating for a better salary
– [12:01] The current job market
– [13:33] How to Work With Headhunters
[16:18] End
We always welcome feedback from listeners. If you have any comments for this episode or for any other, or if you have suggestions for future episodes, please leave us comments here or email us at podcast at this domain name.
While most banks are still lowering their interest rates, Ally Bank increased its rate today, November 13, 2009, to 1.64% APY. Although the rate is up, it is only 0.09 percentage points higher than the rate of 1.55% last month, the lowest rate from Ally Bank or GMAC Bank since I started watching interest rates at the beginning of this decade.
It seems like savers are being punished with these low rates, but I don’t see it that way. Inflation is still low, for now, so savers aren’t quite losing ground. But savings accounts aren’t meant to be appreciating investments, anyway. The low rate is the price we pay for safety and quick access to the money.
To compare Ally’s rates with other banks, and to see how the rates have changed over the past two years, check out this list of historical savings interest rates.
With Congress threatening to create new consumer protection agencies to protect the public from customer-unfriendly banking practices, the Federal Reserve stepped in today to prove it is still relevant and involved with banking regulation. The Fed announced that as of July 1, 2010 for new bank accounts or August 15, 2010 for existing accounts, banks must have received permission from their customers before charging overdraft fees.
Overdraft protection will only be an opt-in service. There are some exemptions to this new rule, however. The only type of overdraft protection requiring customers’ consent is the type in which the bank covers the overdraft to cover the debit. If your overdrafts are covered by a linked savings account or credit card, you could still be charged a fee. Usually these fees are lower, such as $5 rather than $35.
Also, only overdrafts caused by transactions with debit cards or ATM cards qualify for opt-in only. If a customer writes a check that causes an overdraft when cashed, the bank is still free to charge an overdraft fee without the account holder’s permission. Banks still argue this overdraft coverage is a benefit that customers want and don’t mind paying the fee. Customers would rather have their rent or utility check go through if it costs $35 to cover the overdraft than to have their check bounce.
According to a recent survey by ING Direct, 24 percent of Americans are angry about overdraft fees. Are you angry? I can’t bring myself to get worked up about these fees, myself; avoiding them is pretty simple:
- Don’t let your bank account get anywhere close to a zero balance. Always keep a buffer in any account you use for making payments. If you get close to zero, you are much more likely to fall into a bank’s trap, including multiple overdraft fees on the same day.
- Don’t count on money you deposit into your account actually being there until you confirm that the cash is available. Sometimes check deposits take more than a week to clear, and banks can still pull back the funds for weeks after the deposit if there is a problem.
- Here are ten tips for avoiding overdraft fees.
Banks will earn almost $40 billion from overdraft fees this year, and you can be sure the industry doesn’t want to see that practically free revenue disappear. When one door closes, another opens. Banks will innovate and find news ways to collect fees. We already see Bank of America planning to charge annual fees to credit card users who pay their balance in full every month. I expect the news will be full of stories about new fees for the next year.
Photo credit: smith
Fed: banks need customer consent on overdraft fees, Associated Press, November 12, 2009
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