Wise Bread (Jabulani Leffall)

New Credit Card Rules: Who Really Benefits?

Jabulani Leffall — Wed, 24 Feb 2010 15:00:02 +0000

By the time you imbibe these words with your eyes it will be easier to pay your credit card bill, easier to run up your bill, and easier to absolve yourself the responsibility of charging your card to the max.

As a preface, some of the new credit card reform rules that passed earlier this week did eliminate some very annoying and predatory business practices designed to line the pockets of credit card companies, and that’s a good thing.

Practices such as randomly increasing interest rates on outstanding balances, double-cycle billing, or carry-over balance billing are shady at the very least and outright usury at the most.

That said, it's a misnomer to, for lack of a better term, bill this as a victory for the people, to label what is essentially a passive bailout, reform. Yes it’s a misnomer — not quite a farce, but the word reform is not quite accurate either.

Let’s look at some of the fine points of the ruling, which at the end of the day is really meant to encourage you to go back into the store to get the GI Joe with the Kung-Fu grip; or take that vacation that you can’t afford to take; or go ahead and charge that engagement ring because after all, the best things in life are free and diamonds are forever.

Credit card issuers can’t randomly or just up and slap new interest rates on you. This is good because you can pay your bill and budget when you can pay and how much you pay without having cartoon eyes in the next billing cycle.

Credit card companies must give at least a month and a half (45 days) notice of any changes in card terms. This is positive because cardholders who don’t like the new terms should do what they should in most cases do anyway — pay off the balance and cut the card up.

Cardholders cannot be charged over-credit-limit fees unless the cardholder authorizes an over-limit transaction. Unless it’s literally a matter of life or debt, this shouldn’t apply to you. You don’t need those new Jet Skis and it won’t kill you to keep paragraph-paragraph passing that Kindle until the price comes down.

Credit card companies must state their rules clearly and tell customers how long it will take to pay off their balance. This is good in spirit but any cardholder who says they read fully the terms of their card contract — that is unless they’re a lawyer or a scholar in the ancient language of Bureaucratese Latin — is fibbing, maxed out, or both. Nonetheless, the closer to plain English — probably won’t say “do not use this plastic card unless you produce more than you consume” — the better for “victims” who find themselves in the hole.

Card companies can’t push up rates in the first year. This leaves room for 45 days notice on increased rates and room for interest rates to go up in the second and third year to push interest up after you charged that electronic step ladder and later decided to hire a roofer.

Credit card payments that are more than the minimum must now to be charged to senior debt. This has nothing to do with High School, College, or Grand Slam breakfasts at Denny's. What it means is that the older or most pressing consumer debt with the highest interest rate will be where your $30 bucks on your $2700 balance goes, instead of just paying for interest and late fees. Like the “over-limit transaction” rule, if you’re a beneficiary of this you’ve already done way too much.

Credit card companies cannot charge interest if debt is paid on time. This is the most sensible rule of all, and shame on credit card issuers who were doing otherwise.

Issuers must get the signature of a parent or guardian when extending credit to consumers under the age of 21. This is a great idea but probably still won’t stop college kids from going to the ATM with their credit cards or using branded cards.

In the end, the Obama administration will get a pat on the back for fighting for the little guy, but these are new rules encourage you to come back once again and spend what you don’t have. They also don’t apply to what you’ve already spent, which you didn’t have.

Unfortunately, credit as originally intended, used to be a financial tool for the industrious, used for business growth, as a promissory note against gold or something tangible. This credit model is no more. There are credit markets where you can trade debt for debt ,even trade based on the probability that a third-party will be a deadbeat. Face value for face value is no more in this system of credit.

It used to be that credit was used as a deferred payment through promise designed to spur risk and motivate borrowers to produce. Now as our unemployment, savings rates, and consumer debt levels suggest, credit has in more modern times been used by the upper class to hold everybody for ransom. The upper middle and middle class have used credit to pay off other debt and laugh heartily at the neighbor who has the Range Rover 4.0 instead of the Range Rover 4.6. The lower middle class and working poor has used credit to float ourselves as we look for better opportunities or pay our way through college or look for a new job but still want to fell “alive” via our purchases and in some cases, unemployed nights on the town.

To be sure, these new rules may be a good crusade, but what many or perhaps not enough are wondering aloud, is whether the new rules will encourage the same behavior that made them necessary in the first place.

Permalink | 4 comments | Jabulani Leffall's blog | Channel: Consumer Affairs, Credit Cards

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Social Media and Identity Theft in 2010

Jabulani Leffall — Tue, 05 Jan 2010 15:00:04 +0000

By Jabulani Leffall

In the next few days and weeks you will be bombarded with things to watch for in 2010 — you know, lists and such.

They will detail ways to save, what the best vacation destinations are, who's hot and who's not — you know, the important stuff.

Most of this important stuff, such as this blog post for example, you may wish to share via a social networking site: Facebook, Twitter, LinkedIn, MySpace — you know, the important sites.

But hark, hark I say, these sites are actually important sites because millions use them. And millions such as yourself, will be vulnerable to scams, trickery and tomfoolery that will at best lead to some embarrassing hijacking of your page or computer and at worse, help a hacker dial down into what in the data protection world is called PII or personally identifiable information. We've covered a little bit of this in this blog but never enough.

Allow me to pose this question: Would you walk into a dark alley that says "Check out this really cool video of you and your friends"? Would you& trust a Bobby D. like character who says "I got some nice dresses for ya, right around the corner if you walk into that alley"? Would you walk into that alley with your ID in hand, brandished for all to see?

Of course not. You are, after all, kind of sane. I mean you're reading this aren't you?

Yet so many people want to check out those cool videos and see which designer dresses that Bobby Digital has for them every time they log on. Sure they'd skipped the dark alley but only to do the same exact thing digitally on Facebook, et. al, every single day.

This is why Antivirus software firms such as McAfee and Symantec both see 2010 as a breakthrough year for social media sites — wait for it — surprise, uhh yeah, a breakthrough in terms of them being attacked by hackers.

What's alarming, if not brow-raising, is that most of the hacks on your favorite social portals for posting, partying, pandering, pithiness, and persiflage will take place because you or someone you know, walked into that dark digital alley in search of fun, just curious and also just plain careless.

“Mostly it's the users in an individual or small business environment through carelessness,” said David Bloom, a Los Angeles-based consultant specializing in social media. “Like Pogo said, ‘We have met the enemy and it is us.

Indeed most hacker intrusions count on curious users who they can snare by simply having the users click on web links or log in via fake web pages that look like the homepages of the most popular social media destinations.

Spoofing, for instance, involves hackers sending you phony alerts or messages supposedly from your friends, or in the case of Twitter, followers. But once you click on them there’s the possibility of being re-routed potentially malicious sites or triggering automated viruses or remote code execution, which gives a hacker control of your browsing session.

Phishing, meanwhile, also counts on user participation but usually uses more familiar subject matter to users as bait. Users might get an “emergency” message, or a “video of you” from a friend. Another method is a fake error message from your social networking site requiring your action.

With Phishing, users are most often lured into clicking on a spoofed link or page such as fake web pages that look like home pages of trusted web sites — i.e. Facebook — where users unwittingly type in login information or click on page links.

By extension, links are becoming an important component of social networking security. Recently the heavy use of condensed URLs or web addresses (tinyurl and bit.ly) to post links on Twitter and Facebook has made easier to access or cut and paste into a web browser. On the flip side, the URL shorteners can also make it nearly impossible to identify the domain or origin. This increases chances of clicking on a spoofed or malicious link. Also, URL shorteners can also help spammers to evade spam filters installed on personal computers.

“Whether its tinyurl or bit.ly technology, users are getting into the habit of clicking links that they don’t know or trust,” says Corey Thomas, Vice President of Product and Operations for IT security firm Rapid7. “This makes it much easier for a hacker to highjack the target’s system. The most important thing in a situation like this is letting users know the potential risks of tiny URLs and that they should not be clicked on unless absolutely necessary.”

Someone can easily Tweet this blog and shorten the url from Wise Bread to something that looks like an algebra equation and bam you now have "nice dresses."

So remember this year as you give status updates on where you are and what size shoes you're wearing while sitting there, people, perhaps even the wrong people, will be watching and waiting.

Cue ominous musical score and ring in 2010 with vigilance.

Permalink | 4 comments | Jabulani Leffall's blog | Channel: Technology

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Book 'Em This Season

Jabulani Leffall — Wed, 23 Dec 2009 15:00:03 +0000

By Jabulani Leffall

We all remember where we were and what we were doing when we finished. We experienced the utter exhilaration, the awed silence, and the pining for more. It’s a personal experience that we have each shared over a duration of time and were better off for it, mostly. Either way, it leaves an indelible impression, evoking some sort of emotion, and spawning years worth of conversations.

I’m talking about reading.

Rarely in this day and age can you be this quiet and learned and intimate — the lost art that is a craft, one of the last crafts that delineates art.

Based on how quick the words Internet Column became Web logging and that turned into blogging, we all know reading is changing and changing rapidly. I was reminded of this the other day. In this vein, I spied a recent discussion thread on a popular social networking site — let’s call it libro de cara — where a nominally famous author and cultural critic said he was at a popular bookstore that rhymes with Carnes and Sobel and was perplexed about what to get for friends.

Being the mischievous twit that I am, I suggested he buy a Kindle, then invite 12 friends over, for some wine, cheese and a little paragraph-paragraph pass action.

No, No, that’s two paragraphs and you let go of it, it’s her turn — pass the Kindle before I get ugly off in here!

I pondered this in the context of the Holiday Season we are now embroiled in and I thought what better time to just give away a book for Christmas. Not buy one — give one away that you already have and preferably, have already read.

We all have a book sitting on our shelves that may or may not be in mint condition, but it may be in mint condition and if it is, then that’s all the better. But this book sitting on our shelves changed our thinking, made us more well-rounded, made us mad, made us idealistic, made us cynical, but in all ways it enraptured us.

Suggestion: If you care about a person or group of people, find some books that you’ve read and taken care of and write a personalized note.

Thought you might like this because…

You're never look at things the same after you…

I was such-and-such years old when I read this and I gotta tell you…

This is right up your alley, literally the story begins in an alley…

I’m talking about a book report, which is really the most original part of the gift. A book report, complete with the book itself, given to a grown person, impressionable teenager, spouse, office pal, whoever.

Give it away because with this nearly no-cost gift, it’s literally the thought that counts and if they read it, the impression will last longer than the new Halo or even that Pass-the-Kindle party you had — not to mention hundreds of dollars cheaper.

Here’s the deal: get a nice card and write a hand-written or neatly typed note, or make a book marker with a famous quote from the book or with a memory you shared with the gift recipient. Even better, if you have personal info and the person is a close friend, fill out a library card application and put it in the book. We all could use a trip there; they have DVDs and software rentals and Internet access for — gasp — free.

If you’re gonna book ‘em, here’s a tip straight from Colonel Obvious — the Capitan has been promoted — the book should be “pre-owned” and not “used” if you know what I mean. It should be classic and antiquated but not archaic and asbestos-laden with the pages of ears like Golden Retrievers. Moreover, an overabundance of highlighted sharpie notes, saying “I really like this part right here” and “I know riggggghhht,” are equally unacceptable. Also on the don’t-do-it list are literally swollen passages from when you thought it was cool to read under an umbrella in a warm thunderstorm.

The book ‘em initiative is really what the Holiday Season in general and Christmas is about — not just the giving of things, but of ideas, thoughts, experiences — things that make lasting impressions. It’s about transcending the temporary December 25-31 gratification and compulsory euphoria of most consumer goods.

Case in point, my son, who just turned four, four days before Christmas mind you, yawned when he got a new bike from me — literally yawned. But his eyes lit up like white-hot distance quasars when I gave him a considerably cheaper toy replica of a municipal bus line we’d rode out to the park one day, and an accompanying book full of pictures of buses.

That’s the spirit of this book ‘em initiative. I don’t remember half of what I got last year for Christmas, but I remember what I gave. I remember the priceless coffee table books and re-gifted children’s books that were passed to me over the years for Christmas, the ponderings they inspired, and how it feels to read that last sentence.

Feel me on this one people, I said, how it feels to read that last sentence — Happy Holidays.

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Da' Buy World: Considering "Blue Saturday"

Jabulani Leffall — Sat, 28 Nov 2009 14:00:03 +0000

By Jabulani Leffall

Looking for bargain prices on items you know you don't need is kind of like building man-made islands in the Persian Gulf and Indian Oceans in the shape of the world, hoping that people will buy them for millions of dollars and live on them, despite rising sea levels.

Let me say that with the exception of a pancake breakfast for my son, I boycotted Black Friday.

For this post, I had planned to bang out a cautionary tale about Black Friday. I was going to talk about the potential bait and switches — at least those that are on the surface.

You know buy one TV, get one free and it turns out that they give away your grandma’s wood TV to set the new TV on top of.

Or the suits, buy one get one free. Only they don’t tell you what you’re getting is a suit with a lapel so low Matlock could wear it and a style so played out that Sonny Crockett and Rico Tubbs would meet you in Miami with matching Ray-Bans with a string attached to them to put around your neck.

That’s all well and good — personal finance news you can use with some nods to 1980s crime and punishment dramas — quirky stuff.

But that’s not what I’m going to do now because not only has it passed by already but I’m sure you’ve read a thousand Black Friday “beat-the-house” stories.

Consider this a post mortem.

What I saw out of my two pundit eyes and my third analytical winker was a potential metaphorical Blue Saturday. Blue for an economy still under water worldwide, and blue for the genre of music you play when you're sad because you've spent or borrowed too much and can't pay your bills.

I look and I foresee many hangovers from the continual devil-may-care, spend-until-you-feel-better mentality that helped cause “The Great Recession.”

There were two Black Fridays, just in case you didn’t know.

Even as shoppers — many of whom are probably behind on their bills, jobless, nearly jobless or underemployed — crowded the malls, rich sheiks a world away scratched their heads and wrung their hands because they can’t pay their bills either.

Dubai World, the sovereign wealth fund, of one of the Middle East’s richest governments, is as much as $80 billion in debt and has asked its banks for a six-month stay of execution — so to speak — on about $59 billion in debt repayments.

Basically they’re saying they can’t pay for six months and they are “restructuring.” This news sent the stock of every major bank and real estate company in the world down last week and many of these banks, we will soon find out, are more exposed to a Dubai collapse than they care to admit.

Back to the mall.

Am I trying to hate on your new cashmere sweater or clearance sale pumps or new television you got to put on top of your old one? Am I hating on your new fancy phone?

Certainly not, I told you in my last post to suit up so I'm not railing against capitalism and I'm definitely not saying what to do. It’s your money and life; plus we all live with the wicked paradox of an economy predicated on its citizens buying things they don’t need to keep a consumer-based economy on life support.

Back to Dubai.

Dubai World’s restructuring will affect Japan’s real estate companies adversely. Japan has price deflation problems already and is the world’s second largest economy, and the Yen is creaming the dollar right now.

Are you seeing the outside correlation yet?

Financial patterns, we have found, as well as weather patterns, travel east and then around the world. This cold front is already spreading west. Closer to home, British banks could be exposed to Dubai to the tune of $50 billion or more and those banks are already in trouble to begin with.

And over the Thanksgiving Holiday, American banks with potential exposure in Dubai were eerily quiet — perhaps PR folks and executives were out on Michigan or Fifth Avenues.

Right now you’re saying to yourself: "Dubai World? Are you kidding me J, this doesn’t affect me one bit and why am I reading this?"

Fair enough, but let me close with a little more info on Dubai World.

Dubai World is famous for the ostentatious man-made island plots of land in the nearby bay and Indian Ocean that they made for no reason, thinking they would sell like man-made islands shaped like a map of the world or hotcakes.

Dubai World and the government that funded it, didn’t anticipate gluts in demand and didn’t anticipate this big of a margin call either. British banks weren’t thinking about it, neither were Japanese or Australian real estate companies, so why would you be?

And that’s the problem right there. It takes more downturns for people to look again and see that this is not a game and that if the decisions of a few are affecting the masses, the masses, who set the agenda as consumers and the labor force need to change spending habits and approaches to consumption.

But is that in the cards?

Like Dubai World, with its own form of hyper-flashy uber capitalism, American retailers are famous for the ostentatious man-made phenomenon known as “Black Friday” where retailers try to break even for the whole year in what is the start of what they hope will be a 45-day buying spree to push full-year earnings numbers up.

The retailers, like the shoppers they serve, are reacting, reaching for short-term gratification, trying to right the ship with the ring of a cash register. Meanwhile not many are anticipating ancillary forces which can’t be accounted for when everyone’s busy buying things that in many cases, they didn’t or don’t need just to feel better.

All this instead of improving our station, mentally. Setting financial goals or “Wise Breading,” as a verb, is about making the choice not only to be thrifty, but to use wisdom through experience and apply it in financial planning.

Yet a large part of the populous still remains visibly and invisibly chained to repeating self-destructive patterns, even amid the worst downturn in almost a century.

Ask yourself this: what do you think you’ll be pondering six months from now, when you look back on Black Friday of 2009?

Do you think it will matter a little, or a lot?

Permalink | 10 comments | Jabulani Leffall's blog | Channel: Consumer Affairs, Shopping

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The Law (of) Suits: Insurance for Men

Jabulani Leffall — Thu, 05 Nov 2009 16:00:23 +0000

By Jabulani Leffall

In this blog, on this site, I usually explore ways to think about spending rather than ways to actually spend. That’s not my blogcallojob (blog calling or job) to tell you how to spend.

But I’d like to pop a sales tag of conversation for fellow men, or women with fellow men in mind, reading this right now and speak plainly. I’m about to tell you how to spend money on something for which the worth cannot be measured.

It brings smiles, impromptu favors, more respect, more enigma, better service, attention — usually the right kind — and did I mention smiles and respect.

Not the automobile — the suit.

Recently I was riding home with a soon-to-be jobless, soon-to-be former colleague. One word: awkward.

But before he dropped me off, I asked where he was headed, and he said to the mall. And, curiously, making my own judgment on what one could be buying when one knows one won’t have a job, I ask, for what?

He says a suit.

A light goes on and I nod because it makes sense. I nod proudly, in fact, at him. I say to myself, smart man. I nod in whimsical favor because he’s thinking about investing in his future rather than moping over his present. I nod because he wants to plunk money down for something that in most cases brings the immediate return of self satisfaction as well as the intangible prospect of being in the right place and the right time, looking darn good.

He mentioned he didn’t want to “over do it” expense wise. Of course I understood that and then proceeded to rattle on about what could be done. I proceeded to monopolize the convo on what the pros and cons were of different aspects of suit procurement.

Suits, I don't remember saying but will say here, are like insurance for the professional and non-professional but skilled American man. They are insurance for the man who wants to make inroads into achievement and stand out with a statement on who he is when wearing that suit.

It’s like a financial plan: better to be impeccably prepared (overdressed) than woefully underdressed (unprepared).

Now let’s say you’ve paid your rent and gotten your groceries and have all your necessities and you’re a grown, able and responsible man with $300 to $500 and are in the market for a suit.

Okay, you’re like my friend. After asking him what he planned to spend, without revealing too much of the young man’s business, I went into a diatribe where I leaned back in the passenger seat and expounded wisdom using the famous pyramid hand gestures that most pseudo experts use on talk shows. This is the essence of what I said.

Suit up premium

Heck yeah: Classic is called classic for a reason. For instance, classic American clothier Brooks Brothers recently harkened us back to the era of smartly-clothed ad executives from the popular television series Mad Men. The classic look remains just that and outlasts any fashion week. Plus the clothes usually last longer and are of better quality.

Uhhh but wait: The issue here is that suits that are tailored to your specifications and/or made of fine fabrics from top labels, usually begin at $400 per suit. Maybe not the extravagant purchase you want to make right now but there are always sales and alternatives. Maybe you’re a forward thinker who sees their world beyond the recession or even sees opportunity in it. Maybe you want to go make an unmistakable statement. But maybe you don’t which brings us to our next alternative.

Suit up quickly and bountifully

Heck yeah: If you happen to live in a place with a population greater than half a million, there should be at least one or two places that have this type of sale: Three suits for “x” amount of dollars in a package. In other words, what you would pay for one Brooks Brothers or discount Italian or English designer suit, you can get three off-brand no-frill wool or down-market fabric suits, which you can freak just right if you have the right style sense.

This is probably the greatest stitch-for-stich value because it gets you through the week and month and maybe even the year and allows you to mix and match if you have a pre-existing and respectable shirt game and at least one good pair of shoes.

Uhhh but wait: You may be sacrificing quality, which is kind of like buying liability without getting uninsured motorist. After four or five trips to dry cleaners, it’s literally a wrap for these types of suits. I’m not talking about the plastic coating to protect them from the elements. I’m talking about fabric thinning and the appearance of nappy lent beads on your suit. There's not an afro-pick or lent brush in the world that can remedy this type of wear and tear. But that brings us to the last alternative.

Suit up without a suit

Heck yeah: If you’re easing into the game or just a novice or a stylish but not a “suit” man, you know how to accessorize on the cheap. Get a really nice blue or black sport coat or blazer, even a gray or solid brown one: or all four if you go to a thrift shop.

I’m talking blazer now chums. This is not to be confused with a suit jacket but an actual coat, which that 9 times out of ten won’t match your pants directly. You can use your style to go for the professorial, business casual look and perhaps hunt Ebay or your local thrift store for “pre-owned” quality coats that will compliment brand new pants. Get brand new pants — don’t be a tightwad on that.

Also if you’re not going to get a full suit, don’t be a tightwad on shirts either. They should be dry cleaned or brand new and if you’re considering your budget, why not buy a shirt that no one else has from a site such as ShirtsMyway.com. This site claims to have 7 trillion different designs. With that many variations, you will have your own style and through bulk save money by not having to go to the mall and be bilked by someone trying to get a commission. You design it and you order it. No plug here as I don’t own a single shirt from that site but I like the idea and am considering it.

Back to the stand-alone blazers. Save on the coats, up the quotient on the pants and shirt and it’s the cheaper, less high-maintenance alternative. You can wear them with ties or with an open-collared dress shirt and maybe just maybe on rare occasions throw it on with jeans and sneakers if you believe you can pull it off. Or if you believe you can wear a straight face if you don’t pull it off.

Uhhh but wait: You should be able to pull this off if you want to earmark this as a professional style. Remember, it’s not a suit and shouldn’t be carried off as one. If the pants are the same color as the jacket, please let them be close to the same fabric and if not, know your ledge. Shiny silk blazer and corduroy pants might get you unemployed as fast as the trickle-down effect of your company’s falling earnings. Corduroy and silk pants might get you beat up or laughed at so hard you feel like you’re getting beat up. Double polyester — let’s not discuss that.

Why are you still reading this? Go get a suit, no okay wait…look. This is mostly tongue and cheek and there are bigger issues in the world I know, but at the same time, if you’re a professional or professional aspirant between 25 and 50 years of age, you should own a suit.

If you are not independently wealthy through some sort of athletic ability, pop song, technological innovation or government defense contract — in which case you might wear a lot of Hawaiian shirts and khaki — you need to have at least one dark blue or black suit.

If not, you ought to be thinking of a good mix of what was described up here. Are you a grown man or what?

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Recession Journal VI: It's OVER!!!!!!!!!!!! Any Questions?

Jabulani Leffall — Sat, 31 Oct 2009 16:00:04 +0000

By Jabulani Leffall

Are people grabbing strangers in the street and kissing them yet?

Do you see the quivering, multi-colored ticker tape floating in the wind? How about the pitter-pat of feet toward the mall?

Are the talking heads flailing their arms with tales of you winning and the terrorists losing with your purchase of a new smart phone or a plasma television?

Are you happy now?

I ask these things because it’s finally over, technically, officially — the recession is over.

The latest U.S. Commerce Department figures reveal that America's economy grew at a 3.5% pace in the third quarter, beating economist expectations and turning in the best growth numbers in two years.

For any of those still feeling the personal blues and responding to this jargon with a resounding ‘whaaaaa,’ any positive gross domestic product growth after consecutive quarters of contraction or negative GDP, signals a technical, if not literal, end to the recession.

In this case, the latest GDP figures ended four straight quarters of negative GDP growth.

Indeed a relatively bullish equity market — with duller horns than recent years but still bullish — and respectably performing bond market, along with government stimuli and small surges in consumer cars and home purchases, is responsible for the growth.

So I’m checking in with you, how do you feel? Feel good? Okay, you sitting down?

Good.

Well here’s what our "post-recession" looks like right now.

In the same week that good GDP data pulled the United States out of a recession, there's also mixed to bad news where other economic indicators are concerned.

For one, consumer confidence is down.

I asked you how you were feeling, how come you didn’t tell me?

The so called "current conditions" indicator from the Conference Board, which was also recently released, fell to 20.7, and is near its lowest level in 26 years.

This is due to the continually lackluster labor market, where the current jobless rate of just under 10% — 9.8% to be exact — is the highest since 1983.

Okay I know that sucks, but are you comfortable?

Apropos, the ABC Consumer Comfort Index, also recently dropped on investors like it’s hot, indicates that consumers are as uncomfortable about current conditions and about spending as they were during peak levels in discomfort this summer.

And of course, we found out, in that same fateful week that consumer spending had nosedived in September by the largest amount in nine months. And incomes, to say nothing of disposable incomes, were flat across the board.

Still happy?

No, no, sit down, this’ll only take a bit longer. Cop a squat.

Further — yes this came out the same exact week too — while the S&P/Case-Shiller home-price index climbed 1% from the prior month, seasonally adjusted, after a 1.2% increase in July, sales of new U.S. homes unexpectedly fell in September.

The fall of home sales points to fear about lingering foreclosures and the end of tax credits for home buyers that could hamper a housing industry recovery.

Speaking of foreclosures, the U.S. Census Bureau — yes recently they said this — the number of vacant properties, including foreclosures, residences for sale and vacation homes, rose from 18.4 million a year earlier.

Meanwhile durable goods orders are up, but continued high unemployment looms in the shadows, as does the potential for a wild correction in commercial real estate.

Additionally, buried in the basement of the Commerce Department's glowing is data that reveals the inflation-adjusted disposable personal income of consumers falling fell 3.4%, almost the same percentage of positive GDP growth.

Don’t get mad at me, I’m just being real.

Okay, put the torches and pitchforks down. I repeat, we are officially out of a recession folks.

But the long-term effects of new or amended spending habits, our country’s personal and government debt and how we respond now that we’re out, will determine our personal and collective future.

Do you plan to get out there and make something happen? Do you plan to wait until the coast is clear? How has your philosophy changed, if at all?

I know, I know, more questions but as Ken Mayland, president of ClearView Economics pointed out to me in a, to belabor the point, “recent” conversation, “questions are all we have in the present.”

And the more we ask of our government and ourselves where fiscal and personal decisions are concerned, the more answers we have.

This post was included in the Carnival of Money Hackers.

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Recession Journal V: Mind, The GAP

Jabulani Leffall — Wed, 14 Oct 2009 15:00:11 +0000

By Jabulani Leffall

Ours is a society of self-actualization, both real and imagined. There are best-selling books and rich-to-death gurus who peddle “secrets,” visualizations and the fostering and eliciting of new mind sets for individual transformation.

Some self-improvers go so far as to cut pictures out of a magazine and put them on a cork or “vision board,” so that they can attain the perfect house, husband, life career position, amount of money and bliss.

There something to this even for the sharpest of cynics. So much of how we perceive what we read, see and hear everyday about market fundamentals and economic determinants is based on sentiment.

This begs the question: can we think our way out of this recession as corporate citizens and collective consumers?

Recently, on a late-night, three-episode bender, watching a new network show via the Internet — I don’t own a television and thus am saving some wise friggin’ bread with no cable bill every month — I noticed that many of the advertisements had common themes: either compassion, nostalgia for affordable quality or upbeat sentiments.

Saturn for instance, knows it’s hard out there. Northwest Mutual Insurance says anyone can be strong once but can you be strong over the long haul, or something to that effect, after which it brags on its investment track record. Charles Schwab offers more “bang for less buck.” Chucky you naughty, frugal boy.

Apropos of this pattern, a couple days later, I noticed this story in the New York Times about the rose-colored specs of advertisers. Apparently Bank of America, despite the fact that its CEO just quit, says in a new ad that “America is growing stronger everyday.” General Electric, itching to offload its media properties to focus on industry and having made job cuts, according to the report, has an ad showing GE workers who still have jobs, working. Levi Strauss & Company has hearkened back to its frontier-era roots and is biting Walt Whitman’s funky rhyme style to sell us jeans with a pioneer theme.

The power of suggestion is at play here as it always is but people forget that advertising is media too, the most powerful media some would argue. After seeing images of recession over and over and over again, after hearing about the weakness of the dollar and the rise of China and India, perhaps seeing a well done skit about new loans at Bank of America, a heart string pulling story about manifest destiny or an everyman’s journey to financial freedom will change…our minds.

The study of the mind, psychology, is a more exact science in determining out attitudes toward money than say economics or even the behavioral and environment-driven discipline of sociology.

True enough, our everyday spending decisions are based on the economics of our lives and our given realities and also based on our social strata, but ultimately attitude, mind state, is what makes us put those dollars down.

I’m hungry for that particular thing. That’s a cute sweater that I can only get here. I think I need a new TV. When I get some money I think I’m going to buy that. If I had the money I think I’d buy that. Or, you know, I think I feel good about this purchase. I think this is great.

These are thoughts that go through billions of consumers heads in some variation or another every single day and in more advanced or to use a more apt term, commercial societies, these thoughts are tapped into by advertisers almost non-stop.

So if advertisers reflect good times, promise good times or keep bombarding us with promises of good times to come or regale us with thin and thick veiled slices of Americana, perhaps things will turn around.

I know with Christmas coming up, nothing makes one feel better like buying a good gift, feeling worth something, seeing a smile on their child or love one’s face. Wouldn’t it be interesting to see if there was, despite a downward forecast from the National Retail Federation, some kind of yuletide shopping rally that shocked everyone and got everyone back into the malls.

This is not likely to happen and there would be no real lesson for us if a turnaround led to a return to consumerism that made banks, apparel companies and industrial firms even happier than their ads, but the mind is a powerful emitter of hope, creator of purpose. But the mind can also, in the words of Rick James for what he said about cocaine, be a “helluva” drug when thoughts based on delusion and forced euphoria — the kind that tells us these shoes will make us feel better.

Think once, think twice, think about this.

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Recession Journal Part IV: The Double-Dip Trip

Jabulani Leffall — Fri, 11 Sep 2009 15:04:09 +0000

By Jabulani Leffall

Have you ever been broke as Jack's magic beans?

You know, broke as when said beans dropped on the floor because he brought home magic beans instead of food?

Have you ever been that hard up for cash but anticipating a reprieve?

Oh you have.

Okay, well, do you remember how you felt when that direct deposit finally hit or you heard that the check really was in the mail? You felt better right?

Do you remember the euphoria of going from broke to liquid, if only temporarily, and did the money start to burn holes in your pockets on account of you spending it already in your mind before you withdrew cash, wrote a check or swiped a card?

If you're familiar with these questions and can answer them honestly then you are a living breathing symbol of the economies of 1980-83 and 2007-2010.

Let me explain. For the past 18 months or so, most of us have "felt," broke, if only broken in spirit by the slew of continual bad news. In point of fact a great number of us were even broke literally if we or someone on whom we depended loss their job or home.

But now, oh but now folks, we have a potential reprieve — that's the good news. As of the start of September, everything from consumer confidence and expenditures, oil prices, retail sales and industrial output capacity is moving in a positive direction.

Financial market indices, as a result are up, buoyed by the psychological boosts these numbers bring. The S&P 500 index, for instance, hit an 11-month high the week of September 7, 2009.

And even the one down arrow is shaping out to garner a big thumbs-up as a recently-released Labor Department jobless claims last week fell to the lowest level since July.

But should we start spending in our minds now? Should we stimulate the economy and not let the terrorists win now?

Well that's up for debate but the truth is that we still don't know if a lift out of our lovely recession will be a “V” recovery for victory over being broke as beans or a ‘W” recovery — as in wait and see because we’re not out of the woods yet. Who knows, maybe we might even be in for a VW recovery. Wouldn't that bug you out. Marinate and then laugh if you care to.

So my good people, the "VW" or just "W" recovery, represents an up-down-then-up again recessionary trajectory, one that despite current indicators could be in the offing.

What to do?

Well, in a cursory web search using the search terms "Double-Dip Recession," I found Richard Marcus, associate professor of managerial economics and finance at the University of Wisconsin-Milwaukee and I knew that school was in.

And I knew that he has a handle on such things as money and the like. And I knew that he would likely pick up the phone himself and given the often genteel mannerisms of fly-over state residents, I knew he would actually talk to me if I explained who I was and why I was calling and that his work would help further an eventual point that I would be getting to.

Dr. Marcus likens the current economic situation to the extended double-dip recessionary period of 1980 to 1983. Back then, as it is now, there was major government spending and the recession was exacerbated by a severe credit crunch as well as monetary policy from the Federal Reserve that made the downturn more protracted.

Over static on my cell, Marcus posited that if forecasters are to use history as a guide, the 1980-83 downticks turned around with sustained spending, a tax cut and more “helpful monetary policy” and that nowadays if we want sustained change we should act accordingly.

Marcus says that while there is every indication that the current recession will soon be over, this economy is sort of like a swimmer underwater that comes up from air and then goes below again, only to come back up.

I like that he used wide-open metaphors that could apply to dips. He was doing my bidding (insert cartoon villain laugh here).

“I’d said before that I thought there’d be some upturn but I also said that the period 2007 to 2010, will likely take as long to right itself as that time in the 1980s,” Marcus told me. “This is because you have a tax increase that will kick in to slow the economy and eventually even $800 billion in stimulus money will teeter out. Plus the Federal Reserve has doubled the monetary base and they have to be more restrictive.”

Indeed despite positive economic data, the government’s current fiscal and monetary bend and that of the early 80s are two sides of the same coin in that policies in both eras seem, as Marcus puts it, “contractionary in nature.” Plus Marcus added that he expects overall unemployment to continue to rise, “likely going to 10 percent or above before it’s all over.”

And now back to you folks. How do you feel? Do you feel confident? Are you ready to pick up those broken beans and throw caution to the wind, take some risks, buy some goods, services or memories?

Or are you forever changed due to the emerging consumer ethos of frugality, caution and selectivity as the country emerges from the most pervasive downturn since the Great Depression?

<>Well consider the thoughts of yet another economist, Nouriel Roubini, from NYU, whom I probably could not have reached by phone to talk to in a short period of time even if I had one of those long-reaching thingamobobs that grab objects even while you're sitting down.

Roubini is known in many circles as “Doctor Doom,” and he has said that going forward, even if the recession ends, there might not be enough spending in this or other countries to offset the wicked drop in consumer demand from "over spenders" in the United States and Britain.

Yes the U.S. and U.K., which in recent years have become both home to some of the world’s most conspicuously consuming people, and also two of the countries hit hardest by all this crunchy credit.

So if you're thinking that a turnaround is here and your money is burning a hole in your pocket and you want to spend as you did in headier times, think again, double dip yourself before you trip yourself.

Whether the recession is finally over or not, remember when you were broke as a bean and remember how you felt.

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Recession Journal Part III: How Low Can We Go and When Will We Get There?

Jabulani Leffall — Fri, 31 Jul 2009 12:00:11 +0000

By Jabulani Leffall

As a business blogger, high-finance business journalist, business man and one who minds his business – who pretends to know what he's talking about – I pretty much always answer "stay in bonds," when called upon for investment advice.

I hate giving it so I don't. I tend to just pose more questions, as I do in all discourse, objectively presenting many sides of the equation. So people can make up their own minds

After all there are two sides to every story and then there's the truth.

So I thought I'd utilize the ever-changing world of telecommunications, in a figurative sense of course, to try to get at the most pressing question these days: when will this crappy economy turn up?

The answer is, well, when it bottoms out.

But when is that?

Hold on let me check (ring ring).

Hello economic bottom? Economists and forecasters called and left a message, again.

They said they’re still looking for you and you’re still hard to find.

Therefore indicators for recovery from and continued length of the current recession remain inconclusive.

They also said, "We hope to see you soon because you’re neither here nor there."

Indeed, the more economic information that comes out, the more guesswork there is. As of July 17, jobless claims are up to 554,000 – a sum that is less than June numbers but still up versus 524,000 in the previous week, according to FactSet Economics.

Also as of June, the national civilian unemployment rate rose to 9.5%, the highest it’s been year-to-date and average hourly wages are also down compared to last year and last month. Additionally Federal government debt is up to $11.5 trillion as of the end of June opposed to $11.3 trillion at the end of May.

Yet there are a few bright spots. Home sales, building permits and monetary supply, through historically low interest rates, are all up.

So now we can breathe a little bit right?

Well, not so much. Those figures are up while consumer confidence and industrial production output, as of the end of last month, are still down.

Why the disparity among all the leading indicators? And what does a stoppage of declining figures mean vis-à-vis inclining figures in the future?

Enter the Federal Reserve, which this week released its Beige Book survey to arrive at forecasts based on statistical and anecdotal economic evidence. In the report, the Fed said that most of its 12 regional bank districts are seeing a slower pace of economic decline for the months of June and July but didn’t go so far as to predict a turn around.

To the glass-half-full soothsayers, this comes as an early sign that the worst of the worst economic doldrums since the Great Depression is closer to coming to a halt and that thereafter an ascent of the proverbial bar graph of growth will emerge once again.

Such are the sentiments Fed chairman Ben Bernanke, who, despite seeing personal his assets take a 30% decline in 2008, is bullish on the broader economy.

Bernanke recently told Congress that the economy’s contraction “appears to have slowed significantly,” with demand and production showing “tentative signs of stabilization.”

He echoes other policy makers such as New York Fed Chief William Dudley, who predicted that a modest recovery in housing activity and car sales coupled with fiscal stimuli from the government would give the U.S. economy moderate growth in the second half of this year.

Then in the same speech this week, Dudley turned around and said "the balance of risks is still tilted toward weakness in growth and employment and not toward higher inflation."

The only grain of certainty to be gleaned from cautiously optimistic policy makers and from the Beige Book is that neither provides any tangible signs of outright growth.

For instance the Beige Book found that retail demand was “sluggish” in most areas, and that auto sales were “mixed.” Manufacturing was “subdued, yet slightly more positive.” Meanwhile, according to the survey, non-financial services businesses are “largely negative with a few bright spots.”

Yeah that's clearly the sign of recovery right? (Pshhaw!)

Lastly, the most telling indicator, bank lending, “was stable or weakened further” in most loan categories across all 12 Fed districts, with tightened credit standards in at least seven districts. It looks like finding that elusive V-shaped recovery as it relates to the current economic downturn is going to take a bit longer, despite some sporadic cheerleading and sparsely positive numbers.

Plus one must take into consideration that financial firms are still digging out of holes, which means credit will remain tight and in Dudley’s words, for the near-term still “limit the pace of the recovery."

Suffice it to say, policymakers, analysts, investment managers and consumers will all be calling again next week, next month and perhaps even next year, looking for you, economic bottom.

Are you still there?

Well folks it's not there right now, act accordingly.

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Latvians Mortgage Their Souls For Cash

Jabulani Leffall — Thu, 09 Jul 2009 12:00:03 +0000

By Jabulani Leffall

Anybody tired of hearing about personal, local and national budget crises? Would you like to step outside your personal sphere and just for a moment play the “relativity” card? That is where you are relative to others less fortunate. Are you feeling international?

Well, here’s the latest finance news out Eastern Europe, the Baltic republic of Latvia to be exact: their economy is cluster-bombed too.

Like the U.S., Latvia’s government is attempting to prop up its banks with savior capital and putting up cash for consumers who may be in heavy hock to local banks. Latvia’s version of economic stimulus plan could cost up to $80 million annually according to the Latvian parliament. That amounts to perhaps one year of compensation for Richard Fuld, of the erstwhile and now failed bulge bracket investment bank Lehman Brothers but that’s just for context.

Much like the U.S., property values in Latvia are plummeting and unemployment levels are hitting double digits as delinquent loan balances rise.

But here’s where Latvia takes a sharp left: People there are selling their souls for cash.

Not figuratively as some Americans do with payday and subprime or auto tile loans or crime or retail therapy as a spiritual and emotional analgesic -- but literally some Latvians are selling their souls.

This isn’t a misprint, a typo or a joke. As of this week more than 200 people have have signed away their immortal spirits for as little as $100 and as much as $1,000, according to Viktors Mirosichenko, proprietor of, shall we say, boutique Latvian finance house Kontona.

Whether the result of atheism or sheer desperation, people are putting up their intangible, unseen essence to get a little cushion coin. This despite the fact interest rates on the 90-day loans are as elevated as 1% a day.

Here’s what’s in the fine print of Kontona's (clearing throat) consumer finance package.

I, the undersigned do hereby take the loan from the Creditor under the known-to-me terms and conditions on the security of my immaterial intelligence, i.e. immortal soul. I also do hereby certify that the said bail is the property of the undersigned and is not promised to anyone,'

I repeat, this is not a hoax but is something straight out of the Faustian Bargain, a deal with darkness and avarice, fear and loathing, a deal for that which puts one above animals.

It was the French philosopher Alexis De Tocqueville, who in the 19th century posited that human beings make a “Faustian bargain” when “buying into the promise of material wealth and well being ahead of principle.”

This whole Latvian episode is whimsical albeit disturbingly so. It raises a greater question on the role that debt plays in our lives. Granted the Latvians that did take these loans out are thinking about the here and now and can buy back their spirits in 90 days at interest and it’s not like Kontona’s collection agency is going to call and say, “I going to need to margin call on that soul, I’m sending the repo man to come pick that up.”

That said, it makes me wonder what my threshold would be, what our threshold would be, what we would do in a desperate situation such as the ones these Latvians found themselves in. This is definitely a quandary that one cannot handicap unless starving, cannot say we wouldn’t do until it’s us.

Yet most in modern society will die with some kind of debt and events like these make one think about what’s important and why being responsible with money and refocusing attention on buying experience and time instead of things is of the utmost relevance.

It’s cut and dry. Your money or your life? Can you bring your wants and desires into parity with your well being, your self worth and esteem, your identity? Or will credit and debt have your nose needing skin grafts from putting it to the grindstone day after day to pay off an engagement ring. Or a flat screen or shoes or a car that loses value as soon as you put your blinkers on to turn out of the dealership. Or that house, whose floors echo with emptiness, tangible and otherwise, as you lift boxes and other things to depart because you can no longer afford it?

Chances are you won’t be putting your soul up as collateral for anything, anytime soon and this is the hope but on a larger level, have you compromised self to play catch up on a bill, to buy something you knew you shouldn’t? Have you indebted yourself to pay off an existing debt? Do you have a live-for-today-tomorrow-is-not-promised mentality and does that inform reckless monetary decision making?

Here’s what a man who works for Kontona and calls himself “Vesti Segodnya” said of the doomsday loans: “Business is business. We give people palpable cash. If a man values his soul, he’ll definitely pay back the credit. I guess, it’s all fair. Everyone can decide for himself, what’s more important.”
Indeed.

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