Archive for Personal Finance

Where Will It End?

Posted in Economy with tags , , on October 9, 2008 by gyma

Today the stock market closed at 8,579.19, a drop of 678.91 points.  A couple more days like today and Roubini’s adjusted prediction of the Dow dropping to 7,000 will become reality.

I’m decidedly ignorant when it comes to financial matters related to the markets, but it isn’t because I don’t try.  I’ve read several books, taken classes and workshops and continue researching online the best I can.  I still don’t get it and probably never will.

Those of us over 50 are especially worried because we live in a country that doesn’t appreciate wisdom or knowledge so we have trouble getting hired when we lose our jobs.  We are also some of the first to be given pink slips because we have worked hard and made more money than those just out of college.  Many of us don’t have children and will have to take care of ourselves without much family to help out during difficult times.

I know I would not be sleeping these days if I hadn’t bitten the bullet a couple of weeks ago and pulled all our investments out of the stock market and opened relatively safe CDs with that money.  Had we tried waiting it out, we would have lost $50,000 in just the last 3 weeks and this would have been in addition to the $35,000 we had already lost in the last year.  This amount is the equivalent of about 14 years worth of withdrawals for us.

My heart goes out to all those who have lost so much these last several months because I think all those gains were based on a shaky house of cards.  It will take many years for seniors to regain what they’ve lost and we’ll all be the poorer for it.

I’m sure John McCain doesn’t read my blog, but I want him to start focusing on our problems and how he would fix them, rather than trying to portray Obama as a scary, black man.  Okay, maybe not, because if he did have a couple of good ideas (doubtful at this point) he might convince enough people to actually vote for him!

Get Rich Quick Schemes

Posted in Money Matters with tags , on October 8, 2008 by gyma

A couple of weeks ago we got a postcard in the mail from an organization in Utah called StoresOnline.  Their claim is that they will teach you how to make easy money on the Internet.

The card was an invitation to an informational meeting, where if we gave up 90 minutes of our time, we’d get a free lunch and an mp3 player.

Well, we have more time than money these days, so I thought why not?  The meeting was Friday afternoon and I was surprised by how many people were there – probably more than 120.  The majority were over 40 with quite a few who looked to be older than 70.

The man giving the presentation was pretty slick.  He used humor and tried very hard to make it sound like anyone could make easy money on the Internet.  You know the story, about how you can make money while you are sleeping?  Or how you can make money by using a dropshipper so you never have to touch the inventory?  He made it sound like once you created this quick and easy website, all you had to do was open your email each morning and write down how much money was deposited in your bank account overnight. Don’t have an idea what you want to sell?  No problem, a team of experts would be flying in two weeks hence to help you put everything together.

For the original price of $199 you got a license and all the support needed to create an e-commerce website.  Once you were ready to go live, you would be responsible for a $25/month hosting and servicing fee.  And that was all there was to it.

Well, not quite.  For that afternoon only, you could get the license for the low, low price of $50.  Your 50 bucks bought an additional 8-hour training workshop two weeks later where you would learn how to get your website to the top of a search engine list, etc. And we were all encouraged to bring a friend along so they would have an additional sucker to fleece.

We estimated that approximately half of those in attendance paid their $50 and will return in two weeks when they will be told they need to spend an additional $3,600 for six licenses and a bunch of add-ons.

I told Mr. gyma I felt really bad for the elderly folks who turned over $50 for this scam.  I estimated that perhaps 1% of the people who go through this training ever makes any money doing it.  I hope the elders went home and told their loved ones what they did so they can do a quick google search.  If they do they will  discover page after page of complaints from people who paid out thousands of dollars and had nothing but trouble and never made a dime.

I noticed on the distributed sign-up forms that people over the age of 62 had 15 business days to cancel and get a refund.  That timeframe should even cover those who go through the 8-hours of torture before they realize they’ve been taken for a ride.

I got sucked into one of these schemes a year or so ago when I was researching ways to make money from home.  I found a website that for the low price of $49.95 provided you with contacts for taking marketing surveys.  Many years ago I knew people who worked from home and were paid to call people and ask their opinions about products.  With the advent of the “no-call’ lists, I assumed companies were having trouble getting valid feedback.  So it sounded reasonable at the time and it came with a 30-day money back guarantee.  I thought I could give it a try and if it didn’t work, I would get my money back.

Here’s what happened.  When I signed up I had to provide my email address.  I was at least smart enough to create a separate account for just this purpose.  Within 24 hours I had thousands and thousands of emails, none of which generated any money.  They were requests to take surveys, all right, but after you took the survey you had to purchase something in order to get paid.

I tried repeatedly to cancel and get my money back but every email I sent went unanswered.  I contacted my credit card company and asked them to intervene.  They suspended the payment, but eventually told me I had to pay.  Apparently credit cards won’t get involved in disputes in these cases unless the amount owed is over $50!  How clever for this person to charge $.06 less than the limit!

Several years later I still have that email address and every so often I check it.  Last time I looked there were more than 5,000 emails, all of which I deleted with 2 clicks of the mouse.

Have you ever fallen for one of these schemes?

Glass Half Empty

Posted in Economy with tags , on September 23, 2008 by gyma

We spent the morning opening up new IRA CDs at a local bank.  We have now left our “market” days behind us.  We are both getting too old to ride out this particular cycle on Wall Street and needed to find a safer haven for our money.  Should the government go belly up, we’ll all be in the same place anyway, but for the time being our money is safely ensconced in FDIC-insured banks.  We also intend to keep more cash on hand and to stock a pantry with additional food.  Overreacting?  Perhaps, but I don’t see a big enough downside not to do this.

I had an interesting conversation with the “investment” banker who opened our account this morning.  Prior to working for the bank, he worked for a mortgage broker.  This was during the time when President Bush was pushing his “Ownership Society” meme.  The banker is relatively young, under 40, I think.  So even as a young man, this guy understood that not everyone qualified to own a home and he knew what was being done was borderline criminal.

Our investment banker lasted only 6 months with the mortgage broker because his conscience wouldn’t allow him to continue working under such conditions.  This morning he squarely put the blame for the mess we are in on unscrupulous mortgage brokers who knew exactly what they were doing.  Lying to get people into homes they couldn’t possibly afford, and then selling these risky mortgages as quickly as possible.  It wasn’t that the borrowers couldn’t afford the loan when it was made, but that they wouldn’t be able to afford it when the loan reset 3 or 5 years down the road.  Any borrower concerns were put aside by the broker reassuring them that a) their house would appreciate enough to cover it, b) their incomes would rise sufficiently to pay any additional interest, or c) they could always refinance.

When people don’t understand the terms being thrust upon them, they have a tendency to listen to the “experts” believing they wouldn’t lead them astray.  In some ways it’s similar to our being told this morning, by this young investment banker, that the market will come roaring back and will rebound to 14,000 within a year or two.  It’s easy for him to say that because he’s young enough to remain optimistic.  It’s also easy for him to say because he’s not risking anything by encouraging us to stay in the market.  In fact he probably benefits from it because the more people like us pull out of the market, the lower the market sinks.  He thinks we are being foolish by trying to protect what we’ve spent decades accumulating, because inflation will erode it.  But given the choice between inflation erosion or having the stock market implode, I’ll take the inflation.

This financial crisis just feels different to me than others in the cycle.  For one thing, no one seems to know what we are facing.  Some are predicting that the bailout (or now the euphemistic rescue) really won’t solve the problem but will make the same people responsible for this disaster that much richer.

I sincerely hope I’m wrong about all this, but I’m no longer willing or able to take the risk to find out.  YMMV (your mileage may vary).

Financial Dieting

Posted in Books, Culture with tags , , on September 23, 2008 by gyma

Yesterday I wrote about how we have become a nation of spenders and how our economy is now based on our buying stuff we don’t necessarily need.

Over the weekend, I read an interesting article in The Denver Post by David Wann, co-author of the book, Affluenza.  Wann starts off the article by asking the following questions:

If so many are willing to die for our country, why are we afraid to live for it, moderately and unselfishly? Why do we place a higher value on convenience, size, and speed than the well being of living things (including ourselves)?

Good questions.  Wann suggests we will have to fundamentally change how we live.  It will no longer work to think that using CFLs, carrying cloth bags to the grocery store, driving plug-in hybrid cars, or erecting huge windfarms will solve our collective problems.

We are in need of bold leadership that will provide “value-directed policies that reward efficiency and durability and penalize over-consumption.”  As automobile efficiency increased, we demanded heavier and larger vehicles, negating any gains from higher fuel standards.  Similarly, as household appliances became more efficient, we continued using more electricity with our HDTVs, computers, and other high tech gadgets.  Believe it or not, our consumption of bottled water has increased more than 2,000 percent since 1975 and we are now in danger of having large sections of our water supply privatized by Coca-Cola and other water bottlers.

I don’t know if Arnold Toynbee got it right on this but:

{He} observed that civilizations that ultimately succeed follow a “law of progressive simplification,” in which they become culturally richer but materially leaner.{…}

As I age I am continually downsizing.  We live in a 900 square foot ranch with a full basement.  There are 2 bedrooms and 1 bath on the main floor and we have an attached 2 car garage.  We have a large backyard that could contain a good-sized garden (if we had enough water, that is).  We have everything we could possibly need.

Two years ago my depression-era mother died and I was forced to go through years and years of yellowed, clipped newspaper articles, stacks and stacks of magazines and catalogs, piles of saved rubber bands that had become brittle, margarine tubs that filled an entire shelf of a closet, a drawer filled with broken watches, and so much more.  She lived through the depression and wasn’t going to rid herself of anything she thought might be useful.

Upon returning home I started going through all my nooks and crannies.  I took a carload of perfectly good “stuff” to the Goodwill.  Then I discovered craigslist and began selling things I hadn’t used since moving here 9 years ago.  So far I’ve sold about $1,500 work of “stuff.”  I like that my closets are now spacious and that there is less clutter.  I am also pleased that when I’m gone, someone else won’t have to wade through mounds of detritus to get to the good stuff.