1. Here We Go Again

    Posted by Michael • November 15, 2012 @ 7:18 am
    No Comments

    Not going to be much intro to this one. I’ll just repeat here the old adage: “If you can’t tell who the sucker at the table is, then it’s you.”

    LA Times: FHA Gives Defaulters Another Chance

    Unsurprisingly, it seems the FHA is bankrolling (well, guaranteeing) lots of “rebound buyers” in this latest round of home-buying hysterics. What’s a “rebound buyer,” you ask? Well, it’s gals and guys like Hermes Maldonado:

    After two foreclosures and two bankruptcies, Hermes Maldonado is as surprised as anyone that he’s getting a third shot at homeownership.

    The 61-year-old machine operator at a plastics factory bought a $170,000 house in Moreno Valley this summer that boasts laminate-wood floors and squeaky clean appliances. He got the four-bedroom, two-story house despite a pockmarked credit history.

    The last time he owned a home, Maldonado refinanced four times and took on a second mortgage. He put a Cadillac and Mercedes-Benz C300W in the driveway and racked up about $45,000 in credit card bills and other debts. His debt-fueled lifestyle ended only when he was forced into bankruptcy.

    His reentry into homeownership three years later came courtesy of the Federal Housing Administration. The agency has become a major source of cash for so-called rebound buyers — a burgeoning crop of homeowners with past defaults who otherwise would be shut out of the market.

    Good thing the nastiness of 2008 was all Wall Street’s fault, huh? What would we EVER do without government agencies like the FHA around, making things all better?

    Oh, and there is one more completely-unrelated story which I’d like to share:

    NY Times: FHA Audit Said to Show Low Reserves

    So, yeah … cruise on over to these two stories. And try to hold down your lunch.

    Filed In: Debt, Homeownership, Mortgages

    Permalink: Here We Go Again

    No Comments


     

     

  2. The Rise of Part-Time America

    Posted by Michael • October 29, 2012 @ 7:52 am
    No Comments

    An article very much worth reading, if you can spare a handful of minutes:

    NY Times: A Part-Time Life, as Hours Shrink and Shift

    A snippet:

    At its store here, just east of San Diego, Shannon Hardin oversees seven self-checkout stations, usually by herself. Typically working shifts of five or six hours, she hops between stations — bagging groceries, approving alcohol purchases, explaining the checkout system to shoppers and urging customers to join the retailer’s loyalty program, all while watching for shoplifters.

    “I like it. I’m a people person,” said Ms. Hardin, 50, who used to work as an office assistant at a construction company until times went bad.

    But after nearly five years at Fresh & Easy, she remains a part-time worker despite her desire to work full-time. In fact, all 22 employees at her store are part-time except for the five managers.

    She earns $10.90 an hour, and with workweeks averaging 28 hours, her yearly pay equals $16,500. “I can’t live on this,” said Ms. Hardin, who is single. “It’s almost impossible.”

    Ouch. As a guy who hasn’t worked a part-time gig since my college days, I can freely admit that I have a difficult time comprehending the worklife situations of the story’s interviewees.

    But if you’re the sort who wants a sounding board for “Damn all these greedy corporations!” then you’ll have a delightful time perusing the NY Times’ article’s comments section. Reading through that will require a significantly larger investment of time than the article itself!

    Filed In: Poverty, Working

    Permalink: The Rise of Part-Time America

    No Comments


     

     

  3. Survey: People Have No Savings

    Posted by Michael • October 22, 2012 @ 7:50 am
    1 Comment

    No surprise here, I guess: A survey by credit-comparison website CreditDonkey found that 41 percent of respondents have less than $500 of savings at any given time.

    CreditDonkey.com: Nearly Half Have No Emergency Savings

    The site surveyed 1,100 folks. Of that, 41 percent said they have less than $500 in emergency funds or other liquid savings. These findings aren’t far off from a similar study done by the Wall Street Journal back in 2011, which reported that half of us couldn’t come up with $2,000 within a few weeks if necessary.

    From the CreditDonkey article:

    It’s not what you may think: This 41% is made up not only of people living at or below the poverty line. They are also dual-income earners with nice homes, nice cars, nice toys, a 401K retirement savings plan, big mortgages. and big credit card bills. But if they ever get into a bind and need some quick cash – say, because of a car breakdown or an unexpected doctor visit – they don’t have it.

    What’d they expect? Everywhere we turn, the Powers That Be instruct us to “Spend it all,” lest we get left behind our neighbors who are already doing their part by living entirely for today. And that’s regardless of income level. The good news is that our government and all related entities are working diligently to make sure everything we need (food, energy, education, and all that) gets cheaper by the day. (You believe that, right?)

    Ah, no matter. We’ll just worry about the future when it gets here.

    Filed In: Saving, Statistics

    Permalink: Survey: People Have No Savings

    1 Comment


     

     

  4. Kiyosaki’s Rich Global LLC To File BK

    Posted by Michael • October 12, 2012 @ 8:37 am
    1 Comment

    Those of you who follow the travels and travails of Rich Dad Poor Dad author Robert Kiyosaki will be interested to see this:

    NY Post: “Rich Dad Poor Dad” Author Files BK

    So it appears that one thing Mr. Kiyosaki’s “rich dad” taught him was that corporate BK is a perfectly valid method for retaining and shielding one’s personal wealth. In the three Rich Dad books I read, Kiyosaki was quite insistent that creating businesses and setting up corporations was a must.

    Because hey, you never know when you’re gonna lose a lawsuit for a $24 million breach of contract.

    Filed In: Bankruptcy, Books, Gurus, In the News, Robert Kiyosaki

    Permalink: Kiyosaki’s Rich Global LLC To File BK

    1 Comment


     

     

  5. Next Up: 401(k) Insurance

    Posted by Michael • July 31, 2012 @ 7:58 am
    2 Comments

    And no, it’s not the kind you think.

    Time: 401k Loan Defaults Soar; Insurance Needed?

    Obviously, where government and financial services are concerned, you can never have too much graft in the system. Thus our nation’s Smartest Finger Waggers have determined that the time has come to protect our 401(k) plans not from Wall Street, nor from shady CEOs … but from ourselves.

    This, of course, will cost money.

    As Time tells us, because so many folks take loans against their 401(k)s and then later default on those loans, we SIMPLY MUST DO SOMETHING to stem the tide — nay, the FLOOD — of money “leaking” from professionally-managed, employer-sponsored retirement saving plans.

    …Fidelity found in 2010 that a record 22% of 401(k) plans had a loan outstanding. That’s not as bad as it may sound because most loans get paid back. But the default rate on these loans has skyrocketed since the recession; today defaults result in annual 401(k) plan leakage of up to $37 billion . . ..

    Well, heavens-to-Betsy! Thirty-seven billion dollars? Why, this sounds like a great opportunity to introduce more “loan insurance” into the system!

    Now comes a proposal that workers be asked to purchase insurance against involuntary default before they are allowed to borrow from their 401(k). The insurance would work a lot like private mortgage insurance, which some banks require of some borrowers before extending a home loan. This policy would guarantee that any outstanding loan against 401(k) savings would be repaid if the loan goes into default due to job loss through death, disability or termination.

    We’re told that presumably, such “insurance” would be paid for by only those who borrow against their 401(k) plans, and not the rest of us. Color me skeptical. When a new opportunity to skim fees from the masses pops up, you can bet the “safety” it provides will cost a bundle, cumulatively … and they’ll be sure to spread that cost over as many hapless marks investors as possible.

    Filed In: Investing, Retirement, Stocks & Mutual Funds

    Permalink: Next Up: 401(k) Insurance

    2 Comments


     

     

  6. Captain Obvious: Student Loans

    Posted by Michael • July 24, 2012 @ 7:55 am
    3 Comments

    Well, here’s a surprise from student-loan land. Not.

    ABC News: Lax Student Loan Standards Created Debt Crisis

    This, obviously, was a topic which required a bureaucratic government study, and so we got one. From it we get amazing and startling new findings, guaranteed to drop jaws … findings like these:

    From 2005 – 2007, the report found that school involvement in student loans began to shrink and students began borrowing more than necessary. And, lenders began making exceptions for students with lower credit scores.

    Private lenders gave out money without considering whether borrowers would repay, then bundled and resold the loans to investors to avoid losing money when students defaulted.

    Those practices are closely associated with subprime mortgage lending, which inflated the housing bubble and helped bring about the 2008 financial crisis, according to the Associated Press.

    Huh. That’s weird. I know a guy who compared student-loan lending to subprime lending way back in 2010.

    Whodathunkit.

    Filed In: Student Loans

    Permalink: Captain Obvious: Student Loans

    3 Comments


     

     

  7. S&P500 Dollar-Cost Averaging, Pt. 3

    Posted by Michael • July 16, 2012 @ 8:10 am
    1 Comment

    It recently occurred to me that I’d stopped tracking the performance of a hypothetical $1,000/month investment into the S&P 500 (via the SPY exchange-traded fund), going back to a start date of October, 1998. In fact, the last time I’d talked about this topic was my S&P 500 post of April, 2009. The market’s been on a great run since then, all things considered. (Thanks, Federal Reserve, for making sure asset prices don’t go down long-term!)

    So here’s where our fictional dollar-cost-averaging investor would stand now (all dividends reinvested; returns exclude fees, taxes, etc.):

    SPY Tracking

    As of the end of June, 2012, our investor had a cost basis of $188,586. His investment would have been worth $217,672, for an on-paper gain of $29,085 over the course of those 13+ years. For those keeping score, he’s up a smidge over 15 percent, which equates to an internal rate of return of 2.16% per year.

    Our investor’s high-profit mark, to date, was back in March of this year. Cashing out then would’ve brought a profit of $36,468. That mark looks to be eclipsed shortly, I’d think.

    (From the “Wait, you mean there’s risk?” department, it’s worth noting that our investor was staring at a $5,833 loss as recently as September of 2011, too.)

    Now all we need is for a Dave Ramsey acolyte to chime in with a “Look how your money grows when invested at 12 percent per year in good growth-stock mutual funds!” rant, and we’ll be on our way.

    What Does This Tell Us?

    I dunno. Go long antacid, maybe?

    Filed In: Investing, Stocks & Mutual Funds

    Permalink: S&P500 Dollar-Cost Averaging, Pt. 3

    1 Comment


     

     

  8. Debit Card Drawbacks

    Posted by Michael • June 28, 2012 @ 8:10 am
    No Comments

    I’ve mentioned it numerous times on IYM: Debit cards are a great tool, but they have serious drawbacks, too. And there are some things for which they’re totally unacceptable.

    Cue the piece from USA Today:

    USA Today: Debit Card Holds Can Derail Travel Plans

    Dave Ramsey loves to talk up debit cards, but as the article tells us, there are times (vacations, for one) when you really ought to keep that particular slab of account-zapping plastic tucked in your pocket.

    What makes debit cards even worse? Well, as my daily dealings with Joe Q. Public have taught me, there are still a great many folks who have no idea how debit-card daily limits and hold policies actually work. (Though, to be fair, most people also have no idea how their credit-card policies work, either, so why would it be any different for debit cards?)

    Filed In: Credit Cards, Dave Ramsey, Debit Cards

    Permalink: Debit Card Drawbacks

    No Comments


     

     

  9. Gen X and the Great Recession

    Posted by Michael • June 25, 2012 @ 8:12 am
    No Comments

    So according the Fiscal Times, Generation X has felt the brunt of the net-worth decimation that’s been a fixture of the Great Recession:

    Fiscal Times: Gen X Disproportionally Affected by Recession

    Yup, the chart in that page is pretty nasty. On a percentage basis, it tells us, Gen Xers’ median net worth declined by over 58 percent. That was the largest percent decline of any age group. The topic interests me because, hey, I just happen to be in that particular age cohort.

    From the article:

    Gen X, a generation that’s relatively small at 46 million and known for their political apathy and trends like grunge in their heyday, has largely stayed out of the headlines; but they’re also a generation that has tried to do everything right financially. Most worked at a stable job for years, built a comfortable savings, and likely just bought their first home at the market’s peak. Then when everything came crashing down, they were stuck with an underwater mortgage, young kids in the house, possibly a job loss, and unlike boomers, they never had a chance to diversify their portfolios, potentially losing a lot of what they had in stocks.

    That’s an interesting take on it. I don’t know how on-target it is, though — particularly the part about Xers being a generation “that has tried to do everything right financially.” When over thirty percent of an age group reports having no personal savings, well, to me, that’s an indicator that they’re doing it wrong.

    Filed In: In the News, Investing, Net Worth

    Permalink: Gen X and the Great Recession

    No Comments


     

     

  10. Idea: End Student Loans Altogether

    Posted by Michael • June 18, 2012 @ 9:07 am
    1 Comment

    Whilst I haven’t yet finished reading the whole piece, the title made it just too good to not share ASAP:

    Bloomberg: Forget “Cheaper” … Just End Student Loans

    What — you mean supply and demand matters, even in higher ed? Pffft. When did that start? [/snark]

    Filed In: Student Loans

    Permalink: Idea: End Student Loans Altogether

    1 Comment