There's a lot of fear out there in the economy and understandably so! Nobody knows where this is all going to go.

One thing that I found heartening was this graphic from Time.com comparing US job losses to previous recessions. Looking at the graph, the nice thing is that the current recession (turquoise) is tracking pretty closely with the 1981 recession (red).

If job losses continues to track this way, there would only be another 4 months or so of job losses before a recovery starts. I actually was looking for my first real job in 1985, so I remember how hard it was to find a job back then! (Sometimes, it feels like my life is on repeat, lol!)

Click on the image for the article and a larger graph.


http://curiouscapitalist.blogs.time.com/2009/02/09/comparing-this-recession-to-the-last-five/

Having said that, most people have a gut feeling that, as a society, we've been living on credit for a long, long time, so it's time for the bill to be paid.

So, the fear is that this recession will not be the same as previous ones. That could be so. But I do find it hopeful that the job loss graph is tracking with a previous recession.

You know what makes me angry? Seeing some of the interest rates that people around me pay on credit cards.

I am all for people paying off the debt that they incurred. If they charged it, then they should pay for it. I see the original debt plus a reasonable rate of return for the lender as part of the individual's responsibility to pay.

But what makes me angry is when I know people who have gotten in trouble financially and suddenly the credit card jacks their rate up to something like 27%! What the fuck is that? With those sorts of interest rates, people will pay off their original debt many, many times over!

That just strikes me as plain wrong! These people will basically become permanent payers to the credit card company.

The real answer of course (and the best revenge on the credit card companies) is to not pay any interest -- don't use credit cards at all if you can't manage them, or pay them off each month, so that you don't have to pay interest.

I am lucky in that I am able to avoid interest on my cards, but not everyone is in that situation. Once a person gets behind, having their interest rate raised to such high levels just gets my blood boiling!

I used an online calculator located here to show why this makes me crazy! If you owe $5000 on a credit card, and pay the minimum payment of 2% each month, then this is how it breaks down.

At 18% interest, you'll be paying on the debt for almost 8 years.



Jack the rate to 26%, everything else the same, and it will take 50 years.


This calculation is only partially right. I imagine that the credit card company will require more than 2% per month, so it should not take a full 50 years. Also, I didn't verify the calculations above in Excel or anything, so I'm taking the calculator as being correct.



And, by the way, while I'm already boiling about this topic, then I see the article below. The CEO of the failed Washington Mutual, who has been in his job just 3 weeks, could get $18 million in severance...

Washington Mutual Chief Executive Alan Fishman could walk away with more than $18 million in salary, bonuses and severance after less than three weeks on the job, according to the terms of his employment agreement.

http://money.cnn.com/2008/09/26/news/companies/fishman_wamu/index.htm

He didn't cause the problems the company has, but why should ANYONE get that sort of severance? I am not in agreement that CEOs are so much more valuable than the workers that there should be such a difference between pay.

I'm not entirely sure what I think of the proposed US financial system bailout plan yet.

I watched Bush tonight on TV -- that's actually a first, since I normally can't stand to watch his speeches.

First off, if Paulson et al. are asking for $700 billion, then I would just assume that it needs to be doubled to $1.5 trillion. That's just how it seems to go with estimates.

Second, someone on TV the other day made the point that in this plan, we are privatizing profit, but socializing losses, meaning that the people who have profited on this have long ago taken their money and run, but now the nation as a whole is being asked to finance the cleanup.

Third, I agree with the various Senators and Representatives that the money needs to have some rules and conditions attached to it.

What I have not heard anyone say is what new regulations are needed to prevent this sort of bad mortgage debt from poisoning the well again. I, for one, am glad that the remaining investment banks are becoming standard, run of the mill banks, because they will now be subject to standard, run of the mill regulations.

Lastly, I have this sneaking suspicion that this "fix" is really just prolonging the issue instead of fixing it. I suspect that a lot more "correction" is needed in reality than this bailout will provide. I'm all for intervening to make the landing at the bottom softer -- I just wonder if this bailout plan is really helping to the cure the fever or if it is just masking some of the symptoms.

But it was the comments of Mr. Paulson, a former chief of Goldman Sachs, about limiting the pay of executives that signaled the biggest shift in the White House position and the urgency that the administration has placed in winning Congressional approval as quickly as possible.

“The American people are angry about executive compensation, and rightly so,” he said. “No one understands pay for failure.”

Officials said the legislation would almost certainly include a ban on so-called golden parachutes, the generous severance packages that many executives receive on their way out the door, for firms that seek government help. The measure also is likely to include a mechanism for firms to recover any bonus or incentive pay based on corporate earnings or other results that later turn out to have been overstated.

Democrats were also working to include tax provisions that would cap the amount of an executive’s salary that a company could deduct to $400,000 — the amount earned by the president.

At the same time, Congressional Democrats said they were prepared to drop one of their most contentious demands: new authority for bankruptcy judges to modify the terms of first mortgages. That provision was heavily opposed by Senate Republicans.

In addition, Democrats also are leaning toward authorizing the entire $700 billion that Mr. Paulson is seeking but disbursing a smaller amount, perhaps only $150 billion, to start the program, with future funds dependent on how well it is working.

http://www.nytimes.com/2008/09/25/business/economy/25bush.html?exprod=myyahoo

Here's a YouTube of one of the Ohio's representatives --

This is an article about outsourcing debt collection work to India. The part that struck my attention was the quoted part below. I think it's important for people to know how the process works and what is best for them.

(The debt collection company)...files sheaves of lawsuits against customers who do not respond. Sometimes the debt is so old that the statute of limitations for filing a suit has passed, and it may already have vanished from a person’s credit report. If the debtor makes a new payment, though, the statute of limitations starts all over again.

Here's a pretty good article about Jérôme Kerviel - the trader who singlehandedly lost $7+ billion for Soc Gen in France -- http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article3257468.ece.

I found this paragraph funny -- he "only" had xx number of friends. Is the number of friends you have on Facebook REALLY an indication of your popularity or whether you are a loner? Online stuff is nice and all - but I like real life interaction, and the number of friends I have on Facebook doesn't give me real life satisfaction!

On Facebook, the social networking site, his home page had accumulated only 11 friends before the scandal was uncovered. Those who were there trickled away as the news of his problems broke. By Thursday night he had just four. The next morning there were none.

It does seem odd that just one person could set up all of these fictitious trades and not get caught. According to the article, there were some warning signs that were ignored. But from a high level view...if these positions had not been "unwound" as the article put it...then Soc Gen would have gone under. It seems that someone should monitor all trades in aggregate -- so that the total would not put the bank under if they market went down. Is nobody watching the store at Soc Gen?

Didier Corlardeau, president of a shareholder action group, said: “Kerviel’s a scapegoat. We are sure that the bank is hiding something. We’re asking the police to seize the computers to find out exactly what happened. I would not be at all surprised if the investigation brings out all sorts of things.

“For one individual to do what Kerviel is said to have done, it is not possible.”

Yesterday the scepticism seemed to be merited when Soc Gen admitted that questions had arisen over Kerviel’s activities. He had come to the attention of back-office supervisors several times in recent months. But Mustier said: “In some cases he would tell them it was a mistake. He would convince them, for example, by cancelling a position.”

And the jokes of course --

City traders, always quick to see humour in adversity, were swapping jokes about the Société Générale debacle last week. Among favourites were:

A picture of a stereotypical Frenchman saying “Combien!!???” It was captioned “Soc Gen’s risk manager” mocking the French for their short working hours. It began: ‘Friends of rogue trader Jérôme Kerviel last night blamed his $7 billion losses on unbearable levels of stress brought on by a punishing 30-hour week. ‘Kerviel was known to start work as early as nine in the morning and still be at his desk at five or even five-thirty, often with just an hour and a half for lunch. One colleague said: ‘He was, how you say, un workaholique.’ I have a family and a mistress so I would leave the office at around 2pm at the latest, if I wasn’t on strike. But Jerome was tied to that desk’

In actuality, of course, Kerviel worked long, long hours and never took a holiday. Maybe THAT should have been the tipoff!

I haven't done any research on this...but am I reading this right?

Below is a summary of the Financial Services Regulatory Relief Act of 2006, recently passed by Congress and signed by President Bush in October.

I know that our "fractional" banking system only requires a bank to hold a (relatively) small percentage of deposits in reserve, so they can lend out most of it. The idea is that not everyone would demand their deposits all at once...but ZERO RESERVE?

(Bold and underline is mine...)

Section 202

This section provides the Federal Reserve with greater flexibility to set the ratio of reserves a depository institution must maintain against its transaction accounts, allowing a zero reserve ratio, if appropriate.

http://banking.senate.gov/_files/RegRel_summary.pdf

Found on Urban Survival.

Dow finishes over 12000 for the first time.

Is anybody else thinking that we are looking over the top of of the roller coaster hill?

Maybe I'm just cynical that this occurs not too far before election day....

Interesting...the company of one of the stocks that I own is planning to do a stock buyback. That's great -- they should do it, considering how much the stock has dropped since I bought it.

But they're doing the buyback via a "Dutch Auction" -- meaning, I name the price I want to sell the shares at, and then the company will buy back the cheapest shares that it can.

The company gave a price range that it will stay within -- and the upper part of the range is above what I paid for the stock.

I bought the stock on a whim and almost immediately regretted buying it. Then, the stock price dropped like a rock, so I regretted it a bit more. So, I'd like to get rid of it -- and I will probably participate in the offer and name a price at the higher end of the range, in the hopes that my shares will be part of the buyback.

Evidently, new rules are going into effect that will allow companies to automatically withhold money from you for your 401K (unless you opt out) and to change your 401K selections, if they don't think that you're investing properly.

I don't mind if companies default you to certain 401K selections, if you can change them. And I don't mind if they automatically put you into the plan, if you can opt out.

But this line caught my attention:

For people who are already participants in a plan, all of this means paying extra attention to communications from employers: While many companies may choose to add the new features only for new employees, they can also be put in place for existing workers. As a result, the particulars of your 401(k) could theoretically be affected, even if you thought it was all set up the way you wanted it. It isn't just 401(k)-plan participants who are affected by the new rules. They also affect so-called 403(b) plans, which are retirement plans for nonprofit workers and educators.
http://www.prudentbear.com/bearschat/bbs_read.asp?mid=428747&tid=428747&fid=1&start=1&sr=1&sb=1&snsa=A#M428747

So, maybe you think that the stock market is going to crash, but your company puts your money into stock mutual funds anyway because that's what "you're supposed to do."