Prime Rate Credit

Business results and national results on things like foreclosures, bankruptcies and loans, are tracked by a system of quarters, or 4 times a year, by tracking the stats of a given movement in numbers once every 4 years. Business cycles are similar, with fiscal business cycles being tracked on a quarterly basis, sometims not totally based on exact quarters, but a randomly placed interval once every 3 months since there are 12months in a year.

Well, it seems that the foreclosure rate has hit a scary new high in the second quarter nationally, so much so that it has gone up a staggering 14%. May not sound like a lot in some other cases, but if you think about foreclosures and how rare they should be in a healthy economy, this number tells us a lot and it tells us we are far from being “out of the woods” when it comes to our economy’s health and prosperity.

There are reports pouring in about families and individuals who have had to give up their homes and the American dream because they simply cannot keep up with their mortgage payments, which also tells us they shouldn’t have been extended that much credit to begin with, which is another problem being focused on now by the major banks who extend mortgage loans to people and businesses, and that is a lending guideline and the integrity of the lending market, since many of these foreclosures still are considered to be in that dreaded subprime market that we’ve heard so much about lately.

The 14% figure is bad enough for the second quarter, but even worse is the fact that when compared to the foreclosure rates just one short year ago, it appears that the foreclosure rates as of late have more than doubled, surpassing the 100% increase mark this year alone. They say that much of the fault is placed on about 5-6 states too, which means these states are experiencing the worst of the mortgage crisis, and they are suffering as far as local economies go as well (my state happens to be included in this list, which doesn’t surprise me with the number of foreclosures I’ve been hearing about from friends and aquaintances alone.)

Most people I know have already spent or are already planning on how to spend their tax rebate check, and I can tell you, most of my friends family and acquaintences didn’t use it on “fun” stuff, they mostly used it for necessities or in a very utility capacity, like catching up on paying their mortgage, or their gas bills from the winter, or paying off that last credit card (usually not low apr credit cards either of course, those are always the first that we want to pay off because it feels like all of our money goes into a black hole since the interest alone will keep us paying for years.

The way I spent my check was that I really just treated is an income, and used it mixed in with my other income money to pay bills, get groceries, food, entertainment, home improvement stuff, etc etc. So it seems that the government’s plan for people to go out and get crazy and spend their rebate check on things from retail stores and others that are suffering because of the slow economy has kind of busted. Although I will say I just got back from a TJ Maxx in my area, and for a Friday, it certainly was bustling!

And that brings me to another random thought about rebate checks from the government, have any of you seen that cruel joke that’s going around via email where there is a long explanation of why the government is going to issue a second round of stimulus rebate checks, and it’s all really just a ruse to make you feel like an idiot for actually believing it for a minute. I have to admit though, I did laugh!

Citigroup, one of the largest banking, lending and credit card lending companies here in the US, gave investors and financial analysts a positive surprise last week when their earnings beat estimates forecasted. Before you get too excited though, they beat earning estimates that still did not meet their past performance, but right now in the climate we’re in regarding financials that have anything to do with banking, credit or loans, this is good news evne when the forecasts are not all that ambitious.

In fact, they forecasted to LOSE more than the actual loss they posted, so I’d say that’s an underestimate of an underestimate if there is one. This is just a sign of the times, when a company is actually relieved to post a lower loss (to the tune of billions yet), than they expected. Analysts were actually expecting Citigroup to post a larger loss, about a billion more than was actually lost, so this may actually bode well for their stock, which is in the toilet along with every other major financial institution’s stock.

Citigroup has been exposed to the so called subprime mortgage group extensively, which was one of the reasons for the dismal forecast, but it also has had writedowns in the way of credit card lending losses, and it did sell one of it’s subsidiaries, which actually helped them to conserve on money and post less of a loss for this year so far.

I actually have Citi as one of my mortgage lenders, so it’s good to hear they are in better shape than some other banks who are opening their doors to the FDIC and things of that nature, or being investigated for some sort of fraud. Federal agencies are now cracking down on lending practices across the board to help prevent another economic meltdown like the present one we see in our banks and financial sectors, and it’s not a moment too soon really since this all could have been avoided if banks were more closely monitored for their lending practices and didn’t extend credit to those they know would not be able to make good on the amount of debt they were getting themselves into.

We are seeing one of the most trying economic times of our lifetimes, and experts are saying that it’s just going to get worse. Banks are failing and the government is needing to step in, many banks are not remaining solvent, and some are struggling just to avoid a major takeover, and others still are being taken over by the FDIC, which is the government regulating agency that steps in when a bank becomes a failure, and takes over, insuring people’s deposits for up to one hundred thousand dollars as far as I know.

The run on the banks is going to cascade down further into other areas, and many people are scrambling to get their money out of their accounts if they sniff trouble in their individual banks, which causes further spiraling of economic solvency in institutions such as insurance companies and other publicly and privately owned equity corporations.

For now, what we need to focus on is staying calm about our own banks going under, and some say to look for signs that there may be trouble, although often even those that work for banks are some of the last to know about troubles. As one financial pundit says, watch out for when your bank starts putting the deposit slips on obvious display and starts to hide the withdrawal slips, as that is a sure sign that they may be in trouble.

We are even hearing about federal regulators sniffing around Wachovia for fraud possibilities, although no particular person is being investigated, but the whole company is being ivestigated for fraudulent practices. Indymac, one of the pacific northwests largest mortgage lenders, is currently being taken over by the FDIC assuming for reasons that they may have been insolvent, and need to have their deposits insured by the arm of the government who insures the customer deposits up to so much money.

These are some very scary times indeed when it comes to financial and economic security. We know people are having a hard time with it, but when the major banks who supposedly have millions or billions of dollars in backup start to buckle, that’s when people start to really freak out and lose confidence. I’m hoping that this is the last bank failure for a while but the truth is no one knows right now where this might be headed.

Apparently everyone is so fed up with the four dollar gas prices that do not see an end in sight, that they are easing up their views on offshore drilling here in the United States, something that has been banned by Congress for years now because of environmental concerns.

And the concerns are definitely valid, as drilling could definitely interrupt any delicate ecosystem, so there is bound to be criticism and opposition to the offshore drilling that is scheduled to start off the shores of Florida for oil, but many are changing or softening their views on it since Americans are suffering such high gas prices among a lot of other touhg economic factors that have us all not so optimistic about America’s economic future.

The drilling is to begin offshore of Florida, off the panhandle, which means they will be drilling under water, which is a very expensive feat to say the least. I guess that four different companies are slated to begin drilling soon. And it’s expensive because they are merely exploring now, they don’t know exactly where oil fields might be found, but they have to drill first to find out, so it is merely an exploratory process at first, one that will cost millions of dollars.

Many are saying that Florida would only be the beginning if offshore oil drilling is successful there, and that other coastal states would be subjected to the same exploration if they find an abundance of old dinosaur fossil fuel there. Just the mapping of the sea floor where they will be drilling (and miles down, no less), can take years to complete, so this is definitely not something that companies looking to explore take lightly. It may be years before we see any of this drilling come to fruition, and then what?

Do they really impact the gas prices that much? By then will we HOPEFULLY have a good, viable alternative to fuel for our vehicles, or some alternative form of transportation that doesn’t costs us a large portion of our salaries every week? I’m hoping for the latter because I can see offshore drilling being interruptive to our environment, and right now we have enough problems to deal with.

I remember once reading that when a new president is elected, but only if that new president is a democrat, the economy traditionally gets boosted. Well, now I’m reading that if any new president is elected, whether it’s after the incumbent’s two term run or if it’s cutting off an incumbent’s opportunity at a second term, the economy generally bounces up for a bit after they are elected into office.

With this coming election, which many people are calling the most important and historic election in our lifetime or perhaps throughout history, not only because it is the first time a black candidate is running on a major ticket, but also because we are faced with so many challenges today, not just the economy. Some are saying that the new president may have a huge impact on the economy, but are not sure how long it’s effects will last. One thing’s for sure, the economy sure could use a dose of long term optimism, not just a short term dose like the little rallies we’ve seen here and there that fake us into thinking there may be a long term recovery.

While a new president may shoot the arm of the economy, many say that they cannot help with the current housing situation, that is a situation that is going to take years to heal because essentially the damage is already done. Apparently the two presidential hopefuls have a bit of a different agenda when it comes to the mortgage and housing situation, with Barack Obama wanting the government to step in a bit more and John McCain wanting to take a more hands off approac to let the housing market heal itself.

Some say that the McCain approach may be better, because when the government intervenes it actually throws the market into more of a spiral and takes a longer time for recovery. I’m no economy or financial expert, but I tend to agree that the government’s area is not to get into private affairs that the public needs to heal on their own, but that’s just my two cents. I agree that the federal mortgage rate cuts were probably good, but even that has been hotly contested by economists.

Well, I’m not really sure sometimes if reading these help yourself, millionaire-aspiring types of books if helpful to the ego or the self perception, and this is one of those examples, although I will say that it has made me realize that if what they say is true, and the calculation they have you run to see what your “net worth” should be at a certain age is correct, then I’m more than a little behind - along with most of the world!

According to the popular best selling book “The Millionaire Next Door”, their equation for what your net worth should be is your age, divided by ten, then multiplied multiply that by your yearly income. The number I came up with makes me fall about 50% short, maybe a little more than that, however it doesn’t really account for all variable either and is just a simple equation.

What I mean is, does that really mean that I have to have that amount saved to live the same or a better lifestyle that I’m living today when I retire? And what about if my salary that I pay myself has gone up incrementally higher every year? Am I punishing myself for those years that I wasn’t making nearly what I make now? So, if my income went up 30% in one year, I’m still sticking myself to that high number that I should have because this last year I happened to make a lot more money than I had in the past few, and was then able to save a lot more?

While I do have these questions, I still think the books’a good read and really drives home that the people who become millionaires are the ones with self discipline who don’t just spend every cent they make. Saving and investing are pounded into your head again and again, and rampant consumerism is definitely discouraged by the authors, which I agree with and am striving to become more like, because I don’t know about you, I’d like to live the same lifestyle I do now or better in my golden years, and maybe even be able to help out some family members or friends here and there if I can.

Anxiety and stress are probably the biggest issues that effect our state of mind daily. A large portion of our anxiety and stress comes from worries and uncertainties about our financial matters for the present and our futures.

One way to reduce anxieties about money matters is to get in the habit of saving on a regular basis. It doesn’t have to be a huge amount that you are saving and investing as long as you are doing so consistently.

If you set a goal monthly for savings, keep it realistic so it’s doable. Studies show that those who save regularly feel more financially secure and optimistic about their future. Just knowing that you have set a goal for savings and met it each month gives you the confidence to tackle bigger challenges financially.

One way to meet your savings goal monthly is to change your spending habits. For example, if you go out to eat daily for lunch, try brown bagging your lunch and put the difference into a savings account. Coming up with a budget plan, no matter what your income and staying with it helps you set boundaries and actually boosts your self esteem.

One major priority to set is to pay off your high interest debt. If you have balances on your credit cards, make it a priority to pay them off as quickly as possible. If you own a home, try to pay off your mortgage before retiring. This will free up more money for saving without a mortgage payment and also gives you leverage for borrowing against this asset in the event of a cash emergency down the line.

If your company offers a 401k plan, sign up for this work related retirement benefit. Often, companies match your contribution up to a certain percentage. The money is automatically deducted from your paycheck for your input so you don’t really miss it and it forces you to save.

You can request your bank to monthly allot money from your checking account into your savings account for a specified amount to build an emergency fund. Getting in the habit of living beneath your means regularly will help to give you financial security for the future and help to alleviate stress and anxiety about how you will monetarily cope with your future.

Well, I just got off the phone with my credit card company, who, in a genius marketing ploy, make you talk to an actual representative to activate your new card. Things must be rough if they no longer just let the automated service talk to you and tell you your card has been activated after asking your a few security questions!

Basically, I had gotten my new Chase Visa credit card with a fixed low APR in the mail, and had to activate it, since every credit card company sends their active clients a new card once every so often, just in case the plastic wears out (and believe me, I’ve had a few credit cards in the past where the plastic really has actually worn out, so much so that the writing on my signature on the back of my card was no longer legible actually).

Well, this time when I called, they said that my phone number was recognized and there was no further verification required (an automated voice told me this), but then I was subsequently transferred over to a representative to “confirm” the activation after that. Usually it ends with the automated voice telling you that you’ve been verified and you’re good to go ahead and use the card again anywhere you want to.

They also tried to talk me into either buying the right to take a few months off paying the credit card bill, without any penalties or fees, or even any accruing interest during the “time off” for a very nominal fee. I informed them that although that sounded good, I wouldn’t be not paying my credit card if I could help it, so didn’t need this monthly service charge (I think it was less than a buck a month, not bad, but still not something I need personally).

Then, they advised me that they could also send out checks for low APR balance transfers at a 2.99% interest rate, up to the limit on my credit card since I had so much room left on it. This also sounded like a good deal, but I informed them that I have no balances on other cards that would benefit from this at this time.

The gentleman on the line was very friendly and didn’t press me at all, but I was most impressed that he actually asked me my permission for him to go through his schpiel, and I told him yes (I usually don’t, but genuinely wanted to hear what they had to offer this time for some reason).

When Warren Buffett, currently the richest man alive at least in the US, and also the head of Berkshire Hathaway, and considered one of the best investors, if not the best investor ever, talks - everyone listens. And when Warren opened up about his feelings on the state of the current economy here in the US, it was no different. People will pay over half a million just to have lunch with the self made millionaire and investor, so it’s no surprise that he is one of the most quoted and quotable figures in the economic and financial landscape today.

Buffett most recently opened up about his views on the currently high oil prices and said that he does not believe that this is an issue of a price increase driven by speculation on oil prices, but rather more a product of that good old economics term supply and demand. He says that he believes the supply is not as excessive as it used to be and that has driven the price increases we have so lamented over the past few years.

Many are even saying that this is a typical commodity price increase, and that commodity price increases often last 5 to 10 years, so it looks like we may have to hold onto our seats and get ready to bite this high priced gas bullet for a lot longer - or come up with better alternative energy sources for cars. John McCain’s even jumped in, offering to pay 300 million dollars for an efficient car battery that could help cut down our dependence on “black gold”.

Buffett opened up on the economy and the recession as well, stating, as he had before, that he does believe our economy is in the midst of a recession, and that it is currently only showing signs that it is getting worse, and deeper by the data he has seen from steel and construction companies. I have to agree with him in that I do believe this recession is going to last longer than what most people may think, but I’m also a strong believer in the resilience of the economy and know that we will pull out of this and be in a “bull market” again.