Happy Almost New Years!

Hello to all the readers of Prime Rate Credit, I’m just calling it in to wish you a Happy New Years! It’s new Years Eve, with only about a half hour til the infamous Times Square ball drops and Dick Clark announces that it’s officially the new 2009 year. And who would have thought we’d see such a year? Remember when even the year 2000 seemed to be ions away and unattainable? Well, it’s almost 2010 already! Woohoo!

Sure, the year 2008 has held some very difficult times and economic and financial uncertaintly, but we should all still reflect on how lucky we are to be here, to be healthy, and to still have roofs over our head, and to try to help those that aren’t as fortunate through these rough times.

Happy New Year everyone, and here’s to a more prosperous, worry free 2009!

So What is a Ponzi Scheme?

The story that has broken over the past few weeks about former Nasdaq head Bernard Madoff being the head (allegedly alone, but no one really buys that who can appreciate the magnitude of his scam), of a ponzi scheme has brought to the forefront in people’s minds the audacity that some people have and the greed that sometimes can lead to these types of scams being successful for a while, even though they eventually fall apart.

It led me to look up what “ponzi scheme” meant so I could get a grasp of how the scheme worked, although I did know that it somehow involved debts being paid with participants money, and that the alleged investment scheme didn’t actually make the returns it claimed to, but instead used new participants investment money to pay hefty “returns” to others who were already involved in the investment.

A ponzi scheme is named ponzi because it is named after an Italian immigrant who came ot the US and started the first scheme of it’s kind, bilking people out of their money unbenknownst to them. What a ponzi scheme is, is basically a big pyramid scheme. You may have heard of them or even been involved in them on a smaller scale.

I actually was the unwitting victim of a much smaller ponzi scheme when I was in college. I was scrimping to save money and pay the bills, waiting tables at a Bob Evans to pay my way through school and pay for things like car repairs, living expenses, food, utilities and the like, and one of my college friends said he had a friend of a friend who had a glorious story about a pyramid scheme that worked where if you put your money in, you would get double that money back within about eight weeks.

I thought it sounded too good to be true, and my roommate, who had heard the same story was leery of it and decided not put the 400 bucks it required in. At the time, 400 bucks was a lot of money! I, always being an adventurous person and willing to take a risk for a handsome return, although I did have some doubts in the back of my mind, decided to put the four hundred dollars in. Of course, what happened, in my naivety at the time, was that the head of this scheme made off with my money.

The guys who told my friend about it said they heard the guy died who headed it up, which I’m sure was a lie and a way for them to retain our money without paying it back. Of course, I learned a hard lesson then, that these types of schemes prey on people’s optimistic (albeit greedy) nature, and people are willing to swallow information that doesn’t necessarily make a lot of sense, even if it’s at the expense of their pride and their intellectual part telling them it’s wrong, if they thing they may be rewarded financially.

Merry Christmas Prime Rate Readers!

Merry Christmas to all Prime Rate Credit readers. Thanks to all of you for visiting the site about credit deals, financial news and information on how to get better interest rates and how to take advantage of the current economic times we find ourselves in right now. We’ve definitely been through a turbulent 2008 together, now let’s hope that 2009 shows us better times.

Although I’m an optimistic person, I do believe that we are still in for several more months of economic turmoil, although I’m a firm believer in the American capitalist structure and the power of free enterprise, and I do believe that we will come back stronger and more wise for the tests that 2008 has brought us. Merry Christmas to all, and to all a more prosperous and worry-free 2009

Spending Remains Subdued for Holidays

With the exception of a few niches in holiday shopping, such as kid’s clothes and electronics like TV’s, DVD players and the such, holiday sales are expected to be not so good for this holiday season, which many have been glooming and dooming as one of the worst forecast sales seasons for the Christmas and holiday season in a while.

We have heard that one before though, but now we have legitimate reasons to believe it’s actually true at this juncture when the economy is in turmoil, and more than anything people are holding onto their money for fear of what tomorrow brings, of where the economy is going, the housing market, and the plethora of other financial challenges we have ahead of us today.

Early data that is traditionally compiled from reatailers suggests, as our headline shows, that some of the better areas of sales are to be seen and most likely at the end gathered, for the categories of kid’s clothes and electronics, which almost always seem to be a big seller around the holidays since we live in such a tech savvy and hungry world today.

They are showing that for this past weekend so far, sales may be down from last year, and that people also tend to stick to basic necessity types of gifts, such as clothing and other staples, instead of “luxury” items and other products that are considered something that is not really needed. However, one area that sticks out as sort of a luxury or niche market is the electronics area, which is enjoying a fairly stable season so far, considering the extenuating circumstances of this strained holiday shopping season thus far.

Honestly, I can personally attest to the fact that mine and my partner’s situation is not dire, however, I am partly in the business of sales, and have noticed that my sales have significantly declined from October to November, requiring us to re-prioritize our spending habits, which admittedly at one time were fairly liberal and carefree, and we are holding onto our money more than ever for fear that soon we may not even have an easy time making our mortage payments, which are funded by a joint effort, but are greatly supplemented by both of our sidelines which happen to be in sales of nonessential products, which are suffering big time right now.

Obama Has a Tough Road Ahead….

Barack Obama has a huge set of problems he will need to deal with after he is officially sworn in, in January, as the 44th president of the United States, not the least of which is the economy and what is to be done with the rest of the financial bailout money that Bush’ administration heaped on the newer administration, instead of working together (God, I love this country sometimes, we’re in the midst of the worst crisis of this new century, and they just “put it off” – isn’t that special?), but he’s got record unemployment numbers to deal with, the failing auto industry banging down his door for fiscal help, and he’s also got a ton of infrastructure problems, not to mention the task ahead of him for building foreign policy relationships, especially since he is not the most experienced in this area.

He’s going to have a lot of diversions from his real job, and that isn’t necessarily a good thing for a fairly inexperienced commander in chief, and yet many feel that he is more than up to the task and feel that he may be just what we need, not a cynical older guy who’s been there, done that and who may not have his eyes open the way a man with relative inexperience may have to new opportunities and ways to do things.

Obama is fully aware of this challenge, and the poor guy already looks as if he’s been stressed out beyond belief, since he now already looks a bit older, and he hasn’t even taken office yet! However, I’m choosing to take the positive road and tend to think that he may do a great job, he just needs to be broken in, and talk about trial by fire, this is the epitome of that if I ever saw one.

It’s sad to say though, that the president, no matter who he is, can only do so much for an ailing economy. Sure, he can make the right decisions when it comes to economic policy and financial growth for the country, but all in all, this is a nation that needs to recover on its own. There are too many variable at work here that any one person has any type of power to fix.

Mortgage Rates Below 4%?

I remember when the beginning of this whole housing, mortgage, credit and financial crisis started. You started to hear about the prime lending rate being dropped by the Fed almost weekly, and it seemed that they would have to be at a standstill since it had dropped so many consecutive times in an effort to help the weakening economy and unstable housing market. However, things have changed even since then, and the Fed may bounce the rates down yet again if things keep going south the way they have been.

How far will they go down? Well, there’s really no telling, but some are predicting that it may be as low as 4% at some point, which is unheard of, and may have some people running out to refinance their homes to perhaps see if they can get a better mortgage loan rate because of the drop in the interest rates across the US.

In fact, they may even fall further than 4%, which would be quite a shock on paper, considering most people haven’t seen rates that low in their lifetime. Before you do jump out to refinance though, they would most likely only institute this dirt cheap low interest rate for those that are using the loan to buy a home, not to refinance an existing home, so it wouldn’t really provide a loophole for existing homeowners to refinance their homes unfortunately. Sorry for getting your hopes up, I was kind of thinking I might get a few quotes on our mortgage if that were indeed the case though.

The current prime interest rate is 5.49 percent, which isn’t too shabby at all. Forecasting that it will fall almost a whole point, or indeed a whole point or more, in addition to the precipitous drops the Federal Reserve has already instituted is pretty much a shock, but also at this point won’t come as a surprise to some in the know in the financial market and mortgage industry.

It’s nice the home buyers are offered this, and I’m hoping it does indeed help to loosen up the credit markets and get this economy out of “stall” gear in a reasonable amount of time, but in reality the economy needs this and a whole lot more to pull it out of the current crisis we are facing.

Some Are Tapping Their Retirement Accounts

I remember hearing that congress may pass temorary laws that inhibit the taxation penalties that are heaped on people who decide to tap into their retirement accounts before they are fifty nine and half years old, which is the usual age that most retirement, tax sheltered accounts name as their cutoff for no pre-withdrawal penalties. The reason is that in 2009, many people may have to do exactly that, to cover everything from the mortgage and other related living expenses to their grocery bills.

An increasing amount of people now are doing just this, in an effort to prevent their homes from going into foreclosure, and in an effort to help pay the bills during rough times, especially someone who may be in the sales business which relies on a strong economy and strong consumerism, which is suffering big time right now.

The reasons cited for the surge in early retirement fund withdrawals include exactly what we think they might, and that is job losses so they can cover their expenses on the lower income they receive from unemployment, to cover their mortgages which may have increased if they are subprime, and to pay off credit card debt. You can also achieve this well sometimes by getting a good balance transfer credit card, but some feel that giving up growth on their retirement accounts is worth it.

This unfortuante trend in early withdrawal, which most financial experts say should only be a last resort, is likely to continue into the year 2009, especially seeing how we just got some of the worst jobs data we’ve gotten in the past thirty plus years, and it may even get worse in December and January, which unfortunately are usually big layoff months.

Job Losses Worst in Over Thirty Years

I was born in 1974. Yep, I’m 34 years old! This year was also the year that marks the equal time of job losses here in the US, and this year also happened to mark sharp falls in the stock market, lots of job losses, gas shortages, and more. Sort of like what we’re going through today, only HOPEFULLY this will not exceed the crash of 74. As a comfort, you should know the economic distress is most certainly cyclical, and that we will periodically experience these downturns, it’s natural, and it’s part of the way the American, or any economy for that matter, works.

You see, without cycles, we wouldn’t be the capitalist society that we are today. I have a comment on the economy before I talk about the actual headline, and it may not be a popular sentiment seeing how Barack Obama is an overwhelming favorite today, but I think, as some other news outlets have already pointed out, that he really needs to be more definite, more focused, and more involved in this whole economic problem. So far this incoming president, albeit, not the president yet, has been very noncommital and not very visible or swift in saying what actions he plans to take once in office.

I’m really hoping I’m wrong, but we need someone with a definite, strong voice up there at the pulpit telling us exactly what’s going on, not saying that there “can only be one president at a time”. Maybe I’m being too harsh and any incoming president at this time would be getting criticized no matter what they say, but he seems to not have a committed response to how exactly things will be handled with the rest of the bailout money when he takes office.

Anyways, back to the headline. Unfortunately, the economy saw more bad news today when news came out that over 533,000 jobs were lost in November 2008. This is supposedly the largest job loss in one month since 1974, when similar job losses and economic woes were seen. It’s just more bad news in what seems to be a neverending trail of bad economic news.

First we find out we’ve been in recession since December of 2007, when I thought we were supposed to get this data months later, not almost a year after it supposedly started, then we find out that the banks, followed by car makers, and insurance companies, have been completely careless with their spending and are asking for the taxpayers to bail them out. Sometimes it does seem like this will never end, but I can promise you it will, it’s just going to be a long uphill battle, and unfortunately most of 2009 is going to look the same way folks. Wish I had better news for ya!

Would-Be Retirees Putting It Off a Few More Years

It’s no secret that with the economic and financial markets meltdown, a lot of people lost a lot of money from their retirement and other sheltered savings and investment accounts, and some of those people were unfortunately thinking they were right on the threshold of retiring, and boom, fifty percent or more of their savings that was hard earned and hard invested, is gone. This has left a lot of would-be retirees wondering if they can ever retire now with the knowledge that the money they have to live on for their retirement will actually get them through the thick of it, and will last.

A lot of retirees who were planning on retiring this year have been sorely disappointed that a lot of their savings was wiped out essentially within a matter of a month or so, October and November being two of the worst consecutive months the stock market has seen in many, many years.

People who were going to be retiring and living off dividends or interest and extra growth and withdrawing with the presumed knowledge that they would be able to continue to withdraw with their savings still growing every day, have found that this simple truth that was taken for granted for so long is no longer the case, and a lot of people have had to come up with contingent plans for retiring, or have had to put off retirement as much as five to ten years in order to regain what they lost through staying in the workforce longer than they had anticipated – or wanted.

I was just reading a sad article the other day which had quotes from several would be retirees who said that they have had to unfortunately stall their “golden years” so that they could keep working and set off or mitigate some of their losses suffered in the stock market. Many of these losses will not be recouped for up to five years even when the stock market does go back up – which it will, it just takes time, and considering that many stocks shaved off more than fifty percent of their value and cut dividends, that’s not something that is soon recovered from.

Back Friday Gets Ugly

It’s been a while since Black Friday occurred, which is named Black Friday because it is the day that most retailers come out of the red and into the black and start actually being profitable for the year – which is hard to believe! Black Friday is traditionally the day when all retailers compete with one another with ridiculously cheap deals on merchandise in order to draw consumers in by the droves, and people can find some of the best deals they will find all year round on this day after Thanksgiving.

I have to say that the day deserves the name Black Friday not just because retailers come into the black as far as profits go, but also because of some crowd’s behavior, which is embarrassing and yet true that we live in a civilized society and yet something like this awful occurrence can still happen here in the US. Actually, it was two things that happened on Black Friday that make people stop and go “hmm, is this stuff really that important that we treat one another like animals would, or worse?”

Stories that emerge like this about how people tend to take on a pack mentality on days that are traditionally crowded with overeager buyers are exactly why I do not go out shopping on Black Friday. I tried it one time with a friend of mine years ago and decided that it just wasn’t for me. The way I saw people behave wasn’t very attractive, and I believe that now that online shopping has the same deals a lot of others feel the same way and are avoiding the crazy crowds on this busy shopping day.

The two stories that came out about this past Friday shopping day are enough to turn anyone’s stomach. Apparently a New York area Wal-Mart saw the death of an employee when the doors were literally stampeded upon the five am opening of the store by eager shoppers to be the first ones to get the ridiculous low prices on some of their featured items. Even more disgusting is the fact that when the store announced it had to close down because an employee died (he was stampeded), shoppers became irate stating that they’d been in line all night.

Really nice world we live in sometimes, eh? Makes you wonder what kind of people care this much about getting a bargain that they can’t stop and observe that a life was lost all for the sake of cheap DVD’s and digital cameras. Law enforcement is currently looking into prosecuting those that were responsible for trampling and killing the man, in his thirties and the prime of his life, but acknowledged that it might be difficult to track the people down because of the large crowd. His exact cause of death has not been determined, but I think it’s safe to say that had he not been trampled, he would still be with us today.

Another lovely and heartwarming (yes I’m being facetious) story comes out of Southern California, where two people were shot in a toy store apparently fighting over something unrelated to a bargain toy, but that’s still being determined. This one’s still being looked into as well, and the two that were shot did die.

The victims and assailants were two men who were with female companions and children, and pulled guns on one another after their female companions got into a fist fight, killing eachother. Senseless, absolutely senseless and sad. It’s enough to make you stay at home on all Black Fridays from now on, if you already don’t. We went out very briefly to pick up some necessities at a local craft store and even the scene there was chaos, with people’s manners going right out the door. It’s enough to make you sad about the state of America’s mindset today.