Prime Rate Credit

It seems that the stranglehold that high gas and food prices, combined with a number of other factors that you’ve undoubtedly heard discussed in the news at great length, has had an effect on the month of August’s back to school sales of clothes and other back to school luxuries, with consumers focusing mostly on the absolute essentials and not going all out on things like extra clothes or higher end stuff.

What happened is, although of course parents bought their kids the basics, but they didn’t go above and beyond and go all out with the clothes and shoes as retailers normally hope they do so that they exceed their sales expectations and actually profit. Did you know that the majority of profits from retailers comes around holiday times and special occasion times like back to school, and if it weren’t for these special times, they really would not be a profitable enterprise at all! Makes sense if you think about how empty stores seem to be and how no one seems to be actually purchasing anything at places like malls during the days of the week.

Retailers like Wal-mart though apparently posted stronger than forecasted sales, lending to the theory that consumers are getting the lower end stuff and just the basics, since they went a couple of percentage points over what they came up with as forecasts, which doesn’t seem like a lot but in retailers speak it’s quite significant!

Another factor that is lending to the slow August sales is that people are seeing their incomes drop with the employment rates going up as well as companies being forced to offer minimum raises to employees (this happened at my place of work it seems, at least to the majority of people). Even with gas prices going down and mortgage relief being offered by the government, consumers are still feeling the proverbial squeeze on their pocketbooks.

I remember I had talked about this a while back, the phenomena that really isn’t too surprising these days given the “me” and immediate gratification sentiments that seems to run rampant in both my generation (I’m in my early thirties), and the generation after me, which would put that somewhere in the twenties. When I was in my twenties, it was the worst time for spending wildly with money I certainly didn’t have, and it’s the reason that I got in way over my head with credit card debt thanks to putting everything from car repairs to mine and my college room mate’s new stereo system on my trusty credit card.

It didn’t take long before my naturally somewhat thrifty and shrewd spirit kicked in and I realized that although I was waiting tables almost full time to support paying the rent and food and other necessities, I was still spending way beyond my means, and using plastic to boot when I couldn’t afford to pay for things, whether they were necessities or not. Never mind the fact that I never had a red cent to put away, invest or save, I was just trying to make ends meet and have fun as a college student to worry about starting to save. I thought, jeez, I’m so young, I don’t need to start savings until I’m in my thirties or forties and I’ll be fine for retirement!

Little did I know how badly I was shooting myself in the foot back then, since compound interest, that glorious concept that multiplies money a gazillion times the longer money stays invested in interest yielding instruments, takes time to build and the younger you start, the more likely you are to be at that ideal million dollars for retirement - or more.

Well, it seems that these days the sentiment hasn’t really changed among those that are considered “young”, and they still have somewhat of a handicap when it comes to saving their money or even spending it wisely to begin with for that matter. One large company that handles 401k retirement accounts for many large companies says that it sees the majority of younger people cash out their 401k accounts when they switch jobs instead of rolling it over, which is the wiser thing to do so you don’t miss out on that compound interest or end up spending that money on things that’ll be gone in five to ten years, leaving you with nothing for the golden years.

Because they say that “Generation X” people tend to have this sort of mentality when it comes to their retirement money, it could definitely show that there is an impending savings crisis that may manifest when genx-ers reach retirement age in the next thirty years or so. Many Generation x’ers say that they recognize that saving for retirement is important but they have so many other impending obligations they have to save their money for that they end up paying those before they “pay themselves” so to speak through their retirement savings plans.

Well, now there’s another excuse for high gas prices, and this time it comes in the form of a natural disaster of sorts, the latest hurricane to rock the gulf coast and supposedly many refineries that will affect the gas prices again (ok, I thought the majority of our oil came from the middle east, but my bad), and make us scrounge our nickels and dimes to pay for the dang gas tank to be filled once more.

Sometimes you almost have to wonder if the oil companies are praying for a natural disaster just so they can use another excuse as to why the gas prices are heinous. I know I’ve heard that the oil companies don’t make that big of a profit, at least not what we are thinking, and that in fact, as a business venture oil in fact does not yield as much pure profit as many other businesses that doesn’t get a lot of negative press, however you just can’t help but throw your arms up in dismay when you hear yet another excuse as to why we are being reamed at the gas pumps.

Americans are squeezed, no doubt about it, and not just from gas prices as we all know too well now. It’s pretty sad when we are happy to pay $3.60 for our gas, and that is actually a relief from the previous $4.00 prices just a bit ago, when we would have laughed at the fact that anything under 4 bucks was a blessing just a few short years (heck, months) ago.

This latest hurricane is not only a disaster that will require a lot of federal aid from the government who is already bogged down by other disasters such as the banking systems that are falling, not to mention the war in Iraq and the bailout of thousands of homeowners in distress from the mortgage fraud situation or the mere fact that they are in over their heads with mortgages they cannot truly afford.

Now the oil companies have another prepared reason for why they are charging an arm and a leg for something that we all need as a necessity to live our daily lives and contribute to society.

These days everything just seems to be a catch 22, but I’m sure there will come a day soon when all the dust will settle and our economy will once again be booming, jobs will be plentiful, and credit crises will come to a halt (although they never truly do, they are ongoing, just in varying degrees of emergency). We’ll remain positive on America’s outlook because that’s what we do best, we make sure that we will never give in to despair, and watch our country become a booming one again.

Gazillionaire Warren Buffett is talking about the economy, and as usual, when the guru of investing and economics talks, everyone listens. Buffett says that he believes we will still be in what he calls a recession (although some economists have rebuffed that claim because it may not meet the technical definition of a recession which is so many consecutive weeks of downturn and a decrease in domestic product) several months from now, although he has hopes that the economy will be looking stronger in five years or so.

He says that he believes that the mortgage giants such as Fannie Mae and Freddie Mac may remain solvent, however, most likely not without a lot of help from the government and other non privately held entities since the scope of help would be so huge. Buffett has always said he is a long term “bull” when it comes to the US economy, even with short term bear trends and that he always believes the strength of the American economy will bounce back with a vengeance simply because it is too large to just collapse.

Buffett’s comments are always seeked when we are in financial dire straits, especially in recent years where he seems to have earned a sort of wise soothsayer standing because of not only his age but the testament to how standing steady even during tought economic times can stand to make you a lot of money as time goes on, and how it’s the people who panic sell when the first sign of bad news comes that usually end up in the whole when it comes to playing the stock market.

Buffett is known for buying and holding stocks for years and years, and has made a lot of money from doing so over the years, earning him a status of someone who is not only patient, but also someone who knows which companies are set to weather the ups and downs of the economy. He overtook Bill Gates as the richest man in America fairly recently, and his comments and views are seeked on everything from different stocks to the future of the US economy.

I’ve never read so much about consumer confidence as I have in the recent past months. Or maybe it was always news that was there, I just have now reached an age where I actually care about things in the financial news because I know they can affect me and the prices I pay for things, my job security at the insurance company I work for, and the rates I pay for loans, including how things go in my business life, and also how my investment portfolio (although admittedly it’s no great shakes - yet), performs through the years.

Well, apparently in August consumer’s “mood” has improved which means good things for business in general, which in turn should mean better news for our flailing economy. Speaking of economy, I just read an interesting articles by supposed financial experts who claim that the economy is not showing signs of recession, and it’s rather just going through a contraction of sorts. They say there are plenty of variables that indicate recession, however, the economy has still grown over the past several months, which is counter to the actual definition of a recession.

A recession is, by definition, when the economy, or GDP, Gross Domestic Product, is down for several consecutive months, and they say that while the increased numbers are not the norm and are pretty dismal, they nonetheless have still been imrpoving by small margins, which means that by definition right now the economy is not in a recession. Hmm, interesting, but I wouldn’t give it too much credence yet, as recessions cannot even be validated until several months after they actually occur since the number can’t be gathered and validated until such time.

In August, our current month, consumer optimism has improved reportedly because of a drop in oil prices. While people are still watching their wallets because of the gas prices, it has been assumed that because of the national decrease in oil prices, which is most likely tied to the dramatic demand decreases for gasoline, their attitude about the economy is improving, which usually translates into consumer spending more money - which incidentally, as you guessed it, expands and improves the US economy.

Heck, even those overseas are coming over here to the US to reap the benefits of a down economy as well as spend their Euros, which are worth about double or more what the American dollar is currently. I think I’d be going over there to spend some money if I knew I could get twice the bang for my buck too! The American dollar will come back though.

I’ve just read too much from authors and experts who I know have a good track record with things like this that say they have the utmost confidence in the American dollar while it is not performing now, they say it will come back. It may be a longer road than we’d like, but the US will be on the recovery trail soon, I do believe that. It’s been through these hard times before, and the free enterprise system we are built on will surely come swinging back with a vengeance once the comeback has begun.

Well, I know for me personally, the rising prices of everything from gasoline to my breakfast cereal is what’s on my mind these days when I think about our current “economic downturn” ehem - recession. What’s your biggest concern? Most would say it’s the rising costs of everything - not just gas, according to recent statistics on what antsy consumers are the most worried about these days.

Heck, even Wal-Mart is suffering from less earnings now in this economic downturn, which is counter to thought because usually heavily discounted stores thrive in recessions. However, stores like TJ Maxx and other discounted retail outlet stores are doing better, which is to be expected.

When I get the electric bill, I notice it is much higher than it even was last summer, which just goes to show the rising energy costs aren’t just all about gas, they’re about energy across the board. Also, we’ve noticed that our grocery bill has increased somewhat dramatically when factoring in the short span of time that has passed since it increased. Inlfation usually takes a bit longer to kick in than say, a year, which is what’s been going on here with food prices and the general cost of living.

Heck, even when we go out to eat, we’ve noticed our favorite restaurants are cutting portions of our regular dishes. How do we know? Because we tend to order the same dish at many of our favorite haunts, and we’ve noticed the portion sizes have been cut down, big time. It seems like even pizza joints are cutting down on one of the costliest items to make their pizzas - the cheese.

Seems everyone’s hurting this time from the economics of our year so far. Also, 2008 didn’t get off to a great start since that was just when all the subprime hoopla was seriously coming to light as an issue that would not pass lightly. I’m reminded of what economic time we’re in when even one of my favorite discount outlets for food, Marc’s, has increased their prices on just about everything.

Used to be they’d keep their prices on certain items steady for a few years, and they’ve increased the cost of everything from pretzels and chips to dairy products, including my favorite cottage cheese, substantially. It’s still a better deal than the grocery store I suppose, but I use Giant Eagle for all my shopping now because I get the gas points that pay for a portion of my enormous gas tank filling bill. Hopefully we come out of this by next year, if not, people are going to start getting very restless.

It appears that one of the largest credit card and identity theft fraud rings in history has been officially broken up and out of business. Eleven people (so far), have been charged with the frauds which covered a number of large retail outlet stores, including the TJ Maxx family of stores, Boston Market, DSW (for shoe lovers like me), and even Forever 21, a trendy young clothing store that can be found in malls.

No explanation as to why these particular stores were chosen, but the perpetrators hacked into thousands of credit card records so that they could get customer credit information to use for themselves (which is considered identity theft), by driving around and finding open, unsecured networks and hacking into them. They supposedly would then transfer the customer’s credit information onto empty cards with new magnetic strips, and would then use those cards to make purchases on someone else’s dime.

I do remember hearing about this a few months ago, well more than that by now probably, maybe even a year ago, because I was concerned that a store I frequent, TJ Maxx was targeted, however it was unclear whether they targeted those that held store credit cards or just any general credit card, like say any generic Mastercard or Visa. They also said at that time that other stores in that family such as Marshalls were targets, but there is no mention of this in the latest information that came out.

The credit card and identity theives are charged with hijacking and selling more than 40 million credit cards and credit card numbers, which seems nearly impossible to believe, however it was apparently an international operation, so many of those could have also been used abroad which explains the number of cards that were hijacked. The thieves were from allover, including Asia, Russia, and right here in Miami (he was supposedly the ringleader and mastermind of the whole thing). Don’t these people know by now, crime never pays in the end?

My boyfriend just recently got a long, two page letter from a certain company who shall remain nameless, that disclosed that they may have his records, and that someone recently may have had access to his personal and/or financial records, because they were disclosing that they had recently experienced a theft of several laptops which had very sensitive materials on them. The funny thing is, my boyfriend didn’t even think he had ever done business with this particular company, which happens to be a high profile beer distributor, so he wondered when he even would have given this particular company his records to begin with.

These types of letters are a sign of the times in which we live, where highly sensitive data that could lead to our financial ruin is essentially floating out there electronically, and many times is very susceptible to the likes of hackers and na-er do wells who intend to use the information for their personal gain, or for some sort of fraud involving a stolen identitity or maybe even sometimes just to sell your name to lists.

Along with the letter which disclosed the possible breach, he also received another privacy notice, which is the par for the course form that EVERYONE gets now, whether they are signing up for a credit card or just even sometimes signing up for something where none of their personal or financial information is revealed. While these privacy notices were meant to benefit the customer, I can guarantee most people never even read them, and that people don’t even read them when they are accepting or acknowledging their reading online, where they have to sign off on certain things.

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.