The Deed is Done

It is true, my husband was laid off today but we are OK for now. Yesterday I was mad, today I am still mad but I am not sad. I'll be sad 6 months from now if things don't turn around though.

I've stepped up my job search with renewed vigor and remain optimistic for now but the job situation on Long Island is dire. There are lot more offerings in NY City and I would have a much better chance finding something in my field there. But, with no family and few friends out here it is difficult to realistically think that we both could commute given that we have two young children. Nevertheless, if the situation dictates that it has to be so then of course we would find a way. Until then, it will be nice having a little more help around the house.

Final Nail

I said this before and now I'm feeling it again. No matter how much one prepares psychologically and rationally for a layoff, the actuality of it happening gives you one gut-sucking punch. Late this evening, my husband received an email calling him in for what we believe is his final blow tomorrow. No amount of karma or prayer saved us from this one. No one wants to be in a situation where both wage earners are laid off. Economic lightening should not strike the same household twice so it seems. After all, we have paid a lot of dues and are still paying.

My mom says "the lord is good" because we appear to be positioned for survival. So thank you lord for giving us the foresight to aggressively pay down our business debt, large though it still may be; the will to save the requisite 6-9 months emergency fund; and the fortitude to not shop nor truly enjoy our wealth during the boom times when we supposedly had it. Thank you for forcing us to live below our means so that we are positioned to survive this crisis. Thank you for giving me, then taking away my dream job because the short period of time helped us to make a dent in the debt. Thank you for letting my husband lose his job so that we can drain whatever savings we have and continue to struggle for countless years more. After all, we don't work on Wall street so we really shouldn't expect our earnings to return to peak levels even though theirs will thanks to us lowly taxpayers.

On behalf of the 5,000,000 people who have lost their jobs during this recession, who have been ripped off by the Madoffs of the world, whose savings are slim and whose retirements are all but a wish unless you get a union pension, whose houses are underwater and whose future is bleak, we thank you for teaching us how to make lemonade out of lemons. I'm sure ready to have a nice tall glass of our current predicament right about now.

Swine Flu Boo Hoo

Unfortunately, the same swine flu that prompted President Ford to call for the entire U.S. population to be immunized back in 1976 is back to haunt us again. Swine flu? Unfortunately, ground zero for the flu is Mexico prompting our most narrow-minded denizens to bring in any race bias against immigrants especially those from Latin America. Perhaps we are more paranoid because we share a border. After all, we have had SARS and Bird Flu from Asia, Mad Cow from Britain, and Anthrax scares right here in the good old U.S.

There will always be plagues, we have had them from the beginning of time. I always thought it was a method of trimming the herd, reducing the population or the continuation of natural selection. In any case, some of us have to go, so to speak - otherwise we would have overrun the planet a long time ago. Together, modern medicine and morality have given us the default that everyone has a right to life and everyone should be saved at all costs. We could explore all sorts of ramifications to the downside of this logic but it prevails for now.

Anyhow, while we are living and believing that none of us should die for any reason other than natural causes and then, still not without medical intervention, we blame foreigners for bringing themselves and associated ills to this country. We have long forgotten that conquerors have brought diseases that wiped out indigenous populations throughout history. Think, American Indians and the native populations of South America. Famine, associated disease and death have removed whole settlements of humans time and again.

Medicine has given us a golden age of survival that we take for granted. It, in turn, allows us to abuse our health without remorse because there is a pill for everything. Funny how the best defense for a lot of our health risks is a simple washing of the hands. It is something a surprising amount of people feel they should skimp on or skip and I can't figure out why. There has been a national campaign for the last decade or more with signs in every restroom warning patrons and employees to wash their hands after using the facilities and yet many people still do not comply. How hard is it to wash your hands especially when you have euphemistically "used toilet paper" and/or coughed and sneezed into those hands? Instead, many just turn around and touch another surface transferring those germs to the next poor sod who comes in contact with that surface.

We need to learn these lessons and do a better job of utilizing preventive methods because in many cases they are cheap and easy. One day, we will place value on something though I'm not sure what that will be.

Agony

Friday the axe fell again at my husband's company. Since the company is national and many work from home on occasion, including my husband that day, layoff notices were done by phone call. All day Friday, we jumped every time his office line rang, is it us? is it we? has our time come? Each time, it was a colleague trying to continue some vestige of work which was all but impossible given the circumstances.

All day we waited for his fate and in the late afternoon, an email arrived stating that more details were forthcoming from the CEO. So, we waited, again. It was bad enough that the email did not arrive until 7pm but it carried no relief just further torment. After squirming all day, he was treated to an email stating, in essence, that the status of the employees in his division would be determined "next week." Yes, they were treated to the reality of an open-ended death knell, another week of bile churning speculation.

Today he described the feeling from the bench today as one of sheer panic as other bits and pieces of information surfaced to put an even bleaker spin on the whole macabre situation. As we all know, a definitive answer is much, much better than not knowing one's fate. Right now, no one knows what to do or how to act. The one thing they do know is that their group, as they know it, will not be intact come Friday.

Who will be the ones to go? The logic supports any number of outcomes, all of which are plausible. Whatever the outcome, we know we will survive. No one is immune during this economic downturn but it is totally agonizing when the process is dragged out one painful nail at a time.

Credit Card Companies Officially Sanctioned Loan Sharks

I am so blooming mad, I am thoroughly disgusted. After nearly 2 harrowing years of aggressively paying down business debt, unfortunately funded by credit cards, on time and always well above the minimum due, we had reached the stage when the light at the end of the tunnel was in reach. But now, all hopes have been dashed as one by one our creditors have reduced our limits and doubled our interest rate for doing the right thing. Are we being punished because we were only paying down and not charging any more? Are we being punished for actually trying to eradicate our credit card debt? Or are we being punished for simply having credit card debt in the first place?

I understand that many people are defaulting on their debt but I show no signs of doing so, the amount of my payments have been consistent for the last 2 years. I have not made a late payment this decade and I've never abused my balance. Yet, I am a liability as far the credit card companies are concerned. Well, since most of them are banks, they have a captive audience that they can raise rates on at any time and are doing so by necessity since the rest of their loan businesses are tanking. It is an odd feeling to have borrowed at a low rate but now be paying it back at an obscenely high rate when you didn't do anything wrong.

I think it is time to revisit the Fair, Isaac credit score (FICO) monopoly. Anytime a credit line is reduced, it increases our debt utilization or debt ratio, the total amount charged in relation to the credit available. This accounts for 30% of your FICO score. If you have a $2,500 balance on a card with a $10,000 limit, you have a debt ratio of 25% but if the credit card company reduces your limit to $5000 then your debt ratio is now a whopping 50%. Debt ratios of 30% reduce credit scores significantly. This sucks. Yet, most of us have little recourse.

We can disagree with a rate change by agreeing to close the account thereby reverting back to the old rate for the remainder of the repayment. I would gladly take this road but, as we have learned by now, closing down credit cards affects our debt ratios. Then again, how much worse can our debt ratios get since closing cards at this juncture may not make any more difference to our scores since the reduction in credit lines has increased many of our ratios above 50%. Yet, this score affects our cost of credit and is now used as a reference factor of employment. A good score means you are a reputable person? That is definitely debatable. Nevertheless, credit scores across the country are being smashed due to the housing and employment crisis. Maybe there is not much to worry about after all. Let the score fall and to hell with it? Maybe.

At the end of the day, no one can really shut all of their credit cards because we still need a credit card for so many transactions that I have a hard time imagining how people get by without them for everything from reservations to large purchases; even if you don't want to use one, it is tough to get around not using one. If consumers now have to pay double the interest for all the purchases they made last year or before, then they really won't have any extra money to spend. Also, their costs to borrow will be too high to take advantage of the low interest rates that are supposedly abounding. Is anyone really qualifying for them? Investors can cheer the banks for making a profit but at what expense.

End of Quarter Woes

Well, it is that time again; the rise of the layoff axe as companies struggle to report results for the 1st Quarter 2009. So far none of the numbers have been good; they only appear good in theory. Either they are not as bad as analysts expected or they are downright forgery, as is the case with the banks. How hard would it be for you to show a profit if the government handed you tens of billions of dollars and the suspension of mark-to-market accounting rules allowed you to overvalue the "toxic" assets on your books? I'd show a profit and I'd take a bonus too.

The real truth underlying all of this reporting is, of course, the need to lay off more workers in order to improve the outlook for the 2nd quarter. Since wages are the highest expense of any business, businesses have no choice but to continue to reduce the minions for some relief on the books. The layoff numbers are not as daunting as they were initially but the cuts continue in every industry across the board. A simple search of the web reveals so many layoff tracking scorecards for technology, banking, retail, law firms, etc. it is sad to comprehend. Even the once mighty unions are starting to lose the fight to protect their workers from upheaval.

Now the rumor mill is hot and heavy at my husband's company this week. We are counting down 2 days til another d-day on Friday. It looks like the cuts will be deeper accompanied by a major re-organization. We are keeping our fingers crossed yet again. Remember we survived the first set at the beginning of the year. We join the ranks of those living quarter to quarter wondering how long our jobs will survive. It is a nerve-wracking way of living and coupled with all the economic news, it is hard to keep a good face. Yet, we will cheer if we make it past this week and hopefully breathe a sigh of relief that we don't have to face this all again until June.

Sign O' the Times

The economic crisis is taking its toll. The New York Times is diligently trying to save itself as it continues to suffer steep decline in advertising revenues. Unfortunately, declining readership is a sign of the times. Ironically, this news comes a day after it was announced that the New York Times won 5 Pulitzer prizes for Journalism.

The New York Times, the standard bearer of "intelligent" news is still winning awards but it just may die anyway. It has already sold and/or leased most of its midtown Manhattan headquarters and has implemented a 5% reduction in employee paychecks for the remainder of 2009. Incidentally, the New York Times Company also owns the Boston Globe and it is attempting to get those employees to agree to $20,000,000 in concessions or shut down the paper. The Globe lost $50,000,000 last year and is on track to lose $85,000,000 this year.

So, it doesn't help that subscribers like me are considering giving up their beloved subscriptions to this and other publications. Lately, it just seems that every Monday I gather up reams of unread newspaper and toss directly into the recycling, hoping that the next week I will get a chance to read more. However, more weekends than not, after a brief perusal, both my husband and I run out of time to truly sit and read. Besides, with the 24 hour news cycle, we have seen most of the headlines by the time the newspaper arrives.

In fact, I know I read more New York Times on the web than the actual paper that shows up every weekend at my house. So, by all accounts I should give up my subscription except I feel terribly about adding to the demise of this great paper. What a quandary. The upside is that we pay more for the paper to be delivered Saturday and Sunday (which they force you to do) than it costs to buy the Sunday paper on the newsstand. So, we can buy it as we need it without spending money every week to have it and not read it.

But, if we subscribers keep giving it up, then where will the great paper be when we are ready to read it. Us lapsing subscribers are the biggest part of their problem; hence the rapid decline in readership for print media across the board. We are passively allowing our die-hard subscriptions to lapse primarily for the same reasons.

Some newspapers are actually considering charging for their web content so people like me stop reading all the articles for free online in lieu of a subscription. But, like most people, I am unwilling to pay for a web subscription to anything. I suppose I can always find "good" news for free so I could just carry on but I don't want to help kill the New York Times by cancelling my subscription. Then what will we be left with, sensationalist rubbish from the competition? I rue the day but it really may be time for me to say sayonara to the Times.

I thought accounting shenanigans were unsustainable

There is nothing like tax season to put things into perspective. I'm even madder than ever. So far, five financial institutions have shown 1st quarter 2009 profits due to hundreds of billions in bailout funds, government guaranteess for their bad assets, government guarantees for their bad loans, suspended mark to market rules allowing them to value the assets at a phantom price and a gullible electorate. I thought accounting shenanigans were unsustainable; I am very very wrong indeed.

The most egregious reporting came today when Bank of America claimed to have earned over $4,000,000,000 in 1st quarter profits, more profit than they made in the entire year of 2008, as if they did not recently receive over $25,000,000,000 in TARP funds and antoher $120,000,000,000 in loan guarantees. This is the biggest accounting b.s. heard around the world. How in the most bold face of lies can a bank show profits while being held afloat by the taxpayers. We are running with the mandate that some institutions are "too big to fail," and the bankers have moved beyond silently laughing at the gullible taxpayers to rubbing our faces in their government sanctioned ponzi-scheme-like balance sheets in broad daylight at our expense. What a life!

Thankfully, investors met Bank of America's outlandish claims with an even more resounding skepticism than I had anticipated so at least some people are paying attention. Instead we have fools throwing tea parties and protesting about taxation without representation as if George Bush didn't already spend their money while encouraging them to drink the fancy tea he made them believe they could afford. And now poor Obama in order to survive has surrended fully to the financial industry.

The general consensus that America's future depends on saving the financial sector was a battle cry of and by the entitled. Banks have an insatiable appetite for gains, ill-gotten or otherwise and they will take every penny the government has if it let's them.

Tax Time

If I wasn't so busy talking sh** on here all the time, I suppose I would have had my taxes done by now but alas I am not done. So, in order to get back on track and finish them in time to blow town this weekend - I'll keep my opinions to myself or at least to a minimum. In the meantime, I'll be praying for a refund because I sure could use one right about now.

Best of luck to you other procrastinators, I know you are out there!

Instant Gratification Nation

I am looking forward to some nicer spring weather to lift us northeasterners out of our doldrums. Sometimes a little sun can move us beyond the negative news of the day; the constant clamor of the economic times and the distrust of the current solutions that is now reaching fever pitch. We are all armchair economists trying to parse what historical principles are the most fitting in a time where no precedent exists and who is to blame for what went wrong.

Whatever the case or blame, the enormous debt that the country amassed has fueled an unsustainable economic expansion that simply has to shrink. The problem is neither we nor the government can decide who should survive and who should not. The government has made its choices for now; notably the financial industry and its insurance lifelines but we are not addressing the true fact of our 70% based consumer economy; only spending can get it back on track. Period. Until this aspect is addressed, no amount of posturing or investor confidence or stock market rally or whatever can get the ball rolling again.

Impatience with the new status quo just gets the collective blood boiling; in this country of short attention spans and complete dependence on instant gratification - we remain in denial about our disease and the cure. We don't need any more debt fueled medicine, we have cancer and we need surgery. So come on sunny spring, we need something to smile about.

The Bailing Out of the Reckless Has Gone Global

The euphoria on Wall Street with its recent rallies and the reactions to the G-20 summit, which essentially calls for nations to commit more money towards economic stimulus efforts worldwide including $1,000,000,000 for the IMF to help to prop up developing countries, once again puts the celebration squarely on bailouts as the only way to combat the collateral damage of the near-collapse of world financial markets; the bailing out of the reckless has gone global.

In the meantime, the only people who do not seem to be benefiting from any of this financial benevolence are those who "did the right thing." Those who were responsible for their financial actions are getting a rude blow; while their irresponsible compatriots are defaulting on their mortgages, credit card payments and other loans, the dutiful credit borrowers who paid on time, never missed a payment and did not carry large balances are having their credit lines slashed in droves at a time when the credit cushion safety net is most needed. Wasn't this the reason why you paid on time and kept your balances low, so that you could have the credit line available for a financial emergency?

Instead of reward, banks are reducing the credit lines of the diligent folk in order to reduce the amount of reserves required to cover the balances of those who default on their payments. While Wall Street may think their world is getting better now that they are infused with taxpayer cash to meet their debt obligations, the taxpayers are wondering how they are going to meet their debt obligations.

You know the consumer credit crisis is coming; it has already been forecast since the beginning of last year and finally the news is beginning to trickle out. A couple weeks ago it was reported that credit card defaults had reached a 20 year high. It is surer than sure that this whole consumer credit market is seriously about to blow. Nearly 2,000,000 people have lost their jobs this year alone. Compare this to 2008 where the total job loss for the year was 2,600,000. The current clip puts the US on track to lose at least 5,000,000 jobs this year. That is a heck of a lot of people who will stop paying on their cards or will be charging up what's left of their credit lines to survive now that they are jobless; soon they will run out of credit and stop paying on that too. Bankruptcy filings have risen 55% on Long Island this year.

Lenders are tightening their standards, raising interest rates and reducing or canceling consumer credit lines as fast as they can. Unfortunately, credit has fueled our consumer-based economy; consumer spending is responsible for nearly 70% of the US Gross Domestic Product (GDP). 2008 GDP was approximately $14,000,000,000,000. To put it in perspective, the government and the Federal Reserve have lent, promised or guaranteed approximately $12,000,000,000,000 to stem the financial meltdown. The consumer borrow and spend mentality that has fueled this decade's growth will have to be replaced with something else in order to maintain the current GDP. What will that be?

All of this bailout and "not being held accountable for one's actions" does make it very tempting to quit paying those credit card bills and suffer the consequences along with the rest of the folk. Those with business debts and other debts may just abandon paying because they see no reward in doing so. After all, should any of us really be concerned with the negative marks on our credit reports. If your score is below 720, what do you have to lose? No one is going to give you any new credit anyway. I think sometimes of abandoning paying back the credit cards that were used to start our unsuccessful business venture. I have been laid off from the job that I specifically went out and procured to pay this business debt. We are struggling to pay them since I still have not received any unemployment compensation.

However, I am chicken. I want to be able to refinance my mortgage should interest rates continue to fall. I want to be able to get a job in the future without being disqualified because of a bad credit score. My car was originally leased as a business vehicle and the lease is up in a year; I will need good credit to get a replacement vehicle. The relief for the prudent is non-existent, only the assurance that without all of this economic and financial intervention for the greedy and irresponsible, we would all fail. So much for keeping up with the Joneses.

Always Look on the Bright Side of Real Estate

On this April 1, optimism was abounding on all fronts for there is a feeling that the bottom is near for the economy. In typical fashion, Americans want things to turn around now; they don't like to suffer and are tired of the doom and gloom. The stock market surged again following up on its gains of last week on the belief that this should be the bottom yet investors found hope in data that was too arcane for most of us. The economic data to be published later this week and the upcoming 1^st quarter numbers will be a better indicator of the real deal.

For those of us, looking for data that we could feel joyous about, Newsday published an article today that made lemonade out of a sour real estate market. (See Buyers may find LI homes affordable now by Jonathan Starkey) No matter the economic conditions, there is always a bright side to the real estate market and right now it is brighter for buyers. The article quoted a real estate professional spouting the numbers,

“In February, the median closing price for a home in Nassau County was $400,000. That's down from $458,800 the same month last year and $502,500 at the peak in August 2007. In Suffolk County, the median closing price for a home was $309,500 in February, down from $359,500 in February 2008 and $420,000 from its peak in June 2007.”

The data cited should be welcome news for buyers but for sellers, the reality of the new pricing still has not hit home, so to speak. This is bad news for those who bought during those high periods because the odds are they are now underwater in their mortgage. This is also bad news for those who have home equity loan products that together with their mortgage lands them underwater. This is really bad news for those who want to refinance their mortgage just to find out that they are now officially underwater. This is really, really bad news for those who want to trade-up; the desirable next step for those who bought “starter” homes during the last 5 years or so. Many of them would probably have to sell for less than they paid if they are lucky to find a buyer. But, most of all, this is really, really, really bad news for the rest of us who are watching our home equity evaporate along with the rest of our savings and investments.

Anyhow, much of the article is geared toward the first-time home buyer – plenty of incentives exist to help them purchase a home, if they so desired, in the form of tax credits and the like. However, moving out to the island requires a much greater income than most people realize. Unless you are a first-time buyer, you need a 20% down-payment plus the ridiculously expensive NY state closing costs so at the Nassau average of $400,000, a buyer needs $80,000 down plus closing costs which can easily exceed $5,000, not to mention moving and move-in expenses. If you are a first-time home buyer and are lucky to get one of those FHA 3.5% down payment deals and you get assistance with the closing costs, you will still need at least $20,000 to cover the down payment and all of the other expenses. Since we have not been encouraged to save over the last decade, and any investments we had have tanked, where is that money coming from?

Technically, if we understand that banks have reverted back to the general rule of thumb of income to home price, a home price of $400,000 requires at least $125,000 in household income. A mortgage of $300,000 at today’s 5-6% rate is still a $1700 - $1800 payment plus at least $1,000 for taxes and insurance per month and that’s with no PMI (private mortgage insurance). Yep, nearly $3,000 a month for that average home. How many first-time home buyers can afford that?

Houses for sale in my community have been sitting, some for over a year now, and more homes are added to the pile weekly as the older folk realize they have to sell and leave. Since many of these communities are ageing, the sad fact is that there are very few young folk who can afford to take over. Back in the nineties, there was a similar housing decline on Long Island and it recovered nicely. However, the entire economy was not declining drastically across all sectors along with that decline nor did people have the high debt levels that they have today or were losing their jobs or having their salaries frozen or reduced to the magnitude that we are now experiencing. Most of all, there was a steady supply of Wall-Streeters and similar professionals who migrated out but now, even they have been decimated. Maybe there are some "dinks" (double income no kids) out there who continue to dream of raising kids in the suburbs one day and are still waiting to pounce on the housing market. Too bad there may not be enough of them this time around.