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Saturday, April 17th, 2010

This Week in the Economy

The week of the nation’s tax filing deadline saw some important financial news. Here’s a summary of what happened and what it might mean for you.

Recession’s End Unclear

The Business Cycle Dating Committee of the National Bureau of Economic Research, the group responsible for determining official start and end dates for recessions based on analysis of various economic indicators, announced this week that it cannot yet declare an end to the recession.

The press release indicates that, though many economic indicators have improved in recent months (including subprime mortgage defaults and retail sales), it is still too early to say whether or not the recession has officially ended.

Interestingly, though, one member of the committee disagreed with the committee’s final decision and issued a memo indicating as much, citing the following two indicators as primary reasons why he believes the recession has already ended:

  • Real Gross Domestic Product (GDP), which measures the market value of all goods and services produced inside a country in a given year, has reportedly improved since June of 2009, from what’s called the “trough;” and
  • Real Gross Domestic Income (GDI) has also apparently improved, though not for so long a period – the memo indicates it started its upswing in the final quarter of 2009.

He also notes that the economy’s recovery should not surprise anyone, suggesting that, because we “fell” so hard, our “bounce” back should be swift and forceful.

Unemployment Benefits Extension in Congress

Though some economic indicators may be on the upslope, unemployment still hovers close to 10 percent, meaning that millions of American families may not feel the recession’s end for a while.

But there may be hope for such families: a report from the New York Times notes that the Senate has voted 60 – 40 in favor of extending unemployment benefits to out-of-work Americans.

The measure, should it pass both houses of Congress and get signed into law, would apparently cost somewhere in the neighborhood of $18 billion, which seems to be a point of contention for many Senate Republicans.

Unemployment is often considered a strong indicator of bankruptcy filings, so keeping an eye on the unemployment numbers can be a good prediction of Americans filing bankruptcy.

The (Higher) Future of Taxes

Newsweek reported this week that, thanks to serious budget deficits at the federal level and an aging American populace, there’s a good chance taxes will increase – even sharply – in coming years.

While this may not seem like the best news, take this year to enjoy your current tax level!

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Saturday, January 16th, 2010

December Unemployment Unchanged at 10 Percent

The Bureau of Labor Statistics has released its most recent unemployment numbers (for December 2009), and they paint a gloomy picture of the U.S. job landscape.

While the actual unemployment rate and number of unemployed people in the country remain unchanged from the last recorded period (10.0 percent and 15.3 million, respectively), certain figures point to a dismal immediate future.

Unemployment by the Numbers

Here's a look at a breakdown of the current unemployment figures for the United States:

  • Adult men: 10.2 percent
  • Adult women: 8.2 percent
  • Teenagers: 27.1 percent
  • Whites: 9.0 percent
  • Blacks: 16.2 percent
  • Hispanics: 12.9 percent
  • Asians: 8.4 percent

While these numbers represent little movement in either direction from the BLS's last report, they also don’t paint the whole picture. For example:

  • Long-term unemployment continued its upward movement, reaching 6.1 million people who have been without work for 27 weeks or more, composing approximately 40 percent of the total number of unemployed people.
  • The number of underemployed people remains at 9.2 million – though these people are working, they have fewer hours than they’d like because of economic restraints.
  • A whopping 929,000 workers are considered "discouraged," meaning they’re out of work and they would like to work but have stopped looking for jobs because they believe none are available. A year ago, the number of discouraged workers was only 642,000.

Perhaps unsurprisingly, job losses continued in certain sectors (including construction, manufacturing and wholesale trade) and increased in temporary help services (likely from holiday hires).

Looking Ahead

So what do these numbers mean for the future of the U.S. economy and job market? Some analysts suggest the unemployment rate will actually get higher as the economy begins to pick up.

This may sound counter-intuitive, but makes sense upon closer examination: as the economic situation improves nationally, more people will likely enter the work force, believing more opportunities for work are available. And, even if more jobs do crop up, they may not keep pace with the number of new workers seeking employment.

For now, the problem of long-term unemployment continues to plague Americans: the average length of time without a job was 29.1 weeks as of December, which is apparently the highest average since 1948, when records were first kept. With that kind of prolonged job loss, it's no surprise that more than 1.44 million Americans filed bankruptcy last year, and even more are expected to in 2010.

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Friday, October 30th, 2009

Stalemate in Real Estate Sector has Increased Bankruptcy Filings

Guest Author: Peter Gomes

The real estate sector received a jolt when the sub-prime mortgage crisis eroded the US economy. The mortgage market was in doldrums and the upheaval so great that the government had to intervene with its series of mortgage bailout programs.

Consumers bankruptcy filings increased, and so did the number of foreclosures. Many Americans considering bankruptcy filing received >more information on bankruptcy by connecting with a bankruptcy attorney.

The Obama Administration introduced a series of mortgage bailout programs to assist homeowners facing foreclosure. The program, known as the Making Home Affordable Plan, was expected to help as many as 7 million to 9 million homeowners. However, due to few limitations, the program has yet to help as many homeowners as anticipated.

There is a vicious cycle of debt that has led to the recession, which has affected consumer spending as well as investor sentiment.

In the easy-credit boom, people started using their credit cards even for making payments for grocery shopping and for utility bills. As employers went on a cost cutting and job cutting spree, it became difficult for consumers to make ends meet.

For consumers considering filing bankruptcy, it can be Chapter 7 bankruptcy or Chapter 13 bankruptcy. In Chapter 7 bankruptcy, a court-appointed trustee will liquidate your non-exempt assets so that the proceeds can help in paying off creditors. As per the new federal bankruptcy laws, certain changes have been introduced. The prominent ones are Means test and credit counseling.

If you are planning to file Chapter 7 bankruptcy, you have to find out if you qualify for the same by taking the Means test. Consumers also must take a credit counseling session prior to filing bankruptcy.

In case of Chapter 13 bankruptcy, you are given a repayment schedule according to which you are expected to make payments to your creditors.

In either bankruptcy chapter, there is one advantage of filing: an Automatic Stay or Order for Relief that prevents creditors from coming after you for their dues.

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Tuesday, October 6th, 2009

Survey: Shoppers of All Income Levels Cutting Back

A recent survey conducted by IBM found that Americans are trimming their spending in this recession, no matter how much income they pull in each year. Here’s a look at how people are saving and how to make similar cuts work for you.

Saving Strategies at the Supermarket

  • Shopping around: 49% of respondents have apparently begun hitting multiple stores to get the best deals on food products. This strategy can be effective, especially if you currently rely on costly convenience stores for the basics. But beware of driving too far for a bargain – your time and gas are valuable, too.
  • Buying less: More than half (52%) of those surveyed noted that they now buy less at the grocery store. If you choose to follow this strategy, be sure you cut back on expensive items you don’t need and food you end up tossing rather than eating. And don’t buy so little you’ll be hungry all the time – grocery store prices are much lower than those at restaurants and fast-food joints.
  • Looking for new foods: Among those making $20 thousand or less per year, 45% admitted to turning to foods that kept them full for longer periods of time. This can be doubly effective, since many foods that meet this criterion (such as oatmeal, lentils, rice, beans and potatoes) are generally inexpensive as well.
  • Trimming luxury brands: A significant number of those surveyed (34%) mentioned opting for less-expensive versions of health care and beauty products, rather than sacrificing them altogether. This can be very effective, especially if you compare ingredient lists to make sure you’re getting exactly what you want before you buy it.

Frugality Beyond the Recession?

Perhaps surprisingly, a majority of respondents indicated that they will be continuing some or all of their money-saving strategies once the recession ends – 60% said they’d keep exploring various grocery stores for bargains.

This is perhaps the wisest move of all.

And, based on a study conducted by AlixPartners earlier this year, the frugal future of Americans may be more than an optimistic hope.

In fact, the group’s study suggested that our country’s spending levels after the recession will be at only 86% of what they were before the stock market collapsed.

That may be bad news for some industries, but those dealing with debt, job loss or rebuilding finances after filing bankruptcy, every little bit helps.

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Sunday, September 13th, 2009

Federal Reserve Survey: Economy Stable or Improving

The results of the Federal Reserve’s Beige Book business survey, reported earlier this month, suggest that the U.S. economy has stabilized or begun improving.

This assessment comes from a survey of the 12 regional Federal Reserve Banks, 11 of which reported “signs of” an improved economic situation.

The Findings: Faint Praise?

Overall, the report isn’t exactly parade-inspiring; in fact, the anecdotal evidence provided in it may only seem positive in comparison to the dreary numbers and figures we’ve grown accustomed to seeing. For example:

  • Retail sales were generally described as “flat,” which suggests a lack of growth – but no shrinking, either.
  • Labor markets were described as “weak.”
  • Gross Domestic Product (GDP) shrank by only one percent between April and June – a consoling number only when compared to its 6.4 percent decrease from January to March.

These are the so-called “positive” findings of the survey, which is perhaps more an indicator of how badly the U.S. economy has been doing for a while than anything else.

The Exceptions

The Federal Reserve of St. Louis was apparently the only district that did not declare outright improvement in the economy; rather, the St. Louis district noted that the pace of economic contraction “appears to be moderating.”

And not every economic sector showed even hints of recovery: the commercial real estate market is apparently still suffering “very low levels” of construction and continued weak demand for space.

What About Unemployment?

The economy’s gradual recovery is expected to be tough on those looking for work, according to the opinions of several economists. Many are predicting peaks in unemployment in the next few months and slow returns to pre-recession levels.

Indeed, the most recent release of data from the Bureau of Labor Statistics shows that job openings in the U.S. have dropped by 2.4 million, a 50 percent decrease since June 2007.

These numbers have remained fairly consistent for the past several months, and show no indications of drastically changing in the near future.

And of course, the number of Americans filing bankruptcy shows little sign of slowing down, with figures from August, 2009, slightly below July's high and well above last year bankruptcy rate.

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Friday, August 28th, 2009

Recession Changing the Face of Retail?

After decades of continuous consumption and expanding credit, Americans are now learning a new way to shop.

And many retailers are suffering because of it.

Well, Maybe Not…

According to an article from the Associated Press, U.S. retailers have seen a jump in shoppers who decide against purchasing one or more item before they reach the checkout counter.

It’s apparently happening everywhere from the grocery store to upscale clothing outlets, and it’s affecting retail in two major ways:

  • Decreased consumer spending: When we buy less, companies pull in less revenue. And these days, it seems like no company is immune to the belt-tightening undertaken by the American people. But that’s not the only way abandoned purchases hurt retailers.
  • Increased labor costs: When we leave those iced oatmeal cookies in the dairy aisle, realizing we need milk but only want the sweets, someone has to put them back with the desserts. And, sources indicate, retailers have seen higher labor costs because of all the restocking such behavior requires.

Tightened Credit Means the Revival of Layaway

It’s no wonder that we’ve become more cautious about lugging a lot of stuff to the checkout counter: nowadays, many credit card issuers will deny over-limit purchases rather than allow them to go through and charge a fee.

And, because of the shrunken credit market, many retailers are reporting an upswing in layaway, which allows consumers to make gradual, interest-free payments and pick up items when they’re paid in full.

  • K-Mart shoppers have reportedly taken to buying even low-cost items on layaway, including pencils, notebooks and other back-to-school supplies.
  • Sears Holdings apparently re-introduced its layaway program, which had been defunct for twenty years. Sources indicate that the company will also bring back its Christmas Club savings accounts for shoppers interested in saving money for gifts.
  • Google Insights for Search reports that the search term “layaway” was twice as popular among U.S. users this August than a year ago.

Have you scaled down your spending, but you still can't make ends meet? It may be time to consider filing bankruptcy.

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Sunday, August 16th, 2009

Tipping Points: Why You Still Have to Give During a Recession

I know we’re all pinched for money right now; but that's no excuse to skimp on gratuities for the people serving us.

For those of us who aren’t in an industry that involves receiving tips, here are some basics about tipping – and how you can budget it into your life.

The Custom of Tipping

Here’s how you can avoid a tipping faux pas when you’re out.

  • Do your homework. If you’re eating out somewhere other than your hometown, make sure you know what’s considered a standard tipping amount there. In general, for restaurant service, 15 % is considered standard. Good service deserves 20 %.
  • Count it beforehand. The Internet can be your best friend when you’re planning a dinner out: you can check out consumer reviews, menus and even prices. This means there’s no excuse to be taken off-guard by the price of your bill – and use that surprise as a reason not to tip.
  • Go somewhere cheaper if you can’t afford to tip. Many of us are cutting or trimming luxuries from our budgets. If you enjoy eating out but don’t think you can afford to tip anymore, eat at restaurants like Panera, where you can have a sit-down meal without being served.

Consider the Big Picture

Although you may be stretching your entertainment budget further these days, remember that you’re not alone.

Many hospitality industries (like hotels and restaurants) have had to cut employees’ hours or reduce their pay to save money.

The people serving you may be making less money than ever, and your skimping on a tip would only worsen that situation.

Who Gets What?

In case this is starting to sound too much like a lecture, let me mention that I realize some people don’t tip (or don’t tip enough) because they aren’t sure who expects a tip and who does not.

The tipping Web site Tip20.com can help: it lists standard tipping rates for most services in the U.S.

Bottom Line: Show your appreciation to those who are working hard to make sure you are enjoying yourself. (Also, paying it forward can lead to good karma!) You don't run the risk of filing bankruptcy if you tip reasonably.

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Monday, July 13th, 2009

Great Depression Number Two? Experts Give Honest Answers

A tally of financial gurus and bloggers were given a chance to pronounce their opinions of where the country stands in this economic strife.

The group includes:

  • a popular blogger dedicated to giving readers the deals not otherwise known by the general public
  • a Washington D.C. based corporate mogul who runs a billion dollar HP company and is seen as a visionary in the world of finance and economic reform
  • a Chicago-based real estate expert who aids his consumers daily in the plight of real estate purchasing, financing and recovery
  • a Wall Street broker and top blogger
  • a San Francisco-based financial guru with a leading blog
  • leading hedge fund managers

The prevailing thoughts were that of tension, apprehension and uncertainty by all who were a part of this informal questioning.

Along the same lines, the impressions of where the country stands were similar, with a new moniker being placed on our economic status: “The Great Depression 2”.

Whether this characterization is true still remains to be seen and might only come to fruition in hindsight.

However, one thing is clear: Relief is long from being in sight and life as the general consumer knows he or she will not see full recovery for as much as 10 years.

Experts State Their Views On Current Economy

The first of the five questions asked of our financial experts was that of a more simplistic one.

With little frill or extravagance those being questioned were given the short task of offering their opinions on the current economic status of the country. Simply stated,

How would you describe the current status of the economic climate within our country?

While the responses by all the respondents were of similar nature, with similar tone and rhetoric, there were certain responses that defined a tenure in our society, thus producing a billboard effect for the voice of our country’s consumer.

David Hochberg, President of Townstone Financial a Chicago-based Mortgage company, is seen throughout the home loan industry as an expert in loan services as well as a viable source of accurate information as it pertains to the common consumer of home loans, was plain in his response to the question.

We’re in a “State of Peril”

Hochberg states that Illinois, in particular, is in a state of peril not seen for decades.

With the home loan industry under heavy constraints and more and more debtors facing the bankruptcy cycle, Hochberg feels it will be many years before the lending institution recovers.

Even then, Hochberg continues, “the composition of the typical home loan applicant will be much different as will their needs.”

Taking on more of a bird’s eye view of the nation’s economic status while simultaneously drilling deep into the overall perception of where our economy sits is David Morris who is the Director of Mergers & Acquisitions for EDS Corporation (a Hewlett-Packard company).

Mr. Morris is a Georgetown alumnus who sits high a perch one of the country’s largest companies, and is relied upon to help orchestrate the company’s economic prowess amongst its competitors.

Injections of Liquidity Are Not Enough

This in turn serves to provide a certain benchmark for the typical consumer to work from.

David had this to say about where the US economy sits:

“No bubble of any kind in our history has been solved on the first try or in an abridged manner. Pick up any piece of historical analysis by Robert Shiller for a glimpse of what to expect.

Injecting liquidity into the system only holds the doors open long enough for those in charge to execute their contingency exit strategies. A washout of failed participants is the only proven way to eradicate prior excess and cleanse the system.

We are simply in a synthetic environment that buys our government time to deal with the real problems at hand. Any upside in the stock markets between now and the end of the year should be looked at as a gift to exit long positions and reposition for the markets heading south into 2010."

In a similar breath of displeasure and lack of short-term promise is the reply from John Thomas, a senior blogger for the site Seeking Alpha, which is widely considered to be the premier financial blog site—even earning top honors from Time Magazine.

Great Depression Number Two

Thomas who works under the title Mad Hedge Trader (Thomas also works as a Hedge Fund Manager in his ‘day job’) was very clear in his opinion:

“We are now full faced in the great depression number two. With that, there is sure to be a 5-10 year gap for recovery with real estate finding itself more towards the 10 year mark.”

Finding conjoining thoughts with both Morris and Thomas is famed economic blogger Mike ‘Mish’ Shedlock.

Shedlock who has a vast knowledge of the trends and incubus of the nation’s economy offered a profound opinion on the US economy and bankruptcy.

Shedlock offers that we, as a nation, are now amidst a ‘secular attitude change” which is from a dismal “credit event similar to the great depression.”

Considering the overwhelming popularity of Mish’s blog at FinancialSense.com, the nation seems to be taking notice of his perceptions, consequently Shedlock’s response to the question of where our economy stands in worth heavy consideration. As does those of the rest of the respondents.

Cliché No More: Economy is Truly Affecting Us All

Overall, anyone who resides within the US has felt the strains of economic uncertainty, financial unfamiliarity and personal debt shock.

For what comes next in this evolution remains to be seen.

No amount of forecasting, prophesy or analysis will completely tell the story of our nation’s newest economic collapse.

However, one particular aspect to this will remain constant, as it was in the 1930’s. The resolve and ingenuity of the American consumer to fare well in troubled times will far outlast a lack of funding or rickety financial flooring.

The Filing Bankruptcy Option

Filing bankruptcy is a decision not to be lead into lightly.

Although it was created to be a legal avenue to support the financial rebound for those who travel down its path, it is not meant to be—nor should it be—seen as a ‘quick fix’.

The tasks for such financial declaration are laborious and heavy handed, with numerous ramifications resulting from the process.

The ideological change which abounds from a successful navigation of bankruptcy, if followed as the process is intended to be, is such a reformation that most who chose bankruptcy resurface from it far better suited for financial freedom than those who succumb to the far less successful products of financial distress:

  • foreclosure
  • repossession
  • lack of housing
  • unemployment
  • divorce
  • illness, injuries or death

Consequently, filing bankruptcy can often be a prescription for financial remedy far better suited for the current economic status we Americans are knee-deep in.

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Saturday, July 11th, 2009

Hard Times for High Tech: Silicon Valley Bankruptcy Rising

At the showrooms of the Silicon Valley Auto Group, circumstances have forced a few operating changes.

The cars in the showroom are the same, luxury brands of all types surrounding the centerpiece—a red Bugatti costing $1.6 million, but they aren’t selling.

To save money, Ryan Dohogne, general manager of the dealership, says that his staff now take care of the window washing and plant watering on their own.

No Such Thing As Recession-Proof

Similar stories crop up all over this stretch of California.

Until recently, high-tech centers like Silicon Valley were thought to be “recession-proof” given the industry and related economic activity centered nearby.

Last fall, however, previously invested funds ran out, and capital, normally provided by investment firms and venture capitalists froze up.

The result?
Santa Clara County, home to Silicon Valley, has seen bankruptcies increase 59 percent over the past year, and that number is projected to increase before the recovery catches up with the industry.

Not Just California

In other tech centers, things are no better.

Near Raleigh, North Carolina, unemployment has doubled, and is now at 10.7 percent.

The state has lost nearly 200,000 jobs since early 2008, and one out of every five has come from the Research Triangle, a tech sector near Raleigh and Durham.

In Boston, home to several tech centers, foreclosures have tripled since last summer and are on track to break records.

Venture Capital on Shaky Grounds?

Professor Ed Malecki, a digital economy expert at Ohio State University, explains the dilemma.

“Venture capital,” essentially money invested in exciting ideas, “lives off of private wealth. There’s simply less of [that] around right now.”

In Silicon Valley, bankruptcy is a growing reality.

Sam Taherian, a bankruptcy attorney, says he is seeing a growing number of prospective clients visit and take advantage of a free consultations.

After that, he says, people typically take a month or two to decide whether or not to turn to filing bankruptcy, but just the number investigating the option suggests to Taherian that his caseload is about to get heavier.

The Foreclosure Market

Foreclosures are harder to spot in such a wealthy area, but even in a new complex of townhouses near Santa Clara, 10% of the units for sale are available because of foreclosures.

Robert Lei holds a master’s degree in semiconductor device physics, but he has bowed to the reality of the times—now he is a specialist in foreclosure sales.

“They don’t hang out signs because they want to be discreet,” he says. “They don’t want so many people to see so many ‘for sale signs’ and get scared away, like there’s something wrong here.”

Recession Weighing on All

Workers with master’s degrees are lining up at local food pantries and employment centers.

The recession took a while to reach Silicon Valley, but now that it’s here, things feel just about the same.

Recovery should be just around the corner, particularly with the emphasis on green jobs that will be fueled by the spirit of innovation and entrepreneurship that has made this region famous, but in the mean time, people are taking a cue from the rest of the country and simply trying to whether the storm.

Source: The Associated Press

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Saturday, July 4th, 2009

Financial Literacy Fund on the Horizon?

One potentially positive side effect of the real estate market’s crash and subsequent (ongoing) economic recession was a call to arms for promoting financial literacy among American children and adults.

Many of the “exotic” mortgage products and predatory lending strategies that allowed Americans of all income levels to overextend themselves on credit could only succeed in a culture where only those who work in the financial industry have adequate understanding of how the financial system works.

Money Smarts Lacking in the U.S.

If you’re like most Americans, you aren’t as financially savvy as you could be:

  • Average scores on financial literacy tests administered to school-age children have dropped steadily over the years, with 62 percent failing in 2006.
  • Surveys show that as many as 21 percent of 18- and 19-year olds have at least one credit card.
  • Young adults (aged 18 – 24) spend about 30 percent of their income on repaying debt, three times the recommended 10 percent for this purpose.
  • About one in five American households is “unbanked,” meaning that they do not keep their money in a standard, federally insured financial institution.
  • Of households that carry revolving debt (such as credit card debt), the average amount is between $10,000 and $12,000 – and this doesn’t even take into account debt from mortgages, car loans, etc.

And, while these numbers are upsetting in themselves, they’re even more disturbing when considered in context: if almost nobody understands financial matters, who is expected to teach us?

Proposed Bill Would Fund Financial Literacy Education

While the current state of the economy means headaches for most of us, it also means our legislators are taking action to make things better.

According to a press release, Senator Kay Hagan (D – N.C.) has proposed a bill that would provide funding to states that include financial literacy educational programs for sixth to twelfth graders.

According to the release, the bill would:

  • Require that 80 percent of money be funneled to student instruction
  • Allow the remaining 20 percent of funds to go toward professional and curriculum development

The bill is currently beginning its path through the Health, Education, Labor and Pensions committee of the Senate – consider contacting your senator if it interests you.

--We also have filing bankruptcy information at www.TotalBankruptcy.com

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