Silence is Golden!!

Silence is golden. That is what they about driving these brand new electric vehicles. Tesla Motors unveiled two electric cars this past week. The first one is a roadster with a zero to sixty of like 4 seconds. This car is incredibly quick. It tops out at limited 120 mph. Unfortunately the cost is about $109,000. The other that they are going to release is going to be a sedan vehicle at around $50,000. This vehicle is going to be very quick as well. The cars are said to go around 240 miles on a full charge and take about 4 hours to charge completely. These vehicles are expensive but will definitely give other car manufacturers a run for their money. The technology is only going to get cheaper.

Batteries will someday replace the need for gasoline in some of our future vehicles. These cars will become more economically viable to produce and will be able to go further distances. 240 miles could easily turn into 500 miles of range and charge times will drop from 4 hours to 4 minutes. These cars will not make any noise or emit any pollutants and ultimately reduce our need for oil.

Oil prices will continue to rise as emerging countries like China, India, and Russia continue to develop and consume more oil. Critics claim the only way to push this technology on consumers will be too tax gasoline more so than it already is. I think that electric vehicles will become more popular once they are produced at a reasonable cost and become practical to use. Gasoline stations can easily retrofit their stores with charging pods like they do with gasoline.

Lastly, it does not surprise me that Tesla Motors was the brain child of several top Silicon Valley players like Sergey Brin and Larry Paige. In recent years Silicon Valley has gone on to create viable wealth while Wall Street continues too destroy it. As a consumer, and driver of a gas guzzling four-wheel drive eight-cylinder gasoline chugging vehicle, I see a future in electric vehicles (especially if they can haul ass and drive as good as their gasoline counterparts).

How to Avoid Credit Card Fees

It is not unknown, credit cards are loaded with all kinds of fees these days. There are different kinds of card fees that you should know about. You will make a better decision when applying for your next credit card the better informed you are regarding these fees.

The most basic fee that every credit card issuer charges is called the annual fee or the maintenance fee. Not all credit card issuers will charge these fees. There are many no annual fee credit cards available on this website for you to choose from. You will have a better chance of getting a no annual fee credit card if you have better than average credit. Bankcards are more likely to offer no annual fee credit cards to entice customers to sign up for their offer.

The application fee is another type of fee that credit card issuers charge. Most secured or prepaid credit cards charge an application fee as an additional way of generating revenue. These types of cards do not always charge interest and will charge you on a per transaction basis as well if you are not careful. Look for prepaid cards that charge a monthly fee as opposed to per charge fees if you plan to use your card a lot. We also offer a wide array of prepaid and secured credit cards that you may compare on this website.

Once you start using your card you will find out that a another set of fees will apply as well. It is good to know up front how many fees like cash advance, finance fees or balance transfer fees will cost you. Also, be aware that you will pay more fees if you are late with your payments. These days card issuers will even raise your interest rate if you are late on your payments.

The best way to avoid credit card fees is be aware of them. Avoid late charges by paying your credit card payments on time. Be aware of balance transfer fees before you make the transfer. These balance transfer fees are often times based on a percentage of the balance that you wish to transfer. It might not be cost effective for you to transfer your balance should the fees outweigh the interest savings. The more knowledge you have about what you are being charged the better you will be able to figure out how to avoid these charges.


If you are looking for a no annual fee credit card be sure to try the Iberiabank Visa Platinum Rewards card.

JP Morgan Chase Eliminates Monthly Credit Card Service Charges



JP Morgan Chase & Co. has announced that it will refund monthly service charges on about 400,000 low interest credit cards. This move comes after thousands of consumers began to complain. JP Morgan Chase had announced to customers back in January that they were going to start to charge a $10 monthly fee and raise minimum payments from 2% to 5% of an accounts outstanding balance. However, it seems that JP Morgan Chase has had a change of heart. In April, Chase will cease charging the $10 monthly fee. Chase does plan to keep the minimum monthly payments at 5% of the outstanding balance.

It seems to me that some banks are trying to gain back customer confidence. JP Morgan Chase did accept $25 billion of TARP funds recently. Furthermore, credit card issuers have been under attack by consumers for unfair lending practices. Credit card issuers have recently cut cardholder lines of credit and raise interest rates on customers who have been paying their accounts on time every month. Card issuers claim that they have had to raise rates and cut credit lines in order to make up for losses due to delinquent accounts.

I think that the economy will eventually get better and credit will begin to flow again. The recent unleashing of the governments latest program TALF (term asset backed securities lending facility) will help credit to flow again. The idea behind the TALF is incentive institutional investors into purchasing consumer asset backed securities. Once these markets start to revive again, credit will start to unthaw, people will begin spending and jobs will start to be created instead of lost.

As a result of our current economy and with so many people having a hard time making ends meet or being unemployed many are turning to living in an RV instead of a stationary home or apartment to survive. Used RV's of all sizes and styles can be purchased or leased for very reasonable amounts and with so many beautiful RV parks available around the country that include full hook ups (light, water, sewar and cable) for less than $ 40.00 per month many people are looking at this option to reduce monthly living expenses. Another important savings is not having to pay for the extremely high cost of county, city and school taxes.

I recently took a trip last year to pick up my son at school and drove from Texas to Missouri in a 28' Class C Motor home, it was an extremely enjoyable experience as the RV with accommodation's to to sleep our family of 6 which included a full kitchen, bath and AC. The unit was self contained and could run on propane gas, electricity with it's own generator or could hook up to an RV site for full power and water connections. We really enjoyed being able to drive all day and then in the evening being able to park at a Wal-Mart (many approve RV's staying in their parking lots) and turning on the power plant and AC and cooking dinner in the full kitchen and watching a good movie before going to bed.

My wife and I slept in the queen size bed and the kids slept on the small couches that convert to beds. The shower and bathroom were quite small and it took some time to get used to but we enjoyed traveling through several states where we were able to stay at different RV parks that had very nice campgrounds and bathroom facilities. When staying at the campgrounds we really enjoyed spending time outdoors, reading by the awnings or cooking meals on the outdoors grills. We also met some great folks from all walks of life many of whom lived in their RV's full time traveling across the country.

In our particular situation because my wife and I have 4 children it would not be possible to live in such a small RV full time but for a couple with 1-2 kids this could be very possible, especially during tough financial times or at least until their finances got better. The amount of money that can be saved living in an RV full time as compared to an apartment or fixed home is at least $ 2000.00 a month less and with so many types and styles of RV's available this might not be a bad option for someone in need.

On the other hand if your current situation does not merit you having to live in an RV I would highly recommend that you take a trip in one and travel across the country. My wife and I rented one for $ 650.00 for an entire week and visited other states with our children that we had never seen before and got to spend some quality time together. I look forward to taking another trip soon.

Stocks Rally as Fed Unveils Plan to Relieve Banks of Toxic Assets

What an incredible day it was an on Wall Street today. The stock market gained 497 points in a one-day session. This jump came after the government released its latest plan to help the banks remove the toxic assets from their balance sheets. I do not understand the details 100% (yet), but I do get good idea of how this program works. The government is looking to the private sector to come together and invest in these assets (mostly houses) that have caused our banks so many problems. As far as I can understand, investors could purchase a $100,000 asset for $10,000 while the government would match your investment 100%. So therefore, if you were to put in $10,000 the government will put in another $10,000. The FDIC will finance the remaining balance. Furthermore, these loans will be all non-recourse. That means that you can not loose more than what you have invested. The idea is that when the asset/s are sold, the profits will be split 50% with government.

I personally like this idea very much (and so did Wall Street). There is no doubt in my mind that these assets will come back up in value. If I had the money right now, I would seriously consider investing in some of these assets. The United States is a country whose population is always growing. There will be a need for these houses in the future. As the population continues to expand, more people will get married, enter the workforce and therefore purchase homes.

Housing starts also showed that there was an increase home purchases this past month. 50% of those purchases were distressed properties. There will come a point when there is less and less distressed properties on the market. Once this happens, housing prices will start to stabilize and will start to rise again. The stabilization of the housing market will ultimately end the recession.

AIG Bonus Fiasco Could Hurt TALF

The public outcry about the AIG bonuses could hurt programs such as TALF (Term Asset Backed Loan Facility) that is supposed to help free up consumer credit. I agree that the bonuses are uncalled for during a time when the company has lost billions of dollars and has had to be rescued by the government. I do not think that the government has the right to get involved with every decision, including the bonuses. Yes, the government has the right to put a stop to future bonuses of companies who have taken TARP funds. However, I do not think the government has the right to change contracts that were already in place prior to the bailout. What type of message does that send to investors who are supposed to invest in programs like TALF? Investors are afraid of accessing TALF funds because they afraid the government is going to turn around and change the rules on them. Investors do not like uncertainty. How can investors calculate the amount of profits that they will make, if they are afraid that the government is going to restructure these programs every time there is public outcry?

I do not make the kind of money that guys make either (yet), however, I do not think that the government is doing the right thing by taking away these bonuses from these people. A deal is a deal and should be honored. In addition, Congress wants to tax these bonuses 90% as a measure to re coup these funds Congress, is acting out of anger and not rational thinking. This tax would be unconstitutional in the sense that it targets specific individuals. Was it not the unjust taxation of the British that was being imposed upon the colonies one of the reason this country was founded? Congress does not have the right to make up a tax law that to punish a group of individuals. The next law they will want to pass is a 50% tax on everyone that has brown eyes and blonde hair. The passing of such a tax is unconstitutional and goes against the fundamental principles on which this country was founded.

There is a lot of blame to go around for who or what started this financial crisis. I am not against the bailout of AIG as 86% of our country is. Unfortunately the repercussions from the failure of AIG far outweighs the bailout. Should AIG be allowed to fail, there will be millions of claims that would go unpaid. Imagine a scenario in which a domino effect would further ruin our economy, pushing it into a possible depression. Insurance claims for auto repairs or home repairs would go unpaid causing a series of other problems. I do not completely understand the entire scope of AIG’s business model. I do know that most of their problems stem from their heavy involvement in the financial derivatives. However, it is too late too cry over spilt milk. Forget, worrying about paying the bonuses. We need to worry about figuring out a way for a similar financial mess to never happen again.

I just happened to watch an interview of former AIG CEO Hank Greenberg on Cavuto and learned the following Hank Greenberg was a founding partner of AIG with over 35 years of service to the company which was the largest and most successful insurance company in the country. When he left the company in 2005 they had a AAA rating but as soon as Ed Liddy took over things went down hill and they quickly lost their AAA rating. As Hank said in nicer words "Liddy did not know his head from his ass!!" Liddy ran a domestic auto insurance agency and had no clue about running a global insurance company. AIG was the the most diversified and successful insurance company in history until this clown took over. In 1987 Greenburg created AIG Financial Products which turned out to be a huge asset for AIG, when Hank left the company in the first quarter of 2005 the company had made a 5 billion dollar profit!! After he left these clowns ran the business into the ground. According to Hank, Liddy and the Board of Directors had no clue as to what they were doing and were "not minding the store" Well I guess that is what happens when you have a bunch of incompetents with no experience running AIG. In the end Cavuto asked Hank if the company executives deserved bonuses and he replied " why should they be given money for loosing money" According to Hank he would not have give these clowns a plug penny!

Should AIG Employees be allowed to keep their Bonuses?

There are many people who are horrified by the large bonuses that AIG is about to pay some its employees after taking billions of dollars from taxpayers. There are quite a few people in faltered insurance giant AIG who are supposed to receive bonuses in excess of $100,000. This has made the American taxpayers very angry. Why should we as taxpayers be required to bail out a company that made countless mistakes and lost billions of dollars? After all, was it not these same people who placed all kinds of bets in the derivatives markets and lost. However, a big dilemma is at hand. Some of these people had probably already signed agreements with AIG to receive these bonuses. Is it correct for the government to step in and redo these contracts? Are contracts not the root of capitalism?

The government has made it clear that it will do anything they can to get the money back from AIG bonus recipients. Congressmen have even gone so far as saying that they will tax the bonuses 100%. However, the government should not just single out AIG employees. They should also go after Merrill Lynch bonus recipients as well.

Quite frankly, I think that the government does not have the right to stop these bonuses 100%. Perhaps, there are sales people who actually earned these bonuses because of sales revenue that they generated. Not every individual is responsible for the down turn of the company. There are other factors that have caused the collapse of AIG. The fall of Lehman Brothers was certainly something that effected AIG. AIG was forced to pay credit default swaps related to Lehman’s fall.

The bottom line is that there needs to be more regulations to keep financial markets in line. Deregulation, unfortunately, has not worked very well. Rules and regulations need to be set so that this financial crisis never happens again.

Now you can blow your credit card limit without even spending a dime! That's right folks, credit card companies are cutting credit card limits even well below your balance. David Smith would have not minded that American Express cut his credit line down to $ 5000.00 except that when American Express reduced his credit he had an outstanding balance of $ 8,500.00 David found out when he was declined a purchase and called American Express to inquire and they were unable to fully explain why they had done this especially because he had always paid on time. As bad as this sounds, this practice by credit card companies of of cutting credit card limits is perfectly legal, at least for now.

Federal reserve rules require that credit card companies notify cardholders at least 45 days prior to reducing a credit card limit but since there are no penalties credit card companies are just no doing so. Congress is hoping to stop this practice by trying to introduce the Credit Card Act which would offer credit card holders protection by requiring lenders to lower penalty rates within six months once the card holder gets back on track with payments.. Earlier this month the House Committee on Financial services announced a series of hearings that will include discussions about credit card reform.

One of the main reasons that credit card companies are reducing credit card limits is to reduce their overall outstanding liabilities. Another reason may be to try and get consumers to close their accounts for good. It is very important for consumers to try and catch any changes to their account immediately before going over reduced limits or even finding out that your purchase was declined.

Bernard L. Madoff Goes To Jail

On Thursday March 12, 2009 disgraced financier Bernard L. Madoff reported to jail to serve time for what has been called the largest Ponzi scheme ever uncovered. Crowds of people stood outside, many of them victims, wanting to get a chance to see justice served. “Madeoff” pleaded guilty before the Judge Denny Chin and was hauled off to what many say will be the rest of his life behind bars. “Madeoff” apologized to his victims and expressed deep regret and sorrow. However, (as I am sure many of you have read) “Madeoff” has a blog where he talks about everything. He mostly brags about his possessions and has even ridiculed his victims. There is also a link on his blog that then takes you to another one of his websites. Anybody who reads the “about us” page will be completely disgusted by some of his remarks. He even mentioned that one of his kids or grandkids should purchase a condo in Florida from the estate sale of one his “greedy clients” who dropped dead of a heart attack after finding out he and his family had been completely wiped out by “Madeoff”. If you ask me, Bernie, is the greedy pig.

Madoff even goes on to explain how he forged monthly statements and how no one ever really looked at their statements close enough. According to “Madeoff”, his customers could have checked the daily transaction volumes and compared them to actual historical data. He would claim to have purchased 100,000 options for a particular stock on a certain date. The closing price of the stock that was reported was always correct, however, if the investor would have looked closer they would have noticed that the amount of options being traded that day did not add up with what “Madeoff” was reporting.

The bottom line is people trusted this guy without doing any real investigation into what he was doing. His strategies were supposed to be proprietary and he was therefore very secretive with his clients. He was even bold enough to claim that the people who asked to many questions were the ones that he turned away from his “fund”. He figured that these were the ones that would figure him out.

Swindled investors now want to hold the SEC responsible for not having acted on tips the Madoff was running a Ponzi scheme. They are correct to a certain extent. The SEC is somewhat to blame for not having uncovered this scheme years ago. However, as investors they should have done their due diligence and completely investigated “Madeoff” before giving him any money. The other thing that I find hard to understand is why so many of these people gave “Madeoff” the bulk of their net worth to manage. The number one rule too investing is to never keep all your eggs in one basket. These people gave all their money to one individual without even understanding how he made a 10% profit every year. Furthermore, many of these investors were considered to be sophisticated investors. Fund managers (who basically just gave some else’s money to someone else to manage) were duped and lost billions.

The week ended on a positive note this week on Wall Street. The DJIA and S&P averages were positive for the last four trading sessions this past week. Perhaps, investors feel safer now that Bernie “Madeoff” is in jail. The quick sentencing should send a message to others that are running investment scams that they will be caught and brought to justice.

Lawmakers planning to create a Financial Products Safety Commission


Lawmakers announced today a plan to create a Financial Products Safety Commission that would oversee financial products such as mortgages credit cards, auto loans and retirement accounts. This commission would be similar to the Food and Drug Administration that oversees consumable consumer products. One of the main purposes of this commission is to oversee the mortgage industry. Mortgages have changed and become more complex in recent years. Not only are they more complicated, some of them are also predatory in nature. Many mortgage loans that were offered to people were very destructive. I heard about one company from California that was offering people the ability to pay half of the interest while the other half portion of the interest would be accrued on your principal. Once the mortgage re adjusts, these people are then forced to pay a much higher monthly payment then they could actually afford. Some people were duped into these types of loans while others did not plan how they were going to afford the house in the future. Mortgage brokers were more than happy to facilitate these types of loans as well. Everyone was making money, and people were moving into new houses. Unfortunately the house of cards came crumbling down.

Lawmakers are also looking at regulating the mortgage backed securities markets as well. They want to be requiring that loan originators stay with a portion of the loan to ensure that they have a vested interest that the securities will perform over the long run. Quite frankly, I don’t think that is going to be a good idea. I think credit originators should be able to sell their securitized products freely. The emphasis should be placed on the rating agencies. Regulators need to make sure that the rating agencies are generating unbiased ratings. During the housing bubble the rating agencies were manipulating their scoring methods in order to come up with AAA credit ratings. Rating agencies were under pressure to please banks that in turn wanted to sell more mortgages. Had the rating agencies been more scrupulous and under more regulation, banks would not have a choice then to be careful.

The creation of the securitization markets has helped our country. If banks were not allowed to package and sell their loans, our country would not have been able to grow as it has. Securitization markets have allowed investors the ability to build shopping centers, homes, hotels and all sorts of other infrastructure projects. These projects created jobs that fed our economy for many years. After the fall of Lehman Brothers, these securitization markets have all but dried up creating a lack of credit in our economy. This lack of credit has spurred a viscous cycle that has created job loss and financial hardships. I am in agreement that there needs to be more regulation in certain areas. I only hope that regulators will regulate and strangulate these markets.

In financial terms, what is short selling?

For the many of you who are like me certain stock market terminology and rules might be a little confusing. In today’s environment I feel the more informed that we are the better decisions we will make. One of the most confusing concepts that I have never been able to really grasp has been the subject of “short selling”. However, I figure that maybe if I write about it in my blog, it might be a little more understandable for everyone.

There are two basic strategies (that I know of) when buying and selling stocks. First there is the long sale. That is when you believe that the stock you are buying is going to go up. That is a very basic rule. You buy at price X. If price X goes up 50 points (or dollars) then your stock is worth X plus $50. The same concept applies if your stock goes down. Say your stock goes down $50 instead, then your stock is worth X less $50.

Short selling is a strategy based on the idea that the stock is going to go down. The concept is kind of confusing but if you think about it a little you can figure it out. First of all, with short selling a broker “lends” an investor a certain amount of stock shares with the promise that the investor will return back to the broker the same number of shares at an unspecified date. If the price of the stock goes down, then you will have to pay back the broker at the new lower price. Furthermore, the investor gets to pocket the difference. For example you borrow 500 shares of Xyz Company from your broker for $50. The stock price then falls down to $10. You can then pay back the shares at the lower price and pocket the difference. However if the stock goes up you will be forced to pay back the shares at the higher price and you will be forced to pay the difference. The potential for making a big profit by short selling stocks is very good (especially in today’s bear market). However, the losses that can be accumulated should the investors theory that the stock will go down in value can be huge as well.

Many people feel that short selling has caused some of the problems that we are facing on Wall Street today. Lately, investors have been selling short financial stocks and reaping in big profits. However, there are others that argue that short selling has caused many of these stocks down spiral downward in price. There is a growing sector of the population that feels short selling should be banned. However, there are many that would argue otherwise. Representative Barney Frank is taking about bring back the “up tick “ rule. According to investorpedia.com, the uptick rule is explained as follows:

“A former rule established by the SEC that requires that every short sale transaction be entered at a price that is higher than the price of the previous trade. This rule was introduced in the Securities Exchange Act of 1934 as Rule 10a-1. The uptick rule prevents short selling from adding to the downward momentum when the price of an asset is already experiencing sharp declines”

At this point I do not understand 100% what this rule means. I do know that many experts say that reinstating the uptick rule will prevent stocks from spiraling downwards by short sellers. The reinstatement of this rule should hopefully also re instill investor confidence in the markets once again.

What are three reasons why our country is not in a depression?

1) The unemployment rate during the great depression was the highest our country has ever seen. During the Great Depression the unemployment rate was at 25%. Poverty was rampant everywhere. People lacked the basic necessities such as food, clothing and shelter. It was very difficult to find a job as the economy was stagnant. It was not until World War II that the economy started moving again.

2) Unemployment benefits did not exist during the Great Depression. During the 1930s unemployment benefits were non existent. People that lost their jobs went without any source of income. Jobs were very scarce and if you were unemployed chances are you went hungry. These days, the government has unemployment insurance. Unemployment insurance giver those who have been laid off from a job an income for at least 6 months. These benefits have recently been extended to a year because of the severity of the current economic crisis. Unemployment does not give you much income, however, it is much better than no income.

3) Government intervention is another reason our country will avoid a depression as severe as that of the 1930s. Our country is divided by the amount of money that the government is spending in order to fix the economy. The truth is that without intervention our country would be in worse shape than it already is.
During the Great Depression there was little to nothing to done to boost the economy. Banks were allowed to fail and widespread panic swept through the financial markets. The failure of Lehman Brothers caused a similar cataclysmic effect that sent shock waves through the economy. The government does not want to cause more damage in the economy by allowing such large institutions to fail.

There is no doubt that our country is in a severe economic recession. However, we are not anywhere near the destitution that was felt during the 1930s. Unemployment is at an all time high, however, it is not so severe that one in four Americans is without a job. Furthermore, during the Great Depression, public programs like food stamps or Medicaid did not exist. Our economy is also more diversified in the sense that innovation has transformed this country from the industrial age to the era of technology. Technology has broadened are our abilities to do business as well.

The United States has always survived one way or another. The Civil War once divided our country, however, it did not destroy it. We have survived World War I and World War II and the Great Depression. We even survived the worst attack on our country ever, September 11, 2001. I am quite confident that the American spirit will pull us through the worst economic recession in decades. Not only will we survive, we will also become a stronger nation because of it.

United Airlines goes Cashless in the Sky


United Airlines recently announced that they would no longer accept cash on certain flights beginning March 23, 2009. The airline is going to be requiring that all in flight purchases be made with a credit or debit card. This will make things more efficient and easier for stewardesses when they take your order on your next business flight. Instead of having to hand out change and collect cash, airline flight attendant will be able to quickly process your credit card in flight.

Passengers no longer have to worry about having exact change to buy a cocktail during your flight. After March 23rd all you will have to do is “whip” out your credit or debit card and order whatever your want. Flight attendants will appreciate not having to handle cash and pass out change. This will also allow you to be able to “open a tab” much like you do at a restaurant or bar.

United Airlines is also announcing a joint venture with MBNA credit cards. Any purchases that you make in flight will earn you extra reward points. I wonder if they will give you extra rewards for shopping at the Sky Mall in flight magazine.

It will not be long before you are able to make your purchases in flight online. This would allow passengers to browse the available goods and make an immediate purchase. Type in your credit card information on the airplane’s individual computer screens and before you know you will be shipping that blanket you saw to your home. (I need to save this paragraph for another topic, but I just thought I would mention my ideas any way.)

It will not be long before other airline companies such as Southwest and Alaska airlines follow suit. Airplane travelers have always had to worry about having cash, preferably small bills like $5 or $1, on hand to pay the flight attendant for your beverages. Instead, travelers need to be sure to keep their favorite credit or debit cards on hand ready to make purchases.

If you are looking for a good credit card to take with you on your next trip, take a look at the American Express Starwood Preferred credit card. Earn 10,000bonus rewards points after you make your first purchase. This is enough to earn up to three nights free at participating Starwood hotels. Apply now and get a decision in 60 seconds.

Will TALF Unthaw the Securitization Markets?

President Barrack Obama and his team of economical advisors revealed the final details regarding the latest bailout program. The TALF (Term Asset Backed Loan Facility) is supposed to provide investors with cheap financing to purchase asset backed securities. Asset backed securities are basically a group of loans that are bundled, given a value, and then sold to investors to reap the profits. Many of these investors are institutional type investors (pension funds, life insurance companies, etc) or foreign investors coming from China, India and the Middle East. Since the Failure of Lehman Brothers these securitization markets have all but dried up. The result has been the loss of credit and a deep recession that our country has not seen since World War II.

The TALF fund is supposed to provide up to $1 trillion in funding for investors to start to purchase these loans once again. However, a lot of people argue that the securitization system is broken. The problem that created this whole mess was the fact that these securities are being rated by independent private credit rating agencies. The credit agencies then rate these securities for investors based on the creditworthiness of these bundled loans. A “AAA “ rating is considered the best, while a “BBB” rating is considered the worst or sub prime. During the housing boom, these credit agencies began “loosening” their standards as to what qualifies a “AAA” rating. “BBB” rated loans were being given a high rating and begin sold to unsuspecting investors. The foreclosure rate on those mortgage asset backed securities and subsequent losses has spooked investors from other types of asset backed securities like credit cards, auto loans and student loans.

The TALF is supposed to insure those loans in case they begin to default. This is supposed to increase investor confidence. Who is going to rate these securitized loans now? If the same credit rating agencies like Moody’s Investors Services or Standard and Poor’s continue to rate the bonds, no one is going to believe them. The government needs to somehow revamp these credit agencies and restore credibility once again. The TALF program is supposed to give investors a renewed sense of security. At this point, I do not understand it 100%, but I am spending some time trying to figure it out.

The bottom line is that we need these securitization markets to start working once again. The lack of credit has spurred huge problems in our economy. Not one sector of the economy has gone unaffected in my opinion. Retailers and other vendors rely on credit to sell consumer products like cars, televisions, clothes, etc. The loss of sales from credit has forced many companies to lay off workers. I am confident that one way or another we will figure a way to get credit flowing again. Once that happens life as we knew it will manifest itself once again.


If you are looking for a way to borrow money (you must have very good credit) or for a way to invest some money, try “The Lending Club”. The lending club allows small investors to invest in securitized loans like the big fish. You (and 50 to 1200 others) will earn interest for lending qualified applicants money to consolidate credit card debt or even start a business. View each applicant’s stats online and make your own decision.

Economy Continues To Worsen


The economy continues to be a burden to many Americans. Warren Buffet, in his annual report to Berkshire Hathaway shareholders, reported that the economy will continue to be in “shambles for the rest of 2009” and possibly even further than that. Warren Buffet is considered to be the greatest investor of all time. In 2008 Berkshire Hathaway reported its worst year ever. Berkshire Hathaway Class A stock once traded at a hefty price of $140,000 and on Friday February 27, 2009 closed at $78,600. Berkshire Hathaway has lost around 40% of its value in the last year.

The stock market continues to decline as investors worry about the government nationalizing fledgling banks such as Citigroup or Bank of America. This would essentially wipe out the value of all outstanding common stock of those institutions should the government completely take over the banking industry. The likelihood of this happening is very unlikely. However, recent comments made by Senate Banking Committee Chairman, Christopher Dodd, said that nationalizing the banks was not completely out of the question. This has sent the Dow Jones Industrial Average into a downward spiral. Investors are very weary about the government getting involved into the banking system. The consensus on Wall Street is that government is not capable of running a complex banking system. Federal Reserve Chairman Ben Bernanke than commented that it would be very unlikely for the government to nationalize the banks. The Dow Jones Industrial Average is down significantly in 2009.

In recent news as well, the failing insurance giant American Insurance International will receive an additonal $30 billion in federal assistance. This money is supposed to be taken from the TARP. AIG is said to be reporting the biggest loss in its corporate history. This loss is expected to come in at around $60 billion.

I would have imagined that our country would experience a financial crisis such as this. I can remember my 8th grade history professor, teaching the class about The Great Depression. One of the things she emphasized was that our country would never have to suffer like that again, because of government intervention. That always stuck in my mind. Today, we are seeing her theory being tested at its fullest. The nation is being divided by the massive amounts of government intervention into our economic system. There are many that feel that the current stimulus package is filled with “pork”. The Republican Party is blaming the Obama Administration of proposing useless jobs that would not really have any longevity. The Obama administration defends the stimulus package saying that it will create long-term jobs in both the public and private economic sectors. The Obama administration claims that their economic stimulus plan will keep the unemployment from rising about 10% and will eventually bring it down to more manageable levels.

Like most Americans, I am very anxious for this recession to be over. This recession has effected the lives of many people. People who were ready to retire have had to put their plans off for several more years. Everyone has been affected one way or the other. The loss of jobs will continue to cripple our economy until the bleeding is stopped. In all, I think that our country will survive. This is not the first time our country has been in a crisis if you look at the headlines from the last 30 years. Doom and gloom is heard everywhere during bad times. However, our country has survived two World Wars, The Great Depression and onslaught of recessions and hard times. In the end, our country will prevail and come back stronger than ever.



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