The Truth of Credit

I was originally planning on writing about the best things to buy on Black Friday. Then after doing some research, I found that there are multiple stories behind the term Black Friday and where it came from. So I have compiled a few of the stories I found although no one seems to want to take credit for coining the term.

1. In 1966, “Black Friday” is the name given to the Friday following Thanksgiving Day by the Philadelphia Police Department.  It was not meant as a term of endearment. “Black Friday” officially opens the Christmas shopping season in the city and it usually brings massive traffic jams and over-crowded sidewalks as the downtown stores are mobbed from opening to close.
2. In general, the term Black Friday has been used when a public calamity has occurred.
3. Employees of retail stores have for years referred to Black Friday in a satirical way, to note the extremely stressful and hectic nature of the day. Heavy traffic and customer demands added to the long hours make it a difficult day..
4. Probably the most common historical origin of Black Friday is from retailers’ shift to profitability during the holiday season. Back in the day when accounting records were kept by hand, red ink indicated financial loss while black ink indicated profit, thus coining the popular fiscal terms of being “in the red,” (losing money) or “in the black” (profitable). Most retail stores run in the negative (or Red) from January until November, only to get into profit (or Black) from the Friday after Thanksgiving until New Year’s Eve.

What adds to the enigma of Black Friday is that some people consider it a personal holiday of sorts. Waking up at obscene hours and allowing their animal instincts to take over (see above video). While others, like myself, absolutely refuse to leave the house and get into this mist of this craziness. Let me know when it’s over.

Related Post

• The Velocity of Money
• Abolishing 401k plans?
• Will There Be A Second Stimulus Check?

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by Kitty Cats (,,,)>^.?.^<(,,,)

Let’s face it folks, it’s the Holiday Season and with all that good cheer comes a price. No one loves the holidays or being with family more than I, but come January 15th all the fun and excitement has faded when I go out to my snow covered mailbox and find a nice New Year’s present from Bank of America. I know the Suze Ormans of the world want you to be fiscally responsible but when the tree is up and the good times are rolling, January 2009 seems so far away.

How much is a present worth?

• Answer truthfully.  Can you name the presents your family gave you last year? If it wasn’t a Nintendo Wii or Playstation I bet you are having trouble with this one. I know everyone wants to be the “rich uncle or aunt” but more than likely your nieces or nephews aren’t going to remember what you got them.
• Just remember when you purchase that Xbox 360 and the price tag says $199, if you are running a healthy tab on your credit card that means you may be paying 20% (insert your card’s interest rate) per month for that same Xbox.

What else is involved?

• Well, when I was younger my family was on the East Coast and flew every Christmas to the Midwest. Now, five round trip tickets are probably going to be in the $2,000 range and although driving may be cheaper, an 18 hour drive with family sure can seem to take years off your life (only kidding!).
• If you’re hosting the holidays at your home, some people may be staying with you, eating with you, using you electricity, etc.  All these things can add up fast.  Plus, how are you going to entertain your family? There is only so much NFL football on Christmas, unfortunately, it doesn’t last all day.

No one wants to be a “Scrooge” during this time of year.  I know you want to spoil your kids and that’s great if you can afford to. However, remember this post come that snowy January day when you walk to your mailbox. Then when you open that Chase envelope, hopefully you’ll smile instead of pout.

Related Post:

• What is the Velocity of Money?
• The Importance of Cashflow
• Need Help Paying Your Utility Bills?

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photo by The Hidaway

With identity thieves creating havoc with consumers and businesses alike, The Federal Trade Commission (FTC) is doing its best to fight back with some new legislation. They are requiring all financial institutions/creditors to provide responses and programs for prevention practices known as “red flags” which are the calling cards of identity thieves.  This rule was to begin to be policed in November 2008 but has been extended until May of 2009.

What are Red Flags for ID theft?

• Finding discrepancies in your credit report.

• You receive a bill for a credit card account you didn’t open.
• Unauthorized charges on your credit card statement.
• You haven’t received your bills or credit card statements for months.
• Your bank statements show unauthorized transfers or withdrawals.
• You receive a call from a ABC Collection Agency about an account you never opened.
• You receive calls from businesses about merchandise you didn’t buy.
• You’re denied credit because debts show up on your credit reports that don’t belong to you.

Who must comply to the new “Red Flag Rules”?

• A financial institution is defined as a state or national bank, a state or federal savings and loan association, a mutual savings bank, or a state/federal credit union.
• A creditor or any entity that regularly extends, renews, or continues credit.
• A covered account used mostly for personal, family, or household purposes and that involves multiple payments or transactions (Think credit cards or cell phone accounts).

Most of the bigger companies already have great Fraud Departments. I visited with a few people in Chase Bank’s Fraud Department and found them to be some of the brightest people I have been introduced to. Personally, I believe these rules are more for the Mom & Pop shops that extend credit. Do you regularly monitor your bank statements? Have you or anyone you know been a victim of identity theft?

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photo coutesy of Bloomberg.com

Around the time I was leaving work today I heard that Tim Geithner was going to be the new Treasury Secretary on the news.  The name sounded familiar to me but I really had no idea who the guy was.  At the time I thought nothing of it but once I saw how high the market jumped when the news broke, I had to find out.

From Wikipedia:

Tim Geithner was born in Brooklyn, New York City, to Mr. and Mrs. Peter F. Geithner of Larchmont, New York. He completed high school at International School Bangkok, Thailand, and then attended Dartmouth College, graduating with a B.A. in government and Asian studies in 1983. After, he obtained an M.A. in International Economics and East Asian Studies from Johns Hopkins University’s School of Advanced International Studies in 1985. He has studied Japanese and Chinese and has lived in East Africa, India, Thailand, China, and Japan.

He is married to Carole M. Sonnenfeld, a Dartmouth classmate, and with her has two children, Elise and Benjamin. In spare time he fly-fishes, plays tennis and surfs. Geithner is Jewish.

After completing his studies, Geithner worked for Kissinger and Associates in Washington, D.C., for three years and then joined the International Affairs division of the U.S. Treasury Department in 1988.

In 1999 he was promoted to Under Secretary of the Treasury for International Affairs and served under Treasury Secretaries Robert Rubin and Lawrence Summers.

In 2002 he left the Treasury to join the Council on Foreign Relations as a Senior Fellow in the International Economics department. He then worked for the International Monetary Fund as the director of the Policy Development and Review Department until moving to the Federal Reserve in October 2003. In 2006 he became a member of the influential Washington-based financial advisory body, the Group of Thirty.

On November 21, 2008, it was reported that President-elect Barack Obama had decided to nominate Geithner for the position of Treasury Secretary.

More Importantly:

• Geithner has had a seat at the table ever since this recession began. As the President of Federal Reserve Bank of New York over the last 5 years, he oversaw the bailout of Bear Sterns and has been instrumental in the “lifelines” that Fannie & Freddy Mac have been receiving.
• Basically, he knows all the players and should be very much in the “know” for a seamless transition to the Obama administration.

Wall Street seems to pass a vote of confidence with this guy but he is going to face a considerable challenge in the not too distant future. Being the over-sear of $700 billion dollars is going to be a daunting task. Let’s hope his strong credentials and youth bring a spark back to this economy. How much influence do you think a Treasury Secretary has? Do you think Paul Volcker was the better choice?

Related Post:

• Not Another Bailout!!
• Abolishing the 401(k) Plans
• What is Capitulations??

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The word on the street is that if General Motors (GM) does not get a cash infusion they will be bankrupt in 3 to 6 months. Over that last few days, many top level executives from the Big 3 (Ford, Chrysler & GM) have been lobbying hard for a government sponsored bailout plan.  Be glad that you and I don’t have to make this decision. After pouring over a few articles and newscasts I have broken out reasons for and against. In the end I would give my vote and why:

For the bailout!

• Jobs, Jobs & more Jobs - It is said that the auto industry makes up 10% of our workforce. I’m not naive enough to think everyone will lose their jobs but I do believe a healthy amount will and will ultimately make Citigroup’s 53,000 layoffs look like nothing.
• You could pay now or pay later - What I mean by this is that if there is mass layoffs, the government is going to be paying unemployment benefits at a historic level. Will it equal $25 billion dollars? Not sure if I want to find out.
• We need to show that we are not pandering to Wall Street - If we are willing to help out those with white collar jobs that are in trouble but then turn around and alienate the blue collar workers, we will end up having more problems than a bailout on our hands.

Bailout? No way!

• Where does it end? - The line for troubled industries on Pennsylvania Avenue will be long; all looking for their own bailout money.
• Let them file bankruptcy - There have been numerous companies that have come out of bankruptcy protection much leaner.  Besides, if ABC Contracting couldn’t afford its bills they would have to file; why shouldn’t GM?
• Why save a company that is drastically losing its market share each year? Why postpone the inevitable?

In my opinion, GM is worth saving and here is why: If we let all these huge mega companies fall we could be in for a prolonged recession (7-20 years). Does it set a dangerous precedent? Absolutely, but I would have a tough time saying, “Hey, Wall Street! We’ll fix your mistakes, but Detroit, you’re on your own.” I always thought of myself as a capitalist, but maybe I’m a socialist at heart.

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