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-2008 Investments Losing Game for Most
There is an uneasy anticipation on Wall Street, along with a sneaking suspicion that the people describe as a feeling of being ripped off. Investors have deserted the street What started out as an estimate of a few billion in bad loans was now in the trilllions. Greed had consumed the real estate sector. In a mad race to see who would come out on top.
Questionable loans where outright fraud had been committed, were wrapped into packages and sold at prices which could not be justified or sustained. This paper was sold to an unsuspecting world market.
China, japan, Australia, and Ireland were a few of the countries that bought some of the contamminated loans. The world credit bubble was not fully revealed and few know today how much money was lost in the debicle. On Friday, National Public Radio reported that almost one half of all the homeowners in the United States were in danger of losing their homes to foreclosure.
The full story of the credit meltdown began when credit card companies decided to pump the cards for nothing less than maximum return. They jacked interest rates so high that borrowers found themselves paying more and more interest on merchandise worth less and less. Less time to pay on the card was the next agenda item. It got so late charges became a major source of revenue. If the account was paid 20 minutes late, the card holder might see a j$45. late charge appear on the next statement.
the squeeze was really on when others, seeing the cash pouring into the credit card companies, reacted by setting up similar systems to maximize interest and late charges on top of their hefty profits Utility companies, cable TV and even state and local governments got into the action. Charges began adding up to the point where customers began cutting up the credit cards. Too Much Debt!! screamed the headlines. Atm fees soared. Customers found themselves paying extra fees to talk to a live teller. there were even fees if someone called in to check on your account. Then, someone at a major bank hit on the idea of piling on more debt but doing it in a way that would cover the credit card debt . It was brilliant. Each homeowner would be invited by the lenders to access the equity in thier home. a n open line of credit appeared in their bank statements. Homeowners were feeling dizzy with the potential in a new found source of quick money, colnstruction soared as lines of credit were tapped to build add on rooms to homes, buy second and third homes, boats, and ATV's.. Prices soared on everything from consuer staples to home building.
Everyone concluded the war was not difficult to pay for. "After all," everyone said, "We are a rich country."
The internet, after 15 years. is part of mainstream America. But the internet is also rife with fraud. Many operators got used to the idea that they could get free money by minimizing contact with customers after sale. Refunds are hard to get, even if proof is produced to a bank or the vendor. :Sometimes the process is so confusing and time consuming customers finally give up. Banks are reluctant to follow through on fraud so that claims lie molding away until everyone forgets about it or informing you that the statute of limitations has expired---even though it might be the bank that caused the delay to occur. too bad. There is nothing to be done, reports the bank. More money has been paid out by the consumer for nothing at all. No service. No product. and no refund. It all adds up to the free wheeling attitude that rip offs are just part of doing business.
Well all right, everyone said, it's just another blip to cut across. We have seen these things before. Buy chevron or IBMm, etc. Meanwhile, the bears were cleaning up selling stocks short. Only a few stocks actually appreciated during 2008. Most were selliing for a quarter of what they sold for a year ago. Even the blue chips with mounds of cash were and still are slipping in this market.
So all the pension funds dropped in value. Most slashed the dividend or eliminated it altogether. China announced that it would no longer loan cash to the U.S to sustrain a consumer based economy. The world economy began to slide in anticipation of "bank liqudity problems," An injection of money into the system should get the banking system back on track used to work just fine. Cheap money and low interest rates were predictors of a good econonmy. Not this time. No matter what the Fed did or had to say, faith in the system was rapidly seeing conventional wisdom go right out the window.
Why was it no longer working? Those responsible for loaning money were no longer accepting applications for loans or if they were, the loan never got processed.
So far, not much has been heard about prosecution of the miscreants. Until this vital step is completed and faith irestored in the market place, the market will languish at its present level, stifling industrial and real estate growth and destroying the dreams of many for a comfortable retirement free of financial worry.
The credit reporting system serves some consumers well, others are abused with little or no controls from the outside. Merchants recieve instant service on the telephone while consumers are forced to wait until the credit service sends the information requested by regular mail. It's extremly difficult to get false or misleading information off your record. On average, the statue of limitations is about 7 years for most crimes. However, the credit bureau will not release a report on someone who has refused to furnish information from 30 or more years ago. If these reporting companies cannot properly maintain information that impacts strongly on consumers, there should be a certifying agency that moniters how to gather and use the information. As it stands, the system is set up as an adversorial process, one sided and slow moving. A certifying agency could monitor actifvities so that both sides are fairly represented in the process. credit agencies are using the same sytem set up 50 years ago, only they are able to do it faster because of computers. To do something inefficiently but faster is not an improvement but a setup for disasterous occurances of identiy theft and credit card theft on a massive scale.