Archive for January, 2010

Looking at a number of key economic indicators it’s obvious that the country is still mired in an economic crisis that continues to take casualties. Unemployment is stubbornly intractable, bank lending is weak and the stock market has had its worst week since March of 2009.

But it may be possible that we are turning the corner in one key area.

According to a report put out today by analysts at The Conference Board (an international association that publishes business research) consumer confidence rose in January for the third straight month.

Their index of consumer attitudes rose to 55.9 points, the highest measure since September 2008. This beat forecasts which called for a reading of 53.5 based on professional analysts polled by the news agency Reuters.

The uptick was driven by an improved outlook on current economic conditions, but long-term views on employment and the economy are still very poor.

Riding to the rescue in that arena is President Obama, who in his State of the Union address tomorrow is expected to propose a host of initiatives to help the middle class in these troubled times. These include programs designed to help families pay for child care, save for retirement, pay off student loans and care for elderly parents.

Obama understands that most Americans are concerned first and foremost with jobs, and he will surely speak to his stimulus policies designed to put more of us back to work and may unveil new initiatives meant to spark employment.

However, with the country also worried about government spending and deficits, he has a limited toolkit with which to work.

It’s said that all politics is local, I’m guessing that all confidence is personal. The economics of your state, local community and household trump any national metric. The good news is that these are more within your control.

Are you feeling better about the economy? Are you taking concrete measures to be ahead of the employment curve when the economy rebounds? Tell us how you see things and leave us a comment.

Because wars in Iraq and Afghanistan don’t seem to be enough for the guy, President Obama is looking to start a third brutal conflict, this time with our nation’s largest financial institutions.

In a speech last Thursday the President committed to giving bank regulators the power to limit the size of the country’s biggest banks and to limit how much risk they could take in trading securities with your deposit money. This had long been the goal sought by former Fed Chairman Paul Volcker. Volcker advised the nation long ago that banks shouldn’t be able to trade financial securities (like including mortgage-backed securities) using customers’ checking and savings deposits. These losses created the credit crisis of 2008.

According to the President:

When banks benefit from the safety net that taxpayers provide, which includes lower cost capital, it is not appropriate for them to turn around and use that cheap money to trade for profit. And that is especially true when this kind of trading often puts banks in direct conflict with their customers’ interests.

The fact is, these kinds of trading operations can create enormous and costly risks, endangering the entire bank if things go wrong. We simply cannot accept a system in which hedge funds or private equity firms inside banks can place huge, risky bets that are subsidized by taxpayers and that could pose a conflict of interest. And we cannot accept a system in which shareholders make money on these operations if the bank wins, but taxpayers foot the bill if the bank loses.

It’s for these reasons that I’m proposing a simple and common-sense reform, which we’re calling the Volcker Rule, after this tall guy behind me. Banks will no longer be allowed to own, invest or sponsor hedge funds, private equity funds or proprietary trading operations for their own profit unrelated to serving their customers.

Obama says that he’s ready to fight, but he will need to be well armed to tackle these guys. (They have been applying for gun permits after all.)

Now we won’t actually see pistols at dawn, since bankers wouldn’t actually endanger themselves or get their Gucci loafers muddy in a dewy field. Heck, they don’t even allow anyone to endanger their bonuses. Bankers fight with bucks.

So what we will see is a calculated campaign of lobbying and political ads targeting Obama and any members of Congress who speak out in favor of this plan. And this is made easier by the recent Supreme Court ruling that now allows corporations to basically spend unlimited amounts of money to influence political campaigns.  This should get interesting.

If you’re not already using the power of your computer to meticulously track your finances then the long road out of debt is going to be very bumpy for you.

One of the best tools out there is the online service Mint.com which keeps track of your income, spending and debt with reports and recommendations.  It’s a free service, and they also have a great blog.  That’s where I found this gem, a graphical depiction of several business models that feed off of people struggling to pay their bills.

budget planner – Mint.com

When you know how the game is played and how these folks really make their money, you can avoid losing your shirt to them.  The thought of fast money is appealing when you’re in a bind, but remember this: The devil has the power to assume a pleasing shape.
-William Shakespeare