USAinDebt

The year of 2008 will be remembered and identified by the worldwide market crash that hit the economies of many countries, big and small. The global financial crisis ruined quite a few large financial firms which resulted in the collapse of thousands of smaller dependent companies and businesses. Combined with the sub prime mortgage crisis, bad debts, lack of liquidity, corruption and poor government control are pointed out as the main reasons for the market dip.
Although the crisis erupted with full power in 2008, its foundation has been started way earlier than that. To begin with, the American consumer has always lived beyond their means. Buying almost any type of commodities is very often associated with obtaining some type of a loan and paying it off within extended period of time. Credit became the foundation of nearly every purchase. Especially when it came to real estate, banks and other lending institutions were quick to provide credit to consumers, basing their decision on the muddy information, provided by mortgage brokers.

On the other side, consumers were happily taking on those mortgages, being under the false impression that prices of property will always rise and that they are making a good investment. They were also easily hooked by the Adjustable Rate Mortgage (ARM) which allowed them to take on a mortgage at a super low rate. The housing market was at its full glory: the USA home ownership rate grew to the record 69.2% (US Census Bureau Report, 2007). In the meantime, those mortgages were pooled and sold to domestic and foreign investment institutions as ‘AAA’ graded CDO’s. Since everyone was buying, demand has increased which naturally led to the increase in supply. Housing is built everywhere, 24/7. When the market reached its tipping point in the middle of 2007, supply became higher than the demand and prices began to decline. Prices quickly dropped by over 20% within less than a year (Standard & Poor’s Home Price Indices, 2008).

At one point, more people were finding themselves in a situation where they had zero or even negative equity in their homes. As a lot of those people took ARM mortgages, their payments were steadily increasing by that time. Many were unable to pay their mortgages. A wave of refinancing attempts and foreclosures made it harder and harder to obtain better financing rates and new loans. By the end of 2007, Nearly 1.3 million US housing properties were in the process of foreclosure (RealtyTrac. US Foreclosure Activity Report, 2008). This further deepened the issue – more and more consumers were unable to meet their repayment obligations, defaulting on their mortgages. People were resorting to withdrawals from their last savings accounts and even cash advances from credit cards. That led to a global bank run in which more than $550 billion dollars were withdrawn from US accounts. Banks were vastly losing their liquid assets. As a result of this, banks went low on cash, their assets disappeared and a liquidity problem developed. This pretty much is what brought down Washington Mutual – consumers feared that the bank is in trouble; they pulled their cash out and left the bank high and dry. The collapse of the Credit Default Swaps (CDS) market boosted the rapidly evolving subprime mortgage crisis even more. The weak regulation of the CDS market allowed for millions of junk swaps to be traded. The above mentioned investors, buying the ‘AAA’ graded pooled mortgages suddenly found themselves holding nearly worthless paper.

As a result of that, bankruptcies were quick to follow. This huge instability in the market had a snowball effect: AIG, the largest US insurer quickly started losing money merely because of the now worthless CDO’s they have insured. It became a vicious cycle: People were failing to pay off their mortgages, their homes were foreclosed; the owners of those failed loans were unable to recover their money so they turned to the insurers of those loans, who quickly run out of finances to pay the insurance on those junk mortgages. The result: consumers are low on cash, banks are low on cash, investors, insurers and banks are low on cash. The liquidity of the market almost doesn’t exist.

The fall of Lehman Brothers Holdings on September 14th, 2008 started a domino effect within the financial world. Many of their investments were foreign-funded, and as a result of that the US mortgage crisis quickly spilled beyond America’s borders. The German branch of Citigroup was heavily stressed by the bankruptcy of Lehman Brothers. The Indonesian stock market suspended trading after a 10% on October 8th of 2008. Thailand, Russian and Ukraine followed. Merrill Lynch was sold to Bank of America. Black Monday turned into the Black Week for the US markets: The Dow Jones fell 456.3 to 8122.2 leading to a 21pc dip, The S&P 500 fell 53.4 to 856.5, a weekly drop of more than 20pc (TMG. Financial crisis: US stock markets suffer worst week on record, 2008). This brings a whole new problem in the financial market: banks close their doors to loans, not just mortgages, credit cards and personal loans but loans to big companies, such as GM, IBM etc. These companies often rely on loans to support their productivity, but with this market seize it is hard for even them to obtain a good credit.

What started as a mortgage crisis in the middle of 2007 has quickly developed into a worldwide financial crisis. The failure of U.S. and European investment banks, insurance firms, mortgage banks and governments to contain and resolve the subprime mortgage crash has allowed for it to spread and grow into a huge, complex financial mess which is now known as the market crash of 2008.
References

Census Bureau Reports on Residential Vacancies and Homeownerships. US Census Bureau. 26 October 2007.
http://www.census.gov/hhes/www/housing/hvs/qtr307/q307press.pdf

Standard & Poor’s Home Price Indices. Standard & Poor’s S&P/Case-Shiller. New York, November 25, 2008.
http://www2.standardandpoors.com/spf/pdf/index/CSHomePrice_Release_112555.pdf

US Foreclosure Activity Report. RealtyTrac. Irvine, January 29, 2008.
http://www.realtytrac.com/ContentManagement/pressrelease.aspx?ChannelID=9&ItemID=3988&accnt=64847

Financial crisis: US stock markets suffer worst week on record. Telegraph Media Group Limited. London, October 10, 2008.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3174151/Financial-crisis-US-stock-markets-suffer-worst-week-on-record.html

Tags: market crash 2008 | lehman brothers | foreclosure | census | financial crisis |   CDS | debt | credit

History

Ford Motor Company was found in June 16, 1903 with the simple idea of making quality, affordable vehicles so people can afford to buy and use them as they were not just a matter of luxury.  Henry Ford was in the root of this new, Detroit-based car manufacturer. On par with 87 other automobile manufacturers this young company had to quickly improvise in order to stay afloat. Many great innovations came to life in 1920’s – Ford was the first car company to introduce a conveyer-belt assembly line which allowed workers to produce complete vehicles in a matter of hours. Ford’s worker’s policies were also notable – higher wages, profit sharing and opportunities for the handicapped were a phenomenon in the industry. In 1919, Henry Ford retired, handing over the leadership to his son, Edsel. Further down the road, in 1943, Henry had to come back to the management position after the death of his son. On September 1st, 1945 Ford resigns conclusively.

Ford Motor Co has a long history and a great experience in the areas of vehicle manufacturing, alternative fuel innovations and electronics. By 1944, during World War II Ford manufactures B-24 aircraft and M-4 tanks for the US Government. Trough Philco, in 1965 Ford cooperated with NASA in their mission of putting a man on the moon.

Property, Financial & Current Lawsuits

As of the end of 2008, Ford Motor Co owned and operated 95 plants, 41 distribution centers/warehouses, 50 engineering/research & development facilities and 72 sales offices worldwide.

The total sales & revenue (the numbers are in millions, except for the stock prices) for the Ford Motor Company by the end of 2007 are $172,455. The same were equal to $160,065 for the year of 2006 and $176,835 for the year of 2005. The Net Income/Loss were reported as -$2,723 for the year of 2007, -$12,613 for the year of 2006 and $1,440 for the year of 2005. The Ford Common Stock was priced by NYSE at high/low $8.96/$7.35 (Q1 2006) and $8.06/$6.17 (Q2 2006) and $9.48/$6.06 (Q3 2006) and $9.19$/6.85 (Q4 2006). The current stock price (as of February 6th, 2009) is $3.00/$2.80.
According to the current 10K report for 2008, there are 3 state lawsuits, 2 class action lawsuits and 3 other lawsuits, currently in process for the company.

Products

In addition to vehicle manufacturing, Ford also produces vehicle parts, accessories and additives. Ford Motor Co is the manufacturer of the vehicles under the brand of ‘Ford’, ‘Lincoln’, ‘Mercury’, and ‘Volvo’. The company also produces car parts, accessories and additives (such as paint and oils) under the ‘Motorcraft’ brand. Fodor Motor Co is also a stockholder of Mazda. Ford Motor Co also supports several Governmental agencies in their development and manufacturing efforts.

Services

Ford Motor Co provides a wide array of services related to the automotive industry. Besides vehicle manufacturing, Ford also provides parts, accessories and additives (such as paint and oils) under the ‘Motorcraft’ make. Ford Credit is the financial service unit of Ford Motor Co which services loans to private and corporate parties. Ford Racing and The Ford Performance Group manufactures, sells and services vehicles & parts for NASCAR, Formula One and off-road enthusiasts.

Management

William Clay Ford, JR is Ford Motor Company’s Executive Chairman since September 1st, 2006. He started his journey within the Ford Company back in 1988 as a Director. Mr. Ford is also a member of the Environmental and Public Policy, Finance committees.

Allan Mulally is Ford Motor Company’s President and CEO since September 1st, 2006. He is also a member of the Finance committee.

Michael E. Bannister is Ford Motor Company’s Executive Vice President. He is also responsible for all operation within the Ford Credit subsidiary of Ford Motor Co.

Markets, Strategy, Research & Competition

As of today, Ford has established their business worldwide. In the 1920s, vehicles by the Detroit based company were mainly directed towards the US market. Later on, especially after the introduction of the assembly line, Ford breaks ground in Europe, Asia-Pacific, South America, Africa and the Middle East. In the beginning continental models would differ from country to country, with time that has changed and nowadays models differ mainly by continent.

The company strategy is to keep vehicles affordable and safe. Ford vehicles are appealing for a wide arrange of individuals, government as well as businesses. The company manufactures a broad spectrum of cars, trucks, vans and SUVs which are being used as daily drivers, NASCAR, rally & sports cars, test vehicles and military & government transport.
Ford Motor Co invests steadily in research and development. The Ford Company is the world’s first vehicle manufacturer to introduce a hybrid SUV. The company also developed many environmentally-friendly concepts, such as soy foam seats, 6-speed variable rate transmissions and fuel cell hybrid electric plug-ins.

The Detroit based company faces sturdy competition, especially in the recent years. Foreign manufacturers such as Toyota, Honda and Hyundai are on par and even ahead in some areas of development, sales and marketing. Domestic rivals such as GM are also a threat.

Tags: Ford | automobiles | cars | GM | Huyndai | Toyota | Honda | crisis | 10K | Detroit

With the current economic crisis spreading worldwide, many individuals are forced to seek new ways to save businesses, homes and other property. Not that long ago, the word ‘bankruptcy’ was something feared more than death and it was avoided at all costs. Nowadays, however, many resort to bankruptcy lawyers in order to be able to get out of the hole and at least partially save what they have. In a matter of fact, as per CNN ‘consumer bankruptcy filing increased almost 50% over the previous year’ and we are talking million of filings here.

Bankruptcy brings a lot of consequences that might have a very negative impact on your financial ‘grade’. Here are several facts to consider:

1) You are still obligated to pay off some of your debts: Although you will probably get rid of a lot of your simple debts, you may still be responsible for repaying, for example your mortgage or your car loan. There are certain exemptions of that rule in some states, so make sure you check that before filing. You also won’t be able to get rid of your student loans or tax debts.

2)  Bankruptcy will leave a mark: Bankruptcy filing stays on your credit report for 7 to 10 years. It will be there, on top of the negative list when you apply for credit cards, auto insurance, mortgage, rental and even a job. It will be hard for you to obtain any normal loan repayment terms.

3) Bankruptcy costs a lot: Besides the high interest rates you will most likely be getting as a result of your bankruptcy filing, you will also have to pay lawyer and filing fees.

4)  Bankruptcy process takes time: In most cases you may be required to take financial planning and credit counseling session before you are even allowed to file.

5) Bankruptcy filing is restricted: You can file once every six years. So if it does not work the first time,  you will have no other options for the next 6 years. Re-filing has a waiting period of 180 days.

6) Bankruptcy screws up your co-signers: Bankruptcy doesn’t protect the co-signers of your debt. If the filing discharges your debt,  your creditors are free to go after the co-signer.

7)  Bankruptcy won’t save your from acquiring interest:  All of your nonchargeable debts are still acquiring interest and other fees.

8 ) You still may not be able to save your property: In some cases, when you property debts are higher than the discharge exceptions, the bankrupt’s trustee may have to liquidate (sell) your property in order to pay the creditors.

9) There are different types of bankruptcy: Chapter 7 bankruptcy obligates the debtor to turn over all all nonexempt property to the bankruptcy trustee who then liquidates it and repays the loans.  Chapter 13 allows the debtor to keep their property and enter into a repayment plan with 3-5 years term.

10) You can fail in bankruptcy: If you continue missing payments, for example on your mortgage, even though you are under a bankruptcy protection your mortgage lender can go ahead and proceed with foreclosure.

Please be advised that the above facts can have exemptions and vary by state.

Tags: bankruptcy | chapter 7 | chapter 13 | filing | debt | credit | taxes

People often tend to overlook small things, but we have to always remember: the devil is in the details. Little things can change our lives, and it is not necessary that they are complicated. Take a look at this effortless list and pick what you can do to save some money the easy way.

Coffee, or the Starbucks Effect – since when do we need coffee every morning in order to get us going? Price it at least $2 per day, and in one year you can easily spend up to $600. Brewing your coffee, on the other hand will cut that cost in half.

Change your bulbs – 100 Watt regular bulbs burn 10 times more than an energy saving CFL bulb. It is good for your wallet; it is also good for the environment.

Call your banks and ask them to lower you APR’s or waive some fees. Ask to talk with a supervisor.

Save on transportation by riding the bus / subway or carpooling. Even if you do it only once a week, it will save you a lot of money on gas and other car expenses.

Don’t buy bottled water – tap water is perfectly ok to drink. At $2 per 1.5 l bottle, you are throwing away up to $1000 per year on water.

Buy generic products – they are made from the same ingredients but cost less, because you are not paying for the brand (and for their shiny packaging).

Unsubscribe from all those magazines, newspapers and cable TV. Take a walk in the park instead or read a real book.

Brown bag it and stop buying from the vending machine – first of all it is expensive, second its junk food and third one hour later you will be hungry again.

Buy stuff on sale, around the holidays and look for coupons online.

At the end, if you follow the above easy steps, you will probably save at least $3000 per year. Not bad, right?

Tags: save money | frugal living | gas

There are several websites and even programs out there that let you search a zip code for gas stations with lower gas prices. But is it really cost-effective to spend time and gas driving around just to save a questionable amount of money?

Let’s do a quick estimate. Say a gallon of gas costs $4.00 at Gas station 1, and that gas place is 1 mile away. Gas station 2 sells the same gasoline for a lower price, $3.85, and its 3 miles away. For this example, our vehicle will have a 12-gallon fuel tank and it will burn approximately 25 miles per gallon (city driving).

So, after calculating the cost of driving (which is a mix of gasoline cost and vehicle amortization cost) you basically save $1.48 per fill-up. And if you are fueling 4 times a month, 48 times per year, your savings will come to around $70 annually. Now, if you also add the cost of the time you will spend in driving (which has no price) my guess is that you will come up with the right answer to the question, ‘Is it really practical to tinker around for cents?’ all by yourself. For the rest of us, who really hate math – it’s not worth the hassle.

Tags: gas | gasoline | cheap gas | vehicle | car | auto

Not that long ago Chrysler’s marketing department came up with a new way to sell their cars and boost up the manufacturer’s plunging sales. They have turned the consumer’s concentration to a possible light in the tunnel in the recent gas price craze - under the motto ‘Let’s Refuel America’ Chrysler offered what firstly seemed as a great benefit to the buyer: a $2.99 gas price guarantee for up to three years. Sounds wonderful, but how about the fine print?

Unfortunately, the guys at Chrysler ‘forgot’ to mention the details in their commercials. The first and the biggest hit on the customer is the fact, that the buyer will not receive the usual inducements: Most of these vehicles normally are sold with cash-back incentives. However, if you go with the ‘Let’s Refuel America’ plan, you won’t be able to take the green as well, although some of the cars in this plan also offer some cash-back — $500 plus the gas as opposed to $2,500 cash back, for instance. The second caveat is the octane restriction - the plan only applies to diesel and low-grade gasoline, with octane level no higher than 87. Which means that if you pump mid or high-grade gasoline, you will be paying the full price. But that’s not all! The ‘Let’s Refuel America’ deal will only cover you up to 12 000 miles per year. Every additional mile on top of that - you guessed right, regularly priced gas. And last, but not least - you are restricted to maximum of 708 gallons per year.

So after doing the simple math, at average price of $4.20 per galon the ‘Let’s Refuel America’ deal will save the buyer about $800 per year, or up to $2600 for the three years in which the incentive is active. Knowing that you could have received at least $2500 cash back on that vehicle, the ‘Let’s Refuel America’ program doesn’t really save you a dime.

Tags: gas | fuel | jeep | chrysler | Let’s Refuel America | $2.99 guarantee

When credit cards first came into existence there was only one type, the unsecured credit card. If you had good credit and passed all of the relevant criteria, such as a specific income level and working at the same job for a number of years, then you were approved for a credit limit set by the financial institution. Unfortunately many people run into financial difficulties and do not qualify for this type of credit card. Thus the door was opened to the secured credit card.

The secured credit card is basically a credit card for individuals with poor credit (such as those who have been discharged from bankruptcy); or those who have a lower income. This type of credit card is one in which you put down your own money as collateral. You may then use the card and borrow in this manner until a time at which the credit card company is willing to consider extending you credit by way of an unsecured credit card. This will happen once you have proven that you can use credit responsibly and can pay your bills on time every month.

In most cases, the limit on a secured credit card is low, in the range of $500 to $1000. This is a small enough amount that the person who is attempting to rebuild their credit should not run into any financial problems. Most companies are willing to consider a responsible credit card holder for an unsecured card after they have been with the company for anywhere from one to two years. The request will be considered on a case-by-case basis. Once you feel you have proven yourself with responsible credit card use, do not be afraid to approach the company about switching to an unsecured credit card.

There are a number of companies that issue secured credit cards but it is important that you look for one that does not charge an application fee. Most have an annual fee as this is a standard practice, but make sure you compare the fees from company to company before you make a final decision.

Another important point of note is that before you apply to any particular credit card company, find out if they make it a habit to report their credit information to all three credit reporting agencies. After all this is a primary benefit that you should take full advantage of.

Tags: credit card | secured credit card | debt | apr | loan

Millions of Americans are seeing inflation in the price of gas and groceries, but they are being told that the heart of the consumer engine is spending. Some will even argue that in some areas, costs have dropped (like housing) and interest rates on loans have fallen, making it an ideal time to buy a home. But, for those struggling to put food on the table and make the long commute to work at the same time, these conflicting messages can be troublesome. If they continue to spend at the level that they can’t support, they may end up having to take a cash advance to help pay for daily expenses, instead of reserving payday loans for emergencies as they are meant to be used. This can put them further in debt, if spending is not curtailed, and new budgets drawn up to accommodate rising prices.

The first thing a budget can help with is figuring where all the money is going. It may surprise some families to realize that they are now making an additional car payment in the form of gas costs just to make it to work. If they aren’t keeping track of the grocery or the gas bill, they won’t be able to see where the biggest savings might come from. They can’t make decisions based on actual numbers and instead might opt for feel good economics instead of some needed hard choices.

Once a budget is drawn up, people know where modifying behavior will make the most financial sense. Maybe carpooling with your spouse and eliminating one car is the way to go to help you meet your expenses during times of high inflation. Maybe shopping at the big warehouse club is actually increasing your grocery bill because it is too far away and it costs more to get there. Maybe, you can find out which foods cost less and can be used to build a menu during the week without making people go hungry in your family. All the little things add up in a budget and can help you to keep your spending in line while continuing to take advantage of specials when they are available.

Would you pay money to lend yourself your own money? No? Well if you wouldn’t do so, why would you take an Refund Anticipation Loan?

It probably seems easy at first: sing a paper and walk out with a check against your coming refund. Yes but no! Your tax RAL will cost you much more than you can imagine. As an example, H&R Block’s RAL cost is about $230 for a $3000  refund. And you get that refund on a Emerald Card with 36% APR!

Such loan makes no sense. You are way better filing with e-file and getting the refund deposited directly into your bank account. It only takes about a week after the e-filing to receive your funds.

Tags: e-file | filing | hr block | taxes | ral