I think that in our current system, the penalties for skipping out on your obligations are not severe enough. The system should be set up such that it’s a no-brainer that someone with the means to keep paying should do so. Faced with the prospect of 10 years in debtors prison, I’m sure all but those in the worst financial condition would choose to keep paying.
That said, anybody who is in this situation needs to evaluate the value of their credit rating. Is your credit rating worth $100,000 or whatever amount you stand to save? Probably not. Since that is the only penalty in non-recourse states, why not break your contract? If you sign a 2 year contract for a cell phone and 2 months later decide you don’t want it, you cancel your contract paying the early termination penalty. The cell phone companies were wise enough to create this penalty for breaking your contract, such that getting out of the contract hurts.
The banks were foolish. They loaned money to people they shouldn’t have. They eliminated downpayment requirements. They failed to create a system of penalties for non-payment. Just because the banks were stupid, doesn’t mean you have to be. If it makes financial sense: walk away.
Now if I were running the banks, this is what my fix would be for this moral hazard. Create a bank blacklist. If you have a foreclosure in your past, you won’t get credit for 30 years, period. No credit cards, car loans, mortgages, margin trading, nothing. Faced with 30 years of having no access to credit, I think I’d keep paying and I’m sure others would as well.
Somewhat surprising to me, a post I did on Catalina grocery coupons seems to be a big traffic source from Google. So I thought I’d do a post giving some more info on what I know about Catalinas.
There are 2 primary types of Catalinas, abvertised and unadvertised. All Catalinas require that you scan your store card during the transaction. The store circular will tell you how to get advertised Catalinas. For example it might say “Spend $20 on Proctor and Gamble products and get $10 Off Your Next Order (OYNO).” So if you go to the store and buy the required products, a Catalina coupon for $10 ONYO will print out. While not stated in the circular, it appears that you only need to spend $20 based on the non-sale prices of the items. So if the toothpaste is on sale for $1 but is regularly priced at $2, the $2 counts towards the $20 required spend. Those that are quick with math probably already see the trick here. If you buy 10 toothpastes for $10, you’ll satisfy the $20 required minimum spend, and trigger the printing of a $10 OYNO coupon. Effectively you got those 10 toothpastes for free.
The second type of Catalina is unadvertised. It’s based on what you are buying now or what you have bought in the past, remember you need you use your store card to get Catalinas to print out. Because we have a cat, we buy cat food at the grocery store. 2 weeks ago I received a Catalina that told me of another promotion. Buy 12 cans of Friskies get a $2 OYNO, buy 24 cans get a $5 OYNO. Clearly they are tracking my purchase history as I’ve never received a Catalina for dog food, diapers, or Ex-Lax. They know I don’t have a dog, a baby, and I’m not constipated, though I’ve seen Catalinas left behind for these items. But the coupons they do print out are sometimes quite good. I received a coupon for $1.50 off 1 Classico pasta sauce which is 50% off regular or even better if the sauce is on sale (I theorize that this catalina printed because I bought Ragu in the past). I received another for $1.50 off Ball Park hot dogs, which again is pretty darned good when the hot dogs are on sale for $2.50.
So there you have some more info on how Catalina grocery coupons work. If anybody has anymore information be sure to share.
I recently found out about another cashback rebate site: Cashbaq. This one seems relatively new to the party but does offer some particularly good percentages on certain sites.
First an overview. I have posted in the past about how cash rebate sites work. Basically the process is you sign up with the cashback site before making an online purchase. Then you find the link for the store you want to purchase at using the cashback site. You click the link, make your purchase, and approximately 60 days later you get a percentage of your purchase back as a rebate.
So here is how I took Cashbaq for a spin. Entertainment.com was (is still maybe) having a special to get the Boston book for $20 with free shipping. Cashbaq offers $10 back per book purchased. So I linked through Cashbaq and got my book for $20, in approximately 60 days I should have $10 back from Cashbaq. As a bonus, they give new members an extra $5 the first time they cashout. So I’ll be getting $15 back from a $20 purchase. Plus I’m getting my 2009 Entertainment book, which hopefully I’ll use more completely this year…
I noticed a few stores that seem to be good cashback deals compared to Fatwallet. Buy.com and Staples both have 3% cashback on Cashbaq vs 1% and 2% on Fatwallet. Priceline (my favorite site for getting cashback) is still a better deal on Fatwallet, however. So have a look for yourself and compare for the places you shop, Cashbaq may offer you a better deal.
While we probably could have done without it, my wife has been bugging me if we were ever going to get a landline phone. I heard about MagicJack which seems like a really good deal with an entire year of phone service for $40 ($20 for subsequent years). Unfortunately it’s just too unflexible for me. It’s a USB device that you have to plug into a PC and install some software/drivers. Naturally I don’t want some flaky device hooked up to my PC, and just the electricity to set a standalone PC to run it would cost $5-$10 a month.
So I looked into some more standards driven options. Vonage and most of the other big name VoIP providers use a standard called SIP to route telephone calls over the Internet. Unfortunately Vonage $17.99 a month for the least expensive plan. Then I read about how some people are combining GrandCentral(a free forwarding phone number service) with Gizmo (a SIP based competitor to Skype) to give them telephone service completely free (incoming service anyway). Unfortunately for me GrandCentral doesn’t seem to have any numbers available to give to me for free, so I’m SOL there. Gizmo however will sell me a number for $4 a month ($3 a month if I sign up for a whole year).
So I decided to go to the Gizmo route. I picked up a Linksys PAP2t-NA SIP device on EBay and hooked a regular telephone up to it. After some quick configuration (simple but not exactly user friendly) I was able to make a test call to my cell phone. I am quite pleased with the audio quality, which so far is equal or better than an old school regular telephone from the phone company.
So now we have an old school phone number. Still waiting for it to ring…
So while I’ve disputed it for a long time, it appears the US may finally be in a recession. No I don’t know this for sure but it seems likely that we are in a recession that began in July 2008 (the start of the first quarter to show negative GDP).
While it appears likely the we have finally entered a recession, I’d say it’s far from a sure thing. You may have noticed prices at the gas pump are half of what they were 4 months ago. While I imagine for most people fueling their vehicle is actually a very small part of their overall budget, that $20-$30 extra bucks every two weeks for some reason makes people richer/poorer depending upon which direction fuel prices are going. What’s really funny is the government could raise taxes an equivalent amount and nobody would blink an eye. But display that price at the pump and people complain. Along with the cheaper fuel, lower prices for everyday goods are likely to follow. The American consumer is far from dead.
So then we have the media effect. Right now it’s “cool” to be frugal. Clip some coupons and shop at the discount grocer and you’ll get an article written about you. Suddenly saving money is big news. Fortunately, for the most part America’s sense of economics is not too keen. While people will try to be frugal, they’ll be largely unsuccessful. They’ll read that flat panel TV’s use less power than CRTs and run out and buy one to save on their electric bill. They’ll drive out of their way to save $0.67 at the discount store. They’ll sign up for their cable providers “bundle” offer to save them money and end up with a higher bill in the end. They’ll be lured to the mall by offers of 50% off but neglect to notice that the original price has been market up.
Time will tell, but we’ll see where the economy goes from here. My opinion is that reports of the death of the American consumer are greatly exaggerated.
While people seem to be quick to blame the Bush administration for the current mortgage crisis, history does not support this claim. I found a interesting, though 2 months old now, article that has some choice tidbits of information that are widely unreported.
“Spurred by worries that Fannie and Freddie were cooking their books and taking too many risks, Treasury Secretary John Snow proposed placing the companies under Treasury oversight with strict controls over risk and capital reserves.”
This proposal was back in 2003! So what became of Snow’s plan for strict oversight? It was blocked, of course, by none other than Democrat Barney Frank.
“These two entities—Fannie Mae and Freddie Mac—are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. “The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”
But it’s so much easier to blame the Bush administration, isn’t it?
While traveling in Hawaii for my honeymoon, I discovered a new feature that hotels have added to save on energy costs: motion activated air conditioning. Simply put, you must be in the room and moving around for the air conditioning to run. It’s the second part that is a real gotcha, while you’re up and moving around things are fine. Then at 2am you wake up sweating because you weren’t moving in front of the motion detector. Grrr…
The first night this happened I got up a few times to walk over to the thermostat but the A/C clicked on even before I got there (motion detection). Needless to say I didn’t sleep well that night. The next day I took advantage of the hotels free internet to do some research. As it turns out some folks over at FlyerTalk.com have been experiencing this new feature for several months. Fortunately for me, they had some workarounds.
The first workaround suggested was a mylar balloon positioned near the motion detector. While I’m sure this would work great, I didn’t bother to pack one in my luggage???? So, I continue reading. Apparently the trick is to put the thermostat in “bypass” mode. To do this you press the on/off switch and the down arrow at the same time. So I tried it. Sure enough the thermostat displayed “bp” and from that point on ran constantly for 48 hours until I had to repeat the trick.
So it sounds like motion detection A/C is a good idea that is not quite ready for prime time. They need to figure out a way to keep it running while you sleep. Until then, I expect there will be backlash.
Here’s a great YouTube video montage of C-SPAN clips. Certainly seems to be at odds with what you hear on the news. Republicans actually were calling for more regulation of Fannie and Freddie but their attempts were blocked by key Democrats, including of course Barney Frank…
Be sure to watch all the way to end for a clip where Bill Clinton agrees with the Republican attempts to regulate Fannie and Freddie and criticizes congressional Democrats for blocking the new regulation.
While I commented previously on how I agreed with the previous Bear Stearns and AIG bailouts, the latest $700 billion bailout is a new breed (2.0) of bailout. What’s different this time around? It’s not clear what the government is buying and it seems that this time they won’t be getting a very good deal.
Last night Larry Kudlow of “Kudlow and Company” described the importance of market based pricing for the so called garbage securities. That if the government steps in and creates a market, the market players will work to fairly value these securities. Contrary to popular belief, the distressed securities have a value greater than 0 but exactly what that value is is quite difficult to determine. Introduce a capitalist market for valuing and trading these securities and we can be sure they will be fairly valued.
Government is known for it’s ability to overpay. Everybody has heard of the $800 hammer. Our government clearly lacks the ability to value things appropriately, why will it be any different this time?
