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NEW YORK (Money) — Question: I’m 49 and my wife is 50. We agree on most things, except how much of our investment portfolio we should keep in cash. She is completely risk-averse and focuses only on the “spanking” we took in the market last year. I feel that by letting so much money sit in CDs earning 1% to 2% we’re missing out on better opportunities. Currently, we’ve got about 500,000 in cash as part of an otherwise well diversified portfolio. Can you help me convince her to take half that money and buy into some dividend-paying blue chips? –Garry, Atlanta, GeorgiaAnswer: I’m shocked — shocked! — that you and your wife don’t see eye to eye on risk and investments. I’m joking, of course, since there’s tons of research showing that when it comes to investing, women are from Venus (whose denizens tend to trade less frequently and hold more conservative portfolios) and men are from Mars (where residents thrive more on pedal-to-the-metal investing strategies and focus more on an investment’s reward potential than its risks). Research by University of California-Berkeley finance professor Terrance Odean, for example, shows that men trade far more frequently than women — and earn far lower returns. Interestingly enough, however, when Brooke Harrington, a research fellow at the Max Planck Institute and a former assistant professor at Brown University, looked at investment clubs, she found that mixed-gender clubs performed better than men- or women-only groups, largely because they tended to pick a more diversified group of stocks. So what does this have to do with the situation you and your wife face? Well, to me it suggests that rather than you trying to convince your wife to do what you think is best (or have me try to persuade her), you and your wife might be better off working together to come up with a compromise that you can both agree on. After all, it’s not like there’s only one right answer here. You’re trying to manage and invest your money in a way that provides a reasonable return for the amount of risk you’re willing to take. And this tradeoff of risk and return is a subjective matter. What’s comfortable for you may not be comfortable for your wife. So I think you and your wife need to sit down and make your respective cases. But both of you need to realize that “winning” in this case isn’t talking the other person over to your point of view. It’s coming away with a portfolio you can both live with. Now, part of this discussion can, and should, be touchy feely. By this, I mean that you should let your wife know why it bugs you to be giving up opportunities, and she should explain to you why she puts such a premium on safety and wants to avoid another spanking, in the market. But you and she should also go over some numbers so that your eventual cash position isn’t decided on gut feeling alone. You can start, for example, by figuring out how much of a cash reserve you need. At a minimum, you probably want three to six months’ living expenses in cash so you have enough ready money to see you through a job loss or emergency. If you know you’ll be buying any big-ticket items like a car or spending on large projects, like a home refurbishing, within the next few years, you should probably set aside those funds as well in a bank money-market account, CD, or high-quality money-market fund. Once you’ve figured out how much you need as a liquidity reserve, the next question is how to divvy up the rest of your investments among stocks, bonds, and cash. I’m guessing that at your ages you and your wife are investing primarily for retirement. In that case, the main issue is how aggressively or conservatively you want to invest given the number of years you still have until retirement and how much income you’ll eventually need to draw from your assets. As a rule, the more of your portfolio you devote to stocks, the higher the returns you’ll earn over the long run and the larger your nest egg (and eventual retirement income) will be. But as anyone who lived through the last year well knows, a big stock stake means the possibility of big setbacks too. So you and your wife need to understand how different mixes of stocks, bonds, and cash might affect your future retirement security. You can get a pretty quick sense of that by trying the Morningstar Asset Allocator tool. You can use the interactive sliders to create different portfolios and then see how large a nest egg or retirement income each is likely to generate, as well as how large a loss you might suffer in the short term. This will help you and your wife see what you may be gaining and giving up by investing more aggressively or more conservatively. If you’re willing to put a little more time into this, you can also check out more sophisticated calculators such as T. Rowe Price’s Retirement Income Calculator or the myPlan Retirement Quick Check or Retirement Income Planner tools at Fidelity’s site. These tools allow you to factor more information, such as 401(k) contributions and projected Social Security payments, into your analysis and give you a more nuanced view of the pros and cons of different investment strategies. If you and your wife have the kind of confab I suggest and follow it up by running a few numbers, I think you should be able to come away with a mutually agreeable answer to how much of your assets should be in cash. What’s more, you’ll each come away with a better understanding of how your partner thinks and feels about key financial issues, and that’s important not only for achieving economic security but maintaining domestic tranquility too.

Source:CNN

NEW YORK (Fortune) — Karen Weaver, global head of Deutsche Bank’s securitization research division — responsible for analyzing credit default swaps, collateralized mortgage obligations, and other exotic Wall Street products — said last week that 48% of U.S. mortgage owners will end up owing more than their home is worth by 2011.The figure may have left many Americans wondering how this could be possible. But consider that 27% of U.S. homeowners with a mortgage are already “underwater.” And according to Deutsche Bank, home prices may fall another 14% before hitting a bottom.Fortune spoke with Weaver to understand the implications of her recent forecast, why it will affect regions that missed the housing boom, and why still-falling home prices are hurting even the best borrowers.How many Americans are underwater?Currently we estimate that 14 million homeowners have negative equity. However, based on our home price forecast, as prices continue to fall we think that number could reach 25 million, or 48% of all mortgagors.Where does this leave us?The obvious takeaway of falling home prices and being underwater is what it does for defaults. But there’s a bigger implication, which is that when we look at the economy over the past decade or two, it’s been very much a consumer economy. What has been driving the consumer hasn’t been gains in incomes. What has been driving them is easy credit and rising home values. And the fact that their home price was rising and they could borrow against that through home equity lines or loans or refinancing, it augurs for a very different economy going forward if people don’t have that option.0:00
/2:01A delicious cash flowWhat mortgages are most responsible for this problem?The subprime loan borrower is more likely to use a second mortgage when purchasing a home, so they’ll put down very little equity when they’ve purchased. So the same decline in price is going to leave them in a worse negative equity position than someone who put down 20%. On option ARMs (adjustable rate mortgages), the way those loans work is that the payments are very small. And the difference between a normal payment that would cover someone’s full interest and principal, and these lower teaser payments, is added to the balance. So even if prices did nothing, an option ARM could end up with negative equity.Isn’t it the case that many of those were issued at the peak?Exactly. These products — option ARMs, subprime, etc. — were regarded in the industry as “affordability products.” What they were designed to do is to provide options to customers in areas where home prices were unaffordable. In other words, given an individual’s income, it was prohibitively expensive to purchase the average home.So by creating products that lowered the payment, or lowered the amount of down-payment, it enabled more people to buy a home. It also perpetuated the bubble. To give an example, if you look at Los Angeles: At the peak of home prices in LA, only about 9% of people living in Los Angeles made sufficient income to purchase the average house. Now, a number of those people had purchased their homes beforehand, so it was moot to them. But for a first-time home buyer, it meant that it was highly unlikely that you were able to purchase a home unless you used one of these very aggressive products that stretched your [income].This is occurring in states where speculation was rampant — for example, Florida, California, and Nevada — but where else?People are surprised at the extent to which subprime mortgages were used in the Midwest. In a lot of cases the Midwest has had a manufacturing recession for a while now. It’s going through a paradigm shift. So in the industrial Midwest, subprime lending was more popular than some people might think.I think the surprise is prime quality mortgages. That’s where the biggest deterioration could take place in the next leg. Right now about 16% of those borrowers are underwater. If our home price forecast is correct, down another 14%, we could have 41% of borrowers underwater in the prime mortgage space. That’s what happens when another 14% decline occurs.Does this lead to a new wave of foreclosures?Well, we don’t think that the wave has stopped in any sense. But the wave is clearly building. That is evident by looking at serious delinquencies. If you look at a chart of how many borrowers have missed more than two payments, a large portion of those people are going to end up being foreclosures. Well, that rate of serious delinquency has been rising rapidly and continues to rise, pretty much in tandem with unemployment. As long as you have serious delinquencies going up, you know for the next year and a half, a large portion of those are going to turn into foreclosures.Of subprime and Alt-A (Alternative A-paper) borrowers, about 33% of those borrowers are seriously delinquent. If you look at prime jumbo, the highest quality mortgages, 6.2% are seriously delinquent. That sounds like a low number. But two years ago that number was 1%. It’s a very straight trajectory from September 2007, pretty closely mimicking unemployment.At what point of being underwater do homeowners start falling into foreclosure rapidly?Once you get to the point where negative equity is significant — for example, 25% or more — there have been studies that suggest you get more strategic defaults. People say, “I bought my house for 500,000, it’s worth 250,000, there are 10 available for sale in my neighborhood. It makes no economic sense to spend the rest of my life trying to pay off a 500,000 debt when there’s no reasonable likelihood to expect this house to go back up to 500,000.”This might sound extreme, but we have borrowers who bought a 500,000 home in California at the peak of the market on 50,000 of income. So for them to devote their gross income for the next 10 years solely to paying off [their] mortgage doesn’t make any sense.The Federal Reserve of Boston recently studied a similar housing crash in Massachusetts during the 1980s. What did they find?In Massachusetts, there was a downturn in their housing market in the late ’80s. The Federal Reserve [Bank] of Boston put out a report last year, and in their report they looked at how many people defaulted once they had negative equity. If a borrower has equity, and they can’t maintain their home, that borrower is going to sell rather than default. So the question is, once someone does have negative equity, what’s the propensity to default?In Massachusetts, less than 7% of borrowers who had negative equity defaulted. This speaks to the inherent credit worthiness of mortgages — why they’re always considered to be a low-risk investment.Is it fair to say that that will play out the same now?Now, for example, if we believe the Deutsche Bank forecast and 25 million borrowers fall underwater, unfortunately we think 7% will be too low. The reason is when you look at Massachusetts in the late ’80s, you had much better quality borrowers. In addition to that, unemployment in Massachusetts peaked at 9.1%. We’re already at 9.5% [nationally]. In California, unemployment is at 11.5%. We do know that most people try to maintain their home. They try to keep their mortgage current. But to expect it to be as low as 7% is very wishful thinking.

Source:CNN

NEW YORK (Fortune) — Is the financial system stable enough yet to fix itself? Can the government take off the training wheels? That’s the significance of CIT Group’s crisis, beyond its role as a lender to about 1 million small- and medium-size businesses.The government’s decision to let CIT careen toward bankruptcy was contrary to the serial bailouts that Americans have come to expect over the past year. But that gamble looks like it may pay off by showing that parts of the financial system can operate without Washington support.CIT’s board has reportedly approved a deal for a 3 billion short-term loan from a group of its largest bondholders, including Centerbridge Partners, PIMCO, and Silver Point Capital. The bridge financing should give CIT the time it needs to try and pay down or renegotiate the money it owes these lenders. And it significantly increases the odds that CIT will make good on the 1 billion debt payment due to its bondholders this August.CIT had already received 2.3 billion last fall from the government’s Troubled Asset Relief Program; that money would have been lost if CIT had been forced to declare bankruptcy.The New York-based firm’s ability to craft its own rescue deal could help reassure those people worried that the banking system would forever need Uncle Sam’s support in order to function.0:00
/0:49CIT news boosts Asia markets”This was the Obama administration drawing a line in the sand,” says management consultant Peter Cohan. “It wouldn’t be that difficult to spend a few billion from the TARP, a paltry amount compared to the money spent on Bank of America, Citigroup, or insurer American International Group. But we needed to see that the financial system could clean up its own messes again.”The deal would indicate that the bondholders are strong enough to aid a crippled peer and make money at the same time. The lenders, by extending money to a troubled company, will make a return on their investment commensurate with their capital at risk. The Wall Street Journal reports that the bondholders will charge 10.5% interest, a lucrative rate given that the Federal Reserve’s target overnight lending rate is near 0%.Now CIT has a window of time to get rid of the debts that could push it into bankruptcy by persuading bondholders to swap debt for equity in the company or for bonds that mature at a later date.But the company might still have to file for bankruptcy if it can’t solve its debt problems, which would provide yet another gauge of the health of the financial system. In order for CIT to reorganize in an orderly fashion, it must obtain a debtor-in-possession (DIP) loan, which would give it the money necessary to operate while it reorganizes.Since the credit crunch began, foundering companies have had a hard time getting DIP loans, because banks have been too weak or too wary to provide higher-risk loans. But Cohan thinks a stronger bank like JPMorgan Chase (JPM, Fortune 500) would consider providing DIP financing, which would be another indicator that the system is more resilient and less in need of government aid.”Companies once believed they could run the risk of failure and worked like hell not to fail, but then we established the idea that politically connected or too-big-to-fail businesses would be given a government safety net,” says Charles Ortel, managing director of research firm Newport Value Partners. Now that safety net is being withdrawn.The ability for companies to successfully restructure under Chapter 11 bankruptcy protection is the economy’s way of picking up the pieces of a failed business and putting them to better use.”There is still value in CIT that can be picked out if the company files for bankruptcy,” says Sylvain Raynes, a co-founder of R&R Consulting, which advises on securitization, debt financing, and project finance. “In that scenario, it should work the same as always. The shareholders get nothing, the bondholders are paid, but likely less than the value of their bonds, and then another firm buys the assets that are worth something and grows its business.”

Source:CNN

NEW YORK (Fortune) — It’s often been suggested that the CEOs of the Fortune 500 are of above-average height. We’ve never done the number-crunching ourselves, but unofficial studies suggest the assertion has merit. Arianne Cohen, the 6′3” author of The Tall Book: A Celebration of Life from on High, maintains there is a tangible correlation between height and success — and offers up a variety of theories on why tall people tend to thrive in business and elsewhere. Fortune recently sat down with Cohen to talk about the role height plays in the workplace.So there’s really a connection between height and success?It’s huge. Tall people make an average of 789 per inch per year (for every inch above a person of average height) and this has been shown repeatedly in a set of four large-scale salary survey studies over 50 years in both the U.K. and the U.S.Numerous studies show that when bosses are given real and fictitious resumes of two competent employees, there’s about a 70% chance that bosses will pick the taller person for the job. In follow-up studies where the managers were asked to rate the employees coming in to the job, they gave flying color reviews to the tall people, which is hilarious because none of the employees had even done anything yet. The clear implication of this is that tall people are perceived as very competent before they ever display proof that they are.Why is that the case?One reason tall people are successful is that they are very memorable. We are evolutionarily primed so that whenever somebody sizable walks in the room, everyone in the room glances, because millions of years ago the biggest person was either going to be a protection or a threat. Being memorable is a major boon if you’re doing great work, but it’s a double-edged sword: If your work is awful, everyone is going to know it; they won’t forget.Tall people are also very good at guarding their personal space, and this pays off in spades in the workplace. When two friends are talking they tend to be 18 inches apart, when two coworkers are talking they tend to be about three feet apart. When a boss and an employee are talking they tend to be at least four feet apart. People always give tall people that full four feet. So when they do studies where they put a video camera in an office floor and track the body language, tall people are related to by everyone in the room with that “boss-space,” whereas with short people, coworkers crowd their personal space.So how do you explain shorter CEOs like Jack Welch and Ross Perot?These are broad statistics, and there are many short people who do succeed. But people of any height who are successful tend to display certain behaviors that correlate with success. Jack Welch’s wife actually told me that Jack thinks he’s really tall. And there are behaviors that correlate with success. Successful people, whether short or tall, are known and seen. You know when Barry Diller walks into a room, and Jack Welch commands his physical space. So shorter people who are powerful often display many of the same behaviors as tall people. 0:00
/7:21How to profit from freeThere are also a number of short CEOs who have succeeded by avoiding the corporate ladder and starting their own companies. This is definitely the case for Ross Perot, who is a self-made billionaire. Ron Perelman and Barry Diller also started their own companies instead of trying to move up from inside a company.What are the best and worst jobs for tall people?Tall people make more money and also tend to cluster in higher-paying fields. This is because they tend to thrive in fields in which social interactions take place, since they’re helped by their body language. So tall traits are going to shine in these kinds of jobs. For example, if I were a litigator, I would be able to use the full power of my tall body to command presence, whereas if I were a clerk sitting behind a desk, I would gain no benefit from being tall. Granted, plenty of tall people flock to other fields — for example, there are a disproportionate number of tall people in police work, firefighting work, and physical work where being tall would be of value.What advice do you have for tall people in a job interview?They say that when you’re networking, your goal is to be liked. You want to make someone as comfortable as possible. To do this you need to adjust your body language and be hyper-aware of yourself. In my case, this means no hovering. I go out of my way to kill the dumb jock stereotype by being as verbally coherent as possible, and I always sit down as soon as I possibly can. I gain nothing by standing there flexing my physical might.Isn’t it sometimes better to be short than tall?The big challenge for tall people is that they cannot hide. Tall people are always public, and this can be pretty tough. Short people and those of average height can camouflage and sort of disappear in a crowd when they choose to. It’s just a beautiful thing to be able to hide, and really stressful when you’re tall and not able to do this.Have you ever wished you were shorter?Absolutely. In my first job, in consulting, we would sit around in the conference room and I would always be the one called out and asked questions — especially when I hadn’t even had a chance to have my first cup of coffee. Now it’s not a matter of wishing I were short, but of wishing that I could make the awkwardness and all of the really god-awful body language just go away!

NEW YORK: If you’re looking for signs that the market and economy are slowly returning to normal, it is somewhat encouraging that demand for new stocks is finally perking up again.Medidata, a software company for big drug companies, went public Thursday and its stock was up more than 20% in late-morning trading. Medidata’s initial public offering comes one day after two Chinese firms, chemical manufacturer Chemspec International (CPC) and water treatment equipment maker Duoyuan Global Water (DGW), also had successful debuts as public companies. As amazing as it may sound, these three offerings make this week the busiest one for IPOs since April 2008.With that in mind, could the IPO market continue to show signs of life? And if so, will other hot private companies, most notably social networking darlings Facebook and Twitter, soon file for offerings of their own?That might be asking for too much. While Facebook has effectively stolen all the thunder from MySpace, and Twitter is earning raves due to its use as a means for social protest in Iran, both companies still haven’t proven how they intend to transform from merely being cool to also being profitable. And even though IPOs do appear to be making a comeback, investors still seem to be favoring substance over style. It’s helping that companies and underwriters appear to be doing a good job of gauging demand for the new stock. So stocks have tended to do well on their first day but not skyrocket to absurd heights the way low priced dot-com IPOs did back in the late 1990s.”For the most part, everything’s that come on to the market since November has worked. There haven’t been any disasters or disappointments. Deals are being priced at more reasonable valuations,” said Ben Holmes, publisher of MorningNotes.com, a Boulder, Colo.-based independent research firm focusing on IPOs and secondary issues. Talkback: Would you invest in Facebook or Twitter if they go public? Are they worth the hype?Leave your comments at the bottom of this story. But after this week, there’s not much for investors to choose from as the pipeline of prospective IPOs remains mostly empty. There is one company on tap to go public next week, tech service firm LogMeIn. That’s it.Part of that is a typical slump in activity during the summer. The pipeline could start to fill up later this year as long as the recent crop of IPOs continues to fare well.”As long as demand and performance stay healthy, the window for IPOs will remain open,” said Eric Guja, a research analyst with Renaissance Capital, a Greenwich, Conn.-based investment firm specializing in IPOs “But the one thing we’ve yet to see is a real pickup in filing activity.” 0:00
/2:44Twitter finds its ‘moment’That said, there actually have been several successful IPOs so far this year. And some of them have even been ones with significant investments from venture capitalists. The knock on some venture-backed IPOs in the past is that VCs may have rushed some companies onto the markets to take advantage of momentum and investor enthusiasm. As a result, some VC-backed companies debuted to dizzying one-day returns and wound up quickly fizzling once it became apparent that the companies didn’t have the revenue and profits to justify the hype.Quality makes a comebackBut last month, enterprise software firm SolarWinds (SWI), a profitable company that had investments from VC firms Bain Capital, Insight Ventures and Austin Ventures, went public. It was the first venture-backed IPO since last August.The company priced its offering above its initial range and debuted at 12.50. The stock is up nearly 10% since it began trading.SolarWinds’ debut was followed a day later by another venture-backed IPO: online restaurant reservation management firm OpenTable (OPEN). Benchmark Capital, a leading investor in eBay, and Impact Venture Partners are two of the prominent VCs involved in the OpenTable deal. Barry Diller’s IAC/InterActive is also an investor. Shares of OpenTable, which recorded a slight net loss last year but has enjoyed healthy revenue increases and posted decent operating profits, are up more than 40% since they hit the market. Medidata (MDSO) is also venture-backed. And like OpenTable and SolarWinds, the company has an actual business that allows it to generate steady revenue. Medidata’s biggest customers are the heavyweights in pharma and biotech, such as Johnson & Johnson and Amgen.With that in mind, the timing might still not be right for Facebook or Twitter to test the public waters. “Higher profile deals like a Facebook or Twitter could see a lot of demand. But they may be more speculative as far as their business models go,” said Guja. When you look at some of the other successful IPOs of this year (without venture backing) it’s clear that investors are looking for firms that are either: A. already generating earnings or B. heavily exposed to the growth juggernaut that is China.Shares of language software developer Rosetta Stone (RST), which posted annual profits last year and in 2007, are up nearly 40% since the company’s IPO in April. And shares of Chinese online gaming firm Changyou (CYOU), which is also profitable, have more than doubled since it went public in April. Holmes said one company that has already filed for an offering that he thinks could have a chance of doing well is A123 Battery Systems, a company developing lithium-ion batteries for cars. But he’s not predicting a Facebook or Twitter IPO anytime soon.”We had a total absence of new offerings for a long time and we’re just getting back to the low end of normal issuance,” he said. “The IPO market isn’t healthy enough yet to bring out something epic.” Talkback: Would you invest in Facebook or Twitter if they go public? Are they worth the hype?
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NEW YORK: If this recession has taught us anything, it’s that debt can kill.Consumers seem to have figured this out. They are starting to cut their debt loads and save more. But there’s also a lesson here for investors and Corporate America. Firms that are heavily in hock should be avoided. In fact, shares of companies with higher-than-average debt levels have underperformed their less-levered peers by a wide margin.According to figures from Thomson Baseline, shares of S&P 500 companies with a long-term debt to capital ratio below 34% — the S&P 500 average — are up an average of 10.3% this year. The S&P 500 stocks with debt loads above 34% are up only 1.2%.This holds true for smaller companies too. Firms in the S&P SmallCap 600 with a below-average debt load are up 7.2% this year while those with higher debt loads are down 1.6%. And if investors really want to maximize their returns, they might be better off investing in companies with no debt at all. Shares of S&P 500 firms that are debt-free are up an average of 15.6% this year. Debt-free tech giants Apple (AAPL, Fortune 500) and Google (GOOG, Fortune 500) have both surged more than 30%. Mark Travis, president of Intrepid Capital Funds, a Jacksonville Beach, Fla.-based money management firm, said that a strategy of sticking with conservative companies that have strong balance sheets is definitely worthwhile in an environment such as this. His firm’s Intrepid Capital fund is up 10.5% this year while its Intrepid Small Cap fund is up 12.5% year-to-date. Travis said some of the top picks in those funds are companies that may not seem overly exciting, such as Harry Potter publisher Scholastic (SCHL), telecom equipment firm Tellabs (TLAB) and Tidewater (TDW), a marine vessel contractor for the oil industry. But they all have pristine balance sheets and their stocks are up this year.”When it comes to stocks, we are anti-leverage and that looks sexy now. There is the famous quote from Warren Buffett about when the tide rolls out, it’s easy to see who’s swimming naked,” Travis said.Talkback: How worried are you about the debt loads of consumers, businesses and the government? Are you taking steps to cut your debt? Leave your comments at the bottom of this story. Sure, raising money through the sale of corporate bonds could be necessary to help finance expansion. And as long as companies are responsible with how they handle their balance sheets, debt doesn’t have to be a four-letter word.”In times like this, companies with high cash and low debt levels are in a better position to survive and take advantage of opportunities to grow through acquisitions,” said Craig Callahan, founder of ICON Advisers, a Greenwood Village, Colo.-based investment firm with 3.5 billion in assets under management. Still, companies that rely on debt could be in for a rude awakening given that the credit markets remain shut fairly tight, despite the Federal Reserve’s repeated attempts to pry the window open by keeping interest rates near zero.”The Fed has its foot pushed to the floor in a Porsche 911 S,” Travis quipped. “But it took a while to get into this credit crisis and it will take a while to get out.”0:00
/3:32America’s growing debt dilemmaAnd investors may not be forgiving of companies that go on debt binges — even though money is cheap. “Many companies in 2005, 2006, and 2007 looked at how low rates were and borrowed money to buy back shares so they could boost earnings per share. It looks like the recession has put an end to that,” Callahan said. “Investors in general have changed their risk tolerance during the past two years.” Plus, now that the rating agencies are on a crusade to show that they have teeth, even solid companies risk downgrades if they lever up too aggressively.”Any type of financing is tough to come by. And in cyclical businesses, firms with no or little debt have a competitive advantage,” Travis said.So even if the market rally resumes and signs of an economic recovery become more evident, don’t get suckered into companies that are piling on debt just because rates are low. Lehman Brothers, General Motors (GMGMQ) and mall operator General Growth Properties (GGWPQ) — just to name a few recent big bankruptcies — should serve as sobering reminders of what happens when debt burdens become an albatross.Talkback: How worried are you about the debt loads of consumers, businesses and the government? Are you taking steps to cut your debt?
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ELKHART COUNTY, Ind. (Fortune) — Even as Chuck Stouder campaigned for then-Senator Barack Obama last fall, the Elkhart, Ind., man was facing a personal crisis: His long career in the RV industry was coming to a close. He’s since lost his job. Now, Stouder, 58 years old, tells his story:”I had 22 years in the industry — ended up working at Lippert Components, as the set-up guy. We stamped out the parts for RVs and mobile-home frames. I knew the job, was good at it, and it paid the bills.0:00
/1:55Can Obama keep his promise?”The layoffs were gradual, starting in late 2007, when they began shutting down plants. Then, they went from three shifts to two. I was doing about 30 hours a week. I’d seen the decline before, but this one made me nervous. It was just a feeling.”The slowdown became clear in the summer of 2008, the time of year we should have been picking up, when the RV industry goes gangbusters. In the spring and summer, places tend to hire. But this time, we weren’t adding people. When people left, they weren’t being replaced. I watched the trend and said, ‘That’s not good.’”I got the news right at Christmas. Usually, we get off for a couple weeks. They called me and said, ‘Everybody’s on permanent layoff.’ I was somewhat paralyzed. I’m 58 years old. And it’s really tough making a major career change when you haven’t had that big college degree. I had some college behind me, but couldn’t afford to finish. Any career change at that point would have required a massive pay cut. You get used to your lifestyle.”I filed for unemployment. I was working for some friends for some odd cash. I’ve applied for jobs, but so far, no calls back. I read the newspaper and see another company laying off hundreds of workers. I’m going to investigate going back to school, I guess. I’ve come to the conclusion that I’ll have to find something that pays a little less — maybe teaching, or coaching little league. It’s something I enjoy.Glimmers of hope in America’s RV capital”It’s not like I’m overwhelmed with bills. Vicki and I have been together 14 years. Might as well be married. She’s a nurse, has a couple of kids, but no grandkids yet. Our house is paid for. My car is paid for. I still have a little money left in the bank. So we’re fortunate. The only thing is, I don’t have any major outside investments other than my IRA, and I don’t want to touch that.”Will the RV industry bounce back? Yes, it will. But not in the same form. Some of the weaker players will be shaken out. They’re already redesigning how they do things — the towables, for example, will be lighter. They’ll use a lot more composite materials, like fiberglass. They’ll be more fuel-efficient. It’s a pretty innovative group.”Would I go back? Part of me says yes, because of the money. Part of me says, at age 58, if I can find something that’s a little easier on my body, I’ll take it.”President Obama, he’s doing all he can. I’m not convinced about how some of the money’s being thrown around. But I’m a skeptic about everything. He’s right that healthcare has got to be changed. We’ve got to have some form of single-payer system available. I lost health insurance when I lost my job. I’m applying for veterans benefits. I was paying about 20 a week for my healthcare. But I was smart enough to know that my company was paying at least twice that amount.”That adds up. That’s money that can be put into innovation, creating jobs, at higher wages. I’m sympathetic to companies, to some extent. But healthcare is a really major thing.”

Source:CNN

NEW YORK: According to the Federal Trade Commission, more complaints are lodged against the debt collection industry than any other. As more and more consumers are falling behind on their bills, the collections industry is trying harder than ever to collect that debt. They’re reportedly using technology like social networking sites or cell phone texting to get you to pay up. In one case we heard about a debt collection company-located outside the U.S. that used a picture of an attractive woman to “friend” a debtor. Now, once these “faux friends” are part of your network, the company can monitor your updates and keep tabs on you – just in case you mention a big ticket purchase online. Make sure you keep on top of your “friend list.” Facebook, the social networking site, did not return calls seeking comment. 1. Know the lawsThere are strict laws about how debt collectors have to conduct business. They must identify themselves. They can’t harass you and they can’t talk about your debt to anyone but you or your attorney. You shouldn’t be getting phone calls before 8 a.m. or after 9 p.m. They can’t threaten to sue you if they don’t have any intention to do so. And, they can’t misrepresent the amount you owe. 2. Stick with a 401(k)If you’ve lost your job, you may consider keeping your money with your old employer instead of rolling it over into an IRA. That’s because 401(k) plans are off-limits to creditors. IRAs have more limited safeguards. For example, your money in an IRA is protected up to 1 million — only in the case of a personal bankruptcy. Some states may put a cap on how much is shielded from these creditors according to Jay Adkisson, a California attorney who specializes in asset protection.3. Old debt could be off limitsYes. You’re talking about a statute of limitations. 0:00
/0:48Should I sell my house short?There is a limit to how long collectors can legally collect your debt. Generally this limit — called the statue of limitations — is three to six years, according to Justin Baxter, a consumer protection attorney. You’ll want to check in with your state’s attorney general to see what laws apply in your state. You can find out who to contact at www.naag.org.4. Don’t file bankruptcy unnecessarilySometimes people file bankruptcy in order to get creditors to stop calling them. But this is an expensive and unnecessary step.Instead, write a letter to the debt collector and send it certified mail and pay for a return receipt so you know the collector received it. Once they get your letter they can’t contact you again except to tell you they won’t contact you anymore or they’re taking action against you — say, filing a lawsuit. Remember, just because they’re not contacting you anymore doesn’t necessarily mean you don’t owe the debt.Got a financial dilemma? Go to CNNMoney.com/helpdesk to submit questions, read the Help Desk articles and check out new Help Desk videos. And tune in to CNN’s Newsroom Tuesdays and Fridays, when Gerri Willis and other experts answer your questions.

Source:CNN

NEW YORK: We’re just getting the latest figures on unemployment. But it’s not just about the number of people out of work, at issue is also how long people are out of work. It’s taking people about 22 weeks on average to find new employment. That’s the highest ever on record according to the government. And that figure doesn’t even count people who have stopped looking for work.In 2006 people were out of work for about 4 months … but the number of weeks has been creeping up steadily upward.Here’s how to cope if you’ve been unemployed a while:Call your state’s unemployment office. There’s some good news here. Unemployment benefits have been extended dramatically. In most states you can get from 72 to 79 weeks of unemployment. Plus, you’ll also get an extra 25 per week in your paycheck and the first 2,400 of benefits won’t be subject to income tax. To find out what you’re eligible for, you’ll need to call and ask. Get work. Even if you are picking up a job at Starbucks, the reality is that if you aren’t doing anything the perception of employers can be that you are growing stale or worse, lazy says Bradley Richardson, the author of “Career Comeback.” It’s not fair, but it’s true. Seek out part-time or contract work to keep those skills sharp. Bottom line: get out and do something even if it isn’t in your chosen field. Don’t wait to hit the home run — a full-time job with full benefits. Volunteer work is acceptable too.Give yourself a break. Understand that the nature of employment has changed in the last five to seven years. A rollercoaster career path is not unusual because we have had wild swings in employment due to the booms and busts of the last few years. Employers understand this, so if your resume looks a little uneven it won’t be surprising to HR professionals. Find some staffing firms that are active in your field. It’s critical to understand that these firms specialize — some are high-end boutique firms that find jobs for CEOs, others staff temp positions, others do part time work. Find the right staffing firms to pitch and get them working for you. Give them lists of the people you want to meet; copies of the magazine articles that illuminate changes in your field, lists of the companies you want to work for.Develop structure to your daily schedule. You’re not having it imposed by your employer, so you’ll have to put it together yourself. Schedule time to work the social networking sites and research jobs. Having a schedule you can rely on will help keep you from going insane.Got a financial dilemma? Go to CNNMoney.com/helpdesk to submit questions, read the Help Desk articles and check out new Help Desk videos. And tune in to CNN’s Newsroom Tuesdays and Fridays, when Gerri Willis and other experts answer your questions.

Source:CNN